<PAGE>
ADVANTUS SERIES FUND, INC.
S E M I - A N N U A L R E P O R T J U N E 3 0, 1 9 9 8
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GROWTH PORTFOLIO
BOND PORTFOLIO
MONEY MARKET PORTFOLIO
ASSET ALLOCATION PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
INDEX 500 PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
INTERNATIONAL STOCK PORTFOLIO
SMALL COMPANY PORTFOLIO
MATURING GOVERNMENT BOND 1998 PORTFOLIO
MATURING GOVERNMENT BOND 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
VALUE STOCK PORTFOLIO
SMALL COMPANY VALUE PORTFOLIO
GLOBAL BOND PORTFOLIO
INDEX 400 MID-CAP PORTFOLIO
MACRO-CAP VALUE PORTFOLIO
MICRO-CAP GROWTH PORTFOLIO
REAL ESTATE SECURITIES 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
Global Bond Portfolio..................................................... 30
Index 400 Mid-Cap Portfolio............................................... 32
Macro-Cap Value Portfolio................................................. 34
Micro-Cap Growth Portfolio................................................ 36
Real Estate Securities Portfolio.......................................... 38
INVESTMENTS IN SECURITIES
Growth Portfolio.......................................................... 40
Bond Portfolio............................................................ 42
Money Market Portfolio.................................................... 45
Asset Allocation Portfolio................................................ 47
Mortgage Securities Portfolio............................................. 51
Index 500 Portfolio....................................................... 55
Capital Appreciation Portfolio............................................ 62
International Stock Portfolio............................................. 64
Small Company Portfolio................................................... 68
Maturing Government Bond 1998 Portfolio................................... 70
Maturing Government Bond 2002 Portfolio................................... 71
Maturing Government Bond 2006 Portfolio................................... 72
Maturing Government Bond 2010 Portfolio................................... 73
Value Stock Portfolio..................................................... 74
Small Company Value Portfolio............................................. 76
Global Bond Portfolio..................................................... 78
Index 400 Mid-Cap Portfolio............................................... 80
Macro-Cap Value Portfolio................................................. 86
Micro-Cap Growth Portfolio................................................ 88
Real Estate Securities Portfolio.......................................... 90
FINANCIAL STATEMENTS
Statements of Assets and Liabilities...................................... 92
Statements of Operations.................................................. 95
Statements of Changes in Net Assets....................................... 98
Notes to Financial Statements............................................. 104
<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 40.
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>
Period from January 1, 1998 to
June 30, 1998*
Percentage of
Return
<S> <C>
Growth 19.4%
Bond 3.2%
Money Market 2.5%
Asset Allocation 12.6%
Mortgage Securities 3.7%
Index 500 17.3%
Capital Appreciation 21.1%
International Stock 11.8%
Small Company 9.4%
MGB 1998 3.2%
MGB 2002 3.9%
MGB 2006 5.4%
MGB 2010 6.7%
Value Stock 2.3%
Small Company Value 4.2%
Global Bond 5.0%
Index 400 Mid-Cap 8.1%
Macro-Cap Value 12.7%
Micro-Cap Growth 9.3%
Real Estate Securities -3.8%
</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 May 1, 1998 (portfolio
inception) to June 30, 1998 for Real Estate Securities Portfolio.
2
<PAGE>
LETTER FROM THE PRESIDENT
[PHOTO OF WILLIAM N. WESTHOFF]
Dear Shareholder:
In the first six months of 1998, the U.S. economy continued to expand at a
robust pace, despite signs of slowing. The economic expansion is broad based
which illustrates the overall strength of our economy. Asian demand for U.S.
goods has been shrinking, as evidenced by the significant trade drag on U.S.
output growth during the second quarter. The fallout from the Asian financial
situation is underway, and the effects will intensify throughout the year. The
result will be declining U.S. growth through the remainder of 1998. Keep in mind
that the United States has the broadest, strongest economy in the world. Even
though we anticipate our economic growth will slow, our country's economy will
remain healthy.
From a global perspective, the Asian financial crisis continues to unfold and
has had a dampening effect on interest rates and corporate earnings. Ironically
this situation could have an overall positive impact on the U.S. stock market.
Equities continue to benefit from the relatively low level of interest rates,
with expansion capital available to companies at a low cost. Also, money
continues to flow into the U.S. markets at record levels. A "flight to quality"
has brought foreign investors to the shelter of the U.S stock market and to
Treasury securities. Meanwhile, western European equities have shown good
results, and we expect that Europe will continue to provide favorable long-term
results. Investing in developing countries is still fraught with risk for both
debt and equity securities investors.
In the bond market, the structural backdrop points to a falling trend in U.S.
bond yields, but potential domestic inflationary pressures have temporarily
stalled the decline. Recent events throughout Asia, and most recently in Japan,
have served to bring forward the expected bond rally. The spread of financial
market distress to much of the developing world has reduced the risk that the
Federal Reserve Board will have to tighten monetary policy further in this
cycle.
In the stock market, cash flows into the stock market have dominated valuations
and pricing. The stock market has benefited from both the flight to quality
(from abroad) and from the huge and continuing cash flows from the funding of
retirement assets. Equity valuations are on the high side of almost any
historical comparisons, with large cap (and consistent) growth stocks leading
the valuation parade. A strong and steady bond market has propped up stock
prices. This continues even within an environment of slightly slower growth
expectations.
The broad array of portfolios within the Advantus Series Fund affords investors
many choices. Investors, with the guidance of their financial representative,
should review their portfolio to ensure that it is sufficiently diversified with
a variety of fixed income and equity products, including some international
exposure.
Thank you for investing with Advantus.
Sincerely,
[WILLIAM N. WESTHOFF SIGNATURE]
William N. Westhoff
President
Advantus Series Fund, Inc.
3
<PAGE>
Growth Portfolio
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[PHOTO OF TOM GUNDERSON]
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 Growth Portfolio generated a total return of 19.43 percent* for the six
month period ended June 30, 1998. In comparison, the Russell 1000 Growth Index**
returned 20.38 percent for the same period.
PERFORMANCE ANALYSIS
Superior stock selection allowed the Portfolio to produce performance that
exceeded the majority of its peers over the past six months. Our emphasis on the
analysis of individual company fundamentals allowed the Portfolio to produce the
solid results. Stocks that were the biggest contributors to performance over
this period were Lucent Technologies Incorporated (telecommunications
equipment), Microsoft Corporation (software), Cisco Systems, Inc. (data
networking) and Wal-Mart Stores (retailing). Like the overall market, our best
performing stocks were also the largest companies as these stocks continued to
produce strong earnings growth and continue to be favored by the market. In
addition to these very large companies were several companies that have helped
the Portfolio. Galileo International, Inc. (airline reservation systems) gained
63 percent during the first quarter, as this company continued to post
consistent earnings growth. Tyco International, Ltd. (diversified capital goods)
gained 40 percent, as they continued to make wise acquisitions that can allow
the company to continue its excellent earnings growth. Stocks from the Consumer
Cyclical sector such as Carnival Corporation (cruise products) and Tandy
Corporation (consumer electronics) also contributed to performance. Carnival
continues to post revenue and earnings that indicate solid fundamentals, while
Tandy has sold off its non-core divisions and has some strategies in place at
its Radio Shack stores that allowed the stock to be a strong performer.
Like all time periods, not all of the stocks in the Portfolio met our
expectations. ADC Communications reported weak fundamentals and was trimmed from
the Portfolio. Also, Cendant Corporation was sold after its reported "accounting
irregularities." These stocks along with Intel, Philip Morris Companies, Inc.
and Sybron International Corporation were the laggards in the Portfolio over the
past six months. We continue to analyze the fundamentals of these companies,
along with all the companies in the Portfolio, to ensure that they have the
sustainable growth characteristics that we are looking for to provide attractive
long-term capital gains for the Portfolio. If we are not convinced these
companies "have what it takes" to produce superior long-term earnings growth,
they will be trimmed from the Portfolio and replaced with better prospects.
Looking at the Portfolio from a more "macro" perspective, the best sectors
were the Capital Goods sector (led by Tyco) and Consumer Cyclicals (led by
Carnival), followed closely by Technology and Health Care. This is in contrast
to the Russell 1000 Growth Index** where the strongest performance came from the
Technology sector, followed by the Health Care sector.
The trend where the very largest growth companies continue to significantly
outperform the rest of the market continues. Measured by the 20 largest stocks
in the 600 plus stock Russell 1000 Growth Index,** these very large stocks
gained about 32 percent for the six month period while the remaining stocks in
the index gained about 9 percent. In other words, excluding these "top 20"
companies the Russell 1000 Growth Index** would have shown a 9 percent return
versus the 20.4 percent return for the entire Russell 1000 Growth Index.** This
is what one would call a "narrow market" as the majority of the returns are
coming from a short list of companies. Our Portfolio has had meaningful
representation, yet less than the index, in these stocks which allowed the
Portfolio to participate in the strong market performance during the first six
months of 1998.
OUTLOOK
Earnings growth is likely to be more difficult to produce if the Asian economic
problems have a slowing effect on the U.S. companies. As a result, the market
will likely place a higher valuation premium on the companies that can sustain a
continuation of superior earnings growth. Using our ONE-STOCK-AT-A-TIME
fundamental analytical approach we will continue to search the market for these
potential companies that look to produce stronger earnings growth.
4
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- -------------------------------------------------- ------- ------------ ----------
<S> <C> <C> <C>
General Electric Company.......................... 255,800 $ 23,277,800 5.8%
Tyco International, Ltd........................... 245,442 15,462,846 3.9%
Coca-Cola Company................................. 179,500 15,347,250 3.8%
Omnicom Group..................................... 236,700 11,805,412 3.0%
Bristol-Myers Squibb Company...................... 98,900 11,367,319 2.8%
Microsoft Corporation............................. 96,900 10,501,538 2.6%
Procter & Gamble Company.......................... 114,000 10,381,125 2.6%
Cisco Systems, Inc................................ 102,000 9,390,375 2.3%
Carnival Corporation.............................. 228,400 9,050,350 2.3%
Intel............................................. 120,800 8,954,300 2.2%
------------ ----------
$125,538,315 31.3%
------------ ----------
------------ ----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 11.0%
Communication Services 1.3%
Consumer Cyclical 15.8%
Consumer Staples 16.8%
Energy 1.3%
Financial 10.0%
Health Care 18.6%
Technology 20.3%
Transportation 1.5%
Utilities 1.0%
Cash and Other
Assets/Liabilities 2.4%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN GROWTH PORTFOLIO,
RUSSELL 1000 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 35.8%
Five years 19.3%
Ten years 16.1%
(Thousands)
Growth Russell 1000 Growth
Portfolio CPI Index
6/30/88 $ 10,000 $ 10,000 $ 10,000
12/31/88 $ 10,220 $ 10,229 $ 10,244
12/31/89 $ 12,879 $ 10,694 $ 13,924
12/31/90 $ 12,905 $ 11,355 $ 13,888
12/31/91 $ 17,301 $ 11,693 $ 19,604
12/31/92 $ 18,135 $ 12,041 $ 20,585
12/31/93 $ 18,985 $ 12,371 $ 21,178
12/31/94 $ 19,138 $ 12,718 $ 22,955
12/31/95 $ 23,784 $ 13,040 $ 31,493
12/31/96 $ 27,864 $ 13,471 $ 38,775
12/31/97 $ 37,174 $ 13,709 $ 50,592
6/30/98 $44,395 $13,802 $60,902
</TABLE>
On the chart above you can see how the Growth 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 June 30, 1988 through June 30,
1998.
- ----------------------
*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.
5
<PAGE>
Bond Portfolio
PERFORMANCE UPDATE
WAYNE SCHMIDT, CFA
PORTFOLIO MANAGER
[PHOTO OF WAYNE SCHMIDT]
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 six month period ended June 30, 1998, the Bond Portfolio returned 3.23
percent.* The Portfolio's benchmark, the Lehman Brothers Government Corporate
Bond Index,** returned 4.17 percent for the same period.
PERFORMANCE ANALYSIS
Interest rates continued their moderate decline in the first half of 1998 as
concern for strong U.S. economic growth was offset by low inflation, slow global
economic growth and political instability in many countries. The yield curve
flattened as rates on 30-year bonds declined 30 basis points to yield 5.63
percent while 2-year notes declined only 17 basis points to yield 5.48 percent.
The U.S. bond market is comprised of three main sectors: U.S. Government
securities, corporate bonds, and mortgage-backed securities. During the past
seven years, corporate bonds have been the best performing sector for many of
the same reasons that the equity market has performed so well. Strong corporate
earnings and cash flows, positive mergers and acquisitions financed with equity
swaps, an eight-year business expansion and improving credit fundamentals.
During this run, corporate bonds have endured three setbacks. The first was in
the first quarter of 1994 when the Federal Reserve began raising interest rates
and investors feared an economic slowdown. The second was in the fourth quarter
of 1997 when the first round of the Asian crisis resulted in wider corporate
spreads. The most recent was in the second quarter of 1998 as the second round
of Asian problems coupled with foreign currency devaluations, political
uncertainty, and a huge supply of corporate bonds pushed spreads to their widest
levels since 1992.
Long-term U.S. Treasury Bonds were the best performing sector in the first
half of 1998. They benefited from the flattening of yield curve and a flight to
quality by bond investors. As bond investors became worried about global
uncertainties, their appetite for U.S. Treasury securities increased. This
demand, along with a smaller supply of U.S. Treasury securities drove U.S.
Treasury bond prices higher.
The performance of the Portfolio was negatively affected by the overweight
position to the corporate bond sector. Our view is that the setback to corporate
bonds is a temporary phenomenon, not a new trend. Merger and acquisition
activity continues to be positive for bondholders, earnings and cashflows remain
strong, and demand for yield product continue to increase. Corporate bonds still
have the best long-term track record and we will continue to find and hold the
best relative values in this sector.
OUTLOOK
Interest rates will likely continue to be range bound and eventually grind lower
as the year progresses. Economic growth will likely begin to slow and inflation
will remain low as the Asian crisis, Japan and the strong dollar begin to
negatively affect our economy. The Federal Reserve will need to see signs of
slower growth and higher unemployment before they are willing to reduce
short-term interest rates. This could happen by early 1999, paving the way for
lower bond yields. This is positive for fixed income investors. In the
Portfolio, we will continue to own enough duration and take advantage of the
opportunities offered in the U.S. bond market.
6
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Government
Agencies 10.6%
AAA Rated 10.1%
AA Rated 1.5%
A Rated 19.3%
BBB Rated 17.5%
BB Rated 4.1%
Preferred Stock 6.5%
Cash and Other
Assets/Liabilities 6.3%
U.S. Treasury 24.1%
</TABLE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------ ------------ -----------
<S> <C> <C>
U.S. Treasury Note--6.38%, 09/30/01......................... $ 23,571,844 16.9%
U.S. Treasury Note--6.13%, 11/15/27......................... 9,697,645 7.0%
PNC Bank Corporation--6.73%, 01/25/07....................... 5,757,477 4.1%
Lehman Brothers, Inc.--6.63%, 02/15/08...................... 5,560,753 4.0%
TCI Communications Incorporated--8.25%, 01/15/03............ 5,408,150 3.9%
Morgan Stanley Dean Witter--6.88%, 03/01/07................. 5,187,600 3.7%
General Electric Capital Corporation--6.66%, 05/01/18....... 5,084,316 3.7%
GTE Corporation--6.94%, 04/15/28............................ 5,056,750 3.6%
Cable and Wireless Communication--6.63%, 03/06/05........... 5,040,050 3.6%
Time Warner Incorporated 144A Issue--6.95%, 01/15/28........ 5,025,550 3.6%
------------ -----------
$ 75,390,135 54.1%
------------ -----------
------------ -----------
</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 9.2%
Five years 6.4%
Ten years 8.5%
(Thousands)
Lehman Brothers
Bond Government
Corporate Bond
Portfolio Index CPI
6/30/88 $ 10,000 $ 10,000 $ 10,000
12/31/88 $ 10,216 $ 10,285 $ 10,229
12/31/89 $ 11,508 $ 11,749 $ 10,694
12/31/90 $ 12,339 $ 12,723 $ 11,355
12/31/91 $ 14,512 $ 14,774 $ 11,693
12/31/92 $ 15,479 $ 15,897 $ 12,041
12/31/93 $ 17,066 $ 17,690 $ 12,371
12/31/94 $ 16,289 $ 17,073 $ 12,718
12/31/95 $ 19,506 $ 20,055 $ 13,040
12/31/96 $ 20,084 $ 20,636 $ 13,471
12/31/97 $ 21,977 $ 22,650 $ 13,709
6/30/98 $22,688 $23,594 $13,802
</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 June 30, 1988
through June 30, 1998.
- ------------
*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 OF WAYNE SCHMIDT]
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 six month period ended June
30, 1998 was 2.48 percent.* The three-month U.S. Treasury Bill returned 2.68
percent for the same period.
PERFORMANCE ANALYSIS
The yield on the three-month U.S. Treasury declined 25 basis points to yield
5.09 percent. Short-term interest rates continue to be remarkably stable as the
Federal Reserve continues to target the Fed Funds rate at 5.50 percent. The
Federal Reserve's last change to monetary policy was twelve meetings ago in
March 1997, when they raised the Federal Funds target by 25 basis points to 5.50
percent. Many investors began to anticipate that the Federal Reserve would soon
raise short-term interest rates to combat the U.S. economic strength and the
growing concern over wage inflation. The Federal Reserve confirmed everyone's
fears when the minutes from their March meeting were released to find that they
had adopted a bias to raising interest rates. Looking entirely at the domestic
factors, one could conclude that the Federal Reserve would have the latitude to
raise interest rates. However, given the global economic situation, a Federal
Reserve move would worsen an already difficult situation.
Our emphasis in the Portfolio continues to be on the highest quality
commercial paper. This sector accounts for 87.2 percent of the portfolio
holdings. Large U.S. corporations continue to report excellent earnings and
their credit quality trends remain positive. We like this sector because of its
yield advantage, low risk and excellent liquidity. The average days to maturity
of the Portfolio was extended from 53 days to 66 days to reflect our outlook for
lower short-term interest rates ahead. The average money market fund portfolio
is running 58 days to maturity.
OUTLOOK
In the Portfolio, we will continue to purchase commercial paper from the highest
rated U.S. corporations. These investment vehicles provide money market
investors with safety, liquidity and an attractive yield. With short-term
interest rates hovering around five percent and inflation running at 1.5
percent, a 3.5 percent real return is attractive by historical standards. The
future direction of short-term interest rates will be determined by Federal
Reserve policy, inflation, economic growth rates, and currency exchange rates.
The Federal Reserve will carefully monitor these activities and refrain from
raising interest rates. Looking ahead to 1999, the discussion of Fed policy may
shift to lowering interest rates as the U.S. economy begins to show signs of
slower growth with very moderate inflation. We will also continue to keep our
average days to maturity at or above the industry average.
8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Average Days to
Maturity
Number of
Days
<S> <C>
1/7/98 42
1/14/98 41
1/21/98 41
1/28/98 46
2/4/98 45
2/11/98 49
2/18/98 47
2/25/98 47
3/4/98 48
3/11/98 51
3/18/98 50
3/25/98 52
4/1/98 53
4/8/98 46
4/15/98 45
4/22/98 38
4/29/98 37
5/6/98 51
5/13/98 50
5/20/98 57
5/27/98 51
6/3/98 50
6/10/98 49
6/17/98 57
6/24/98 51
6/30/98 66
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Seven-Day Compound
Yield*
Percentage
<S> <C>
1/7/98 5.69%
1/14/98 4.70%
1/21/98 5.12%
1/28/98 5.65%
2/4/98 4.81%
2/11/98 5.06%
2/18/98 5.03%
2/25/98 5.07%
3/4/98 5.15%
3/11/98 5.09%
3/18/98 4.95%
3/25/98 5.08%
4/1/98 4.81%
4/8/98 5.58%
4/15/98 5.96%
4/22/98 4.49%
4/29/98 4.42%
5/6/98 5.09%
5/13/98 5.10%
5/20/98 5.13%
5/27/98 5.01%
6/3/98 5.17%
6/10/98 5.02%
6/17/98 4.94%
6/24/98 4.83%
6/30/98 4.64%
</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 OF TOM GUNDERSON]
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 generated a total return of 12.61 percent* for
the six month period ended June 30, 1998. The Portfolio's benchmark, a blend
comprised of 60 percent Russell 1000 Growth Index** and 40 percent Lehman
Brothers Aggregate Bond Index+ returned 13.96 percent for the same period.
PERFORMANCE ANALYSIS
The financial markets were driven by the stock market during the first half of
1998. Robust corporate profits along with stable to lower interest rates, low
inflation, and continued healthy money flows into the market allowed the stock
market, as measured by the S&P 500,++ to gain 17.6 percent for the six month
period ended June 30, 1998. The fixed income markets (bonds, mortgages) and cash
(money market) posted low single digit returns for the period. Once again, the
place to be was in stocks.
Early in January stocks were purchased to increase the Portfolio's holdings
from 55 percent of the Portfolio to 60 percent as stocks had lagged the rally in
the bond market. Later in April, following another short-term stock market
correction, we again purchased 5 percent more in stocks and concurrently sold 5
percent from bonds. The current asset allocation is 69 percent stocks, 28
percent bonds, 3 percent cash.
Superior stock selection allowed the Portfolio to produce performance that
exceeded the majority of its peers over the past six months. Our emphasis on the
analysis of individual company fundamentals allowed the Portfolio to produce the
solid results. Stocks that were the biggest contributors to performance over
this period were Lucent Technologies Incorporated (telecommunications
equipment), Microsoft Corporation (software), Cisco Systems, Inc. (data
networking) and Wal-Mart Stores (retailing). Like the overall market, our best
performing stocks were also the largest companies, as these stocks continue to
produce strong earnings growth and continue to be favored by the market. In
addition to these very large companies, were several companies that have helped
the Portfolio. Galileo International, Inc. (airline reservation systems) gained
63 percent during the first half of 1998, as this company continued to post
consistent earnings growth. Tyco International, Ltd. (diversified capital goods)
gained 40 percent as they continued to make wise acquisitions that may position
that company to continue its excellent earnings growth. Stocks from the Consumer
Cyclical sector such as Carnival Corporation (cruise products) and Tandy
Corporation (consumer electronics) also contributed to performance. Carnival
continues to post revenue and earnings that indicate solid fundamentals, while
Tandy has sold off its non-core divisions and has some strategies in place at
its Radio Shack stores that allowed the stock to be a strong performer.
Over the past six months we purchased some REIT's (Real Estate Investment
Trusts) into the Portfolio. Valuation levels on the REIT's became more
attractive as they lagged the stock market rally. Additionally, they produce an
attractive current yield.
The bonds in the Portfolio continue to give an attractive current yield and
provide diversification and stability to the Portfolio. Over the past six months
interest rates continued their longer-term trend lower, instigating our lowering
of the bond weighting in the account to 30 percent from 35 percent at the start
of the year. As interest rates move lower, bonds are generally less attractive
compared to stocks within our approach to managing the portfolio.
OUTLOOK
Over the next six months the market will be focused on corporate profits and the
impact Asian economic problems will have on the U.S. companies. Another focus of
the markets will be to more closely monitor wages, and the possible increases
that they may have on inflation. To date these issues have not been a problem,
but that does not mean there will not be concerns that the market needs to deal
with in the future.
As always, we will continue to monitor the financial markets and seek to
position the Portfolio to meaningfully participate during market advances, while
protecting your capital during periods of market decline.
10
<PAGE>
FIVE LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ -------- ------------- ----------
<S> <C> <C> <C>
General Electric Company.................................... 223,152 $ 20,306,832 5.2%
Coca-Cola Company........................................... 156,400 13,372,200 3.5%
Tyco International Ltd...................................... 206,198 12,990,474 3.4%
Omnicom Group............................................... 219,508 10,947,961 2.8%
Bristol-Myers Squibb Company................................ 88,000 10,114,500 2.6%
------------- ----------
$ 67,731,967 17.5%
------------- ----------
------------- ----------
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- ------------------------------------------------------------ ----------
<S> <C>
U.S. Treasury............................................... 21.6%
U.S. Government Agencies.................................... 11.9%
AAA rated................................................... 12.6%
AA rated.................................................... 3.7%
A rated..................................................... 21.9%
BBB rated................................................... 22.1%
BB rated.................................................... 6.2%
----------
100.0%
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 27.8%
Common Stocks 66.8%
Preferred Stocks 2.1%
Cash and Other
Assets/Liabilities 3.3%
</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 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 22.1%
Five year 13.8%
Ten year 13.3%
(Thousands)
Asset
Allocation
Blended
Portfolio CPI Index
6/30/88 $10,000 $10,000 $10,000
12/31/88 $10,214 $10,229 $10,260
12/31/89 $12,276 $10,694 $13,047
12/31/90 $12,718 $11,355 $13,524
12/31/91 $16,391 $11,693 $17,704
12/31/92 $17,583 $12,041 $18,772
12/31/93 $18,719 $12,371 $19,841
12/31/94 $18,458 $12,718 $19,933
12/31/95 $23,074 $13,040 $25,806
12/31/96 $25,959 $13,471 $29,669
12/31/97 $30,888 $13,709 $36,217
6/30/98 $34,784 $13,802 $41,273
</TABLE>
On the chart above you can see the Asset Allocation Portfolio's
total return compared to a blended index of 60 percent Russell 1000
Growth Index and 40 percent Lehman Brothers Aggregate Bond Index and
the Consumer Price Index. The three lines represent the cumulative
total return of a hypothetical $10,000 investment made on June 30,
1988 through June 30, 1998.
- ----------------------
*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 is comprised of the Lehman
Brothers Government/Corporate Index, the Lehman Brothers
Mortgage-Backed Securities Index and the Lehman Brothers
Asset-Backed Securities Index.
++The S&P 500 is a broad, unmanaged index of 500 common stocks which
are representative of the U.S. stock market overall.
11
<PAGE>
Mortgage Securities Portfolio
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO OF KENT WEBER]
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 performance for the Mortgage Securities Portfolio for the six month period
ended June 30, 1998 was 3.67 percent.* The Portfolio's benchmark index, the
Lehman Brothers Mortgage-Backed Securities Index** returned 3.38 for the same
period.
PERFORMANCE ANALYSIS
Broadly speaking, the mortgage market put in another period of solid performance
by slightly outperforming duration-matched Treasuries, on average, over the past
six months. A relatively benign interest rate environment steadily improved
credit and demand 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 a steady increase in prepayment activity.
As a result of these conditions, the duration of the mortgage market shortened
from 3.2 years to 2.4 years, and thus maintains the mortgage market as one of
the highest yielding asset classes available to fixed income investors today.
The Portfolio's duration was held approximately 7 percent longer than the
index throughout the reporting period. This benefited the Portfolio as interest
rates fell by about .35 percent, thus adding some price appreciation on top of
healthy income. Income-oriented investors can be assured that this Portfolio is
broadly diversified among the various sectors of the mortgage market
(residential, commercial, pass-throughs, collateralized mortgage obligations,
etc.) and holds securities that are among the highest credit and cash flow
quality. High quality is evidenced by the Portfolio's overall rating of AA, as
well as the fact that the Portfolio is structured to carry less prepayment risk
than the index.
We are always sensitive to prepayment concerns because in this asset class,
prepayment risk is a fact of life. By adhering to our consistent and disciplined
approach, we found it necessary to make only certain adjustments to the
Portfolio during this reporting period. The adjustments that we made were small
and incremental over the reporting period to reflect changing fundamentals,
which validated that the Portfolio was well positioned going into this
lower-rate environment. As interest rates drifted, the following strategies were
put in place:
- Reduced exposure to mortgages with high loan rates.
- Continued development of broad diversification, which reduces our exposure
to any one sector.
- Continued emphasis on securities that are prepayment challenged or carry
restricted rights to prepay.
- Purchased securities consisting of mortgage loans with low balances (below
$65,000) made to first time homeowners at below market interest rates.
- Increased asset allocation of commercial mortgage-backed securities.
- Swapped credit risk for prepayment risk.
- Increased holdings in non-agency investment grade securities. (Investment
grade securities are those securities rated BBB and above).
The Asian economic situation has elicited some secondary effects in the
mortgage market. A "flight to quality" has investors seeking shelter in Treasury
securities at the expense of both higher yielding mortgage-backed securities and
corporate bonds. This "flight" has put downward pressure on domestic and global
interest rates, which has led to an increase in the general level of refinancing
activity. Only a handful of securities have borne the brunt of this prepayment
wave (For example, short maturity securities such as adjustable rate, balloon,
and high coupon mortgages, in which we remain underweighted.).
OUTLOOK
We believe the Portfolio is well situated. It is broadly diversified, utilizing
numerous sectors of the mortgage market to add value. We continue to favor high
quality securities from both a credit and cash flow perspective. We think some
predictability is comforting.
There may be opportunity for some price appreciation on top of coupon
income, which could lead to mid to high single digit returns for 1998. We
anticipate that the overall market will likely experience consistent growth and
some mild inflation, which sets the stage for a fixed-income friendly year.
The combination of strong growth, paired with volatile global conditions
placed the Federal Reserve Board on hold for the near term. Meanwhile, inflation
is extremely docile and shows little evidence of rearing its head. It is
inflation, not growth, which drives interest rates. Therefore, with inflation
averaging around 2 percent and growth oscillating between 1 and 4 percent, we
look for rates to ultimately stabilize and perhaps even move moderately lower by
the end of the year. The current environment remains bond-friendly.
12
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA Rated 19.5%
U.S. Government and Agencies
Obligations 30.0%
AA Rated 13.1%
A Rated 20.6%
BBB Rated 11.8%
Preferred Stock 1.9%
Cash and Other
Assets/Liabilities 3.1%
</TABLE>
HIGH QUALITY ASSETS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Public Issues 57.8%
Private Placements 6.5%
Private 144A Issue 30.7%
Preferred Stock 1.9%
Cash and Other
Assets/Liabilities 3.1%
</TABLE>
SOLID LIQUIDITY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FHLMC MBS 3.0%
FNMA MBS 6.3%
GNMA MBS 16.5%
Vendee MBS 4.2%
Asset Backed Securities 2.6%
CMOs/MRBs 15.2%
Whole Loan MBS 37.4%
Commercial MBS 8.6%
Corporate/Agency Bonds 0.9%
Preferred Stock 1.9%
Cash and Other
Assets/Liabilities 3.4%
</TABLE>
PRUDENT SECTOR DIVERSIFICATION
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 8.8%
Five year 6.8%
Ten year 9.0%
Lehman
Brothers
Mortgage Mortgage-Backed
Securities Securities
Portfolio Index CPI
6/30/88 $10,000 $10,000 $10,000
12/31/88 $10,337 $10,256 $10,229
12/31/89 $11,733 $11,828 $10,694
12/31/90 $12,839 $13,098 $11,355
12/31/91 $14,928 $15,155 $11,693
12/31/92 $15,878 $16,209 $12,041
12/31/93 $17,347 $17,288 $12,371
12/31/94 $16,762 $17,008 $12,718
12/31/95 $19,780 $19,865 $13,040
12/31/96 $20,820 $20,900 $13,471
12/31/97 $22,723 $22,884 $13,709
6/30/98 $23,557 $23,657 $13,802
</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 June 30, 1988 through June 30, 1998.
- ------------
*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 OF TERRI BRANDT]
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
The Index 500 Portfolio generated a total return of 17.25 percent* for the six
month period ended June 30, 1998. This compares to the S&P 500 Index,** which
earned 17.68 percent for the same period.
PERFORMANCE ANALYSIS
A handful of sectors played a key role in the Portfolio's performance during the
reporting period. Technology turned in solid performance for the first half of
1998, outperforming the market. Owing mainly to the increases in the computer
software and computer services industry and the computer networking industry.
Health Care, Financial and Consumer Cyclicals also posted gains to the
Portfolio.
Transportation and Utilities sectors had the smallest contribution to the
Portfolio in this reporting period. The worst performer was the Energy sector,
hurt by a decline in utilities and a plunge in oil prices to nine-year lows. So
far this year, the largest and smallest stocks have shown the strongest
performance. The middle of the market has lagged in comparison.
OUTLOOK
The positive story for large-cap stocks will likely continue. The larger the
better, in that the largest companies in the S&P 500** have shown the best
performance for year-to-date returns, while the middle and bottom companies
continue to turn in lower gains during the same period.
Hopes for small but steady gains to come in corporate earnings without
serious inflation should help to push stocks further. The Technology sector was
the largest mover to the Portfolio's return year-to-date. The big question now
is how the technology stocks will do amid continued worries about weak Asian
demand.
14
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ------------ -----------
<S> <C> <C> <C>
General Electric Company.................................... 178,500 $ 16,243,500 3.3%
Microsoft Corporation....................................... 132,800 14,392,200 2.9%
Coca-Cola Company........................................... 134,900 11,533,950 2.4%
Exxon Corporation........................................... 134,500 9,591,531 2.0%
Merck & Co., Inc............................................ 65,400 8,747,250 1.8%
Pfizer, Inc................................................. 70,500 7,662,469 1.6%
Wal-Mart Stores............................................. 122,500 7,441,875 1.5%
Procter & Gamble Company.................................... 73,168 6,662,861 1.4%
Intel....................................................... 89,200 6,611,950 1.3%
Royal Dutch Petroleum....................................... 116,900 6,407,581 1.3%
------------ -----------
$ 95,295,167 19.5%
------------ -----------
------------ -----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 4.1%
Capital Goods 7.9%
Communication Services 6.8%
Consumer Cyclical 10.2%
Consumer Staples 14.1%
Energy 7.1%
Financial 17.8%
Health Care 11.3%
Technology 13.1%
Transportation 1.0%
Utilities 3.3%
Cash and Other
Assets/Liabilities 3.3%
</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 29.2%
Five year 22.3%
Ten year 17.9%
Index 500 S&P 500
Portfolio Index CPI
6/30/88 $10,000 $10,000 $10,000
12/31/88 $10,301 $11,657 $10,229
12/31/89 $13,459 $15,346 $10,694
12/31/90 $12,931 $14,864 $11,355
12/31/91 $16,777 $19,390 $11,693
12/31/92 $18,016 $20,867 $12,041
12/31/93 $19,774 $22,973 $12,371
12/31/94 $20,007 $23,259 $12,718
12/31/95 $27,377 $31,962 $13,040
12/31/96 $33,302 $38,009 $13,471
12/31/97 $44,079 $50,245 $13,709
6/30/98 $51,681 $59,129 $13,802
</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 June 30,
1988 through June 30, 1998.
- ----------------------
+"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 OF CLARK WINSLOW]
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
Total return for the Capital Appreciation Portfolio was 21.06 percent* for the
six month period ended June 30, 1998. This compares favorably with the return of
the Portfolio's benchmark. The Russell 1000 Growth Index** increased 20.38
percent, while the S&P 500 Index+ appreciated 17.68 percent for the same period.
PERFORMANCE ANALYSIS
The trend of the largest market capitalization companies outperforming the broad
market continued to affect the market for the first six months of 1998. Only 37
stocks in the Russell 1000 Growth Index** have a market capitalization greater
than $46 billion and comprise 57 percent of the Index's** value. These mega cap
stocks returned in excess of 26 percent through June 30, 1998 and outperformed
all other market capitalization sectors by more than 10 percent.
The investment philosophy implemented by Winslow Capital Management in the
Portfolio is based on the belief that investing in companies with strong future
earnings growth potential will provide higher potential results over the long
term. Through fundamental research of these companies we identify stocks that
are attractively valued relative to their estimated future earnings growth.
Mixing several medium capitalization stocks with large cap growth issues
enhances the philosophy. This means that we generally will be underweighted in
the very largest, slower growing companies that have performed strongly in the
recent past.
The Portfolio's overweighted positions in technology, healthcare and
specialty retailing companies were additive to results in the first six months
of 1998. The best performing holdings in the Technology sector for the six
months were Cisco Systems, Inc. and Microsoft Corporation with price moves of 65
percent.* The Portfolio's average technology stock appreciated 31 percent* for
the first two quarters. The Portfolio's healthcare investments on average moved
up 40 percent,* with Warner-Lambert Company's 68 percent* move leading the way.
In addition, the specialty retailers owned in the Portfolio advanced 35
percent,* with Tommy Hilfiger Corporation up over 75 percent.* During the same
time period the Finance and Energy sectors detracted from the overall return. In
the Financial Service sector, the average holding appreciated 7 percent.* We are
slightly overweighted in the Energy sector and our companies declined 14
percent,* but it is a small part of the Portfolio and the long-term outlook is
favorable.
OUTLOOK
Winslow Capital follows a fundamental "bottom up" investment process that leads
us to companies with above-average future earnings growth potential.
Above-average growth potential is a necessity, but valuation of the stock is
also important. These investment philosophy guidelines have led us to
overweighted positions in the Consumer, Technology and Health Care sectors
relative to our benchmark. We look for individual stocks in these sectors to
report strong earnings and do not foresee the need to position the Portfolio
differently for the upcoming quarters. In the most recent quarter, the average
reported earnings gain for the companies in the Portfolio was 30 percent.*
We continue to expect GDP growth of 2 percent for the remainder of 1998.
Growth in Europe and the U.S., which represents 85 percent of S&P 500+ profits,
will offset a weak Asia. The positive of the Asian impact is that it helps keep
inflation low at approximately 1 percent and has eased fears of an increase in
interest rates. In an environment of slowing corporate profits and stable
interest rates, stock selection becomes increasingly important. Our optimism for
the second half performance of the Portfolio, despite the prospect of a
relatively flattish market, is based on an emphasis in sectors showing strong
domestic growth such as retail, healthcare and technology. We think that over
the next six months there will be many more earnings disappointments. Investment
performance may be more dependent on avoiding the losers than identifying the
winners.
16
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- -------------- ----------
<S> <C> <C> <C>
Cisco Systems, Inc.......................................... 165,150 $ 15,204,122 4.2%
Home Depot, Inc............................................. 177,800 14,768,471 4.1%
Parametric Technology Corporation........................... 506,900 13,749,663 3.8%
Computer Associates International........................... 235,400 13,079,413 3.6%
Federal National Mortgage Association....................... 194,000 11,785,500 3.3%
Wal-Mart Stores............................................. 188,000 11,421,000 3.2%
Dollar General Corporation.................................. 258,676 10,233,869 2.8%
HBO & Company............................................... 287,600 10,137,900 2.8%
USA Waste Services, Inc..................................... 202,700 10,008,312 2.8%
Warner-Lambert Company...................................... 142,200 9,865,125 2.7%
-------------- -----
$ 120,253,375 33.3%
-------------- -----
-------------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Basic Materials 2.0%
Capital Goods 7.2%
Communication Services 4.8%
Consumer Cyclical 17.7%
Consumer Staples 3.6%
Energy 3.4%
Financial 11.6%
Health Care 15.0%
Technology 31.1%
Utilities 2.2%
Cash and Other
Assets/Liabilities 1.4%
</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 38.6%
Five year 20.4%
Ten year 17.6%
Russell
Capital 1000
Appreciation Growth
Portfolio Index CPI
6/30/88 $10,000 $10,000 $10,000
12/31/88 $9,923 $10,244 $10,229
12/31/89 $13,713 $13,924 $10,694
12/31/90 $13,432 $13,888 $11,355
12/31/91 $19,045 $19,604 $11,693
12/31/92 $20,006 $20,585 $12,041
12/31/93 $22,094 $21,178 $12,371
12/31/94 $22,591 $22,955 $12,718
12/31/95 $27,737 $31,493 $13,040
12/31/96 $32,622 $38,775 $13,471
12/31/97 $41,841 $50,592 $13,709
6/30/98 $50,652 $60,902 $13,802
</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 June 30, 1988 through
June 30, 1998.
- ------------
*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 OF GARY CLEMONS]
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 Asian financial crisis and its effects on corporations across the world
continued to dominate economic news during the second quarter of 1998,
increasing volatility in financial markets around the world. Investors learned
the negative implications of global corporate interdependence, as the events in
Asia caused economists to predict a slowdown in global GDP growth for 1998. In
this environment, the International Stock Portfolio increased 11.81 percent* for
the six month period ended June 30, 1998, compared to the Morgan Stanley Capital
EAFE Index** return of 16.08 percent for the same period.
PERFORMANCE ANALYSIS
The Portfolio continues to benefit from a high exposure to European equities,
which represented approximately 65 percent of total assets during the period.
Equity markets were strong across Europe, as the region prepares for European
Economic and Monetary Union (EMU). The Portfolio's European financials fared
especially well over the period, as interest rate convergence in preparation for
the EMU led to lower rates in several nations. European financial equities were
among the Portfolio's top performers during the period, including the
Netherlands insurance companies, Aegon and International Nederlanden Group,
which advanced 97 percent* and 57 percent,* respectively and one of our largest
positions, French bank Banque Nationale De Paris ADR, appreciated 55 percent*
during the period.
The Latin American markets struggled during the first half of 1998, as they
felt the residual effect of investor fear toward Asia. The Portfolio currently
holds approximately 7 percent in Latin American equities. We view the recent
downturn in Latin equities as a short-term phenomenon, and view it as an
opportunity to find investment values throughout the region. Weakness in these
markets has provided us with attractive investment opportunities. For example,
we have taken advantage of recent price weakness to add Anonima Telephonos De
Venezuela (CANTV) to the Portfolio. CANTV is the Venezuelan phone company, which
is trading at an attractive current P/E of 9x and offers a 6 percent dividend
yield potential (1). We continue to devote attention toward discovering further
quality investments in the Latin American region.
OUTLOOK
Turning toward Asia, it appeared in the first half of 1998 that the region's
financial crisis was far from over. Increased evidence of bad debts, foreign
exchange exposure, and political turbulence sent Asian equity markets even
lower. The Portfolio has approximately 7 percent of total assets invested in
Asian equities, with the majority invested in Hong Kong. With many share prices
having fallen over 75 percent in U.S. dollar, investment opportunities are
becoming more prevalent. However, caution is warranted when investing in the
region, hence our focus on companies with strong management, solid balance
sheets and sound long-term fundamentals.
- ---------
(1)P/E and dividend yield based on ADR price of $27. The P/E Ratio is not
necessarily indicative of future results or of how the portfolio itself is
doing.
18
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF COMMON
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ --------- ----------- -----------
<S> <C> <C> <C>
AXA-UAP..................................................... 87,427 $ 9,833,007 3.5%
Banque Nationale De Paris................................... 118,700 9,698,585 3.5%
Aegon....................................................... 96,208 8,376,613 3.0%
Philips Electronics......................................... 93,800 7,890,108 2.8%
Deutsche Bank............................................... 82,050 6,944,443 2.5%
Telefonica De Espana........................................ 150,000 6,937,378 2.5%
Rhone-Poulenc............................................... 122,325 6,899,243 2.5%
Courtaulds PLC.............................................. 785,200 5,840,818 2.1%
International Nederlanden Group............................. 84,687 5,548,875 2.0%
BTR PLC..................................................... 1,945,450 5,522,232 2.0%
----------- -----
$73,491,302 26.4%
----------- -----
----------- -----
</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 10.2%
Five year 16.2%
Since inception
(May 1, 1992) 14.4%
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
6/30/98 $22,934 16,481 11,626
</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 June 30, 1998.
- ----------------------
*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 form European, Asian and Far Eastern markets.
19
<PAGE>
Small Company Portfolio
PERFORMANCE UPDATE
JIM TATERA, CFA
CHIEF EQUITY PORTFOLIO
MANAGER
[PHOTO OF JIM TATERA]
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 9.43 percent* for the six month period
ended June 30, 1998. The Portfolio's benchmark, the Russell 2000 Growth Index**
returned 5.46 percent for the same period. The combination of faltering earnings
and declining interest rates has furthered what was already a large-cap, growth
oriented bias in the market. The dominance of the largest stocks in the first
half of the year was so substantial that in only two other half-year periods
since 1955 have small stocks done worse on a comparative basis.
PERFORMANCE ANALYSIS
Consumer Cyclical stocks, which include the retailers, and technology stocks
were the big positive contributors to performance in the Russell 2000 Growth
Index** during the first half of 1998, accounting for more than half of the
index return. The Energy sector showed the weakest absolute return and despite
its smaller weight in the index was the largest negative contributor to
performance. Health Care and Producer Durables also showed negative returns for
the period. The main culprit of these negative results was weaker than expected
earnings and the absolute decline in oil prices.
The Portfolio's strong relative performance was due, in part, to avoidance
of earnings problems through our diligent analysis process. One area in
particular, which performed well, was the Consumer Cyclical stocks. This sector
is dominated by retailing companies like Pacific Sunwear of California
(specialty retailer to young adults and teens), Borders Group Incorporated
(superstore book retailer) and Tropical Sportswear International (men's
apparel). All three have performed very well year-to-date. Tropical Sportswear
International (TSIC) is typical of the companies we like to invest in. TSIC has
created a value-added business by manufacturing and supplying private label
garments for major retailers like Wal-Mart Stores, Dillards, Inc. and Federated
Department Stores. Originally focused on men's basic casual pants, TSIC has
expanded their product line. TSIC not only provides manufacturing and and
sourcing abilities to its retailers, but TSIC also provides a level of service
with unmatched delivery times and a comprehensive brand management program which
helps the retailers minimize the investment in inventory while maximizing the
in-stock supply of the garments. In other words TSIC has become an invaluable
member of the retailers' teams and has built strong relationships that can be
leveraged for future opportunities.
United Rental, Inc. is another top performer for the Portfolio. United
Rental, Inc. rents and sells industrial equipment, parts and services. It is the
major consolidator in the industry with a proven management team that is growing
their business into a national brand franchise.
Laggards for the period were an eclectic group led by Premiere Technologies
which fell in price as the company slowed its growth to consolidate its most
recent acquisitions. Premiere has developed a very strong product offering to
pursue the burgeoning telecommunications market; the consolidation of the
acquisitions is simply taking longer than expected.
Two other areas, specifically the semiconductor and oil service areas, which
have been weak continue to show problems. Demand and pricing for semiconductors
remained weak, as well. The energy area has been especially hard hit with the
fall in oil prices. While we do have exposure to both areas, neither is a major
emphasis in the Portfolio today. We continue to keep abreast of developments in
companies in these areas with the anticipation of adding to our holdings when
our analysis shows a positive turn in the fundamentals.
OUTLOOK
We have been cautiously optimistic through the first half of 1998. Our caution
remains focused on the sustainability of company earnings and the potentially
overly optimistic estimates by Wall Street analysts. While the U.S. economy
continues to chug along, Europe has been strong and Asia weak. As it relates to
most
20
<PAGE>
of the smaller growth companies in the Portfolio, the international markets and
events have less direct revenue or earnings impact than they have on the large
multinational companies. With that being said, the Asian problems are negatively
influencing a multitude of industries and will likely have a trickle-down effect
to the smallest companies. Thus our major concern today relates to earnings.
Our approach focuses on those companies that exhibit superior revenue and
earnings growth potential with above peer profitability and strong management
vision. It is our belief that over time these issues will display higher
positive earnings surprise through accelerating operating momentum and would
then produce positive performance for the Portfolio. Today's valuations for
small growth companies are at historically low levels and will likely gain
investors' attention at some point. When that occurs small growth companies have
the ability to significantly outperform larger companies. The Portfolio is well
positioned by investing in small companies, which we feel have the ability to be
tomorrow's leading companies.
FIVE LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
United Rental, Inc.......................................... 182,700 $ 7,673,400 3.9%
Kaydon Corporation.......................................... 192,800 6,808,250 3.5%
Borders Group Incorporated.................................. 172,940 6,398,780 3.3%
Eagle USA Airfreight, Inc................................... 173,500 6,018,281 3.1%
MSC Industrial Direct Company............................... 201,600 5,745,600 2.9%
----------- -----
$32,644,311 16.7%
----------- -----
----------- -----
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN SMALL COMPANY PORTFOLIO,
RUSSELL 2000 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>
One year 12.4%
Five Year 14.5%
Since inception
(May 3, 1993) 15.1%
Small
Russell
Company 2000
Growth
Portfolio CPI Index
5/03/93 $10,000 $10,000 $10,000
12/31/93 $11,733 10,118 12,234
12/31/94 $12,456 10,402 11,938
12/31/95 $16,449 10,665 15,641
12/31/96 $17,509 11,017 17,401
12/31/97 $18,867 11,212 19,654
6/30/98 $20,646 11,288 20,727
</TABLE>
On the chart above you can see how the Small Company Portfolio's
total return compared to the Russell 2000 Growth Index and the
Consumer Price Index. The three lines represent the total return of a
hypothetical $10,000 investment made on inception date of the Small
Company Portfolio (May 3, 1993) through June 30, 1998.
- ------------
*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
smallest 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.
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 OF KENT WEBER]
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 with maturities near the 1998, 2002, 2006 and 2010 liquidation
dates of each Portfolio.
PERFORMANCE
For the six month period ended June 30, 1998, the Maturing Government Bond
Portfolios generated the following returns:
<TABLE>
<S> <C>
Maturing Government Bond 1998 Portfolio................ 3.20 percent*
Maturing Government Bond 2002 Portfolio................ 3.90 percent*
Maturing Government Bond 2006 Portfolio................ 5.35 percent*
Maturing Government Bond 2010 Portfolio................ 6.68 percent*
</TABLE>
For the six month period ended June 30, 1998, the Ryan Lab's U.S. Treasury
Strip Indexes of comparable maturity generated the following returns:
<TABLE>
<S> <C>
Ryan Lab's Inc. September 1998 Index................... 2.87 percent**
Ryan Lab's Inc. September 2002 Index................... 4.18 percent**
Ryan Lab's Inc. September 2006 Index................... 5.20 percent**
Ryan Lab's Inc. September 2010 Index................... 6.61 percent**
</TABLE>
PERFORMANCE ANALYSIS
Our investment activities continue to focus on tracking the performance of the
respective indices. To reach these goals, we continue to use a variety of
Government Agency securities. By selectively using these Government Agency
securities in concert with U.S. Treasury securities, the Portfolios benefit from
enhanced diversification and also from the receipt of additional income (over
that of U.S. 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................ .53 years
Maturing Government Bond 2002 Portfolio................ 4.28 years
Maturing Government Bond 2006 Portfolio................ 8.26 years
Maturing Government Bond 2010 Portfolio................ 12.33 years
</TABLE>
OUTLOOK
At the time of this report, investors have been notified of the maturity of the
1998 Portfolio. The other Portfolios remain well situated, in our opinion. We
stand ready to handle an inherent increase in volatility that occurs due to the
low interest rate levels. We anticipate that the market will experience slower
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>
FHLB 11.8%
FICO 21.7%
FNMA 15.1%
Israel GTC 4.2%
TVA 25.7%
U.S. Treasury
Strips 21.5%
</TABLE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FICO 14.2%
FNMA 15.6%
Israel GTC 8.5%
TVA 18.4%
U.S. Treasury Strips 42.8%
Cash and Other
Assets/Liabilities .5%
</TABLE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FICO 11.1%
FNMA 11.1%
Israel GTC 7.5%
Israel State Aid Strips 12.8%
RFC Strip 12.4%
U.S. Treasury Strips 44.5%
Cash and Other
Assets/Liabilities .6%
</TABLE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FICO 10.6%
FNMA 6.2%
Israel GTC 1.6%
Israel State Aid Strips 19.0%
RFC Strip 4.1%
Turkey GTC 6.3%
U.S. Treasury Strips 51.6%
Cash and Other
Assets/Liabilities 0.6%
</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 U.S. Treasury
Strips consists of all active zero-coupon U.S. 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 6.6%
Since inception (May
2, 1994) 7.0%
(Thousands)
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 $10,190
12/31/95 $11,606 $11,700 $10,448
12/31/96 $12,086 $12,294 $10,793
12/31/97 $12,822 $13,231 $10,984
6/30/98 $13,233 $13,725 $11,058
</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 June 30, 1998.
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 10.5%
Since inception (May
2, 1994) 9.1%
(Thousands)
Ryan Labs,
Inc.
Maturing June 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 $10,190
12/31/95 $12,537 $12,857 $10,447
12/31/96 $12,754 $13,028 $10,793
12/31/97 $13,838 $14,612 $10,983
6/30/98 $14,377 $15,476 $11,058
</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 June 30, 1998.
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
returns:
<S> <C> <C> <C>
One year 16.3%
Since inception (May
2, 1994) 11.6%
(Thousands)
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 $10,190
12/31/95 $13,490 $14,076 $10,447
12/31/96 $13,327 $13,720 $10,793
12/31/97 $15,009 $16,258 $10,983
6/30/98 $15,812 $17,565 $11,058
</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 June 30, 1998.
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 23.4%
Since inception (May
2, 1994) 13.8%
(Thousands)
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 $10,190
12/31/95 $14,080 $15,112 $10,447
12/31/96 $13,599 $14,276 $10,793
12/31/97 $16,028 $17,854 $10,983
6/30/98 $17,098 $19,833 $11,058
</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 June 30, 1998.
- ------------
*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
GARY ASTER, CFA
PORTFOLIO MANAGER
[PHOTO OF GARY ASTER]
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 2.31 percent* for the period ended June 30,
1998. In comparison, its benchmark, the Russell 1000 Value Index,** earned 12.16
percent for the same period.
In prior reporting periods, the S&P Barra Value Index+ was used as the
Portfolio's benchmark. The current benchmark, the Russell 1000 Value Index,**
better fits our stated investment objective than did the S&P Barra Value Index.+
The Portfolio's performance will be compared to the Russell 1000 Value Index**
going forward.
PERFORMANCE ANALYSIS
While progress has been made toward restructuring the Portfolio, results for the
first half of 1998 still lagged the benchmark Russell 1000 Value Index** by a
significant margin.
Since most significant economic sector over-weightings, including Energy,
have been reduced, it is appropriate to identify stock selection as the main
issue. Philips Electronics, R.J.R. Nabisco Holdings Corporation and Morton
International, Inc. all suffered double digit percentage declines during the
first half of the year due to a variety of factors including earnings
disappointments, deteriorating fundamental business outlook and lack of
sufficient communication with investors. Two of these holding have been sold and
the other is under close review.
The process of restructuring the Portfolio continues to move forward.
Several companies whose stocks meet our value requirements have been added to
the Portfolio. Among these additions are Food Lion, Inc., Diebold and Deluxe
Corporation. The stocks of each of these three companies share several common
investment attributes including a significant decline in the stock price prior
to purchase, experienced management teams and good business fundamentals
including strong balance sheets and good cash flow generation.
OUTLOOK
Looking ahead we expect that the Portfolio may eventually experience investment
return potential which may be at or near general market levels during rising
markets, better than market levels during declining markets and better than
market levels over a full market cycle.
26
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Humana...................................................... 283,700 $ 8,847,894 4.3%
Everest Reinsurance Holdings................................ 223,892 8,605,849 4.2%
Hormel Foods Corporation.................................... 239,813 8,288,537 4.1%
Federated Department Stores................................. 148,100 7,969,631 3.9%
El Paso Natural Gas Company................................. 194,952 7,456,914 3.6%
International Business Machine.............................. 60,400 6,934,675 3.4%
Nationsbank Corporation..................................... 89,300 6,831,450 3.3%
Valero Energy Corporation................................... 198,100 6,586,825 3.2%
American Express Company.................................... 56,400 6,429,600 3.1%
Texas Utilities Company..................................... 134,800 5,611,050 2.7%
----------- -----
$73,562,425 35.8%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 9.6%
Capital Goods 1.7%
Communication Services 4.1%
Consumer Cyclical 10.1%
Consumer Staples 9.8%
Energy 12.5%
Financial 22.9%
Health Care 4.1%
Technology 7.4%
Transportation 1.0%
Utilities 10.8%
Cash and Other
Assets/Liabilities 6.0%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN VALUE STOCK PORTFOLIO,
S&P 500 BARRA VALUE INDEX, RUSSELL 1000 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> <C>
One year 6.7%
Since inception (May
2, 1994) 21.6%
(Thousands)
Value Stock S&P 500 Barra Value Russell 1000 Value
Portfolio Index CPI Index
5/02/94 $10,000 $10,000 $10,000 $10,000
12/31/94 $10,457 $10,062 $10,190 $10,209
12/31/95 $13,904 $13,784 $10,448 $14,124
12/31/96 $18,207 $16,816 $10,793 $17,181
12/31/97 $22,065 $21,859 $10,984 $23,223
6/30/98 $22,574 $24,510 $11,058 $26,047
</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, Russell 1000
Value 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 Value Stock Portfolio (May 2, 1994) through June 30, 1998.
- ------------
*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 Value Index contains stock from the Russell 1000 with low
book to price ratio. 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 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
GARY ASTER, CFA
PORTFOLIO MANAGER
[PHOTO OF GARY ASTER]
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
For the six month period ended June 30, 1998, the Small Company Value Portfolio
returned 4.19 percent.* The Russell 2000 Value Index** returned 4.44 percent for
the same reporting period. While showing respectable performance, small value
stocks continue to lag large capitalization stocks as investors are attracted to
the superior liquidity and stable earnings offered by these issues.
PERFORMANCE ANALYSIS
Sector returns were mixed for the Portfolio for the first half of 1998.
Relatively poor returns for stocks held in the Capital Goods and Transportation
sectors were offset by the strong showing in certain selections in Energy,
Health Care and Technology. Some highlights in the first half include: The
Learning Company, Inc. (up 84 percent*) which is consolidating the educational
software market with acquisitions made at attractive valuations. In June,
Nationwide Mutual Insurance Company announced that it is acquiring Allied Group
Incorporated (up 64 percent*).
The turmoil in Asia, which began to hamper Portfolio performance in the
latter stages of 1997, continues. Holdings in the more economically sensitive
sectors such as Basic Materials and Energy were the most affected as commodity
prices dropped due to decreased demand from Asia. The concerns associated with
falling commodities are largely reflected in the market. Any sign of progress
out of Asia will likely cause renewed confidence in the worldwide economy and
solid performance from what are now inexpensive, economically sensitive stocks.
We will continue to monitor the progress of the Asian economies and determine
the affect on stocks held in the Portfolio.
OUTLOOK
The recent underperformance of small capitalization stocks relative to large
stocks has acted to widen the valuation gap that already existed at the
beginning of the year. We feel that the near-term and long-term outlook for
small capitalization stocks is very good.
We continue to believe that the Portfolio's composition is positioned well.
The current holdings have solid fundamentals and are selling at reasonable
valuations.
28
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Learning Company, Inc....................................... 8,700 $ 257,738 4.5%
Wicor, Inc.................................................. 8,900 205,813 3.6%
Amerus Life Holdings........................................ 6,200 200,725 3.5%
Bay View Capital Corporation................................ 6,300 200,025 3.5%
Peoples Heritage Financial Group, Inc....................... 8,400 198,450 3.5%
RLI Corporation............................................. 4,875 198,352 3.5%
Michaels Stores Incorporated................................ 5,600 197,575 3.5%
United Dominion Industries.................................. 5,900 196,912 3.5%
Sierra Pacific Resources.................................... 5,400 196,088 3.5%
Sovereign Bancorp Incorporated.............................. 11,880 194,164 3.4%
----------- -----
$ 2,045,842 36.0%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 5.4%
Capital Goods 10.5%
Consumer Cyclical 10.3%
Consumer Staples 8.1%
Energy 1.5%
Financial 30.6%
Technology 6.3%
Transportaton 3.7%
Utilities 10.0%
Cash and Other
Assets/Liabilities 13.6%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN SMALL COMPANY VALUE PORTFOLIO,
RUSSELL 2000 VALUE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Total return (not annualized) from
October 1, 1997
<S> <C> <C> <C>
(inception date) to June 30, 1998: 6.6%
(Thousands)
Small Company Value Russell 2000 Value
Portfolio Index CPI
10/1/97 $ 10,000 $ 10,000 $ 10,000
12/31/97 $ 10,229 $ 10,168 $ 10,019
6/30/98 $ 10,658 $ 10,619 $ 10,087
</TABLE>
On the chart above you can see how the Small Company Value
Portfolio's total return compared to the Russell 2000 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
Small Company Value Portfolio (October 1, 1997) through June 30, 1998.
- ------------
*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 a low
price to book ratios. The Russell 2000 are the 2,000 smallest 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>
Global Bond Portfolio
PERFORMANCE UPDATE
EDWARD DOVE
JULIUS BAER INVESTMENT
MANAGEMENT
[PHOTO OF EDWARD DOVE]
WAYNE SCHMIDT,
CFA
ADVANTUS CAPITAL
MANAGEMENT
[PHOTO OF WAYNE SCHMIDT]
The Global Bond Portfolio seeks to maximize current income consistent with
protection of principal. The Portfolio pursues its objective by investing
primarily in debt securities issued by issuers located anywhere in the world.
Prior to May 1, 1998, this Portfolio was known as the International Bond
Portfolio. While Advantus Capital Management, Inc. acts as the investment
adviser for the Portfolio, Julius Baer Investment Management Inc. provides
investment advice to the Global Bond Portfolio under a subadvisory agreement.
PERFORMANCE
The Global Bond Portfolio had a return of 5.04 percent* for the six month period
ended June 30, 1998. This compares to the Salomon Brothers World Government Bond
Index** return of 2.79 percent for the same period.
In prior reporting periods, the Salomon Brothers Index+ was used as the
International Bond Portfolio's benchmark. The Salomon Brothers World Government
Bond Index** better fits the stated investment objective of the Global Bond
Portfolio. The Portfolio's performance will be compared to the Salomon Brothers
World Government Bond Index** going forward.
PERFORMANCE ANALYSIS
Global Commentary:
The major theme affecting global bond markets during the first six months of
1998 was the effects of the Asian crisis. Because of the turmoil in this region,
growth around the world was subdued, inflation remained in check, and bond
markets performed well in U.S. dollar terms. Bond yields fell across the board
with Sweden the best performing among developing countries. The U.S. dollar
experienced a slight decline, which helped returns for U.S. investors. Japan and
Australia were the only exceptions to this trend, as both bond markets turned in
negative returns.
An overweight position in European bonds, notably the United Kingdom and
Sweden, helped propel performance during the first half of 1998. In these
markets, we maintained a long duration position (over 6.5 years vs. the index of
5.5 years), which was the right decision as most of the movement was at the long
end of the curve in these markets. Being out of Japan once again proved
favorable for the Portfolio, as this bond market continues to suffer from low
yields and an economy that is completely stalled. Likewise, the currency
weakened against the U.S. dollar.
U.S. Commentary:
Interest rates continued their moderate decline in the second quarter as concern
for strong domestic economic growth was offset by low inflation, global economic
and political instability. The yield curve flattened as rates on the 30-year
U.S. Treasury Bond declined 31 basis points to yield 5.63 percent while 2-year
notes declined only 8 basis points to yield 5.48 percent for the six month
period.
Long U.S. Treasury Bonds were the best performing sector in the second
quarter. They benefited from the flattening of yield curve and a flight to
quality by bond investors. As bond investors became worried about global
uncertainties, their appetite for U.S. Treasury securities increased. This
demand, along with a smaller supply of U.S. Treasury securities drove bond
prices higher.
Mortgage-backed securities performed very well, especially considering the
relatively low interest rate environment. Prepayment speeds and yield spreads
held steady, providing stable returns from this sector.
OUTLOOK
Global Outlook:
Continental Europe will likely experience a moderate pick-up in growth through
year-end, while the United Kingdom will likely see its growth slow down. This,
combined with a lack of inflationary pressures, creates a positive environment
for bond markets. We will continue to overweight the Portfolio with European
bonds. Because of slowing growth, however, UK sterling should come under
pressure. Therefore, we have hedged the UK sterling position into Deutschmarks.
In the Far East and Pacific regions, the Asian crisis will likely create
sharply negative growth for all the regions economies. Because of this, we favor
the bond markets of Australia and New Zealand as yields move lower over the
remainder of 1998. In these two markets we have hedged the currency exposure
back into U.S. dollars.
Japan's economy has deteriorated even further with yields at just over 1
percent. We see little value in this market. Therefore, no Japanese bonds will
be held in the Portfolio.
U.S. Outlook:
Interest rates will likely continue to be range bound and eventually grind lower
as the year progresses. Economic growth will likely begin to slow and inflation
will likely remain low as the Asian crisis, Japan and the strong dollar begin to
negatively affect our economy. The Federal Reserve will need to see signs of
slower growth and higher unemployment before they are willing to reduce
short-term interest rates. This could happen by early 1999, paving the way for
lower bond yields. This is positive for fixed income investors. In the
Portfolio, we will continue to own enough duration and take advantage of the
opportunities offered in the U.S. bond market.
We look forward to reporting to you again at the end of the year.
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....... $ 1,942,596 8.9%
Sweden Series 1038 (Swedish Krona)--6.500%, 10/25/06........ 1,471,919 6.7%
British Treasury (British Sterling Pound)--9.000%,
08/06/12.................................................. 1,435,726 6.5%
Australian Government (Australian Dollar)--8.750%,
08/15/08.................................................. 1,255,244 5.7%
U.S. Treasury Bond--6.125%, 11/15/27........................ 1,125,141 4.7%
Glaxo (British Sterling Pound)--8.750%, 12/01/05............ 937,405 4.3%
International Bank Reconstruction & Development (British
Sterling Pound)--7.125%, 07/03/07......................... 889,033 4.1%
U.S Treasury Bond--8.000%, 11/15/21......................... 966,797 4.1%
Denmark (Danish Kroner)--7.000%, 12/15/04................... 701,639 3.2%
U.S. Treasury Note--6.375%, 09/30/01........................ 767,618 3.2%
----------- ----------
$11,493,118 51.4%
----------- ----------
----------- ----------
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN GLOBAL BOND PORTFOLIO,
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX, SALOMON BROTHERS NON-U.S.
WORLD GOVERNMENT BOND INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Total return (not annualized) from
October 1, 1997
<S> <C> <C> <C> <C>
(inception date) to June 30, 1998: 5.1%
(Thousands)
Salomon Salomon Brothers
Brothers Non-U.S.
Global World
Bond Government World Government
Portfolio Bond Index Bond Index CPI
10/1/97 $10,000 $10,000 $10,000 $10,000
12/31/97 $10,008 $10,021 $9,861 $10,019
6/30/98 $10,512 $10,300 $10,067 $10,087
</TABLE>
On the chart above you can see how the Global Bond Portfolio's
total return compared to the Salomon Brothers World Government Bond
Index, the Salomon Brothers Non-U.S. World Government Bond 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 Global
Bond Portfolio (October 1, 1997) through June 30, 1998.
- ------------
*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 World Government Bond Index is a market value-weighted
index of government debt securities issued by twelve different nations:
Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the
Netherlands, Spain, United Kingdom and the United States. The goal of the
index is to include all fixed-rate institutionally traded bonds issued by the
above governments. The minimum maturity is one year, and the minimum
outstanding must be at least $25 million U.S. dollars. Also included in the
index are zero-coupon renewable securities. Floating rate and private
placement issues are excluded from the index. Returns are available in both
U.S. dollars and local currency terms.
+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 OF TERRI BRANDT]
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
For the six month period ending June 30, 1998, the Index 400 Mid-Cap Portfolio
returned 8.10 percent.* This compares to the S&P 400 MidCap Index,** which
earned 8.63 percent for the same period.
PERFORMANCE ANALYSIS
The Technology sector was the top contributor to the index during the reporting
period. The Technology sector rallied from its losses late last year and was the
strongest performer in the Portfolio. Financial, Transportation, Consumer
Staples and Consumer Cyclical sectors also contributed to the performance.
Early in the reporting period, oil prices plunged to nine-year lows. This
profoundly hurt the Energy sector. Energy turned in a loss of more than 15
percent in the second half of the reporting period and was the worst performing
sector in the Portfolio. The sector was hurt by significant downward earning
revisions. Basic Materials followed the Energy sector as the second poorest
performer for the Portfolio.
OUTLOOK
We expect that the market will likely remain where it is if low interest rates,
low inflation and a strong domestic economy continue. In order for the market to
move higher, it is necessary to have growth in corporate earnings without the
threat of serious inflation. Year-to-date, the Technology sector has had the
greatest impact on the index return. The big question now: How will technology
stocks perform amid continued worries about weak Asian demand?
As we look ahead, the picture for mid-cap stocks remains bright.
32
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
S&P 400 Mid-Cap Depositary Receipt.......................... 3,700 $ 257,613 4.0%
America Online.............................................. 1,400 148,400 2.3%
Coca-Cola Enterprises....................................... 2,600 102,050 1.6%
USA Waste Services, Inc..................................... 1,300 64,187 1.0%
BMC Software, Inc........................................... 1,200 62,325 0.9%
AES Corporation............................................. 1,100 57,819 0.9%
Washington Post............................................. 100 57,600 0.9%
Compuware Corporation....................................... 1,100 56,238 0.9%
Capital One Financial Corporation........................... 400 49,675 0.8%
McKesson Corporation........................................ 600 48,750 0.7%
----------- -----
$ 904,657 14.0%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 6.0%
Capital Goods 8.0%
Communication Services 2.9%
Consumer Cyclical 15.2%
Consumer Staples 9.8%
Energy 4.5%
Financial 18.4%
Health Care 8.4%
Technology 14.2%
Transportation 1.8%
Utilities 10.5%
Cash and Other
Assets/Liabilities 0.3%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 400 MID-CAP PORTFOLIO,
S&P 400 MIDCAP INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Total return (not annualized) from
October 1, 1997
<S> <C> <C> <C>
(inception date) to June 30, 1998: 8.2%
(Thousands)
Index 400 Mid-Cap S&P 400 Mid-Cap
Portfolio Index CPI
10/1/97 $10,000 $10,000 $10,000
12/31/97 $10,006 $10,117 $10,019
6/30/97 $10,816 $11,938 $10,087
</TABLE>
On the chart above you can see how the Index 400 Mid-Cap
Portfolio's total return compared to the S&P 400 MidCap 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 Index
400 Mid-Cap Portfolio (October 1, 1997) through June 30, 1998.
- ------------
*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 percent industrials, 18
percent utilities, 15 percent financials and 1 percent 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 OF MICHAEL J KELLY]
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 12.67 percent* for the six month period
ended June 30, 1998. This compares to the S&P 500 Index** return of 17.68
percent for the same period.
PERFORMANCE ANALYSIS
U.S. stock markets rose to new highs during the first half of 1998, despite
waves of bad news from Asia and an apparent slowdown in corporate profit growth.
Though the ultimate impact of Asian woes on the U.S. economy remains uncertain,
the market dismissed fears of a worst case scenario.
Growth in earnings and a benign interest rate environment have been key
supports to continued equity market strength. Core information has managed to
decline even with falling unemployment and mostly flat capacity utilization
rate. More recently, overall inflation has been held in check by a stronger
dollar and lower energy prices. The combination of low unemployment, inflation
and interest rates continues to bolster consumer confidence as well as
consumer-based stocks. Year-to-date, retail stocks have gained 37 percent* and
consumer cyclical stocks are up 33 percent.*
Drug stocks have also been strong this year. Relative to most large
multi-national corporations, the outlook for pharmaceutical companies appears
positive. Earnings growth trends have been very favorable with a number of major
drugs coming to market, price discounting to managed care is moderating, and
retail pricing and volumes are increasing. Although markets and currency in
Europe continue to be difficult, this group had no exposure to Southeast Asia.
In addition, further industry consolidation seems likely. Not surprisingly, drug
stocks outpaced the market during the first half (up 28 percent*), adding to the
group's 55 percent* 1997 increase.
Stock selection among drug stocks helped the Portfolio outperform in this
sector. Warner-Lambert Company, one of the Portfolio's largest holding, gained
68 percent* during the first six months of the year. Sales of Warner's
cholesterol-reducing drug Lipitor surpassed the $1 billion mark. At the same
time, concerns raised in the fourth quarter regarding the company's innovative
diabetes drug, Ruzulin, abated substantially.
Meanwhile, commodity-driven energy and basic industry stocks have gained
only 4 percent* and 7 percent,* respectively. Recovery in these sectors may take
some time, and near term earnings uncertainty remains high. However, our
investment approach has helped us to identify companies in these groups whose
stocks have declined disproportionately to their longer-term earnings and cash
flow prospects.
For example, stocks of several traditional chemical companies appear
underpriced relative to our normalized cash flow forecasts. Dow Chemical
Company, a long-term underperformer, has shifted its mix of businesses as well
as corporate culture to focus on improving profitability and growth. The company
has disposed of poor businesses and is making value-added acquisitions. Prices
for key commodities appear to have bottomed; and Dow's realignment should
magnify the earnings impact of any improvement in pricing trends. Other
companies, such as DuPont, are pursuing exciting growth opportunities in life
science related areas. DuPont's commitment to pursing only high growth, high
return business is evidenced by its announced IPO of Conoco and acquisition of
Merck's stake in the DuPont Merck joint venture.
OUTLOOK
Looking ahead, we would note that the sustainability of domestic economic
momentum amid global disinflationary developments has been impressive. Still,
growth in corporate profits seems unlikely to rebound to 1997 levels in view of
softened global demand, a stronger dollar, domestic capacity growth, and
increasing wage pressures. Thus, our forecast calls for the recent slowdown in
operating earnings growth to persist through the end of the year.
34
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
COMMON
MARKET STOCK
SHARES VALUE PORTFOLIO
------- ----------- ----------
<S> <C> <C> <C>
Procter & Gamble Company.................................... 2,300 $ 209,444 3.5%
Monsanto Company............................................ 3,300 184,388 3.1%
SBC Communications, Inc..................................... 4,500 180,000 3.0%
Federal National Mortgage Association....................... 2,800 170,100 2.8%
Starwood Lodging............................................ 3,367 162,668 2.7%
Bristol-Myers Squibb Company................................ 1,400 160,913 2.7%
Union Pacific Corporation................................... 3,600 158,850 2.6%
Humana, Inc................................................. 4,900 152,819 2.5%
Tosco Corporation........................................... 5,200 152,750 2.5%
Cisco Systems, Inc.......................................... 1,600 147,300 2.4%
----------- -----
$ 1,679,232 27.8%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 5.5%
Communication Services 7.6%
Consumer Cyclical 21.6%
Energy 5.5%
Financial 17.5%
Health Care 16.5%
Technology 14.4%
Transportation 4.0%
Utilities 3.7%
Cash and Other
Assets/Liabilities 3.7%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MACRO-CAP VALUE PORTFOLIO,
S & P 500 INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Total return (not annualized) from
October 15, 1997
(inception date) to June 30, 1998: 10.3%
(Thousands)
Macro-Cap Value S&P 500
Portfolio Index CPI
10/15/97 $10,000 $10,000 $10,000
12/31/97 $9,787 $10,287 $10,019
<S> <C> <C> <C>
6/30/98 $11,027 $12,106 $10,087
</TABLE>
On the chart above you can see how the Macro-Cap Value 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
inception date for the Macro-Cap Value Portfolio (October 15, 1997)
through June 30, 1998 and on October 1, 1997 through June 30, 1998 for
the S & P 500 Index and the Consumer Price Index.
- ----------------------
*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 AND
RICHARD S. COONS
WALL STREET ASSOCIATES
[PHOTO OF WILLIAM JEFFREY]
[PHOTO OF KENNETH MCCAIN]
[PHOTO OF RICHARD COONS]
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
For the six month period ending June 30, 1998, the Portfolio earned 9.27
percent* versus the Russell 2000 Growth Index** return of 5.46 percent for the
same period. Portfolio performance for the period was driven by stock selection
in the Technology and Consumer sectors. In the Technology sector, investments in
software and business services produced large gains while apparel and retail
dominated the Consumer Cyclical sector.
During the second quarter 1998, the Micro-Cap Growth Portfolio returned
- -3.84 percent* compared to the Russell 2000 Growth Index** return of -5.74
percent for the same period. Strong stock selection in the Technology sector
(particularly software and networking companies) added value to portfolio
return.
PERFORMANCE ANALYSIS
A choppy and unpredictable second quarter ended with an upswing but created a
wider gap between the performance of the market's largest stocks and lagging
smaller issues. During the first six months of the year the S&P 500 Index+
gained 17.8 percent while smaller stocks (as measured by the Russell 2000
Index**) rose just 4.9 percent over the same period. As the Asian crisis
re-emerged, investors flocked to the perceived stability and liquidity of larger
stocks. Smaller-cap stocks languished for much of the second quarter but ended
the period on a strong note. Consumer stocks (especially apparel and specialty
retail) benefited from low interest rates and confident consumers. Technology
stocks, which sold off dramatically in May, rebounded strongly in the final
weeks of the quarter.
OUTLOOK
The Asian crisis has continued and there is no immediate end in sight. U.S.
companies have begun to feel the impact of Asia and corporate earnings are
declining. The earnings forecasts for the S&P 500 Index+ have been lowered in
each of the last ten months. We expect that analysts will continue to make
downward revisions on earnings estimates, particularly larger-cap stocks with
significant Asian exposure.
It is our opinion that the earnings strength found in smaller-cap companies
will be more valuable as profit growth continues to slow in many larger-cap
issues. The expected earnings growth for the S&P 500 Index+ is 8 percent (and
trending lower) versus 13 percent for small-cap stocks. As Asia's problems
continue, we believe investors will move towards the more visible earnings
growth rate potential found in smaller-cap stocks. Specifically, we anticipate
consumer stocks will likely continue to be strong due to the low interest rate
environment. We also expect technology stocks, many of which have been
dramatically oversold, to rebound off their lows.
36
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Software AG Systems, Inc.................................... 5,700 $ 166,725 3.5%
Metzler Group, Inc.......................................... 3,300 120,863 2.5%
Golf Trust of America, Inc.................................. 3,400 116,875 2.4%
JDA Software Group, Inc..................................... 2,500 109,375 2.3%
Envoy Corporation........................................... 2,300 108,963 2.3%
Eastern Environmental Services, Inc......................... 3,200 108,800 2.3%
Insight Enterprises, Inc.................................... 2,700 108,000 2.2%
Aspen Technology, Inc....................................... 2,100 106,050 2.2%
Family Golf Centers......................................... 3,900 98,719 2.1%
Algos Pharmaceuticals....................................... 3,100 83,700 1.7%
----------- -----
$ 1,128,070 23.5%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 4.5%
Communication Services 5.2%
Consumer Cyclical 22.8%
Consumer Staples 5.5%
Energy 3.4%
Financial 2.9%
Health Care 11.6%
Technology 27.8%
Transportation 1.1%
Cash and Other
Assets/Liabilities 15.2%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MICRO-CAP GROWTH PORTFOLIO,
RUSSELL 2000 GROWTH INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Total return (not annualized) from
October 1, 1997
(inception date) to June 30, 1998: -5.2%
(Thousands)
Micro-Cap Growth Russell 2000 Growth
Portfolio Index CPI
<S> <C> <C> <C>
10/1/97 $10,000 $10,000 $10,000
12/31/97 $8,680 $9,181 $10,019
6/30/97 $9,484 $9,682 $10,087
</TABLE>
On the chart above you can see how the Micro-Cap Growth
Portfolio's total return compared to the Russell 2000 Growth Index and
the Consumer Price Index. The three lines represent the total return
of a hypothetical $10,000 investment made on inception date of the
Micro-Cap Growth Portfolio (October 1, 1997) through June 30, 1998.
- ----------------------
*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 smallest 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.
37
<PAGE>
Real Estate Securities Portfolio
PERFORMANCE UPDATE
JOE BETLEJ, CFA
PORTFOLIO MANAGER
[PHOTO OF JOSEPH BETLEJ]
The Real Estate Securities Portfolio seeks above-average income and long-term
growth of capital. The Portfolio intends to pursue its objective by investing
primarily in equity securities of companies in the real estate industry. The
Portfolio seeks to provide a yield in excess of the yield of the Standard &
Poor's Corporation 500 Composite Stock Price Index (S&P 500).+
PERFORMANCE
The Real Estate Securities Portfolio was added to the Series Fund on May 1,
1998. The Portfolio's return for the period from May 1 (date of inception) to
June 30, 1998 was -3.80 percent.* This compares to the Wilshire Associates Real
Estate Securities Index (WARESI)** return of -1.47 for the same period.
PERFORMANCE ANALYSIS
The large gap between real estate securities returns and the broader equity
market has been frustrating for the public real estate companies and their
investors. After strong second half performance in 1997, some underperformance
could have been expected in the first half of 1998, but the breadth of the
difference has surprised analysts. Accordingly, we feel as a result of the
underperformance the market for real estate securities is oversold.
What was behind the real estate market's poor performance in the first half
of the year? As we have moved to a more mature part of the real estate cycle,
some market fundamentals have changed. Our observation is that the stock market
doesn't like change. While most markets remain in balance, increasing fears of
new development have caused investors to question whether the strong operating
performance is sustainable. Also, at the beginning of the year, valuation
parameters suggested that real estate securities had moved ahead of their
underlying value, causing investors to become more concerned about returns
achieved on capital employed by this sector's companies. High return
expectations (20 percent plus) had to be dampened within this part of the real
estate cycle. Finally, a cloud hovered over the sector as the legislature
proposed various changes to the Real Estate Investment Trust (REIT) structure.
As the cloud lifted, the only change that withstood the congressional process
was that the grandfathered status of the Paired-Share was eliminated--affecting
only six companies.
OUTLOOK
We are confident that the continuation of the strong economic and interest rate
environment will provide fertile ground for the real estate securities market's
recovery. Company business models must further refine their focus on sustainable
earnings growth, particularly with a focus on internal growth prospects. Using
capital more efficiently will be more highly valued in a market where equity
capital has become scarce. More importantly, however, the sector must become a
very compelling value play. We believe that on the basis of dividend yield,
multiples relative to the broader market, return on capital, and the valuation
of the underlying assets, the market for real estate securities is now a
compelling opportunity for investors.
The market forces are putting pressure on weaker management and we expect a
shake out of the lesser teams through consolidation. We are positioning the
Portfolio with companies that have a value creation focus, strong management
teams with strong alignment with shareholders, conservative capital structures,
and strong assets with appreciation potential. The market has discounted complex
stories and paired share REITs, creating strong buying opportunities within
these groups. We will take advantage of the discounts the market is offering to
provide value to the Portfolio. Picking stocks with the above characteristics
should provide above average returns as the sector recovers.
38
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Starwoood Lodging Trust..................................... 4,300 $ 207,744 4.6%
Patriot American Hospitality................................ 7,700 184,319 4.1%
Camden Property Trust....................................... 5,700 169,575 3.7%
Boston Properties, Inc...................................... 4,900 169,050 3.7%
Storage Trust Realty........................................ 7,100 165,963 3.7%
Catellus Development........................................ 8,700 153,881 3.4%
Pacific Gulf Properties, Inc................................ 7,100 151,319 3.3%
Glenborough Realty Trust, Inc............................... 5,600 147,700 3.2%
Carramerica Realty Corporation.............................. 5,100 144,712 3.2%
Regency Realty Corporation.................................. 5,600 140,700 3.1%
----------- ----------
$ 1,634,963 36.0%
----------- ----------
----------- ----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Consumer Cyclical 7.2%
Financial 81.2%
Cash and Other
Assets/Liabilities 11.6%
</TABLE>
- ------------
+The S&P 500 is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
*Historical 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 Wilshire Associates Real Estate Securities Index is a market
capitalization-weighted index of equity securities whose primary business is
equity ownership of commercial real estate (REITS). The index contains 65
securities of which 79 percent are equity and hybrid REITS and 21 percent are
real estate operating companies (REOCS). Total return, dividend return and
price return are available for this index series.
39
<PAGE>
Growth Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
COMMON STOCK (97.6%)
CAPITAL GOODS (11.0%)
Electrical Equipment (5.7%)
255,800 General Electric Company......................... $ 23,277,800
------------------
Manufacturing (3.8%)
245,442 Tyco International, Ltd.......................... 15,462,846
------------------
Waste Management (1.5%)
126,300 USA Waste Services, Inc. (b)..................... 6,236,062
------------------
COMMUNICATION SERVICES (1.3%)
Telecommunication (1.3%)
88,800 MCI Communications............................... 5,161,500
------------------
CONSUMER CYCLICAL (15.8%)
Auto (1.3%)
150,600 Danaher Corporation.............................. 5,525,137
------------------
Building Materials (1.7%)
117,300 Masco Corporation................................ 7,096,650
------------------
Houseware (1.7%)
285,400 Leggett & Platt Incorporated..................... 7,135,000
------------------
Retail (4.7%)
424,400 Family Dollar Stores............................. 7,851,400
124,600 Tandy Corporation................................ 6,611,587
76,600 Wal-Mart Stores.................................. 4,653,450
------------------
19,116,437
------------------
Service (6.4%)
172,200 Equifax Incorporated............................. 6,253,012
236,700 Omnicom Group.................................... 11,805,412
188,000 Service Corporation International................ 8,060,500
------------------
26,118,924
------------------
CONSUMER STAPLES (16.8%)
Beverage (5.0%)
179,500 Coca-Cola Company................................ 15,347,250
124,000 Pepsico, Inc..................................... 5,107,250
------------------
20,454,500
------------------
Entertainment (2.6%)
228,400 Carnival Corporation............................. 9,050,350
17,400 Walt Disney Company.............................. 1,828,087
------------------
10,878,437
------------------
Household Product (5.2%)
157,700 Dial............................................. 4,090,344
48,200 Gillette Company................................. 2,732,337
83,000 Newell Company................................... 4,134,437
114,000 Procter & Gamble Company......................... 10,381,125
------------------
21,338,243
------------------
Retail (1.9%)
190,000 Safeway, Inc. (b)................................ 7,730,625
------------------
Service (1.4%)
79,700 Automatic Data Processing, Inc................... 5,808,137
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Tobacco (.7%)
73,100 Philip Morris Companies, Inc..................... $ 2,878,312
------------------
ENERGY (1.3%)
Oil & Gas (1.3%)
80,000 Anadarko Petroleum Corporation................... 5,375,000
------------------
FINANCIAL (10.0%)
Banks (1.4%)
158,900 Norwest Corporation.............................. 5,938,888
------------------
Commercial Finance (1.1%)
81,200 Finova Finance Trust............................. 4,597,950
------------------
Consumer Finance (1.2%)
62,200 Associates First Capital Corporation............. 4,781,625
------------------
Finance--Diversified (1.5%)
128,600 Federal Home Loan Mortgage Corporation........... 6,052,238
------------------
Insurance (4.0%)
28,600 American International Group..................... 4,175,600
59,100 Hartford Life.................................... 3,365,006
89,300 Nationwide Financial Services.................... 4,554,300
79,250 SunAmerica Incorporated.......................... 4,551,922
------------------
16,646,828
------------------
Savings and Loans (.8%)
73,650 Washington Mutual Incorporated................... 3,199,172
------------------
HEALTH CARE (18.6%)
Drugs (8.7%)
98,900 Bristol-Myers Squibb Company..................... 11,367,319
78,600 Eli Lilly & Company.............................. 5,192,513
47,600 Merck & Co., Inc................................. 6,366,500
68,100 Pfizer, Inc...................................... 7,401,619
57,600 Schering Plough Corporation...................... 5,277,600
------------------
35,605,551
------------------
Health Care--Diversified (6.0%)
113,400 Abbott Laboratories.............................. 4,635,225
96,000 American Home Products Corporation............... 4,968,000
106,800 Johnson & Johnson................................ 7,876,500
100,500 Warner-Lambert Company........................... 6,972,188
------------------
24,451,913
------------------
Medical Products/Supplies (3.9%)
107,400 Guidant Corporation.............................. 7,658,963
338,000 Sybron International Corporation (b)............. 8,534,500
------------------
16,193,463
------------------
TECHNOLOGY (20.3%)
126,500 BMC Software, Inc. (b)........................... 6,570,094
132,300 Cadence Design Systems, Inc. (b)................. 4,134,375
102,000 Cisco Systems, Inc. (b).......................... 9,390,375
71,200 Computer Associates International................ 3,956,050
</TABLE>
See accompanying notes to investments in securities.
40
<PAGE>
Growth Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
98,900 EMC Corporation (b).............................. $ 4,431,956
187,800 Galileo International, Inc....................... 8,462,738
120,800 Intel............................................ 8,954,300
99,800 Lucent Technologies Incorporated................. 8,302,113
96,900 Microsoft Corporation (b)........................ 10,501,538
173,300 Parametric Technology Corporation (b)............ 4,700,763
205,500 Paychex Incorporated............................. 8,361,281
77,000 Tellabs Incorporated (b)......................... 5,515,125
------------------
83,280,708
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
TRANSPORTATION (1.5%)
Trucking (1.5%)
140,800 CNF Transportation............................... $ 5,984,000
------------------
UTILITIES (1.0%)
Electric Companies (1.0%)
80,900 AES Corporation (b).............................. 4,252,306
------------------
400,578,252
Total common stock (cost: $309,812,856).......................
------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.0%)
$ 8,426,761 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.50%...... 8,426,761
------------
Total short-term securities (cost: $8,426,761).......................... 8,426,761
------------
Total investments in securities (cost: $318,239,617) (c)................ $409,005,013
------------
------------
</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 June 30, 1998 the cost of securities for federal income tax purposes was
$318,772,455. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $92,720,045
Gross unrealized depreciation.......... (2,487,487)
-----------
Net unrealized appreciation............ $90,232,558
-----------
-----------
</TABLE>
41
<PAGE>
Bond Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (87.1%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (34.7%)
Federal Home Loan Mortgage Corporation (FHLMC) (1.3%)
$ 1,697,441 FHLMC............................................ 6.50% 02/01/16 $ 1,705,062
375,596 FHLMC............................................ 6.50% 12/01/23 377,313
------------------
2,082,375
------------------
Federal National Mortgage Association (FNMA) (6.8%)
4,000,000 FNMA............................................. 5.75% 06/15/05 4,014,084
5,000,000 FNMA............................................. 6.14% 03/24/03 5,004,835
832,329 FNMA............................................. 6.50% 02/01/26 831,355
965,919 FNMA............................................. 7.00% 09/01/17 988,357
------------------
10,838,631
------------------
Government National Mortgage Association (GNMA) (2.5%)
749,108 GNMA............................................. 7.00% 11/15/23 762,742
434,630 GNMA............................................. 7.00% 10/15/25 441,954
1,500,000 GNMA (c)......................................... 7.00% 07/01/28 1,523,895
279,867 GNMA............................................. 7.50% 02/15/23 288,109
468,510 GNMA............................................. 8.00% 09/15/24 486,028
169,128 GNMA............................................. 8.50% 10/15/22 178,998
238,316 GNMA............................................. 8.50% 12/15/22 252,224
------------------
3,933,950
------------------
U.S. Treasury (24.1%)
2,000,000 U.S. Treasury Bond............................... 6.00% 02/15/26 2,080,626
9,050,000 U.S. Treasury Note............................... 6.13% 11/15/27 9,697,645
23,025,000 U.S. Treasury Note............................... 6.38% 09/30/01 23,571,844
3,000,000 U.S. Treasury Note............................... 6.63% 03/31/02 3,106,875
------------------
38,456,990
------------------
Total U.S. government and agencies obligations (cost:
$54,567,592)...................................................... 55,311,946
------------------
CORPORATE OBLIGATIONS (52.4%)
BASIC MATERIALS (1.8%)
Chemicals (1.8%)
2,686,975 Ciba Geigy Corporation 144A Issue (d)............ 7.24% 01/02/16 2,876,111
------------------
CAPITAL GOODS (3.1%)
Waste Management (3.1%)
4,900,000 WMX Technologies, Inc............................ 6.25% 10/15/00 4,904,572
------------------
COMMUNICATION SERVICES (6.3%)
Telephone (6.3%)
5,000,000 Cable and Wireless Communication (b)............. 6.63% 03/06/05 5,040,050
5,000,000 GTE Corporation.................................. 6.94% 04/15/28 5,056,750
------------------
10,096,800
------------------
CONSUMER STAPLES (9.1%)
Broadcasting (3.4%)
5,000,000 TCI Communications Incorporated.................. 8.25% 01/15/03 5,408,150
------------------
Entertainment (3.1%)
5,000,000 Time Warner Incorporated 144A Issue (d).......... 6.95% 01/15/28 5,025,550
------------------
Household Product (2.6%)
3,850,000 Premark International, Inc....................... 10.50% 09/15/00 4,193,774
------------------
</TABLE>
See accompanying notes to investments in securities.
42
<PAGE>
Bond Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
FINANCIAL (29.7%)
Asset-Backed Securities (.9%)
$ 1,350,000 National Collegiate.............................. 7.24% 09/20/14 $ 1,368,563
------------------
Auto Finance (2.5%)
4,000,000 Ford Motor Credit Company........................ 6.38% 04/03/00 4,024,320
------------------
Banks (5.8%)
5,500,000 PNC Bank Corporation............................. 6.73% 01/25/07 5,757,477
3,400,000 St. George Bank Capital Note 144A Issue (b)(d)... 8.49% 12/31/49 3,553,272
------------------
9,310,749
------------------
Collateralized Mortgage Obligations/Mortgage Revenue
Bonds (2.8%)
950,000 California Housing Finance Agency................ 8.16% 02/01/28 996,313
1,200,000 CFSB Finance Company 144A Issue (d).............. 7.18% 11/15/05 1,197,000
1,586,340 Prudential Home Mortgage Securities.............. 6.05% 04/25/24 1,542,716
868,000 Wyoming Community Development.................... 6.85% 06/01/10 866,915
------------------
4,602,944
------------------
Commercial Finance (3.2%)
5,014,000 General Electric Capital Corporation............. 6.66% 05/01/18 5,084,316
------------------
Finance-Diversified (1.7%)
3,500,000 Guangdong Enterprises 144A Issue (b)(d).......... 8.88% 05/22/07 2,683,695
------------------
Investment Bankers/Brokers (6.7%)
5,500,000 Lehman Brothers, Inc............................. 6.63% 02/15/08 5,560,753
5,000,000 Morgan Stanley Dean Witter....................... 6.88% 03/01/07 5,187,600
------------------
10,748,353
------------------
Real Estate Investment Trust (3.7%)
4,800,000 Bradley Operating LP............................. 7.00% 11/15/04 4,871,107
1,000,000 Security Capital Pacific Trust................... 7.50% 02/15/14 1,039,390
------------------
5,910,497
------------------
Savings and Loans (2.4%)
3,500,000 Bank United Corporation.......................... 8.88% 05/01/07 3,897,642
------------------
UTILITIES (2.4%)
Electric Companies (2.4%)
4,000,000 Enersis S.A. (b)................................. 6.90% 12/01/06 3,829,480
------------------
Total corporate obligations (cost: $83,397,823)..................... 83,965,516
------------------
Total long-term debt securities (cost: $137,965,415)................ 139,277,462
------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<C> <S> <C>
PREFERRED STOCK (6.5%)
FINANCIAL (6.5%)
Real Estate Investment Trust (6.5%)
70,000 Duke Realty Investment, Inc. 7.99%............... 3,727,500
35,000 Nationwide Health Properties, Inc. 7.68%......... 3,589,687
60,000 Security Capital Industrial 8.54%................ 3,155,580
------------
Total preferred stock (cost: $9,955,725)......... 10,472,767
------------
</TABLE>
See accompanying notes to investments in securities.
43
<PAGE>
Bond Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.8%)
$1,500,000 GTE Funding...................................... 5.64% 07/10/98 $ 1,497,631
3,046,974 Temporary Investment Fund--Temp Fund Porfolio, current rate 5.50%... 3,046,974
1,520,000 U.S. Treasury Bill............................... 5.06% 08/27/98 1,508,184
------------------
Total short-term securities (cost: $6,053,003)...................... 6,052,789
------------------
Total investments in securities (cost: $153,974,143) (e)............ $ 155,803,018
------------------
------------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The portfolio held 9.4% of net assets in foreign securities at June 30,
1998.
(c) At June 30, 1998 the total cost of investments issued on a when-issued or
forward commitment basis is $1,525,078.
(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 June 30, 1998, 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 $ 2,686,975
Guangdong Enterprises 144A Issue....... various 3,606,430
St. George Bank Capital Note 144A 6/12/97 3,401,288
Issue................................
CFSB Finance Company 144A Issue........ 5/15/96 1,174,182
Time Warner Incorporated 144A Issue.... various 4,896,749
------------
$ 15,765,624
------------
------------
</TABLE>
(e) At June 30, 1998 the cost of securities for federal income tax purposes was
$154,215,142. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $2,687,163
Gross unrealized depreciation.......... (1,099,287)
----------
Net unrealized appreciation............ $1,587,876
----------
----------
</TABLE>
44
<PAGE>
Money Market Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (91.1%)
BASIC MATERIALS (8.6%)
Agriculture Product (4.9%)
$3,365,000 Cargill Incorporated............................. 5.64% 08/27/98 $ 3,335,639
------------------
Paper and Forest (3.7%)
2,515,000 Kimberly Clark (c)............................... 5.61% 07/17/98 2,508,830
------------------
COMMUNICATION SERVICES (8.9%)
Telephone (8.9%)
1,105,000 Bellsouth Telecommunications..................... 5.60% 07/22/98 1,101,449
1,860,000 Bellsouth Telecommunications..................... 5.60% 08/10/98 1,848,647
400,000 Bellsouth Telecommunications..................... 5.61% 08/20/98 396,949
2,700,000 SBC Communications (c)........................... 5.61% 07/13/98 2,695,030
------------------
6,042,075
------------------
CONSUMER CYCLICAL (22.3%)
Building Materials (4.9%)
760,000 DuPont........................................... 5.62% 07/29/98 756,736
2,605,000 DuPont........................................... 5.66% 10/28/98 2,557,797
------------------
3,314,533
------------------
Hardware and Tools (3.9%)
2,655,000 The Stanley Works................................ 5.64% 08/13/98 2,637,472
------------------
Publishing (9.0%)
1,815,000 McGraw-Hill...................................... 5.64% 07/13/98 1,811,642
1,559,000 McGraw-Hill...................................... 5.65% 09/23/98 1,538,980
2,000,000 Tribune Company (c).............................. 5.63% 07/09/98 1,997,535
430,000 Tribune Company (c).............................. 5.66% 07/13/98 429,201
303,000 Tribune Company (c).............................. 5.66% 07/20/98 302,110
------------------
6,079,468
------------------
Retail (4.5%)
3,030,000 Toys R Us........................................ 5.62% 08/07/98 3,012,825
------------------
CONSUMER STAPLES (10.5%)
Beverage (4.6%)
3,116,000 Coca-Cola Company................................ 5.62% 08/24/98 3,090,289
------------------
Entertainment (3.0%)
2,000,000 Walt Disney...................................... 5.57% 07/28/98 1,991,789
------------------
Household Product (2.9%)
2,000,000 Clorox Company................................... 5.65% 09/30/98 1,972,224
------------------
ENERGY (4.4%)
Oil & Gas (4.4%)
3,000,000 Shell Oil........................................ 5.59% 07/30/98 2,986,731
------------------
FINANCIAL (18.5%)
Auto Finance (4.9%)
3,365,000 GMAC............................................. 5.69% 11/25/98 3,289,680
------------------
Commercial Finance (4.8%)
3,350,000 GE Capital Corporation........................... 5.71% 12/04/98 3,270,194
------------------
Consumer Finance (8.8%)
1,915,000 Ciesco LP (c).................................... 5.63% 07/20/98 1,909,404
1,423,000 Ciesco LP (c).................................... 5.64% 08/20/98 1,412,096
</TABLE>
See accompanying notes to investments in securities.
45
<PAGE>
Money Market Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
FINANCIAL--CONTINUED
<C> <S> <C> <C> <C>
$2,615,000 Xerox Credit Corporation......................... 5.60% 07/24/98 $ 2,605,800
------------------
5,927,300
------------------
UTILITIES (17.9%)
Electric Companies (17.9%)
1,510,000 Alabama Power.................................... 5.62% 07/28/98 1,503,753
1,155,000 Carolina Power & Light........................... 5.65% 07/06/98 1,154,108
175,000 Carolina Power & Light........................... 5.63% 07/23/98 174,408
2,035,000 Carolina Power & Light........................... 5.64% 08/28/98 2,016,932
505,000 Emerson Electric Company......................... 5.62% 08/25/98 500,757
2,360,000 Emerson Electric Company......................... 5.68% 11/30/98 2,305,512
1,619,000 Florida Power.................................... 5.67% 08/03/98 1,610,730
2,800,000 Wisconsin Electric Power Company................. 5.13% 09/15/98 2,796,289
------------------
12,062,489
------------------
Total commercial paper (cost: $61,521,538)......................... 61,521,538
------------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES (5.3%)
U.S. Government and Agencies Obligations (4.4%)
3,000,000 Federal Home Loan Bank........................... 5.58% 03/02/99 2,998,370
------------------
U.S. Treasury (.9%)
580,000 U.S. Treasury Bill............................... 5.16% 10/01/98 572,615
------------------
Total U.S. Government and Agencies Securities (cost: $3,570,985)... 3,570,985
------------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.3%)
2,243,353 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
5.50%............................................................. 2,243,353
------------
Total short-term securities (cost: $2,243,353)...................... 2,243,353
------------
Total investments in securities (cost: $67,335,876) (b)............. $ 67,335,876
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Also represents the cost of securities for federal income tax purposes at
June 30, 1998.
(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.
46
<PAGE>
Asset Allocation Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ------------------
<C> <S> <C>
COMMON STOCK (66.8%)
CAPITAL GOODS (6.8%)
Electrical Equipment (3.5%)
223,152 General Electric Company......................... $ 20,306,832
------------------
Manufacturing (2.3%)
206,198 Tyco International Ltd........................... 12,990,474
------------------
Waste Management (1.0%)
113,575 USA Waste Services, Inc. (b)..................... 5,607,766
------------------
COMMUNICATION SERVICES (.8%)
Telecommunication (.8%)
83,700 MCI Communications............................... 4,865,062
------------------
CONSUMER CYCLICAL (10.5%)
Auto (.8%)
127,600 Danaher Corporation.............................. 4,681,325
------------------
Building Materials (1.1%)
19,900 D.R. Horton Incorporated......................... 415,412
99,800 Masco Corporation................................ 6,037,900
------------------
6,453,312
------------------
Houseware (1.1%)
252,600 Leggett & Platt Incorporated..................... 6,315,000
------------------
Lodging--Hotel (.4%)
23,800 Capstar Hotel Company (b)........................ 666,400
50,100 Host Marriott Corporation (b).................... 892,406
16,400 Prime Hospitality Corporation (b)................ 285,975
5,100 Promus Hotel Corporation (b)..................... 196,350
------------------
2,041,131
------------------
Retail (2.9%)
370,800 Family Dollar Stores............................. 6,859,800
107,200 Tandy Corporation................................ 5,688,300
73,200 Wal-Mart Stores.................................. 4,446,900
------------------
16,995,000
------------------
Service (4.2%)
149,500 Equifax Incorporated............................. 5,428,719
219,508 Omnicom Group.................................... 10,947,961
176,800 Service Corporation International................ 7,580,300
------------------
23,956,980
------------------
CONSUMER STAPLES (10.5%)
Beverage (3.1%)
156,400 Coca-Cola Company................................ 13,372,200
108,800 Pepsico, Inc..................................... 4,481,200
------------------
17,853,400
------------------
Entertainment (1.6%)
204,400 Carnival Corporation............................. 8,099,350
13,100 Walt Disney Company.............................. 1,376,319
------------------
9,475,669
------------------
Household Product (3.2%)
146,800 Dial............................................. 3,807,625
45,200 Gillette Company................................. 2,562,275
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ------------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
76,700 Newell Company................................... $ 3,820,619
91,310 Procter & Gamble Company......................... 8,314,917
------------------
18,505,436
------------------
Retail (1.2%)
168,984 Safeway, Inc. (b)................................ 6,875,536
------------------
Service (.9%)
69,500 Automatic Data Processing, Inc................... 5,064,812
------------------
Tobacco (.5%)
69,000 Philip Morris Companies, Inc..................... 2,716,875
------------------
ENERGY (.8%)
Oil & Gas (.8%)
70,800 Anadarko Petroleum Corporation................... 4,756,875
------------------
FINANCIAL (11.3%)
Banks (.8%)
122,700 Norwest Corporation.............................. 4,585,912
------------------
Commercial Finance (.8%)
83,600 Finova Finance Trust............................. 4,733,850
------------------
Consumer Finance (.8%)
58,100 Associates First Capital Corporation............. 4,466,437
------------------
Finance--Diversified (.9%)
20,900 Asset Investors Corporation...................... 333,094
108,300 Federal Home Loan Mortgage Corporation........... 5,096,869
------------------
5,429,963
------------------
Insurance (2.6%)
25,509 American International Group..................... 3,724,314
55,600 Hartford Life.................................... 3,165,725
78,900 Nationwide Financial Services.................... 4,023,900
70,850 SunAmerica, Inc.................................. 4,069,447
------------------
14,983,386
------------------
Investment Bankers/Brokers ( -- )
2,088 Reckson Service Industries (b)................... 6,916
------------------
Real Estate (.9%)
52,300 Burnham Pacific Property, Inc.................... 742,006
60,000 Catellus Development (b)......................... 1,061,250
27,900 Crescent Real Estate Equity Company.............. 938,137
52,400 Patriot American Hospitality..................... 1,254,325
30,000 Starwoood Lodging Trust.......................... 1,449,375
------------------
5,445,093
------------------
Real Estate Investment Trust (4.0%)
20,100 Apartment Investment and Management Company...... 793,950
35,800 Arden Realty Group, Inc.......................... 926,325
22,200 Avalon Bay Communities, Inc...................... 843,600
33,500 Boston Properties, Inc........................... 1,155,750
37,100 Camden Property Trust............................ 1,103,725
33,100 Carramerica Realty Corporation................... 939,212
10,600 Charles E. Smith Residential..................... 339,200
</TABLE>
See accompanying notes to investments in securities.
47
<PAGE>
Asset Allocation Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ------------------
FINANCIAL--CONTINUED
<C> <S> <C>
19,900 Chastain Capital Corporation..................... $ 256,212
33,000 Corporate Office Properties...................... 292,875
15,700 Eastgroup Properties............................. 314,981
17,800 Essex Property Trust............................. 551,800
32,400 Excel Realty Trust, Inc.......................... 933,525
23,800 Felcor Suite Hotels, Inc......................... 746,725
30,800 First Industrial Realty Trust.................... 979,473
11,500 Franchise Finance Corporation of America......... 298,281
37,100 Glenborough Realty Trust, Inc.................... 978,512
22,200 Highwoods Properties, Inc........................ 717,337
28,700 Home Properties New York, Inc.................... 765,931
34,400 Kilroy Realty.................................... 860,000
28,980 Koger Equity Incorporated........................ 585,034
12,800 Lennar Corporation............................... 377,600
13,900 LNR Property Corporation......................... 356,188
24,700 Macerich Company................................. 724,019
22,200 Mack-Cali Realty................................. 763,125
49,100 Pacific Gulf Properties, Inc..................... 1,046,444
34,200 Pan Pacific Retail Properties.................... 696,825
38,600 Philips International Realty (b)................. 636,900
26,100 Reckson Associates Realty Corporation............ 616,613
38,700 Regency Realty Corporation....................... 972,338
10,000 Spieker Properties, Inc.......................... 387,500
40,400 Storage Trust Realty............................. 944,350
59,800 Sunstone Hotel Investors......................... 798,672
10,700 Urban Shopping Centers, Inc...................... 337,050
------------------
23,039,671
------------------
Savings and Loans (.5%)
65,550 Washington Mutual Incorporated................... 2,847,328
------------------
HEALTH CARE (11.9%)
Drugs (5.5%)
88,000 Bristol-Myers Squibb Company..................... 10,114,500
70,200 Eli Lilly & Company.............................. 4,637,588
42,400 Merck & Co., Inc................................. 5,671,000
58,700 Pfizer, Inc...................................... 6,379,956
50,500 Schering Plough Corporation...................... 4,627,063
------------------
31,430,107
------------------
Health Care--Diversified (3.8%)
104,200 Abbott Laboratories.............................. 4,259,175
85,800 American Home Products Corporation............... 4,440,150
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ------------------
<C> <S> <C>
HEALTH CARE--CONTINUED
89,500 Johnson & Johnson................................ $ 6,600,625
95,100 Warner-Lambert Company........................... 6,597,563
------------------
21,897,513
------------------
Medical Products/Supplies (2.6%)
100,400 Guidant Corporation.............................. 7,159,775
303,200 Sybron International
Corporation (b)................................ 7,655,800
------------------
14,815,575
------------------
TECHNOLOGY (12.7%)
106,000 BMC Software, Inc. (b)........................... 5,505,375
123,400 Cadence Design Systems, Inc. (b)................. 3,856,250
91,350 Cisco Systems, Inc. (b).......................... 8,409,909
61,900 Computer Associates International................ 3,439,319
90,500 EMC Corporation (b).............................. 4,055,531
155,000 Galileo International, Inc....................... 6,984,688
98,700 Intel............................................ 7,316,138
89,200 Lucent Technologies, Inc......................... 7,420,325
80,300 Microsoft Corporation (b)........................ 8,702,513
163,300 Parametric Technology Corporation (b)............ 4,429,513
189,975 Paychex Incorporated............................. 7,729,608
72,500 Tellabs Incorporated (b)......................... 5,192,813
------------------
73,041,982
------------------
TRANSPORTATION (.8%)
Trucking (.8%)
113,600 CNF Transportation............................... 4,828,000
------------------
UTILITIES (.7%)
Electric Companies (.7%)
76,400 AES Corporation (b).............................. 4,015,775
------------------
385,028,993
Total common stock (cost: $274,601,057).....................
------------------
PREFERRED STOCK (2.1%)
FINANCIAL (2.1%)
Real Estate Investment Trust (2.1%)
102,000 Duke Realty Investment, Inc. 7.99%............... 5,431,500
39,000 Nationwide Health Properties, Inc. 7.68%......... 3,999,937
50,000 Security Capital Industrial, 8.54%............... 2,629,650
------------------
12,061,087
Total preferred stock (cost: $11,467,385)...................
------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (27.8%)
GOVERNMENT OBLIGATIONS (10.1%)
Federal Home Loan Mortgage Corporation (FHLMC) (.5%)
$1,612,569 FHLMC............................................ 6.50% 02/01/16 1,619,809
1,130,471 FHLMC............................................ 6.50% 12/01/23 1,135,637
------------------
2,755,446
------------------
Federal National Mortgage Association (FNMA) (1.8%)
6,000,000 FNMA............................................. 5.75% 06/15/05 6,021,126
3,250,000 FNMA............................................. 6.14% 03/24/03 3,253,143
818,931 FNMA............................................. 6.50% 09/01/25 817,973
------------------
10,092,242
------------------
</TABLE>
See accompanying notes to investments in securities.
48
<PAGE>
Asset Allocation Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
GOVERNMENT OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Government National Mortgage Association (GNMA) (1.1%)
$1,380,544 GNMA............................................. 7.00% 11/15/24 $ 1,406,028
1,738,521 GNMA............................................. 7.00% 10/15/25 1,767,815
204,071 GNMA............................................. 7.50% 06/20/02 206,732
94,984 GNMA............................................. 7.50% 07/20/02 96,223
504,178 GNMA............................................. 7.50% 05/15/24 518,511
2,074,006 GNMA............................................. 7.50% 10/15/27 2,131,477
------------------
6,126,786
------------------
State and Local Government Obligations (.7%)
1,700,000 Nebraska Investment Housing Revenue.............. 6.60% 03/01/24 1,717,000
2,170,000 Wyoming Community Development.................... 6.85% 06/01/10 2,167,287
------------------
3,884,287
------------------
U.S. Treasury (6.0%)
6,700,000 U.S. Treasury Bond............................... 6.13% 11/15/27 7,179,472
3,000,000 U.S. Treasury Note............................... 5.63% 02/15/06 3,012,189
11,625,000 U.S. Treasury Note............................... 6.38% 09/30/01 11,901,094
8,150,000 U.S. Treasury Note............................... 6.63% 06/30/01 8,386,863
3,800,000 U.S. Treasury Note............................... 7.25% 08/15/04 4,136,064
------------------
34,615,682
------------------
Total government obligations (cost: $56,931,558).................... 57,474,443
------------------
CORPORATE OBLIGATIONS (17.7%)
BASIC MATERIALS (.9%)
Chemicals (.9%)
4,836,556 Ciba Geigy Corporation 144A Issue (d)............ 7.24% 01/02/16 5,177,001
------------------
CAPITAL GOODS (1.0%)
Waste Management (1.0%)
6,000,000 WMX Technologies, Inc............................ 6.25% 10/15/00 6,005,598
------------------
COMMUNICATION SERVICES (2.0%)
Telephone (2.0%)
5,900,000 Cable and Wireless Communications (c)............ 6.63% 03/06/05 5,947,259
5,800,000 GTE Corporation.................................. 6.94% 04/15/28 5,865,830
------------------
11,813,089
------------------
CONSUMER CYCLICAL (.4%)
Textiles (.4%)
2,750,000 Reliance Industries Ltd. 144A Issue (c)(d)....... 10.25% 01/15/97 2,468,208
------------------
CONSUMER STAPLES (3.0%)
Broadcasting (1.1%)
6,000,000 TCI Commumications, Inc.......................... 8.25% 01/15/03 6,489,780
------------------
Entertainment (1.0%)
5,800,000 Time Warner, Inc................................. 6.95% 01/15/28 5,829,638
------------------
Household Product (.9%)
4,900,000 Premark International, Inc....................... 10.50% 09/15/00 5,337,531
------------------
FINANCIAL (9.8%)
Asset-Backed Securities (1.7%)
1,132,981 Paine Webber Mortgage Acceptance Corporation..... 6.93% 02/25/24 1,146,595
7,178,000 PNC Bank Corporation............................. 6.73% 01/25/07 7,514,031
1,000,000 Prudential Home Mortgage 144A Issue (d).......... 7.90% 04/28/22 1,008,850
------------------
9,669,476
------------------
Auto Finance (.8%)
4,500,000 Ford Motor Credit Company........................ 6.38% 04/03/00 4,527,360
------------------
Banks (.7%)
4,000,000 St. George Bank Capital Note 144A Issue (c)(d)... 8.49% 12/31/49 4,180,320
------------------
</TABLE>
See accompanying notes to investments in securities.
49
<PAGE>
Asset Allocation Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Commercial Finance (1.0%)
$5,645,000 General Electric Capital Corporation............. 6.66% 05/01/18 $ 5,724,165
------------------
Consumer Finance (.7%)
3,700,000 Associates Corporation of North America.......... 6.63% 05/15/01 3,758,826
------------------
Finance--Diversified (.6%)
4,300,000 Guangdong Enterprises 144A Issue (c)(d).......... 8.88% 05/22/07 3,297,111
------------------
Investment Bankers/Brokers (2.2%)
6,050,000 Lehman Brothers, Inc............................. 6.63% 02/15/08 6,116,828
6,196,000 Morgan Stanley Dean Witter....................... 6.88% 03/01/07 6,428,474
------------------
12,545,302
------------------
Real Estate Investment Trust (1.4%)
6,250,000 Bradley Real Estate.............................. 7.00% 11/15/04 6,342,588
1,500,000 Security Capital Pacific Trust................... 7.50% 02/15/14 1,559,085
------------------
7,901,673
------------------
Savings and Loans (.7%)
3,750,000 Bank United Corporation.......................... 8.88% 05/01/07 4,176,045
------------------
UTILITIES (.6%)
Electric Companies (.6%)
3,750,000 Enersis S.A. (c)................................. 6.90% 12/01/06 3,590,138
------------------
Total corporate obligations (cost: $102,223,599).................... 102,491,261
------------------
Total long-term debt securities (cost: $159,155,157)................ 159,965,704
------------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.3%)
4,000,000 Bellsouth Telecommunications.................... 5.61% 07/23/98 3,985,733
2,230,000 Florida Power................................... 5.64% 07/15/98 2,224,778
4,000,000 Kimberly Clark.................................. 5.62% 07/06/98 3,996,175
3,328,183 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%............................................................ 3,328,183
-------------
Total short-term securities (cost: $13,536,807).................... 13,534,869
-------------
Total investments in securities (cost: $458,760,406) (e)........... $ 570,590,653
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held 3.4% of net assets in foreign securities as of June 30,
1998.
(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 June 30, 1998, which includes acquisition date
and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ------------
<S> <C> <C>
Ciba Geigy Corporation 144A Issue...... various $ 4,886,550
Guangdong Enterprises 144A Issue....... various 4,430,757
Prudential Home Mortgage 144A Issue.... 7/19/96 1,055,615
Reliance Industries Ltd. 144A Issue.... various 2,964,720
St. George Bank Capital Note 144A 6/12/97 4,001,515
Issue................................
------------
$ 17,339,157
------------
------------
</TABLE>
(e) At June 30, 1998 the cost of securities for federal income tax purposes was
$459,915,280. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $116,501,885
Gross unrealized depreciation.......... (5,826,512)
------------
Net unrealized appreciation............ $110,675,373
------------
------------
</TABLE>
50
<PAGE>
Mortgage Securities Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (94.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (30.0%)
Federal Home Loan Mortgage Corporation (FHLMC) (3.0%)
$1,000,000 FHLMC (c)........................................ 3.50% 06/15/07 $ 891,272
1,697,547 FHLMC............................................ 6.50% 12/01/23 1,705,305
735,320 FHLMC............................................ 7.00% 12/01/22 750,953
------------------
3,347,530
------------------
Federal National Mortgage Association (FNMA) (6.3%)
1,250,000 FNMA............................................. 5.00% 05/25/22 1,192,720
725,939 FNMA............................................. 6.00% 07/01/07 723,972
347,522 FNMA............................................. 6.50% 02/01/17 349,882
1,192,873 FNMA............................................. 6.50% 03/01/17 1,200,698
774,330 FNMA (g)......................................... 6.90% 06/25/19 784,836
1,185,415 FNMA............................................. 7.00% 09/01/17 1,212,952
1,513,073 FNMA............................................. 8.00% 07/15/16 1,581,161
7,420 FNMA............................................. 8.00% 05/01/22 7,712
------------------
7,053,933
------------------
Government National Mortgage Association (GNMA) (16.5%)
556,440 GNMA............................................. 7.00% 08/15/16 568,364
302,079 GNMA............................................. 7.00% 09/15/16 308,552
273,526 GNMA............................................. 7.00% 03/15/17 279,313
237,068 GNMA............................................. 7.00% 05/15/17 242,084
255,741 GNMA............................................. 7.00% 05/15/17 261,153
589,130 GNMA............................................. 7.00% 06/15/17 601,596
598,429 GNMA............................................. 7.00% 06/15/17 611,092
320,727 GNMA............................................. 7.00% 07/15/17 327,513
52,385 GNMA............................................. 7.00% 09/15/27 53,233
471,168 GNMA............................................. 7.00% 11/15/27 478,791
33,273 GNMA............................................. 7.00% 11/15/27 33,811
79,649 GNMA............................................. 7.00% 01/15/28 80,925
127,915 GNMA............................................. 7.00% 01/15/28 129,965
252,250 GNMA............................................. 7.00% 01/15/28 256,291
32,701 GNMA............................................. 7.00% 01/15/28 33,225
182,841 GNMA............................................. 7.00% 01/15/28 185,770
206,330 GNMA............................................. 7.00% 02/15/28 209,635
345,235 GNMA............................................. 7.00% 02/15/28 350,765
148,934 GNMA............................................. 7.00% 02/15/28 151,320
197,266 GNMA............................................. 7.00% 02/15/28 200,427
495,000 GNMA............................................. 7.00% 06/15/28 502,885
1,500,000 GNMA (c)......................................... 7.00% 07/01/28 1,523,895
500,000 GNMA (c)......................................... 7.00% 07/21/28 513,902
265,553 GNMA............................................. 7.50% 01/15/26 272,938
476,261 GNMA............................................. 7.50% 05/15/27 489,458
350,933 GNMA............................................. 7.50% 07/15/27 360,657
809,458 GNMA............................................. 7.50% 09/15/27 831,888
1,136,002 GNMA............................................. 7.50% 11/15/27 1,167,481
190,405 GNMA............................................. 7.50% 01/15/28 195,657
183,223 GNMA............................................. 7.50% 01/15/28 188,277
456,455 GNMA............................................. 7.50% 04/01/28 469,104
504,189 GNMA............................................. 7.50% 04/15/28 518,094
495,001 GNMA............................................. 7.50% 06/18/28 508,767
1,500,000 GNMA (c)......................................... 7.50% 07/21/28 1,541,707
1,000,000 GNMA (c)......................................... 7.50% 07/21/28 1,027,805
1,276,728 GNMA............................................. 8.00% 05/20/22 1,318,822
</TABLE>
See accompanying notes to investments in securities.
51
<PAGE>
Mortgage Securities Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
$ 16,088 GNMA............................................. 8.50% 10/20/16 $ 17,003
160,203 GNMA............................................. 8.50% 10/20/16 169,314
145,222 GNMA............................................. 8.50% 12/20/16 153,481
187,728 GNMA............................................. 8.50% 03/20/17 198,293
260,154 GNMA............................................. 8.50% 05/20/17 274,795
672,705 GNMA............................................. 8.50% 07/20/17 710,565
286,845 GNMA............................................. 8.50% 08/20/17 302,988
178 GNMA............................................. 8.50% 03/15/22 188
------------------
18,621,789
------------------
Other U.S. Government Agencies (4.2%)
639,885 Vendee Mortgage Trust Participation Certificates
(b)............................................ 7.21% 02/15/25 661,198
1,732,019 Vendee Mortgage Trust Participation Certificates
(b)............................................ 7.79% 02/15/25 1,822,409
2,086,530 Vendee Mortgage Trust Participation Certificates
(b)............................................ 8.29% 12/15/26 2,232,587
------------------
4,716,194
------------------
Total U.S government and agencies obligations (cost: $32,824,679)... 33,739,446
------------------
OTHER MORTGAGE-BACKED SECURITIES (63.8%)
Asset-Backed Securities (2.6%)
862,307 Structured Mortgage Asset Residential Trust 144A
Issue (d)...................................... 8.24% 03/15/01 868,236
2,000,000 Team Fleet Financing 144A Issue (e).............. 7.80% 05/15/03 2,082,500
------------------
2,950,736
------------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds
(15.2%)
1,020,903 American Housing Trust........................... 8.13% 06/25/18 1,049,456
2,833,010 Bank Mart Funding Corporation 144A Issue (d)..... 8.25% 02/20/19 2,833,010
2,860,836 Bear Stearns Mortgage, Inc....................... 6.75% 01/30/28 2,839,380
366,568 Black Diamond Mortgage Trust 144A Issue (e)...... 6.78% 01/29/13 365,423
3,000,000 California Housing Finance Agency................ 7.76% 08/01/25 3,093,750
1,300,000 California Housing Finance Agency................ 8.16% 02/01/28 1,363,375
1,000,000 Kidder Peabody Mortgage Asset Trust.............. 7.45% 10/01/18 1,002,950
1,000,000 Lehman Brothers Grantor Trust.................... 7.00% 12/01/22 1,006,563
500,000 Louisiana Housing Finance Agency................. 6.38% 12/01/23 498,095
500,000 Missouri Housing Development..................... 6.67% 03/01/29 506,194
1,000,000 Pennsylvania Housing Finance..................... 7.41% 10/01/17 1,022,126
1,476,600 Wyoming Community Development.................... 6.85% 06/01/10 1,474,754
------------------
17,055,076
------------------
Commercial Mortgage-Backed Securities (8.6%)
5,515,540 Asset Securitization Corporation 144A Issue
(e)(f)......................................... 2.38% 08/13/29 932,471
1,872,495 Huntoon Page (d)................................. 7.00% 12/01/19 1,879,517
2,701,300 New York Dorm Authority (d)...................... 7.75% 04/01/28 2,816,105
1,788,950 Pleasant Hill Revenue Bond....................... 7.95% 09/20/15 1,952,352
2,017,535 Rosewood Care Center............................. 7.25% 11/01/13 2,075,051
------------------
9,655,496
------------------
Whole Loan Mortgage-Backed (37.4%)
1,460,212 Banco Hipotecario Nacional 144A Issue (d)(h)..... 7.92% 07/25/09 1,419,600
97,685 Bank of America Corporation...................... 8.38% 05/01/07 97,685
1,320,040 Bear Stearns Mortgage, Inc....................... 8.00% 11/25/29 1,353,041
3,108,926 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.62% 03/28/25 3,085,609
1,590,825 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.62% 03/28/25 1,555,031
1,450,156 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.96% 08/28/24 1,395,322
2,850,000 CSFB Finance Company 144A Issue (d).............. 7.18% 11/15/05 2,842,875
1,035,423 CSFB Mortgage Securities 144A Issue (e).......... 7.77% 05/30/23 1,062,603
172,148 First Bank Systems............................... 3.19% 03/25/08 150,285
1,206,135 GE Capital Mortgage Services 144A Issue (e)...... 6.00% 12/25/08 1,181,205
2,750,000 GE Capital Mortgage Services 144A Issue (e)...... 7.34% 04/25/24 2,677,290
890,980 International Capital Markets 144A Issue (d)..... 8.25% 09/01/15 902,674
1,740,075 Lehman Structure Securities 144A Issue (e)....... 6.62% 03/28/24 1,724,306
2,929,885 Metropolitan Asset Funding 144A Issue (e)........ 6.98% 05/20/12 2,926,222
</TABLE>
See accompanying notes to investments in securities.
52
<PAGE>
Mortgage Securities Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
OTHER MORTGAGE-BACKED SECURITIES--CONTINUED
<C> <S> <C> <C> <C>
$2,217,164 Morgan Stanley Capital 144A Issue (e)............ 6.98% 06/29/26 $ 2,201,921
2,072,697 Morgan Stanley Capital 144A Issue (e)............ 6.98% 06/29/26 2,020,879
1,720,500 Paine Webber Mortgage............................ 6.75% 01/25/24 1,730,685
662,967 Paine Webber Mortgage Acceptance Corporation..... 8.13% 07/25/09 678,713
1,470,660 Prudential Home Mortgage......................... 7.38% 06/25/22 1,647,140
1,781,250 Prudential Home Mortgage......................... 6.05% 04/25/24 1,732,265
400,000 Prudential Home Mortgage......................... 8.00% 09/25/22 416,168
393,989 Prudential Home Mortgage 144A Issue (d).......... 7.50% 08/25/07 394,669
1,000,000 Prudential Home Mortgage 144A Issue (e).......... 7.90% 04/28/22 1,010,410
2,380,536 Prudential Home Mortgage 144A Issue (e).......... 7.90% 04/28/22 2,390,439
1,500,000 Prudential Home Mortgage 144A Issue (e).......... 7.90% 04/28/22 1,513,275
2,000,000 Prudential Home Mortgage 144A Issue (e).......... 7.90% 04/28/22 2,021,860
7,243 Travelers Mortgage Services, Inc................. 10.00% 06/25/01 7,217
1,891,925 Tryon Mortgage Funding........................... 7.75% 12/20/09 1,934,520
------------------
42,073,909
------------------
Total other mortgage-backed securities (cost: $70,611,858).......... 71,735,217
------------------
CORPORATE OBLIGATIONS (.9%)
1,000,000 Security Capital Pacific Trust................... 7.50% 02/15/14 1,039,390
------------------
Total corporate obligations (cost: $990,277)........................ 1,039,390
------------------
Total long-term debt securities (cost: $104,426,814)................ 106,514,053
------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C> <C> <C>
PREFERRED STOCK (1.9%)
FINANCIAL (1.9%)
Real Estate Investment Trust (1.9%)
39,000 Duke Realty Investment, Inc. 7.99%.................................. 2,076,750
-------------
Total preferred stock (cost: $1,958,360)............................ 2,076,750
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.1%)
$1,320,000 Bell Atlantic CP.................................. 5.60% 07/06/98 1,318,738
430,013 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%............................................................. 430,013
1,790,000 U.S. Treasury Bill................................ 5.04% 08/27/98 1,776,085
-------------
Total short-term securities (cost: $3,525,125)...................... 3,524,836
-------------
Total investments in securities (cost: $109,910,299) (i)............ $ 112,115,639
-------------
-------------
</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 June 30, 1998.
(c) At June 30, 1998 the total cost of investments issued on a when-issued or
forward commitment basis is $5,602,617.
(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 June 30, 1998 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- -------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
Banco Hipotecario Nacional 144A Issue........................................... 4/30/97 $ 1,460,212
Bank Mart Funding Corporation 144A Issue........................................ various 2,830,653
CSFB Finance Company 144A Issue................................................. 6/28/95 2,837,091
Huntoon Page.................................................................... 10/28/97 1,879,260
International Capital Markets 144A Issue........................................ 1/9/95 846,408
New York Dorm Authority......................................................... 5/2/98 2,784,190
Prudential Home Mortgage 144A Issue............................................. 5/29/98 394,099
Structured Mortgage Asset Residential Trust 144A Issue.......................... 3/3/97 862,307
------------
$ 10,201,260
------------
------------
</TABLE>
53
<PAGE>
Mortgage Securities Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
Notes to Investments in Securities--continued
- ------------------------------
(e) 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". These securities have been determined to be liquid
under guidelines established by the board of directors.
(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 its
accrual period, but accrues additional principal at specific rates. The
interest rate disclosed represents current yield based upon estimated future
cash flows.
(h) At June 30, 1998 the Portfolio held 1.2% of net assets in foreign
securities.
(i) At June 30, 1998 the cost of securities for federal income tax purposes was
$109,916,810. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $2,457,305
Gross unrealized depreciation.......... (258,476)
----------
Net unrealized appreciation............ $2,198,829
----------
----------
</TABLE>
54
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
COMMON STOCK (96.7%)
BASIC MATERIALS (4.1%)
Agriculture Product (.3%)
31,108 Archer Daniels Midland Company................... $ 602,718
9,000 Cognizant Corporation (b)........................ 567,000
13,300 Pioneer Hi-Bred International.................... 550,287
------------------
1,720,005
------------------
Aluminum (.2%)
12,375 Alcan Aluminium Limited (c)...................... 341,859
9,400 Aluminum Company Of America...................... 619,812
4,000 Reynolds Metals Company.......................... 223,750
------------------
1,185,421
------------------
Chemicals (2.4%)
12,800 Air Products and Chemicals, Inc.................. 512,000
3,900 BF Goodrich Company.............................. 193,537
12,400 Dow Chemical Company............................. 1,198,925
61,700 DuPont........................................... 4,604,362
3,825 Eastman Chemical Company......................... 238,106
7,000 Ecolab, Inc...................................... 217,000
7,787 Engelhard Corporation............................ 157,687
1,900 FMC Corporation (b).............................. 129,556
2,900 Great Lakes Chemical Corporation................. 114,369
5,200 Hercules Incorporated............................ 213,850
5,900 International Flavors &
Fragrances..................................... 256,281
32,300 Monsanto Company................................. 1,804,762
7,100 Morton International, Inc........................ 177,500
3,600 Nalco Chemical Company........................... 126,450
9,700 PPG Industries, Inc.............................. 674,756
8,600 Praxair, Inc..................................... 402,587
3,400 Rohm And Haas Company............................ 353,387
5,000 Sigma-Aldrich.................................... 175,625
6,700 Union Carbide Corporation........................ 357,612
4,000 W.R. Grace & Co. (b)............................. 68,250
------------------
11,976,602
------------------
Iron and Steel (.2%)
10,662 Allegheny Teledyne Incorporated.................. 243,893
5,800 Armco, Inc. (b).................................. 36,975
6,900 Bethlehem Steel Corporation (b).................. 85,819
2,600 Inland Steel Industries, Inc..................... 73,287
5,000 Nucor Corporation................................ 230,000
4,640 USX--U.S. Steel Group, Inc....................... 153,120
5,200 Worthington Industries........................... 78,325
------------------
901,419
------------------
Mining (.3%)
2,200 Asarco Incorporated.............................. 48,950
20,300 Barrick Gold Corporation (c)..................... 389,506
12,500 Battle Mountain Gold............................. 74,219
5,000 Cyprus Amax Minerals Company..................... 66,250
10,100 Freeport-McMoran Copper.......................... 153,394
11,500 Homestake Mining Company......................... 119,312
9,100 Inco Limited (c)................................. 123,987
8,522 Newmont Mining Corporation....................... 201,332
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
BASIC MATERIALS--CONTINUED
3,200 Phelps Dodge Corporation......................... $ 183,000
13,400 Placer Dome, Inc. (c)............................ 157,450
------------------
1,517,400
------------------
Paper and Forest (.7%)
2,900 Bemis Company, Inc............................... 118,537
2,966 Boise Cascade Corporation........................ 97,136
5,200 Champion International Corporation............... 255,775
11,000 Fort James Corporation........................... 489,500
5,000 Georgia-Pacific Corporation...................... 294,687
16,500 International Paper Company...................... 709,500
5,600 Louisiana-Pacific Corporation.................... 102,200
5,700 Mead Corporation................................. 180,975
1,600 Potlatch Corporation............................. 67,200
5,400 Stone Container Corporation (b).................. 84,375
3,100 Temple-Inland, Inc............................... 167,012
3,750 Union Camp Corporation........................... 186,094
5,000 Westvaco Corporation............................. 141,250
10,900 Weyerhaeuser Company............................. 503,444
6,000 Willamette Industries, Inc....................... 192,000
------------------
3,589,685
------------------
CAPITAL GOODS (7.9%)
Aerospace/Defense (1.8%)
30,700 Allied-Signal, Inc............................... 1,362,312
54,530 Boeing Company................................... 2,429,993
6,800 General Dynamics Corporation..................... 316,200
10,619 Lockheed Martin Corporation...................... 1,124,287
3,700 Northrop Grumman Corporation..................... 381,562
18,500 Raytheon Company................................. 1,093,812
10,900 Rockwell International Corporation............... 523,881
9,000 Textron, Inc..................................... 645,187
12,900 United Technologies Corporation.................. 1,193,250
------------------
9,070,484
------------------
Containers--Metal/Glass (.2%)
1,600 Ball Corporation................................. 64,300
7,000 Crown Cork & Seal Company, Inc................... 332,500
8,400 Owens-Illinois, Inc. (b)......................... 375,900
------------------
772,700
------------------
Electrical Equipment (3.8%)
12,000 AMP Incorporated................................. 412,500
38,700 CBS Corporation.................................. 1,228,725
6,600 Cooper Industries................................ 362,587
178,500 General Electric Company......................... 16,243,500
6,900 Honeywell, Inc................................... 576,581
3,800 Raychem Corporation.............................. 112,337
8,600 Thermo Electron Corporation (b).................. 294,012
------------------
19,230,242
------------------
Engineering/Construction (.3%)
20,300 Caterpillar, Inc................................. 1,073,362
4,500 Fluor Corporation................................ 229,500
2,200 Foster Wheeler Corporation....................... 47,162
</TABLE>
See accompanying notes to investments in securities.
55
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
CAPITAL GOODS--CONTINUED
<C> <S> <C>
2,600 Harnischfeger Industries, Inc.................... $ 73,612
------------------
1,423,636
------------------
Machinery (.4%)
1,300 Briggs & Stratton Corporation.................... 48,669
3,600 Case Corporation................................. 173,700
2,100 Cincinnati Milacron, Inc......................... 51,056
13,600 Deere & Company.................................. 719,100
11,200 Dover Corporation................................ 383,600
9,000 Ingersoll-Rand Company........................... 396,563
1,000 Nacco Industries................................. 129,250
------------------
1,901,938
------------------
Manufacturing (.9%)
1,500 Aeroquip-Vickers, Inc............................ 87,562
5,600 Avery Dennison Corporation....................... 301,000
13,600 Illinois Tool Works, Inc......................... 906,950
4,400 Johnson Controls................................. 251,625
2,300 Millipore Corporation............................ 62,675
2,300 National Service Industries, Inc................. 117,012
6,799 Pall Corporation................................. 139,379
5,300 Parker Hannifin Corporation...................... 202,062
3,912 Sealed Air (b)................................... 143,766
9,200 Tenneco, Inc..................................... 350,175
31,200 Tyco International, Ltd.......................... 1,965,600
------------------
4,527,806
------------------
Metal Fabrication ( -- )
3,400 Timken Company................................... 104,762
------------------
Office Equipment (.2%)
7,300 Ikon Office Solutions............................ 106,306
4,800 Moore Corporation Limited (c).................... 63,600
14,900 Pitney Bowes, Inc................................ 717,062
------------------
886,968
------------------
Trucks and Parts (.1%)
2,100 Cummins Engine Company, Inc...................... 107,625
2,950 Navistar International Corporation (b)........... 85,181
4,280 Paccar, Inc...................................... 223,630
------------------
416,436
------------------
Waste Management (.2%)
10,000 Browning-Ferris Industries....................... 347,500
24,400 WMX Technologies, Inc............................ 854,000
------------------
1,201,500
------------------
COMMUNICATION SERVICES (6.8%)
Cellular (.4%)
30,100 Airtouch Communications (b)...................... 1,758,969
14,300 Nextel Communications, Inc. (b).................. 355,712
------------------
2,114,681
------------------
Telecommunication (1.3%)
38,200 MCI Communications............................... 2,220,375
23,400 Sprint Corporation............................... 1,649,700
55,200 Worldcom, Inc. (b)............................... 2,673,750
------------------
6,543,825
------------------
Telephone (5.1%)
10,000 Alltel Corporation............................... 465,000
59,700 Ameritech........................................ 2,679,037
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
COMMUNICATION SERVICES--CONTINUED
88,535 AT&T Corporation................................. $ 5,057,562
85,618 Bell Atlantic Corporation........................ 3,906,321
54,100 Bellsouth Corporation............................ 3,631,462
8,900 Frontier Corporation............................. 280,350
52,200 GTE Corporation.................................. 2,903,625
33,100 MediaOne, Inc. (b)............................... 1,454,331
99,912 SBC Communications, Inc.......................... 3,996,480
27,203 US West Communications Group..................... 1,278,543
------------------
25,652,711
------------------
CONSUMER CYCLICAL (10.2%)
Auto (2.1%)
35,300 Chrysler Corporation Holding Company............. 1,990,037
4,200 Cooper Tire & Rubber Company..................... 86,625
5,700 Dana Corporation................................. 304,950
4,100 Eaton Corporation................................ 318,775
3,400 Echlin, Inc...................................... 166,812
65,400 Ford Motor Company............................... 3,858,600
38,600 General Motors Corporation....................... 2,578,962
8,500 Goodyear Tire & Rubber Company................... 547,719
6,400 ITT Industries................................... 239,200
3,400 Pep Boys......................................... 64,387
3,250 Snap-On Incorporated............................. 117,812
6,400 TRW, Inc......................................... 349,600
------------------
10,623,479
------------------
Building Materials (.3%)
2,200 Armstrong World Industries, Inc.................. 148,225
3,200 Centex Corporation............................... 120,800
2,500 Crane Company.................................... 121,406
2,000 Fleetwood Enterprises, Inc....................... 80,000
2,100 Kaufman & Broad Home Corporation................. 66,675
9,000 Masco Corporation................................ 544,500
2,900 Owens Corning.................................... 118,356
2,300 Pulte Corporation................................ 68,712
------------------
1,268,674
------------------
Construction ( -- )
3,900 American Greetings............................... 198,656
2,100 Jostens, Inc..................................... 50,662
------------------
249,318
------------------
Distribution Durables (.1%)
9,650 Genuine Parts Company............................ 333,528
------------------
Hardware and Tools (.1%)
5,200 Black & Decker Corporation....................... 317,200
4,800 The Stanley Works................................ 199,500
------------------
516,700
------------------
Houseware (.2%)
12,600 Corning, Inc..................................... 437,850
5,200 Maytag Corporation............................... 256,750
4,100 Whirlpool Corporation............................ 281,875
------------------
976,475
------------------
Leisure (.2%)
5,400 Brunswick Corporation............................ 133,650
7,200 Hasbro, Inc...................................... 283,050
</TABLE>
See accompanying notes to investments in securities.
56
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
CONSUMER CYCLICAL--CONTINUED
<C> <S> <C>
15,841 Mattel, Inc...................................... $ 670,272
------------------
1,086,972
------------------
Lodging--Hotel (.2%)
13,600 Hilton Hotels Corporation........................ 387,600
13,900 Marriott International........................... 450,012
------------------
837,612
------------------
Photography/Imagery (.6%)
17,700 Eastman Kodak Company............................ 1,293,206
2,400 Polaroid Corporation............................. 85,350
17,800 Xerox Corporation................................ 1,808,925
------------------
3,187,481
------------------
Publishing (.8%)
5,200 Dow Jones & Company, Inc......................... 289,900
9,260 Dun & Bradstreet Corporation (b)................. 334,517
15,500 Gannett Company.................................. 1,101,469
4,300 Knight-Ridder, Inc............................... 236,769
5,400 McGraw-Hill Companies, Inc....................... 440,437
2,800 Meredith Corporation............................. 131,425
5,200 New York Times Company........................... 412,100
7,900 R.R. Donnelly & Sons Company..................... 361,425
4,800 Times Mirror Company............................. 301,800
6,700 Tribune Company.................................. 461,044
------------------
4,070,886
------------------
Retail (4.6%)
8,200 Autozone, Inc. (b)............................... 261,887
5,400 Circuit City Stores, Inc......................... 253,125
5,800 Consolidated Stores Corporation (b).............. 210,250
11,700 Costco Companies, Inc. (b)....................... 737,831
23,800 Datyon Hudson Corporation........................ 1,154,300
6,000 Dillards, Inc.................................... 248,625
11,400 Federated Department Stores (b).................. 613,462
21,600 Gap Incorporated................................. 1,331,100
3,800 Harcourt General, Inc............................ 226,100
39,886 Home Depot, Inc.................................. 3,313,031
13,600 JC Penny Company................................. 983,450
26,600 K Mart Corporation (b)........................... 512,050
19,800 Lowe's Companies, Inc............................ 803,137
12,900 May Department Stores Company.................... 844,950
2,000 Mercantile Stores Company, Inc................... 157,875
15,800 Nike, Inc........................................ 769,262
4,200 Nordstrom, Inc................................... 324,450
3,000 Reebok International, Ltd. (b)................... 83,062
21,400 Sears, Roebuck & Company......................... 1,306,737
9,400 Sherwin-Williams Company......................... 311,375
5,600 Tandy Corporation................................ 297,150
11,800 The Limited, Inc................................. 390,875
17,200 TJX Companies Incorporated....................... 414,950
15,450 Toys R Us (b).................................... 364,041
7,300 Venator Group (b)................................ 139,612
122,500 Wal-Mart Stores.................................. 7,441,875
------------------
23,494,562
------------------
Service (.8%)
44,182 Cendant Corporation (b).......................... 922,299
8,100 Equifax Incorporated............................. 294,131
5,900 H & R Block, Inc................................. 248,537
5,400 Harrah's Entertainment (b)....................... 125,550
6,900 Interpublic Group Company........................ 418,744
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
9,700 Mirage Resort, Inc. (b).......................... $ 206,731
8,800 Omnicom Group.................................... 438,900
13,700 Service Corporation International................ 587,387
27,600 Tele-Communications, Inc. (b).................... 1,060,875
------------------
4,303,154
------------------
Textiles (.2%)
3,900 Fruit Of The Loom (b)............................ 129,431
3,600 Liz Clairborne, Inc.............................. 188,100
1,900 Russell Corporation.............................. 57,356
1,100 Springs Industries, Inc.......................... 50,737
6,600 V. F. Corporation................................ 339,900
------------------
765,524
------------------
CONSUMER STAPLES (14.1%)
Beverage (3.4%)
26,700 Anheuser-Busch Companies, Inc.................... 1,259,906
3,800 Brown-Forman, Inc................................ 244,150
134,900 Coca-Cola Company................................ 11,533,950
2,000 Coors Company.................................... 68,000
82,700 Pepsico, Inc..................................... 3,406,206
19,400 The Seagram Company, Ltd. (c).................... 794,187
------------------
17,306,399
------------------
Broadcasting (.3%)
6,700 Clear Channel Communications (b)................. 731,137
19,000 Comcast Corporation.............................. 771,282
------------------
1,502,419
------------------
Entertainment (1.5%)
4,000 King World Productions, Inc. (b)................. 102,000
31,500 Time Warner, Inc................................. 2,691,281
19,230 Viacom (b)....................................... 1,120,147
36,882 Walt Disney Company.............................. 3,874,915
------------------
7,788,343
------------------
Food (2.4%)
15,700 Best Foods....................................... 911,581
24,900 Campbell Soup Company............................ 1,322,812
25,850 ConAgra, Inc..................................... 819,122
8,600 General Mills, Inc............................... 588,025
7,800 Hershey Foods Corporation........................ 538,200
19,900 HJ Heinz Company................................. 1,116,887
22,400 Kellogg Company.................................. 841,400
7,500 Quaker Oats Company.............................. 412,031
5,900 Ralston-Purina Group............................. 689,194
25,800 Sara Lee Corporation............................. 1,443,187
34,900 Unilever N.V. (c)................................ 2,754,919
6,300 Wm. Wrigley Jr. Company.......................... 617,400
------------------
12,054,758
------------------
Food & Health (.1%)
18,500 Sysco Corporation................................ 474,062
------------------
Household Product (3.2%)
5,600 Clorox Company................................... 534,100
16,100 Colgate Palmolive Company........................ 1,416,800
61,100 Gillette Company................................. 3,463,606
30,300 Kimberly-Clark Corporation....................... 1,390,012
22,300 Minnesota Mining and Manufacturing............... 1,832,781
8,700 Newell Company................................... 433,369
73,168 Procter & Gamble Company......................... 6,662,861
</TABLE>
See accompanying notes to investments in securities.
57
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
CONSUMER STAPLES--CONTINUED
<C> <S> <C>
8,100 Rubbermaid Incorporated.......................... $ 268,819
3,300 Tupperware Corporation........................... 92,812
------------------
16,095,160
------------------
Personal Care (.1%)
3,000 Alberto-Culver Company........................... 87,000
7,200 Avon Products.................................... 558,000
------------------
645,000
------------------
Restaurants (.6%)
8,100 Darden Restaurants, Inc.......................... 128,587
37,600 McDonalds Corporation............................ 2,594,400
8,230 Tricon Global Restaurants (b).................... 260,788
7,200 Wendy's International, Inc....................... 169,200
------------------
3,152,975
------------------
Retail (1.0%)
13,400 Albertson's Incorporated......................... 694,287
14,900 American Stores Company.......................... 360,394
21,400 CVS Corporation.................................. 833,263
3,200 Giant Food, Inc.................................. 137,800
13,600 Kroger Company (b)............................... 583,100
1,400 Longs Drug Stores Corporation.................... 40,425
13,800 Rite Aid Corporation............................. 518,363
3,300 Super Valu, Inc.................................. 146,438
2,000 The Great Atlantic & Pacific..................... 66,125
27,000 Walgreen Company................................. 1,115,438
8,100 Winn-Dixie Stores, Inc........................... 414,619
------------------
4,910,252
------------------
Service (.3%)
16,300 Automatic Data Processing, Inc................... 1,187,863
3,600 Ceridian Corporation (b)......................... 211,500
4,400 Deluxe Corporation............................... 157,575
------------------
1,556,938
------------------
Tobacco (1.2%)
9,300 Fortune Brands, Inc.............................. 357,469
132,200 Philip Morris Companies, Inc..................... 5,205,375
9,900 UST, Inc......................................... 267,300
------------------
5,830,144
------------------
ENERGY (7.1%)
Oil (5.7%)
5,000 Amerada Hess Corporation......................... 271,563
53,200 Amoco Corporation................................ 2,214,450
35,900 Chevron Corporation.............................. 2,981,944
134,500 Exxon Corporation................................ 9,591,531
42,800 Mobil Corporation................................ 3,279,550
18,400 Occidental Petroleum Corporation................. 496,800
2,600 Pennzoil Company................................. 131,625
14,300 Phillips Petroleum Company....................... 689,081
116,900 Royal Dutch Petroleum (c)........................ 6,407,581
29,900 Texaco, Inc...................................... 1,784,656
13,400 Unocal Corporation............................... 479,050
15,700 USX--Marathon Group.............................. 538,706
------------------
28,866,537
------------------
Oil & Gas (1.4%)
3,300 Anadarko Petroleum Corporation................... 221,719
5,200 Apache Corporation............................... 163,800
4,100 Ashland, Inc..................................... 211,663
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
ENERGY--CONTINUED
17,500 Atlantic Richfield Company....................... $ 1,367,188
8,600 Baker Hughes Incorporated........................ 297,238
9,580 Burlington Resources, Inc........................ 412,539
9,500 Dresser Industries, Inc.......................... 418,594
1,100 Eastern Enterprises.............................. 47,163
14,300 Halliburton Company.............................. 637,244
2,700 Helmerich & Payne................................ 60,075
2,600 Kerr-McGee Corporation........................... 150,475
3,300 McDermott International, Inc..................... 113,644
5,700 Oryx Energy Company (b).......................... 126,113
4,700 Rowan Company (b)................................ 91,356
27,500 Schlumberger Limited............................. 1,878,594
5,100 Sun Company, Inc................................. 197,944
13,800 Union Pacific Resources Group.................... 242,363
3,000 Western Atlas Corporation (b).................... 254,625
------------------
6,892,337
------------------
FINANCIAL (17.8%)
Auto Finance (.2%)
14,880 Fleet Financial Group, Inc....................... 1,242,480
------------------
Banks (8.0%)
35,163 Banc One Corporation............................. 1,962,552
15,800 Bank Of Boston Corporation....................... 878,875
20,600 Bank of New York, Inc............................ 1,250,163
37,808 Bankamerica Corporation.......................... 3,268,029
5,400 Bankers Trust New York Corporation............... 626,738
7,800 BB&T Corporation................................. 527,475
46,068 Chase Manhattan Corporation...................... 3,478,134
25,300 Citicorp......................................... 3,776,025
8,550 Comerica......................................... 566,438
12,650 Fifth Third Bancorp.............................. 796,950
15,837 First Chicago NBD Corporation.................... 1,403,554
52,708 First Union Corporation.......................... 3,070,241
10,400 Huntington Bancshares............................ 348,400
9,700 J.P. Morgan & Company, Inc....................... 1,136,113
23,900 Keycorp.......................................... 851,438
13,900 Mellon Bank Corporation.......................... 967,788
7,100 Mercantile Bancorporation........................ 357,663
18,400 National City Corporation........................ 1,306,400
51,237 Nationsbank Corporation.......................... 3,919,631
6,100 Northern Trust Corporation....................... 465,125
41,100 Norwest Corporation.............................. 1,536,113
16,600 PNC Bank Corporation............................. 893,288
6,000 Republic New York Corporation.................... 377,625
8,600 State Street Corporation......................... 597,700
9,600 Summit Bancorp................................... 456,000
11,500 Suntrust Banks, Inc.............................. 935,094
14,300 Synovus Financial Corporation.................... 339,625
40,084 U.S. Bancorp..................................... 1,723,612
11,200 Wachovia Corporation............................. 946,400
5,266 Wells Fargo & Company............................ 1,943,154
------------------
40,706,343
------------------
Consumer Finance (1.4%)
25,400 American Express Company......................... 2,895,600
18,889 Associates First Capital Corporation............. 1,452,092
2,900 Beneficial Corporation........................... 444,244
7,400 Green Tree Financial Corporation................. 316,813
17,500 Household International, Inc..................... 870,625
</TABLE>
See accompanying notes to investments in securities.
58
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
FINANCIAL--CONTINUED
<C> <S> <C>
27,287 MBNA Corporation................................. $ 900,471
------------------
6,879,845
------------------
Finance--Diversified (2.1%)
13,856 American General Corporation..................... 986,374
14,500 Charles Schwab Corporation....................... 471,250
37,900 Federal Home Loan Mortgage Corporation........... 1,783,669
57,900 Federal National Mortgage Association............ 3,517,425
6,200 MGIC Investment Corporation...................... 353,788
30,500 S&P 500 Depositary Receipt....................... 3,456,031
------------------
10,568,537
------------------
Insurance (4.6%)
8,155 Aetna Incorporated............................... 620,799
23,357 Allstate Corporation............................. 2,138,625
38,320 American International Group..................... 5,594,720
9,100 Aon Corporation.................................. 639,275
9,300 Chubb Corporation................................ 747,488
12,100 Cigna Corporation................................ 834,900
8,900 Cincinnati Financial Corporation................. 341,538
10,300 Conseco, Inc..................................... 481,525
4,600 General RE Corporation........................... 1,166,100
6,500 ITT Hartford Group............................... 743,438
5,800 Jefferson-Pilot Corporation...................... 336,038
5,600 Lincoln National Corporation..................... 511,700
6,300 Loews Corporation................................ 548,888
13,950 Marsh & McLennen................................. 843,103
5,300 MBIA, Inc........................................ 396,838
4,400 Progressive Corporation.......................... 620,400
5,200 Providian Financial.............................. 408,525
7,700 Safeco Corporation............................... 349,869
12,517 St. Paul Companies, Inc.......................... 526,511
10,600 SunAmerica Incorporated.......................... 608,838
7,600 Torchmark Corporation............................ 347,700
3,700 Transamerica Corporation......................... 425,963
62,514 Travelers Group Incorporated..................... 3,789,911
7,600 Unum Corporation................................. 421,800
------------------
23,444,492
------------------
Investment Bankers/Brokers (1.1%)
13,400 Franklin Resources, Inc.......................... 723,600
5,600 Lehman Brothers Holdings, Inc.................... 434,350
18,200 Merrill Lynch & Co., Inc......................... 1,678,950
32,330 Morgan Stanley Dean Witter....................... 2,954,154
------------------
5,791,054
------------------
Public Finance (.1%)
5,900 Countrywide Credit Industries.................... 299,425
------------------
Savings and Loans (.3%)
3,100 Golden West Financial Corporation................ 329,569
6,000 H.F. Ahmanson & Company.......................... 426,000
21,035 Washington Mutual Incorporated................... 913,708
------------------
1,669,277
------------------
HEALTH CARE (11.3%)
Biotechnology (.2%)
14,300 Amgen, Inc. (b).................................. 934,863
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
HEALTH CARE--CONTINUED
Drugs (6.3%)
54,200 Bristol-Myers Squibb Company..................... $ 6,229,613
6,300 Cardinal Health Incorporated..................... 590,625
60,500 Eli Lilly & Company.............................. 3,996,781
65,400 Merck & Co., Inc................................. 8,747,250
70,500 Pfizer, Inc...................................... 7,662,469
27,655 Pharmacia & Upjohn............................... 1,275,587
39,900 Schering Plough Corporation...................... 3,655,838
------------------
32,158,163
------------------
Health Care--Diversified (3.2%)
83,400 Abbott Laboratories.............................. 3,408,975
3,500 Allergan, Inc.................................... 162,313
70,800 American Home Products Corporation............... 3,663,900
21,400 HealthSouth Rehabilitation Company (b)........... 571,113
73,300 Johnson & Johnson................................ 5,405,875
44,500 Warner-Lambert Company........................... 3,087,188
------------------
16,299,364
------------------
Hospital Management (.3%)
35,306 Columbia/HCA Healthcare Corporation.............. 1,028,287
16,600 Tenet Healthcare Corporation (b)................. 518,750
------------------
1,547,037
------------------
Managed Care (.2%)
8,900 Humana (b)....................................... 277,569
3,400 Manor Care, Inc.................................. 130,688
10,300 United Health Care............................... 654,050
------------------
1,062,307
------------------
Medical Products/Supplies (1.1%)
4,600 Alza Corporation (b)............................. 198,950
3,000 Bausch & Lomb Incorporated....................... 150,375
15,300 Baxter International, Inc........................ 823,331
6,400 Becton, Dickinson & Company...................... 496,800
6,000 Biomet, Inc...................................... 198,375
10,600 Boston Scientific Corporation (b)................ 759,225
2,700 C.R. Bard........................................ 102,769
3,000 Fresenius Medical Care (b)(c).................... 188
8,200 Guidant Corporation.............................. 584,763
3,900 Mallinckrodt, Inc................................ 115,781
25,500 Medtronic, Inc................................... 1,625,625
4,500 St. Jude Medical, Inc. (b)....................... 165,656
4,100 United States Surgical Corporation............... 187,063
------------------
5,408,901
------------------
TECHNOLOGY (13.1%)
19,300 3 Com (b)........................................ 592,269
3,700 Adobe Systems, Inc............................... 157,019
7,700 Advanced Micro Devices, Inc. (b)................. 131,381
4,800 Andrew Corporation (b)........................... 86,700
7,200 Apple Computer Incorporated (b).................. 206,550
19,900 Applied Materials, Inc. (b)...................... 587,050
2,200 Autodesk, Inc.................................... 84,975
11,900 Bay Networks, Inc. (b)........................... 383,775
8,600 Cabletron Systems Incorporated (b)............... 115,563
55,500 Cisco Systems, Inc. (b).......................... 5,109,469
90,064 Compaq Computer Corporation...................... 2,555,566
29,787 Computer Associates International................ 1,655,040
</TABLE>
See accompanying notes to investments in securities.
59
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
8,500 Computer Sciences Corporation (b)................ $ 544,000
2,600 Data General (b)................................. 38,838
35,600 Dell Computer Corporation (b).................... 3,304,125
6,400 DSC Communications (b)........................... 192,000
2,400 EG&G, Inc........................................ 72,000
27,000 EMC Corporation (b).............................. 1,209,938
23,300 First Data Corporation........................... 776,181
8,400 Gateway (b)...................................... 425,250
7,500 General Instrument Corporation (b)............... 203,906
2,300 General Signal Corporation....................... 82,800
4,300 Harris Corporation............................... 192,156
22,600 HBO & Company.................................... 796,650
56,700 Hewlett-Packard Company.......................... 3,394,913
89,200 Intel............................................ 6,611,950
53,000 International Business Machine................... 6,085,063
4,500 KLA-Tencor Corporation (b)....................... 124,594
7,700 LSI Logic Corporation (b)........................ 177,581
71,000 Lucent Technologies, Inc......................... 5,906,313
11,500 Micron Technology, Inc. (b)...................... 285,344
132,800 Microsoft Corporation (b)........................ 14,392,200
32,500 Motorola......................................... 1,708,281
8,900 National Semiconductor Corporation (b)........... 117,369
28,400 Northern Telecom Limited......................... 1,611,700
19,100 Novell, Inc. (b)................................. 243,525
53,575 Oracle Corporation (b)........................... 1,315,936
13,900 Parametric Technology Corporation (b)............ 377,038
2,800 Perkin-Elmer Corporation......................... 174,125
3,400 Scientific-Atlanta, Inc.......................... 86,275
13,200 Seagate Technology, Inc. (b)..................... 314,325
1,400 Shared Medical Systems........................... 102,813
10,200 Silicon Graphics Incorporated (b)................ 123,675
20,600 Sun Microsystems, Inc. (b)....................... 894,813
2,700 Tektronix, Inc................................... 95,513
9,900 Tellabs Incorporated (b)......................... 709,088
21,300 Texas Instruments Incorporated................... 1,242,056
3,000 Thomas & Betts Corporation....................... 147,750
13,600 Unisys Corporation (b)........................... 384,200
5,400 W.W. Grainger, Inc............................... 268,988
------------------
66,398,629
------------------
TRANSPORTATION (1.0%)
Air Freight (.1%)
8,000 FDX Corporation (b).............................. 502,000
------------------
Airlines (.4%)
10,000 AMR Corporation (b).............................. 832,500
4,800 Delta Air Lines, Inc............................. 620,400
12,000 Southwest Airlines Company....................... 355,500
5,000 USAir Group, Inc. (b)............................ 396,250
------------------
2,204,650
------------------
Railroads (.5%)
8,973 Burlington Northern Santa Fe..................... 881,036
11,900 CSX Corporation.................................. 541,450
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
TRANSPORTATION--CONTINUED
20,500 Norfolk Southern Corporation..................... $ 611,156
13,100 Union Pacific Corporation........................ 578,038
------------------
2,611,680
------------------
Transport Services ( -- )
17,900 Laidlaw, Inc. (c)................................ 218,156
------------------
Trucking ( -- )
4,100 Ryder System, Inc................................ 129,406
------------------
UTILITIES (3.3%)
Electric Companies (2.6%)
6,900 Ameren Corporation............................... 274,275
10,300 American Electric Power Company.................. 467,363
8,000 Baltimore Gas & Electric Company................. 248,500
8,200 Carolina Power & Light Company................... 355,675
11,500 Central & Southwest Corporation.................. 309,063
8,532 Cinergy.......................................... 298,620
12,800 Consolidated Edison, Inc......................... 589,600
10,550 Dominion Resources, Inc.......................... 429,913
7,900 DTE Energy Company............................... 318,963
19,650 Duke Energy Corporation.......................... 1,164,263
20,800 Edison International............................. 614,900
24,200 Emerson Electric Company......................... 1,461,075
13,300 Entergy Corporation.............................. 382,375
12,500 FirstEnergy Corporation.......................... 384,375
9,900 FPL Group Incorporated........................... 623,700
6,900 GPU Incorporated................................. 260,906
15,322 Houston Industries, Inc.......................... 473,067
7,800 Niagra Mohawk Power Corporation (b).............. 116,513
8,100 Northern States Power Company.................... 231,863
20,700 Pacific Gas & Electric Company................... 653,344
16,100 Pacificorp....................................... 364,263
12,100 Peco Energy Company.............................. 353,169
9,000 PP&L Resources, Inc.............................. 204,188
12,550 Public Service Enterprise Group.................. 432,191
37,600 Southern Company................................. 1,041,050
13,362 Texas Utilities Company.......................... 556,193
11,800 Unicom Corporation............................... 413,738
------------------
13,023,145
------------------
Natural Gas (.7%)
5,800 Coastal Corporation.............................. 404,913
4,350 Columbia Gas System, Inc......................... 241,969
5,200 Consolidated Natural Gas Company................. 306,150
17,900 Enron Corporation................................ 967,719
2,600 Nicor, Inc....................................... 104,325
800 Oneok, Inc....................................... 31,900
2,000 Peoples Energy Corporation....................... 77,250
6,166 Sempra Energy (b)................................ 171,107
6,000 Sonat, Inc....................................... 231,750
22,400 The Williams Company............................. 756,000
------------------
3,293,083
------------------
489,920,747
Total common stock (cost: $299,522,309).......................
------------------
</TABLE>
See accompanying notes to investments in securities.
60
<PAGE>
Index 500 Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (.2%)
$ 1,011,925 Temporary Investment Fund--Temp Fund Portfolio current rate 5.50%....... $ 1,011,925
----------------
Total short-term securities (cost: $1,011,925).......................... 1,011,925
----------------
Total investments in securities (cost: $300,534,234) (d)................ $ 490,932,672
----------------
----------------
</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 2.2% of net assets in foreign securities at June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$301,133,215. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $196,332,859
Gross unrealized depreciation.......... (6,533,402)
------------
Net unrealized appreciation............ $189,799,457
------------
------------
</TABLE>
61
<PAGE>
Capital Appreciation Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
COMMON STOCK (98.6%)
BASIC MATERIALS (2.0%)
Agriculture Product (2.0%)
118,500 Cognizant Corporation (b)........................ $ 7,465,500
------------------
CAPITAL GOODS (7.2%)
Electrical Equipment (1.9%)
203,400 Thermo Electron Corporation (b).................. 6,953,737
------------------
Manufacturing (2.6%)
149,900 Tyco International, Ltd.......................... 9,443,700
------------------
Waste Management (2.7%)
202,700 USA Waste Services, Inc. (b)..................... 10,008,312
------------------
COMMUNICATION SERVICES (4.8%)
Telecommunication (4.8%)
267,300 ADC Telecommunications, Inc. (b)................. 9,764,816
162,100 Worldcom Incorporated (b)........................ 7,851,719
------------------
17,616,535
------------------
CONSUMER CYCLICAL (17.7%)
Building Materials (2.3%)
140,200 Masco Corporation................................ 8,482,100
------------------
Lodging--Hotel (1.0%)
218,200 Prime Hospitality Corporation (b)................ 3,804,862
------------------
Retail (11.1%)
258,676 Dollar General Corporation....................... 10,233,869
177,800 Home Depot, Inc.................................. 14,768,471
79,200 Kohl's, Inc. (b)................................. 4,108,500
188,000 Wal-Mart Stores.................................. 11,421,000
------------------
40,531,840
------------------
Service (1.6%)
278,000 Cendant Corporation (b).......................... 5,803,250
------------------
Textiles (1.7%)
100,100 Tommy Hilfiger Corporation (b)................... 6,256,250
------------------
CONSUMER STAPLES (3.6%)
Entertainment (2.1%)
197,400 Carnival Corporation............................. 7,821,975
------------------
Restaurants (1.5%)
136,400 Papa John's International, Inc. (b).............. 5,379,275
------------------
ENERGY (3.4%)
Oil & Gas (3.4%)
148,400 Halliburton Company.............................. 6,613,075
85,500 Schlumberger Limited............................. 5,840,719
------------------
12,453,794
------------------
FINANCIAL (11.6%)
Banks (4.7%)
111,400 Bankamerica Corporation.......................... 9,629,137
205,100 Norwest Corporation.............................. 7,665,612
------------------
17,294,749
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
FINANCIAL--CONTINUED
Consumer Finance (1.9%)
208,000 MBNA Corporation................................. $ 6,864,000
------------------
Finance--Diversified (5.0%)
194,000 Federal National Mortgage Association............ 11,785,500
112,900 MGIC Investment Corporation...................... 6,442,356
------------------
18,227,856
------------------
HEALTH CARE (15.0%)
Drugs (6.0%)
96,200 Bergen Brunswig Corporation...................... 4,461,275
39,200 Cardinal Health Incorporated..................... 3,675,000
62,800 Merck & Co., Inc................................. 8,399,500
49,000 Pfizer, Inc...................................... 5,325,688
------------------
21,861,463
------------------
Health Care--Diversified (2.7%)
142,200 Warner-Lambert Company........................... 9,865,125
------------------
Managed Care (2.4%)
137,000 United Health Care............................... 8,699,500
------------------
Special Services (3.9%)
244,800 Omnicare Incorporated............................ 9,333,000
79,200 Steris Corporation (b)........................... 5,036,629
------------------
14,369,629
------------------
TECHNOLOGY (31.1%)
165,150 Cisco Systems, Inc. (b).......................... 15,204,122
235,400 Computer Associates International................ 13,079,413
180,000 Fiserv (b)....................................... 7,644,384
174,000 Gartner Group Incorporated (b)................... 6,090,000
287,600 HBO & Company.................................... 10,137,900
115,200 HNC Software Incorporated (b).................... 4,701,600
40,900 Microsoft Corporation (b)........................ 4,432,538
161,250 Network Associates (b)........................... 7,719,844
506,900 Parametric Technology Corporation (b)............ 13,749,663
110,250 Paychex Incorporated............................. 4,485,797
120,600 Peoplesoft Incorporated (b)...................... 5,668,200
199,000 Sterling Commerce, Inc. (b)...................... 9,651,500
131,800 Synopsys Incorporated (b)........................ 6,029,850
72,100 Tellabs Incorporated (b)......................... 5,164,163
------------------
113,758,974
------------------
UTILITIES (2.2%)
Electric Companies (2.2%)
153,700 AES Corporation (b).............................. 8,078,856
------------------
361,041,282
Total common stock (cost: $233,199,618).......................
------------------
</TABLE>
See accompanying notes to investments in securities.
62
<PAGE>
Capital Appreciation Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ------------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (1.7%)
$6,194,311 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%............................................................. $ 6,194,311
------------------
Total short-term securities (cost: $6,194,311)...................... 6,194,311
------------------
Total investments in securities (cost: $239,393,929) (c)............ $ 367,235,593
------------------
------------------
</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 June 30, 1998 the cost of securities for federal income tax purposes was
$239,393,929. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $129,696,745
Gross unrealized depreciation.......... (1,855,081)
------------
Net unrealized appreciation............ $127,841,664
------------
------------
</TABLE>
63
<PAGE>
International Stock Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
COMMON STOCKS (85.0%)
ARGENTINA (2.2%)
Energy (1.6%)
176,400 YPF Sociedad Anonima ADR............................................... $ 5,303,025
Telecomunications (.6%)
61,330 Telefonica De Argentina ADR............................................ 1,989,423
------------------
7,292,448
------------------
AUSTRIA (1.1%)
Electrical and Electronics (.7%)
6,980 Bohler-Uddeholm Ord.................................................... 461,701
6,000 Bohler-Uddeholm 144A Issue (c)......................................... 396,878
10,850 VA Technologie 144A Issue (c).......................................... 1,351,545
Utilities--Gas and Electric (.4%)
8,400 Evn Energie-Versorgung................................................. 1,258,510
------------------
3,468,634
------------------
AUSTRALIA (2.9%)
Banking (.4%)
102,304 National Australia Bank, Ltd........................................... 1,353,463
Building Materials and Components (1.0%)
1,315,401 Pioneer International, Ltd............................................. 3,145,523
Merchandising (.1%)
345,500 David Jones, Ltd....................................................... 397,003
Multi-Industry (.9%)
573,600 Mayne Nickless, Ltd.................................................... 3,046,137
Transportation (.5%)
86,848 BTR PLC................................................................ 235,191
85,000 Quantas Airways, Ltd ADR
144A Issue (c)....................................................... 1,279,055
------------------
9,456,372
------------------
BELGIUM (.4%)
Chemicals (.4%)
20,000 Union Miniere NPV (b).................................................. 1,237,224
------------------
BRAZIL (.8%)
Energy (.8%)
137,900 Petroleo Brasileiro.................................................... 2,563,397
------------------
CANADA (2.6%)
Banking (.5%)
50,000 Canadian Imperial Bank of Commerce NPV................................. 1,611,035
Chemical (.8%)
212,200 Agrium NPV............................................................. 2,679,025
Energy (.8%)
363,800 Ranger Oil, Ltd........................................................ 2,660,288
Food and Household Products (.5%)
82,800 Oshawa Group, Ltd...................................................... 1,494,687
------------------
8,445,035
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
CHILE (.6%)
Utilities--Gas and Electric (.6%)
59,500 Compania De Telcomunicaciones ADR...................................... $ 1,208,594
43,800 Gener Sa ADR........................................................... 799,350
------------------
2,007,944
------------------
CHINA (.2%)
Chemicals (.2%)
5,313,800 Yizheng Chemical....................................................... 583,067
------------------
FINLAND (3.0%)
Banking (1.5%)
740,000 Merita, Ltd A.......................................................... 4,890,731
Telecommunications (.7%)
30,000 Nokia.................................................................. 2,210,030
Wholesale and International Trade (.8%)
85,000 Amer Group, Ltd (b).................................................... 1,644,971
107,500 Metsa-Serla............................................................ 1,040,202
------------------
9,785,934
------------------
FRANCE (11.3%)
Banking (2.9%)
57,400 Banque Nationale De Paris.............................................. 4,689,977
61,300 Banque Nationale De Paris ADR 144A Issue (b)........................... 5,008,608
Electrical and Electronics (1.2%)
19,365 Alcatel Alsthom........................................................ 3,942,824
Energy Sources (1.2%)
27,862 Societe National Elf Aquitaine......................................... 3,917,086
Financial Services (.3%)
10,800 Credit Commercial De France............................................ 909,229
Health and Personal Care (2.1%)
122,325 Rhone-Poulenc.......................................................... 6,899,243
Insurance (3.0%)
87,427 AXA-UAP................................................................ 9,833,007
Mining and Metal (.3%)
7,000 Pechiney............................................................... 281,922
40,894 Pechiney ADR........................................................... 822,992
Multi-Industry (.3%)
4,837 Marine Wendel.......................................................... 890,437
------------------
37,195,325
------------------
GERMANY (2.9%)
Banking (2.1%)
82,050 Deutsche Bank.......................................................... 6,944,443
Chemicals (.8%)
49,400 Bayer.................................................................. 2,550,826
------------------
9,495,269
------------------
HONG KONG (5.1%)
Banking (.7%)
90,614 HSBC Holdings PLC...................................................... 2,216,660
Electrical and Electronics (.1%)
141,900 Hong Kong Aircraft Engineering, Ltd.................................... 219,815
</TABLE>
See accompanying notes to investments in securities.
64
<PAGE>
International Stock Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
HONG KONG--CONTINUED
<C> <S> <C>
Financial Services (.2%)
1,109,000 South China Morning Post Holdings, Ltd................................. $ 533,276
113,000 Peregrine Investment Holdings.......................................... --
Food and Household Products (.3%)
3,201,000 Cafe De Coral Holdings, Ltd............................................ 1,095,030
Multi-Industry (1.0%)
221,000 Hutchison Whampoa, Ltd................................................. 1,166,837
448,568 Jardine Strategic Holdings, Ltd........................................ 852,279
509,739 Jardine Matheson Holdings, Ltd (Singapore)............................. 1,376,295
Telecommunications (1.4%)
2,700,000 Hong Kong Telecommunications, Ltd...................................... 5,071,323
Transportation (.5%)
190,000 Swire Pacific Class A.................................................. 717,421
1,519,800 Swire Pacific Class B.................................................. 912,292
Utilities (.9%)
65,000 Hong Kong Electric Holdings, Ltd....................................... 2,989,737
------------------
17,150,965
------------------
INDIA (.2%)
Financial Services (.2%)
469,435 India Fund............................................................. 603,548
------------------
INDONESIA (.2%)
Consumer Products (.2%)
62,600 P.T. Indosat ADR....................................................... 696,425
------------------
ISRAEL (.8%)
Pharmaceutical (.8%)
78,700 Teva Pharmaceutical Industries ADR..................................... 2,769,256
------------------
ITALY (2.9%)
Automotive (.8%)
639,760 Fiat SPA............................................................... 2,801,763
Telecommunication (2.1%)
1,105,000 Telecom Italia SPA Di Risp............................................. 5,352,392
278,000 Sirti SPA.............................................................. 1,513,234
------------------
9,667,389
------------------
JAPAN (.1%)
Transportation (.1%)
90,000 Hitachi Zosen Company.................................................. 145,161
Utilities--Gas and Electric (--%)
13,000 Kyudenko............................................................... 84,994
------------------
230,155
------------------
LUXEMBOURG (.5%)
Mining and Metals (.5%)
137,300 Minorco SA ADR......................................................... 1,639,019
------------------
MEXICO (1.4%)
Chemicals (.2%)
252,000 Vitro.................................................................. 539,920
Mining and Metals (.4%)
540,000 Grupo Mexico Series 'B'................................................ 1,479,287
Telecommunications (.8%)
53,610 Telefonos De Mexico ADR................................................ 2,576,631
------------------
4,595,838
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
NETHERLANDS (7.1%)
Broadcasting, Advertising and Publishing (1.7%)
84,687 International Nederlanden Group........................................ $ 5,548,875
Building Materials and Components (.1%)
16,520 European Vinyls........................................................ 288,484
Electrical and Electronics (2.4%)
93,800 Philips Electronics.................................................... 7,890,108
Insurance (2.5%)
96,208 Aegon.................................................................. 8,376,613
Merchandising (.4%)
18,591 Koninklijke Bijenkorf Beheer........................................... 1,303,172
------------------
23,407,252
------------------
NEW ZEALAND (1.0%)
Forest Products and Paper (.4%)
1,654,000 Carter Holt Harvey, Ltd................................................ 1,444,917
Transportation (.2%)
481,000 Air New Zealand, Ltd 'B'............................................... 517,742
Wholesale and International Trade (.4%)
2,431,185 Brierley Investments, Ltd.............................................. 1,213,633
------------------
3,176,292
------------------
NORWAY (2.0%)
Energy Sources (.4%)
98,000 Saga Petroleum......................................................... 1,509,660
Health and Personal Care (1.3%)
562,295 Nycomed Class A........................................................ 4,184,180
Mining and Metals (.3%)
78,000 Elkem As Oslo.......................................................... 936,815
------------------
6,630,655
------------------
PHILLIPPINES (.4%)
Telecommunications (.4%)
54,000 Phillippine Long Distance Telephone ADR................................ 1,221,750
------------------
PORTUGAL (.8%)
Banking (.8%)
85,560 Banco Portugues De Investimento........................................ 2,763,604
------------------
SINGAPORE (.1%)
Transportation (.1%)
78,000 Singapore Airlines..................................................... 366,459
------------------
SOUTH AFRICA (.3%)
Mining and Metals (.3%)
78,879 Anglo American Platinum, Ltd........................................... 855,075
------------------
SPAIN (7.2%)
Banking (2.2%)
11,450 Banco de Andalucia..................................................... 2,427,430
108,000 Argentaria Bancaria ADR................................................ 4,873,500
Energy Sources (1.0%)
57,000 Repsol................................................................. 3,141,879
Telecommunications (2.1%)
150,000 Telefonica De Espana................................................... 6,937,378
Utilities--Gas and Electric (1.9%)
250,000 Iberdrola.............................................................. 4,060,665
110,000 Empresa Nacional de Electricidad....................................... 2,407,371
------------------
23,848,223
------------------
</TABLE>
See accompanying notes to investments in securities.
65
<PAGE>
International Stock Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
SWEDEN (6.8%)
<C> <S> <C>
Broadcasting, Advertising and Publishing (.1%)
15,000 Marieberg Tidnings..................................................... $ 423,410
Business and Public Service (.7%)
400 Nackebro Fastighets.................................................... 6,674
114,500 Esselte................................................................ 2,542,529
Forest Products and Paper (.6%)
122,000 Stora Kopparbergs Bergslags............................................ 1,928,491
Health and Personal Care (1.4%)
95,500 Fastighets Balder Units................................................ 101,838
95,500 Svenska Handelsbanken.................................................. 4,432,944
Metals and Mining (.4%)
79,800 Granges................................................................ 1,461,648
Multi-Industry (.4%)
104,500 Electrolux............................................................. 1,796,073
Transportation (3.0%)
35,000 Autoliv ADR............................................................ 1,119,684
109,900 Autoliv AB ADR......................................................... 3,475,588
178,500 Volvo.................................................................. 5,318,499
------------------
22,607,378
------------------
SWITZERLAND (2.2%)
Financial Services (2.0%)
1,730 ASEA Brown Boveri Group................................................ 2,558,563
18,525 Credit Suisse Group.................................................... 4,127,946
Health and Personal Care (.2%)
370 Societe Generale....................................................... 628,067
------------------
7,314,576
------------------
THAILAND (.5%)
Banking (.5%)
1,416,500 Bangkok Bank, Foreign.................................................. 1,747,521
Building Materials and Components (--%)
101,894 Siam City Cement, Foreign.............................................. 72,522
------------------
1,820,043
------------------
UNITED KINGDOM (16.6%)
Banking (1.0%)
118,943 Barclays Bank PLC...................................................... 3,431,850
Building Materials and Components (.7%)
620,090 BICC PLC............................................................... 1,356,350
257,100 Hepworth PLC........................................................... 927,260
Chemicals (4.0%)
785,200 Courtaulds PLC......................................................... 5,840,818
387,833 Somerfield PLC......................................................... 2,476,977
1,775,000 Medeva PLC............................................................. 5,068,041
Electrical and Electronics (.5%)
136,900 Waste Management International PLC..................................... 752,047
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
82,000 Waste Management International PLC ADR................................. $ 891,750
Energy Services (1.5%)
260,000 British Telecommunications PLC......................................... 3,212,557
114,286 Thames Water Group PLC................................................. 2,081,917
Financial Services (.8%)
322,900 Tate & Lyle PLC........................................................ 2,565,030
Food and Household Products (1.0%)
2,939,878 Albert Fisher Group PLC................................................ 1,129,023
761,473 Hillsdown Holdings..................................................... 2,059,753
Metals and Mining (1.5%)
2,225,400 British Steel PLC...................................................... 4,895,583
Transportation (4.0%)
1,945,450 BTR PLC................................................................ 5,522,232
690,000 Elementis PLC.......................................................... 1,774,253
168,500 Hyder PLC.............................................................. 2,647,495
768,600 Thorn B................................................................ 3,144,214
Utilities--Gas and Electric (1.6%)
208,775 National Power PLC..................................................... 1,966,090
309,782 BG PLC................................................................. 1,792,277
821,100 Centrica PLC (b)....................................................... 1,384,725
------------------
54,920,242
------------------
VENEZUELA (.8%)
Telecommunications (.8%)
100,100 Anonima Telephonos De Venezuela........................................ 2,502,500
------------------
Total common stocks (cost $214,629,111)............................................. 280,317,293
------------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCKS AND OTHER (1.9%)
BRAZIL (1.3%)
Telecommunications (1.3%)
Telecomunicacoes Brasileiras........................................... 4,509,444
41,300
------------------
FRANCE (--%)
Mining and Metal (--%)
Pechiney Certificate of Investment..................................... 83,691
2,000
------------------
GERMANY (.2%)
Telecommunications (.2%)
Moebel Walther AG...................................................... 550,874
11,685
------------------
RUSSIA (.2%)
Utilities--Gas and Electric (.2%)
RAO Gasprom ADR 144A Issue (c)......................................... 667,823
60,300
------------------
UNITED KINGDOM (.2%)
Utilities (.2%)
137,700 Hyder PLC.............................................................. 277,055
------------------
Total preferred stocks and other (cost: $4,404,060)................................. 6,088,887
------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
LONG-TERM SECURITIES (.6%)
HONG KONG (--%)
Banking (--%)
$ 1,680,000 PIV Investment Finance Convertible............... 4.50% 12/01/00 197,925
------------
MEXICO (.6%)
Telecommunications (.6%)
42,300 SBC Communications, Inc. (U.S. dollar)........... 7.75% 03/15/01 1,919,363
------------
Total long-term debt securities (cost $3,696,189)................... 2,117,288
------------
</TABLE>
See accompanying notes to investments in securities.
66
<PAGE>
International Stock Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------
SHORT-TERM SECURITIES (12.2%)
<C> <S> <C> <C> <C> <C>
$ 2,967,000 Norwest Advantage Cash Investment Fund, current rate 5.286% .............. $ 2,967,000
1,721,000 U.S. Treasury Bill..................................... 4.860% 07/23/98 1,715,815
6,898,000 U.S. Treasury Bill..................................... 5.130% 10/15/98 6,796,392
10,105,000 U.S. Treasury Bill..................................... 5.200% 11/12/98 9,915,329
4,097,000 U.S. Treasury Bill..................................... 5.260% 12/10/98 4,003,506
4,500,000 U.S. Treasury Bill..................................... 4.990% 09/24/98 4,448,565
3,796,000 U.S. Treasury Bill..................................... 5.020% 10/29/98 3,728,887
6,657,000 U.S. Treasury Bill..................................... 5.180% 11/19/98 6,525,791
------------------
Total short-term securities (cost $40,096,752)............................ 40,101,285
------------------
Total investments in securities (cost $262,826,112) (d)................... $ 328,624,753
------------------
------------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securites are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) 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 June 30, 1998 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- -----------
<S> <C> <C>
Banque Nationale De Paris ADR 144A Various $ 2,720,363
Issue................................
Bohler-Uddeholm 144A Issue............. Various 824,910
Qantas Airways Limited ADR 144A Various 1,350,928
Issue................................
RAO Gasprom ADR 144A Issue............. Various 455,482
Va Technologie 144A Issue.............. Various 1,026,767
-----------
$ 6,378,450
-----------
-----------
</TABLE>
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$262,826,112. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $94,680,093
Gross unrealized depreciation.......... (28,881,452)
-----------
Net unrealized appreciation............ $65,798,641
-----------
-----------
</TABLE>
See accompanying notes to investments in securities.
67
<PAGE>
Small Company Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(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 (4.7%)
Agriculture Product (1.4%)
131,350 NCO Group Incorporated (b)............................................................. $ 2,889,700
------------------
Chemicals (3.3%)
170,778 Cambrex Corporation.................................................................... 4,482,922
61,230 Valspar Corporation.................................................................... 2,426,239
------------------
6,909,161
------------------
CAPITAL GOODS (12.1%)
Electrical Equipment (1.7%)
155,793 Advanced Lighting Technologies (b)..................................................... 3,622,187
------------------
Engineering/Construction (3.7%)
182,700 United Rental, Inc. (b)................................................................ 7,673,400
------------------
Machinery (3.3%)
192,800 Kaydon Corporation..................................................................... 6,808,250
------------------
Metal Fabrication (1.7%)
132,425 Shaw Group Incorporated (b)............................................................ 3,443,050
------------------
Waste Management (1.7%)
73,100 American Disposal Services, Inc. (b)................................................... 3,426,562
------------------
COMMUNICATION SERVICES (1.8%)
Cellular (1.4%)
161,300 LCC International Incorporated (b)..................................................... 2,984,050
------------------
Telephone (.4%)
88,200 Premiere Technologies (b).............................................................. 731,787
------------------
CONSUMER CYCLICAL (25.6%)
Building Materials (1.1%)
111,000 The Maxim Group, Inc. (b).............................................................. 2,206,125
------------------
Distribution Durables (2.8%)
201,600 MSC Industrial Direct Company (b)...................................................... 5,745,600
------------------
Leisure (2.4%)
185,300 American Skiing Corporation (b)........................................................ 2,408,900
58,100 National R.V. Holdings, Inc. (b)....................................................... 2,621,762
------------------
5,030,662
------------------
Lodging-Hotel (.4%)
74,968 Extended Stay America (b).............................................................. 843,390
------------------
Retail (8.4%)
172,940 Borders Group Incorporated (b)......................................................... 6,398,780
32,600 Kohl's, Inc. (b)....................................................................... 1,691,125
151,350 Pacific Sunwear of California (b)...................................................... 5,297,250
89,100 Stage Stores, Inc. (b)................................................................. 4,031,775
------------------
17,418,930
------------------
Service (7.8%)
210,700 Acxiom Corporation (b)................................................................. 5,254,331
125,100 CKS Group Incorporated (b)............................................................. 2,251,800
144,200 Copart Incorporated (b)................................................................ 3,334,625
279,300 Fairfield Communities, Inc. (b)........................................................ 5,359,069
------------------
16,199,825
------------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Textiles (2.7%)
94,000 Nautica Enterprises, Inc. (b).......................................................... $ 2,520,375
144,000 Tropical Sportswear International (b).................................................. 3,060,000
------------------
5,580,375
------------------
CONSUMER STAPLES (2.4%)
Broadcasting (1.4%)
71,700 United Video Satellite Group (b)....................................................... 2,841,112
------------------
Service (1.0%)
88,100 Corrections Corporation Of America (b)................................................. 2,070,350
------------------
ENERGY (5.3%)
Oil (.6%)
113,200 Newpark Resources Incorporated (b)..................................................... 1,259,350
------------------
Oil & Gas (4.7%)
29,300 Apache Corporation..................................................................... 922,950
109,800 J. Ray McDermott Holdings, Inc. (b).................................................... 4,556,700
114,000 Petroleum Geo-Services (b)(c).......................................................... 3,477,000
36,100 R & B Falcon Corporation (b)........................................................... 816,762
------------------
9,773,412
------------------
FINANCIAL (3.4%)
Banks (.6%)
48,000 GBC Bancorp............................................................................ 1,272,000
------------------
Insurance (1.4%)
36,400 Life Re Corporation.................................................................... 2,984,800
------------------
Investment Bankers/Brokers (1.4%)
75,200 T. Rowe Price Associates............................................................... 2,824,700
------------------
HEALTH CARE (13.0%)
Drugs (.4%)
86,900 Cygnus, Inc. (b)....................................................................... 907,019
------------------
Hospital Management (2.0%)
118,433 Sunrise Assisted Living, Inc. (b)...................................................... 4,071,134
------------------
Managed Care (1.5%)
19,500 Ameripath, Inc. (b).................................................................... 230,344
111,384 Concentra Managed Care, Inc. (b)....................................................... 2,895,984
------------------
3,126,328
------------------
Medical Products/Supplies (8.2%)
28,300 Amerisource Health Corporation (b)..................................................... 1,858,956
132,700 Hanger Orthopedic Group (b)............................................................ 2,703,763
120,900 Sola International, Inc. (b)........................................................... 3,951,919
148,700 Sybron International Corporation (b)................................................... 3,754,675
136,066 Total Renal Care Holdings, Inc. (b).................................................... 4,694,285
------------------
16,963,598
------------------
Special Services (.9%)
66,000 Curative Health Services (b)........................................................... 1,881,000
------------------
TECHNOLOGY (22.8%)
152,900 DII Group Incorporated (b)............................................................. 2,608,856
61,600 DuPont Photomasks Incorporated (b)..................................................... 2,125,200
127,000 Gartner Group Incorporated (b)......................................................... 4,445,000
</TABLE>
See accompanying notes to investments in securities.
68
<PAGE>
Small Company Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
56,900 Global Imaging Systems, Inc. (b)....................................................... $ 796,600
72,200 HNC Software Incorporated (b).......................................................... 2,946,663
81,000 Integrated Process Equipment (b)....................................................... 911,250
36,700 Lamalie Associates (b)................................................................. 674,363
99,650 Mastech Corporation (b)................................................................ 2,802,656
106,000 Maximus Incorporated (b)............................................................... 3,047,500
165,500 May & Speh Incorporated (b)............................................................ 3,289,313
59,600 Orbotech, Ltd. (b)(c).................................................................. 2,167,950
45,000 Peapod Incorporated (b)................................................................ 270,000
92,800 Photronics Incorporated (b)............................................................ 2,047,400
45,600 Sapient Corporation (b)................................................................ 2,405,400
45,500 Saville Systems-ADR (b)(c)............................................................. 2,280,688
57,400 The Bisys Group, Inc. (b).............................................................. 2,353,400
60,300 Uniphase Corporation (b)............................................................... 3,785,712
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ------------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
116,600 Xylan Corporation (b).................................................................. $ 3,476,138
110,600 Zebra Technologies Corporation (b)..................................................... 4,728,150
------------------
47,162,239
------------------
TRANSPORTATION (3.4%)
Air Freight (2.9%)
173,500 Eagle USA Airfreight, Inc. (b)......................................................... 6,018,281
------------------
Airlines (.5%)
5,400 Ryanair Holdings PLC-ADR (b)(c)........................................................ 192,375
34,000 Skywest Incorporated................................................................... 952,000
------------------
1,144,375
------------------
Total common stock (cost: $146,645,371)............................................................ 195,812,752
------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.5%)
$2,117,000 Atlantic Richfield Company....................... 5.68% 07/08/98 2,114,313
1,150,000 General Mills Incorporated....................... 5.69% 07/06/98 1,148,900
4,022,000 GTE Funding...................................... 5.69% 07/15/98 4,012,582
930,000 Potomac Electric................................. 5.69% 07/07/98 928,965
3,323,262 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%............................................................. 3,323,262
1,000,000 Tribune Company.................................. 5.66% 07/17/98 997,351
905,000 U.S. Treasury Bill............................... 5.02% 07/23/98 902,351
------------
Total short-term securities (cost: $13,429,241)..................... 13,427,724
------------
Total investments in securities (cost: $160,074,612) (d)............ $209,240,476
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Portfolio held 3.9% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$160,450,997. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $60,542,282
Gross unrealized depreciation.......... (11,752,804)
-----------
Net unrealized appreciation............ $48,789,479
-----------
-----------
</TABLE>
69
<PAGE>
Maturing Government Bond 1998 Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (10.9%)
U.S. GOVERNMENT AND AGENCIES OBLIGATION
$ 600,000 Financial Corporation Strip (b).................. 6.04% 08/08/99 $ 563,670
----------------
Total U.S. government and agencies obligations (cost: $561,870)... 563,670
----------------
Total long-term debt securities (cost: $561,870).................. 563,670
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (89.1%)
615,000 Federal Home Loan Bank Strip (b)................. 6.73% 08/25/98 610,105
590,000 Financial Corporation Strip (b).................. 6.62% 05/30/99 560,264
100,000 FNMA Strip (b)................................... 5.95% 08/12/98 99,384
356,000 FNMA Strip (b)................................... 7.11% 11/22/98 348,478
350,000 FNMA Strip (b)................................... 7.05% 05/22/99 332,962
223,000 Israel Government Trust Certificate (b).......... 6.54% 11/15/98 218,582
1,404 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%........................................................... 1,404
457,470 Tennesse Valley Authority Strip (b).............. 5.91% 11/15/98 448,160
900,000 Tennessee Valley Authority Strip (b)............. 6.72% 10/15/98 886,212
1,133,000 U.S. Treasury Interest Strip (b)................. 5.92% 11/15/98 1,110,952
----------------
Total short-term securities (cost: $4,596,778).................... 4,616,503
----------------
Total investments in securities (cost: $5,158,648) (c)............ $ 5,180,173
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At June 30, 1998 the cost of securities for federal income tax purposes was
$5,158,683. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $21,505
Gross unrealized depreciation.......... (15)
-------
Net unrealized appreciation............ $21,490
-------
-------
</TABLE>
70
<PAGE>
Maturing Government Bond 2002 Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.5%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.5%)
$ 500,000 Financial Corporation Strip (b).................. 7.04% 06/27/02 $ 398,405
360,000 Financial Corporation Strip (b).................. 6.36% 09/07/02 284,094
525,000 FNMA Strip (b)................................... 7.60% 02/01/02 428,794
425,000 FNMA Strip (b)................................... 6.37% 08/01/03 318,537
182,000 Israel Government Trust Certificates (b)......... 7.03% 05/15/02 146,687
325,000 Israel Government Trust Certificates (b)......... 5.95% 05/15/02 261,940
1,150,000 Tennessee Valley Authority Strip (b)............. 7.40% 04/15/03 879,968
1,710,000 U.S. Treasury Interest Strip (b)................. 6.71% 08/15/02 1,368,787
775,000 U.S. Treasury Interest Strip (b)................. 6.25% 02/15/03 603,028
100,000 U.S. Treasury Principal Strip (c)................ 6.28% 02/15/03 77,705
----------------
Total long-term debt securities (cost: $4,561,503)................ 4,767,945
----------------
SHORT-TERM SECURITIES (.4%)
20,780 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%........................................................... 20,780
----------------
Total short-term securities (cost: $20,780)....................... 20,780
----------------
Total investments in securities (cost: $4,582,283) (d)............ $ 4,788,725
----------------
----------------
</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) For principal only issues (strips) the interest rate disclosed represents
current yields based upon estimated future cash flows.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$4,586,672. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<CAPTION>
Gross unrealized appreciation.......... $202,053
<S> <C>
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $202,053
--------
--------
</TABLE>
71
<PAGE>
Maturing Government Bond 2006 Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.2%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.2%)
$ 921,000 Financial Corporation Strips (b)................. 7.65% 09/07/07 $ 538,849
810,000 FNMA Strip (b)................................... 7.62% 08/01/05 539,411
553,000 Israel Government Trust Certificates (b)......... 7.44% 11/15/05 364,621
1,000,000 Israel State Aid (b)............................. 6.58% 11/15/06 623,140
1,000,000 Resolution Funding Corporation Strips (b)........ 7.46% 07/15/07 602,380
2,700,000 U.S. Treasury Interest Strip (b)................. 6.51% 11/15/06 1,703,133
750,000 U.S. Treasury Interest Strip (b)................. 5.78% 02/15/07 465,795
----------------
Total long-term debt securities (cost: $4,396,164)................ 4,837,329
----------------
SHORT-TERM SECURITIES (.6%)
31,752 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%........................................................... 31,752
----------------
Total short-term securities (cost: $31,752)....................... 31,752
----------------
Total investments in securities (cost: $4,427,916) (c)............ $ 4,869,081
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At June 30, 1998 the cost of securities for federal income tax purposes was
$4,438,429. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $430,652
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $430,652
--------
--------
</TABLE>
72
<PAGE>
Maturing Government Bond 2010 Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (99.4%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (99.4%)
$ 945,000 Financial Corporation Strips (b)................. 7.92% 08/08/11 $ 431,109
500,000 FNMA Strip (b)................................... 7.70% 02/12/10 252,760
132,000 Israel Government Trust Certificates (b)......... 7.66% 05/15/10 66,348
515,000 Israel State Aid (b)............................. 8.26% 03/15/10 262,207
1,100,000 Israel State Aid (b)............................. 6.85% 08/15/11 513,480
350,000 Resolution Funding Corporation Strip (b)......... 7.59% 04/15/11 167,832
524,000 Turkey Trust (b)................................. 6.69% 11/15/10 255,209
1,680,000 U.S. Treasury Interest Strip (b)................. 6.11% 05/15/10 862,025
1,975,000 U.S. Treasury Interest Strip (b)................. 6.27% 02/15/11 969,073
575,000 U.S. Treasury Interest Strip (b)................. 6.93% 08/15/11 273,944
----------------
Total long-term debt securities (cost: $3,566,837) (c)............ $ 4,053,987
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At June 30, 1998 the cost of securities for federal income tax purposes was
$3,572,941. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $481,046
Gross unrealized depreciation.......... --
--------
Net unrealized appreciation............ $481,046
--------
--------
</TABLE>
73
<PAGE>
Value Stock Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (94.0%)
BASIC MATERIALS (9.6%)
Aluminum (1.5%)
56,800 Reynolds Metals Company.......................... $ 3,177,250
----------------
Chemicals (4.8%)
30,000 Cytec Industries, Inc. (b)....................... 1,327,500
58,400 DuPont........................................... 4,358,100
187,900 Morton International, Inc........................ 4,697,500
----------------
10,383,100
----------------
Paper and Forest (3.3%)
115,475 Fort James Corporation........................... 5,138,637
64,100 Mead Corporation................................. 2,035,175
----------------
7,173,812
----------------
CAPITAL GOODS (1.7%)
Electrical Equipment (.5%)
36,500 Diebold.......................................... 1,053,937
----------------
Manufacturing (1.2%)
14,404 United Dominion Industries....................... 480,733
109,900 Walter Industries Incorporated (b)............... 2,081,231
----------------
2,561,964
----------------
COMMUNICATION SERVICES (4.1%)
Telephone (4.1%)
71,800 AT&T Corporation................................. 4,101,575
123,900 SBC Communications, Inc.......................... 4,956,000
----------------
9,057,575
----------------
CONSUMER CYCLICAL (10.1%)
Auto (1.3%)
36,700 Eaton Corporation................................ 2,853,425
----------------
Retail (8.5%)
148,100 Federated Department Stores (b).................. 7,969,631
29,300 JC Penny Company................................. 2,118,756
103,400 Tandy Corporation................................ 5,486,662
152,520 Venator Group (b)................................ 2,916,945
----------------
18,491,994
----------------
Service (.3%)
18,000 Tele-Communications, Inc. (b).................... 691,875
----------------
CONSUMER STAPLES (9.8%)
Food (3.8%)
239,813 Hormel Foods Corporation......................... 8,288,537
----------------
Retail (1.1%)
226,900 Food Lion, Inc................................... 2,410,812
----------------
Service (1.5%)
91,900 Deluxe Corporation............................... 3,291,169
----------------
Tobacco (3.4%)
97,700 Philip Morris Companies, Inc..................... 3,846,937
154,200 RJR Nabisco Holdings Corporation................. 3,662,250
----------------
7,509,187
----------------
ENERGY (12.5%)
Oil (8.5%)
38,000 Chevron Corporation.............................. 3,156,375
57,900 Exxon Corporation................................ 4,128,994
49,800 Mobil Corporation................................ 3,815,925
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
ENERGY--CONTINUED
64,300 USX--Marathon Group.............................. $ 2,206,294
173,800 YPF Sociedad Anonima (c)......................... 5,224,863
----------------
18,532,451
----------------
Oil & Gas (4.0%)
107,800 Enron Oil & Gas.................................. 2,182,950
198,100 Valero Energy Corporation........................ 6,586,825
----------------
8,769,775
----------------
FINANCIAL (22.9%)
Banks (7.0%)
77,540 Banc One Corporation............................. 4,327,701
27,300 Citicorp......................................... 4,074,525
89,300 Nationsbank Corporation.......................... 6,831,450
----------------
15,233,676
----------------
Consumer Finance (2.9%)
56,400 American Express Company......................... 6,429,600
----------------
Finance--Diversified (3.5%)
91,200 Federal National Mortgage Association............ 5,540,400
44,400 Starwood Lodging Trust........................... 2,145,075
----------------
7,685,475
----------------
Insurance (3.9%)
223,892 Everest Reinsurance Holdings..................... 8,605,849
----------------
Real Estate Investment Trust (1.9%)
86,600 Equity Residential Properties.................... 4,108,088
----------------
Savings and Loans (3.7%)
74,370 Golden State Bancorp (b)......................... 2,212,508
79,170 Golden State Bancorp Warrants (b)................ 420,591
332,300 Sovereign Bancorp Incorporated................... 5,431,045
----------------
8,064,144
----------------
HEALTH CARE (4.1%)
Managed Care (4.1%)
283,700 Humana (b)....................................... 8,847,894
----------------
TECHNOLOGY (7.4%)
141,000 Bay Networks, Inc. (b)........................... 4,547,250
119,300 Electronic Data Systems Corporation.............. 4,772,000
60,400 International Business Machine................... 6,934,675
----------------
16,253,925
----------------
TRANSPORTATION (1.0%)
Trucking (1.0%)
53,100 CNF Transportation............................... 2,256,750
----------------
UTILITIES (10.8%)
Electric Companies (7.4%)
128,000 Dominion Resources, Inc.......................... 5,216,000
195,400 Teco Energy...................................... 5,239,163
134,800 Texas Utilities Company.......................... 5,611,050
----------------
16,066,213
----------------
Natural Gas (3.4%)
194,952 El Paso Natural Gas Company...................... 7,456,914
----------------
205,255,391
Total common stock (cost: $182,192,416).......................
----------------
</TABLE>
See accompanying notes to investments in securities.
74
<PAGE>
Value Stock Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ---------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.8%)
$1,275,000 General Mills Incorporated...................... 5.69% 07/06/98 $ 1,273,781
980,000 GTE Funding..................................... 5.64% 07/10/98 978,452
6,141,807 Temporary Investment Fund--Temp Fund Portfolio, current rate
5.50%............................................................ 6,141,807
6,445,000 U.S. Treasury Bill.............................. 5.03% 07/23/98 6,426,136
---------------
Total short-term securities (cost: $14,820,041).................... 14,820,176
---------------
Total investments in securities (cost: $197,012,457) (d)........... $ 220,075,567
---------------
---------------
</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 2.4% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$197,240,685. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $30,857,852
Gross unrealized depreciation.......... (8,022,970)
-----------
Net unrealized appreciation............ $22,834,882
-----------
-----------
</TABLE>
75
<PAGE>
Small Company Value Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (86.4%)
BASIC MATERIALS (5.4%)
Aluminum (1.9%)
8,300 Century Aluminum Company......................... $ 122,425
----------------
Chemicals (3.5%)
4,800 A. Schulman, Inc................................. 93,900
6,200 Quest Diagnostics, Inc. (b)...................... 135,625
----------------
229,525
----------------
CAPITAL GOODS (10.5%)
Manufacturing (5.0%)
5,900 United Dominion Industries....................... 196,912
7,000 Walter Industries Incorporated (b)............... 132,562
----------------
329,474
----------------
Metal Fabrication (5.5%)
3,600 Gibraltar Steel Corporation (b).................. 73,800
6,400 Shaw Group Incorporated (b)...................... 166,400
2,900 Triumph Group Incorporated (b)................... 121,800
----------------
362,000
----------------
CONSUMER CYCLICAL (10.3%)
Auto (2.4%)
8,800 Intermet Corporation............................. 159,500
----------------
Publishing (2.8%)
11,000 Journal Register Company (b)..................... 184,250
----------------
Retail (3.0%)
5,600 Michaels Stores Incorporated (b)................. 197,575
----------------
Textiles (2.1%)
6,400 Tropical Sportswear International Corporation
(b)............................................ 136,000
----------------
CONSUMER STAPLES (8.1%)
Food (3.8%)
6,900 Chiquita Brands International.................... 97,031
2,800 Earthgrains Company.............................. 156,450
----------------
253,481
----------------
Food & Health (1.7%)
4,100 Multifoods Corporation........................... 112,750
----------------
Household Product (2.6%)
6,600 First Brands Corporation......................... 169,125
----------------
ENERGY (1.5%)
Oil & Gas (1.5%)
6,400 Tesoro Petroleum Corporation (b)................. 101,600
----------------
FINANCIAL (30.6%)
Banks (5.6%)
5,350 Commercial Federal Corporation................... 169,194
8,400 Peoples Heritage Financial Group, Inc............ 198,450
----------------
367,644
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
Insurance (9.9%)
3,600 Allied Group Incorporated........................ $ 168,525
6,200 Amerus Life Holdings............................. 200,725
3,630 Frontier Insurance Group, Inc.................... 81,902
4,875 RLI Corporation.................................. 198,352
----------------
649,504
----------------
Real Estate Investment Trust (9.1%)
1,900 Apartment Investment & Management Company........ 75,050
3,400 Glenborough Realty Trust, Inc.................... 89,675
2,100 Kilroy Realty.................................... 52,500
4,700 Pacific Gulf Properties, Inc..................... 100,169
3,400 Prentiss Properties Trust........................ 82,662
4,900 Storage Trust Realty............................. 114,537
6,400 Sunstone Hotel Investors......................... 85,200
----------------
599,793
----------------
Savings and Loans (6.0%)
6,300 Bay View Capital Corporation..................... 200,025
11,880 Sovereign Bancorp Incorporated................... 194,164
----------------
394,189
----------------
TECHNOLOGY (6.3%)
2,300 DuPont Photomasks Incorporated (b)............... 79,350
8,700 Learning Company, Inc. (b)....................... 257,738
3,400 Photronics Incorporated (b)...................... 75,013
----------------
412,101
----------------
TRANSPORTATION (3.7%)
Shipping (1.6%)
4,100 Teekay Shipping Corporation (c).................. 102,756
----------------
Trucking (2.1%)
4,200 US Freightways Corporation....................... 137,944
----------------
UTILITIES (10.0%)
Electric Companies (5.0%)
5,400 Sierra Pacific Resources......................... 196,088
4,000 WPS Resources Corporation........................ 131,250
----------------
327,338
----------------
Natural Gas (5.0%)
3,600 Piedmont Natural Gas Company..................... 121,050
8,900 Wicor, Inc....................................... 205,813
----------------
326,863
----------------
5,675,837
Total common stock (cost: $5,349,581).......................
----------------
</TABLE>
See accompanying notes to investments in securities.
76
<PAGE>
Small Company Value Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- -------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (13.2%)
$175,699 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
5.50%............................................................... $ 175,699
578,000 U.S. Treasury Bill.............................. 5.01% 08/27/98 573,507
120,000 U.S. Treasury Bill.............................. 5.17% 10/01/98 118,473
-------------
Total short-term securities (cost: $867,695).......................... 867,679
-------------
Total investments in securities (cost: $6,217,276) (d)................ $ 6,543,516
-------------
-------------
</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 1.6% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$6,228,792. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $534,800
Gross unrealized depreciation.......... (220,076)
--------
Net unrealized appreciation............ $314,724
--------
--------
</TABLE>
77
<PAGE>
Global Bond Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(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 (92.2%)
AUSTRALIA (4.9%)
Government (4.9%)
1,630,000 Australian Government (Australian Dollar)........ 8.750% 08/15/08 $ 1,255,244
----------------
DENMARK (5.7%)
Government (5.7%)
4,300,000 Denmark (Danish Kroner).......................... 7.000% 12/15/04 701,639
1,000,000 Denmark (Danish Kroner).......................... 7.000% 11/10/24 176,814
3,470,000 Denmark (Danish Kroner).......................... 8.000% 03/15/06 604,194
----------------
1,482,647
----------------
GERMANY (7.5%)
Government (7.5%)
3,000,000 Deutschland Republic (Deutsch Mark).............. 6.500% 07/04/27 1,942,596
----------------
GREECE (2.0%)
Government (2.0%)
75,000,000 Hellenic Republic (Greek Drachma)................ 8.900% 03/21/04 249,934
230,000 Hellenic Republic (European Currency Unit)....... 5.750% 03/21/08 255,999
----------------
505,933
----------------
NEW ZEALAND (1.4%)
Government (1.4%)
449,000 New Zealand (New Zealand Dollar)................. 8.000% 02/15/01 238,673
200,000 New Zealand (New Zealand Dollar)................. 8.000% 11/15/06 114,499
----------------
353,172
----------------
PHILLIPINES (.5%)
Government (0.5%)
7,000,000 International Bank Reconstruction and Development
(Phillipine Peso).............................. 10.250% 04/11/02 140,000
----------------
SOUTH AFRICA (.7%)
Government (0.7%)
500,000 South Africa (South African Rand)................ 12.000% 02/28/05 73,250
700,000 South Africa (South African Rand)................ 12.000% 12/21/06 102,348
----------------
175,598
----------------
SWEDEN (5.7%)
Government (5.7%)
10,600,000 Sweden Series 1038 (Swedish Krona)............... 6.500% 10/25/06 1,471,919
----------------
UNITED KINGDOM (14.3%)
Banking (5.6%)
660,000 British Treasury (British Sterling Pound)........ 9.000% 08/06/12 1,435,726
Financial (5.1%)
500,000 International Bank Reconstruction and Development
(British Sterling Pound)....................... 7.125% 07/30/07 889,033
400,000 UK Treasury Strips (British Sterling Pound)
(d)............................................ 5.910% 12/07/05 433,465
Pharmaceuticals (3.6%)
500,000 Glaxo (British Sterling Pound)................... 8.750% 12/01/05 937,405
----------------
3,695,629
----------------
UNITED STATES (48.6%)
Government (30.4%)
498,411 FHLMC (U.S. Dollars)............................. 6.500% 05/01/13 501,680
502,049 GLMC (U.S. Dollars).............................. 7.000% 05/01/28 500,320
501,337 FGCI (U.S. Dollars).............................. 7.000% 05/18/98 510,267
500,000 FNMA Note (U.S. Dollars)......................... 8.625% 11/10/04 518,031
455,624 GNMA (U.S. Dollars).............................. 7.500% 12/12/02 468,012
8 GNMA (U.S. Dollars).............................. 7.500% 05/15/25 8
495,000 GNSF (U.S. Dollars).............................. 7.000% 06/15/28 502,737
750,000 U.S. Treasury Note (U.S. Dollars)................ 6.375% 09/30/01 767,618
750,000 U.S. Treasury Bond (U.S. Dollars)................ 8.000% 11/15/21 966,797
485,519 FGCI (U.S. Dollars).............................. 7.000% 09/01/08 494,168
500,000 FNMA (U.S. Dollars).............................. 5.750% 6/15/05 501,761
</TABLE>
See accompanying notes to investments in securities.
78
<PAGE>
Global Bond Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL (b) VALUE(a)
- ----------------------- ----------------
UNITED STATES--CONTINUED
<C> <S> <C> <C> <C>
1,050,000 Treasury Bond (U.S. Dollars)..................... 6.125% 11/15/27 $ 1,125,141
Corporate (15.6%)
500,000 Cable & Wireless (U.S. Dollars).................. 6.250% 03/06/05 508,910
500,000 Consumers Energy 144A Issue (U.S. Dollars) (c)... 6.375% 02/01/08 497,601
500,000 GTE Corp Debenture (U.S. Dollars)................ 6.940% 04/15/28 510,126
500,000 General Electric Capital Corporation (U.S.
Dollars)....................................... 6.660% 05/01/18 507,012
500,000 Lehman Bros (U.S. Dollars)....................... 6.500% 04/15/08 500,974
500,000 TCI Communications (U.S. Dollars)................ 6.375% 05/01/03 503,996
500,000 Time Warner (U.S. Dollars)....................... 6.950% 1/15/28 506,857
500,000 Associates Corp of North America (U.S.
Dollars)....................................... 6.625% 5/15/01 507,950
----------------
10,899,966
----------------
Total long-term debt securities (cost: $21,615,630).......................... 21,922,704
----------------
SHORT-TERM SECURITIES (1.4%)
1,250,000 Mexican Cetes (Mexican Peso)..................... 22.240% 9/24/98 131,754
450,000 Poland Treasury (Polish Zloty)................... 20.250% 2/10/99 114,589
1,000,000 U.S. Treasury Note (U.S. Dollars)................ 5.625% 11/30/99 1,001,250
665,178 Provident Institutional Temp Fund (U.S. Dollars)--Temp Fund Portfolio,
current rate 5.500%........................................................ 665,178
----------------
Total short-term debt securities (cost: $1,924,636).......................... 1,912,771
----------------
Total investments in securities (cost: $23,540,266) (e)...................... $ 23,835,475
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Principal amounts for debt securities are denominated in the currencies
indicated.
(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 June 30, 1998 includes acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ----------
<S> <C> <C>
Consumers Energy 144A Issue............ Various $ 492,387
----------
----------
</TABLE>
(d) For principal only issues (strips) the interest rate disclosed represents
current yields based upon estimated future cash flows.
(e) At June 30, 1998 the cost of securities for federal income tax purposes was
$23,540,266. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C> <C>
Gross unrealized appreciation.......... $374,116
(78,907)
Gross unrealized depreciation..........
--------
$295,209
Net unrealized appreciation............
--------
--------
</TABLE>
79
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (99.7%)
BASIC MATERIALS (6.0%)
Aluminum (.2%)
300 Alumax, Inc. (b)................................. $ 13,912
----------------
Chemicals (3.4%)
300 A. Schulman, Inc................................. 5,869
1,300 Airgas (b)....................................... 18,687
300 Albemarle Corporation............................ 6,619
200 Betzdearborn..................................... 8,437
400 Cabot............................................ 12,925
400 Crompton & Knowles............................... 10,075
300 Cytec Industries, Inc. (b)....................... 13,275
200 Dexter Corporation............................... 6,362
800 Ethyl............................................ 4,900
300 Ferro............................................ 7,594
300 Georgia Gulf..................................... 6,844
100 H.B. Fuller Company.............................. 5,544
600 IMC Global, Inc.................................. 18,075
300 Lubrizol......................................... 9,075
500 Lyondell Petrochemical........................... 15,219
300 M.A. Hanna Company............................... 5,494
200 Minerals Technologies, Inc....................... 10,175
300 Olin Corporation................................. 12,506
500 RPM Incorporated (b)............................. 8,500
700 Solutia, Inc..................................... 20,081
300 Wellamn, Inc..................................... 6,806
300 Witco Corporation................................ 8,775
----------------
221,837
----------------
Construction (.7%)
300 Calmat........................................... 6,600
300 Martin Marietta Materials........................ 13,500
100 Southdown........................................ 7,137
200 Vulcan Materials................................. 21,337
----------------
48,574
----------------
Iron and Steel (.4%)
400 AK Steel Holding Corporation..................... 7,150
100 Carpenter Technology............................. 5,025
300 Oregon Steel Mills, Inc.......................... 5,587
300 UCAR International (b)........................... 8,756
----------------
26,518
----------------
Paper and Forest (1.3%)
200 Bowater Incorporated............................. 9,450
200 Chesapeake Corporation........................... 7,787
600 Consolidated Paper, Inc.......................... 16,350
500 Georgia-Pacific Corporation...................... 11,531
400 Longview Fibre Company........................... 5,700
300 P.H. Glatfelter Company.......................... 4,744
200 Raynoier, Inc.................................... 9,200
550 Sonoco Products Company.......................... 16,637
300 Wausau-Mosinee Paper Corporation................. 6,862
----------------
88,261
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CAPITAL GOODS (8.0%)
Aerospace/Defense (.8%)
200 Cordant Technologies, Inc........................ $ 9,225
300 Gencorp.......................................... 7,575
300 Precision Castparts Corporation.................. 16,012
300 Sundstrand Corporation........................... 17,175
----------------
49,987
----------------
Electrical Equipment (1.9%)
500 American Power Conversion (b).................... 15,000
400 Diebold.......................................... 11,550
400 Hubbell, Inc..................................... 16,650
875 Molex Incorporated............................... 21,875
300 SCI Systems, Inc. (b)............................ 11,287
700 Solectron Corporation (b)........................ 29,444
300 Symbol Technologies.............................. 11,325
420 Vishay Intertechnology, Inc. (b)................. 7,534
----------------
124,665
----------------
Engineering/Construction (.5%)
400 Granite Construction Company..................... 12,212
200 Jacobs Engineering Group (b)..................... 6,425
300 Newport News Shipbuilding, Inc................... 8,025
400 Varco International, Inc. (b).................... 7,925
----------------
34,587
----------------
Machinery (.6%)
400 Agco Corporation................................. 8,225
300 Albany International Corporation................. 7,181
200 Kaydon Corporation............................... 7,062
200 Kennametal Incorporated.......................... 8,350
100 Tecumseh Products Company........................ 5,281
----------------
36,099
----------------
Manufacturing (1.2%)
300 Ametek, Inc...................................... 8,794
200 Carlisle Companies, Inc.......................... 8,612
300 Donaldson Company, Inc........................... 7,087
300 Federal Signal Corporation....................... 7,294
200 Flowserve Corporation............................ 4,925
100 Nordson Corporation.............................. 4,700
200 Pentair, Inc..................................... 8,500
300 Stewart & Stevenson Services..................... 5,400
200 Teleflex, Inc.................................... 7,600
200 Trinity Industries............................... 8,300
200 York International Corporation................... 8,712
----------------
79,924
----------------
Metal Fabrication (.3%)
200 Maxxum, Inc. (b)................................. 11,431
400 Watts Industries Incorporated.................... 8,350
----------------
19,781
----------------
Office Equipment (1.7%)
600 Herman Miller, Inc............................... 14,587
400 Hon Industries................................... 13,600
400 Lexmark International Group (b).................. 24,400
</TABLE>
See accompanying notes to investments in securities.
80
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
CAPITAL GOODS--CONTINUED
<C> <S> <C>
200 Standard Register................................ $ 7,075
400 Unisource World Wide, Inc........................ 4,325
750 U.S. Office Products Company (b)................. 14,625
500 Viking Office Products, Inc (b).................. 15,687
700 Wallace Computer Services, Inc................... 16,625
----------------
110,924
----------------
Waste Management (1.0%)
1,300 USA Waste Services, Inc. (b)..................... 64,187
----------------
COMMUNICATION SERVICES (2.9%)
Cellular (.5%)
700 360 Communications Company (b)................... 22,400
500 Vanguard Cellular Systems (b).................... 9,437
----------------
31,837
----------------
Telecommunication (.9%)
800 ADC Telecommunications, Inc. (b)................. 29,225
300 Comsat Corporation............................... 8,494
400 Qualcomm, Inc. (b)............................... 22,475
----------------
60,194
----------------
Telephone (1.5%)
400 Aliant Communications, Inc....................... 10,975
550 Century Telephone Enterprise..................... 25,231
800 Cincinnati Bell Incorporated..................... 22,900
400 Southern New England Telecommunications.......... 26,200
300 Telephone and Data Systems, Inc.................. 11,812
----------------
97,118
----------------
CONSUMER CYCLICAL (15.2%)
Auto (1.8%)
200 Arvin Industries, Inc. (b)....................... 7,262
100 Bandag, Incorporated............................. 3,900
100 Borg-Warner Automotive, Inc...................... 4,806
800 Danaher Corporation.............................. 29,350
300 Federal Mogul Corporation........................ 20,250
300 Harsco Corporation............................... 13,744
400 Mark IV Industries, Inc.......................... 8,650
400 Meritor Automotive............................... 9,600
200 Modine Manufacturing Company..................... 6,925
200 OEA, Inc......................................... 3,200
300 Superior Industries International................ 8,456
----------------
116,143
----------------
Building Materials (.2%)
700 Clayton Homes.................................... 13,300
----------------
Construction (.2%)
300 Lancaster Colony Corporation..................... 11,362
----------------
Houseware (.5%)
1,200 Leggett & Platt Incorporated..................... 30,000
----------------
Leisure (1.2%)
1,000 Callaway Golf Company............................ 19,687
200 Gtech Holdings Corporation (b)................... 6,737
900 Harley-Davidson, Inc............................. 34,875
700 International Game Technology.................... 16,975
----------------
78,274
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Lodging--Hotel (.3%)
477 Promus Hotel Corporation (b)..................... $ 18,364
----------------
Publishing (1.4%)
600 A.H. Belo........................................ 14,625
300 Lee Enterprises.................................. 9,187
200 Media General, Inc............................... 9,750
100 Washington Post.................................. 57,600
----------------
91,162
----------------
Retail (7.2%)
400 Barnes and Noble, Inc. (b)....................... 14,975
400 Bed Bath & Beyond, Inc. (b)...................... 20,725
600 Best Buy Company, Inc. (b)....................... 21,675
200 BJ's Wholesale Club, Inc. (b).................... 8,125
500 Borders Group Incorporated (b)................... 18,500
300 Claire's Stores, Inc............................. 6,150
500 CompUSA, Inc. (b)................................ 9,031
875 Dollar General Corporation....................... 34,617
1,000 Family Dollar Stores............................. 18,500
200 Fastenal Company................................. 9,287
300 Fingerhut Company................................ 9,900
900 Fred Meyer, Inc. (b)............................. 38,250
500 General Nutrition Companies (b).................. 15,562
1,500 Heilig-Meyers Company............................ 18,469
900 Kohl's, Inc. (b)................................. 46,687
200 Lands' End, Inc. (b)............................. 6,325
500 Micro Warehouse, Inc. (b)........................ 7,750
900 Office Depot, Inc. (b)........................... 28,406
700 Officemax (b).................................... 11,550
200 Payless Shoesource, Inc. (b)..................... 14,737
500 Proffitts Incorporated (b)....................... 20,187
400 Saks Holdings, Inc. (b).......................... 11,050
1,650 Staples Incorporated (b)......................... 47,747
200 Tiffany & Company................................ 9,600
875 U.S. Filter Corporation (b)...................... 24,555
----------------
472,360
----------------
Service (1.3%)
500 Circus Circus Enterprises, Inc. (b).............. 8,469
200 Pittston Company................................. 7,375
400 Quintiles Transnational (b)...................... 19,675
300 Rollins.......................................... 6,150
400 Sotheby's Holdings............................... 8,950
600 Stewart Enterprises, Inc......................... 15,975
600 Viad............................................. 16,650
----------------
83,244
----------------
Textiles (1.1%)
500 Burlington Industries (b)........................ 7,031
600 Jones Apparel Group, Inc. (b).................... 21,937
200 Nine West Group, Inc. (b)........................ 5,362
800 Shaw Industries.................................. 14,100
400 Unifi Incorporated............................... 13,700
300 Warnaco Group.................................... 12,731
----------------
74,861
----------------
</TABLE>
See accompanying notes to investments in securities.
81
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
CONSUMER STAPLES (9.8%)
<C> <S> <C>
Beverage (1.8%)
2,600 Coca-Cola Enterprises............................ $ 102,050
600 Whitman Corporation.............................. 13,762
----------------
115,812
----------------
Broadcasting (.4%)
300 A.C. Nielsen Corporation (b)..................... 7,575
206 Chris-Craft Industries, Inc. (b)................. 11,266
100 TCA Cable TV, Inc................................ 6,000
----------------
24,841
----------------
Food (2.0%)
200 Dean Foods Company............................... 10,987
300 Dole Food Company................................ 14,906
200 Dreyer's Grand Ice Cream, Inc.................... 4,025
500 Flowers Industries............................... 10,219
400 Hormel Foods Corporation......................... 13,825
500 IBP, Inc......................................... 9,062
400 Interstate Bakeries.............................. 13,275
300 J.M. Smucker (b)................................. 7,444
400 Lance, Inc....................................... 8,950
400 McCormick & Company.............................. 14,288
400 Universal Foods.................................. 8,875
900 Vlasic Foods International (b)................... 18,112
----------------
133,968
----------------
Food & Health (.2%)
300 Multifoods Corporation........................... 8,250
200 US Foodservice (b)............................... 7,012
----------------
15,262
----------------
Household Product (.7%)
600 Dial............................................. 15,562
300 Enesco Group..................................... 9,225
300 First Brands Corporation......................... 7,687
400 Premark International, Inc....................... 12,900
----------------
45,374
----------------
Personal Care (.4%)
400 Carter Wallace, Inc.............................. 7,225
1,600 Perrigo Company (b).............................. 16,100
----------------
23,325
----------------
Restaurants (1.4%)
400 Bob Evans Farms.................................. 8,475
400 Brinker International, Inc. (b).................. 7,700
500 Buffets Incorporated (b)......................... 7,844
300 Cracker Barrel Old Country Store................. 9,525
500 Lone Star Steakhouse & Saloon, Inc. (b).......... 6,906
300 Outback Steakhouse, Inc. (b)..................... 11,700
500 Sbarro, Inc...................................... 14,062
500 Starbucks Corporation (b)........................ 26,719
----------------
92,931
----------------
Retail (.7%)
200 Hannaford Brothers Mortgage Company.............. 8,800
400 Ruddick.......................................... 7,250
1,400 Tyson Foods, Inc................................. 30,363
----------------
46,413
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Service (2.1%)
700 Accustaff, Inc. (b).............................. $ 21,465
600 Cintas........................................... 30,600
400 Corrections Corporation of America (b)........... 9,400
200 Kelly Services................................... 7,075
500 Manpower......................................... 14,344
300 Ogden Corporation................................ 8,306
1,600 Olston Corporation............................... 17,900
500 Robert Half International (b).................... 27,938
----------------
137,028
----------------
Tobacco (.1%)
200 Universal Corporation............................ 7,475
----------------
ENERGY (4.5%)
Oil & Gas (4.5%)
400 BJ Services (b).................................. 11,625
200 Camco International, Inc......................... 15,575
800 Ensco International.............................. 13,900
585 EVI Weatherford, Inc. (b)........................ 21,718
1,000 Global Marine (b)................................ 18,688
500 Murphy Oil....................................... 25,344
600 Nabors Industries (b)............................ 11,888
300 Noble Affiliates, Inc............................ 11,400
800 Noble Drilling Corporation (b)................... 19,250
600 Ocean Energy Incorporated (b).................... 11,738
1,000 Parker Drilling Company (b)...................... 7,063
600 Pioneer Natural Resources........................ 14,325
800 Ranger Oil LTD (b)(c)............................ 5,850
500 Seagull Energy (b)............................... 8,281
300 Smith International, Inc. (b).................... 10,444
300 Tidewater........................................ 9,900
900 Tosco Corporation................................ 26,438
600 Transocean Offshore, Inc......................... 26,700
500 Ultramar Diamond Shamrock Corporation............ 15,781
300 Valero Energy Corporation........................ 9,975
----------------
295,883
----------------
FINANCIAL (18.4%)
Banks (6.6%)
375 Associated Banc Corporation...................... 14,109
300 City National Corporation........................ 11,081
700 Crestar Financial Corporation.................... 38,194
1,050 First Security Corporation....................... 22,477
700 First Tennessee National Corporation............. 22,094
300 First Virginia Banks, Inc........................ 15,338
1,200 Firstar Corporation.............................. 45,600
1,100 Hibernia Corporation............................. 22,206
800 Marshall & Ilsley Corporation.................... 40,850
400 Mercantile Bankshares Corporation................ 13,925
525 Old Kent Financial Corporation................... 18,884
400 Pacific Century Financial Corporation............ 9,600
1,000 Regions Financial Corporation.................... 41,063
950 Southtrust Corporation........................... 41,325
500 TCF Financial Corporation........................ 14,750
500 Union Planters Corporation....................... 29,406
200 Wilmington Trust Corporation..................... 12,175
400 Zions Bancorporation............................. 21,250
----------------
434,327
----------------
</TABLE>
See accompanying notes to investments in securities.
82
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
Commercial Finance (.7%)
300 Finova Finance Trust............................. $ 16,988
1,250 North Fork Bancorporation........................ 30,547
----------------
47,535
----------------
Consumer Finance (.8%)
400 Capital One Financial Corporation................ 49,675
----------------
Finance--Diversified (4.7%)
400 AMBAC Financial Group............................ 23,400
400 MCN Financing.................................... 9,950
200 PMI Group........................................ 14,675
3,700 S&P 400 Mid-Cap Depositary Receipt............... 257,613
----------------
305,638
----------------
Insurance (2.8%)
1,600 AFLAC, Inc....................................... 48,500
500 American Financial Group......................... 21,656
200 HSB Group........................................ 10,700
750 Old Republic Corporation......................... 21,984
800 Provident Companies, Inc......................... 27,600
800 Reliastar Financial.............................. 38,400
200 Transatlantic Holdings, Inc...................... 15,463
----------------
184,303
----------------
Investment Bankers/Brokers (2.1%)
600 A.G. Edwards..................................... 25,613
700 Bear Stearns Companies........................... 39,813
1,050 Paine Webber Group, Inc.......................... 45,019
800 T. Rowe Price Associates......................... 30,050
----------------
140,495
----------------
Savings and Loans (.7%)
730 Charter One Financial, Inc....................... 24,592
700 Dime Bancorp..................................... 20,956
----------------
45,548
----------------
HEALTH CARE (8.4%)
Biotechnology (.7%)
400 Biogen, Inc. (b)................................. 19,600
400 Centocor, Inc. (b)............................... 14,500
400 Genzyme Corporation (b).......................... 10,225
----------------
44,325
----------------
Drugs (2.6%)
300 Bergen Brunswig Corporation...................... 13,913
1,000 Chiron (b)....................................... 15,688
400 Forest Laboratories (b).......................... 14,300
400 ICN Pharmaceuticals, Inc......................... 18,275
600 McKesson Corporation............................. 48,750
700 Mylan Laboratories............................... 21,044
100 R.P. Scherer Corporation (b)..................... 8,863
600 Watson Pharmaceuticals (b)....................... 28,013
----------------
168,846
----------------
Health Care--Diversified (.3%)
700 Ivax Corporation (b)............................. 6,475
400 Quorum Health Group (b).......................... 10,600
----------------
17,075
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
HEALTH CARE--CONTINUED
Hospital Management (.7%)
900 Health Management Association, Inc. (b).......... $ 30,094
200 Pacificare Health Systems, Inc. (b).............. 17,675
----------------
47,769
----------------
Managed Care (1.4%)
600 Beverly Enterprises (b).......................... 8,288
700 Concentra Managed Care, Inc. (b)................. 18,200
400 First Healthcare Group Corporation (b)........... 11,400
700 Foundation Health Systems (b).................... 18,463
300 Health Care and Retirement (b)................... 11,831
400 Novacare, Inc. (b)............................... 4,700
1,200 Oxford Health Plan, Inc. (b)..................... 18,375
----------------
91,257
----------------
Medical Products/Supplies (1.9%)
400 Acuson Corporation (b)........................... 7,275
300 Allegiance Corporation........................... 15,375
400 Dentsply International........................... 10,000
400 Hillenbrand Industries, Inc...................... 24,000
1,200 PSS World Medical, Inc. (b)...................... 17,550
500 Stryker Corporation.............................. 19,188
600 Sybron International Corporation (b)............. 15,150
400 Total Renal Care Holdings, Inc. (b).............. 13,800
----------------
122,338
----------------
Special Services (.8%)
1,500 Apria Healthcare Group, Inc. (b)................. 10,031
200 ATL Ultrasound, Inc. (b)......................... 9,125
300 Covance, Inc. (b)................................ 6,750
1,200 Medaphis Corporation (b)......................... 7,200
500 Omnicare Incorporated............................ 19,063
----------------
52,169
----------------
TECHNOLOGY (14.2%)
500 Altera Corporation (b)........................... 14,781
1,400 America Online (b)............................... 148,400
900 Analog Devices, Inc. (b)......................... 22,106
600 Arrow Electronic, Inc. (b)....................... 13,050
600 Atmel Corporation (b)............................ 8,175
200 Avnet Incorporated............................... 10,938
200 Beckman Coulter, Inc............................. 11,650
1,200 BMC Software, Inc. (b)........................... 62,325
1,200 Cadence Design Systems, Inc. (b)................. 37,500
800 Cirrus Logic Incorporated (b).................... 8,900
800 Comdisco, Inc.................................... 15,200
1,100 Compuware Corporation (b)........................ 56,238
300 Comverse Technology (b).......................... 15,563
800 Cypress Semiconductor Corporation (b)............ 6,650
300 Electronic Arts, Inc. (b)........................ 16,200
450 Fiserv (b)....................................... 19,111
500 Information Resources, Inc. (b).................. 9,250
2,500 Informix Corporation (b)......................... 19,766
2,300 Integrated Device Technology (b)................. 16,459
400 Keane, Inc. (b).................................. 22,400
500 Linear Technology Corporation.................... 30,156
300 Litton Industries, Inc. (b)...................... 17,700
800 Maxim Integrated Products (b).................... 25,350
700 Mentor Graphics (b).............................. 7,394
600 NCR Corporation (b).............................. 19,500
</TABLE>
See accompanying notes to investments in securities.
83
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
600 Network Associates (b)........................... $ 28,725
900 Paychex Incorporated............................. 36,619
200 Policy Management Systems (b).................... 7,850
800 Quantum Corporation (b).......................... 16,600
500 Reynolds & Reynolds.............................. 9,094
1,300 Sensormatic Electronics Corporation.............. 18,200
1,500 Sequent Computer Systems, Inc. (b)............... 18,094
500 Sterling Commerce, Inc. (b)...................... 24,250
400 Sterling Software, Inc. (b)...................... 11,825
600 Storage Technology (b)........................... 26,025
300 Stratus Computer (b)............................. 7,594
300 Structural Dynamics Research (b)................. 6,938
500 Sungard Data Systems (b)......................... 19,188
300 Symantec (b)..................................... 7,838
400 Synopsys Incorporated (b)........................ 18,300
500 Teradyne Incorporated (b)........................ 13,375
200 Varian Associates, Inc........................... 7,800
400 Xilinx Incorporated (b).......................... 13,600
----------------
926,677
----------------
TRANSPORTATION (1.8%)
Air Freight (.1%)
200 Airborne Freight Corporation..................... 6,988
----------------
Airlines (.3%)
200 Alaska Airgroup, Inc. (b)........................ 10,913
200 ASA Holdings, Inc................................ 9,925
----------------
20,838
----------------
Railroads (.7%)
200 GATX Corporation................................. 8,775
600 Kansas City Southern Industries.................. 29,775
300 Wisconsin Central Transport (b).................. 6,563
----------------
45,113
----------------
Shipping (.4%)
300 Alexander & Baldwin, Inc......................... 8,738
900 Overseas Shipholding Group....................... 18,338
----------------
27,076
----------------
Trucking (.3%)
300 Arnold Industries, Inc........................... 4,425
300 CNF Transportation............................... 12,750
----------------
17,175
----------------
UTILITIES (10.5%)
Electric Companies (8.5%)
1,100 AES Corporation (b).............................. 57,819
700 Allegheny Energy, Inc............................ 21,088
500 Black Hills Corporation.......................... 11,530
400 Central Maine Power Company...................... 7,800
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
UTILITIES--CONTINUED
300 Central Louisiana Electric....................... $ 8,925
600 CMS Energy Corporation........................... 26,400
600 Conectiv Incorporated............................ 12,300
600 Florida Progress Corporation..................... 24,675
200 Hawaiian Electric Industries..................... 7,938
600 Idaho Power Company.............................. 20,775
400 Illinova Corporation............................. 12,000
300 Ipalco Enterprises, Inc.......................... 13,331
400 Kansas City Power & Light........................ 11,600
800 LG&E Energy Corporation.......................... 21,650
600 Midamerican Energy Holdings...................... 12,975
200 Minnesota Power, Inc............................. 7,950
300 Montana Power Company............................ 10,425
300 Nevada Power Company............................. 7,725
900 New Century Energies, Inc........................ 40,894
400 New England Electric System...................... 17,300
400 New York State Electric & Gas.................... 16,650
800 Nipsco Industries, Inc........................... 22,400
700 Northeast Utilities (b).......................... 11,856
400 OGE Energy Corporation........................... 10,800
500 Pinnacle West Capital Corporation................ 22,500
700 Potomac Electric Power Company................... 17,544
400 Public Service Company New Mexico................ 9,075
500 Puget Sound Energy, Inc.......................... 13,406
600 Scana Corporation................................ 17,888
700 Teco Energy...................................... 18,769
300 Utilicorp United, Inc............................ 11,306
600 Wisconsin Energy................................. 18,225
400 WPL Holdings..................................... 13,000
----------------
558,519
----------------
Natural Gas (1.5%)
400 AGL Resources.................................... 7,950
700 El Paso Natural Gas Company...................... 26,775
1,200 Marketspan Corporation (b)....................... 35,925
200 National Fuel Gas Company........................ 8,713
400 Questar Corporation.............................. 7,850
300 Washington Gas Light............................. 8,025
----------------
95,238
----------------
Power Products--Industrial (.3%)
400 CalEnergy Company, Inc. (b)...................... 12,025
300 Indiana Energy Incorporated...................... 8,963
----------------
20,988
----------------
Water Utilities (.2%)
500 American Water Works, Inc........................ 15,500
----------------
6,521,199
Total common stock (cost: $6,133,857).......................
----------------
</TABLE>
See accompanying notes to investments in securities.
84
<PAGE>
Index 400 Mid-Cap Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.4%)
$ 187,718 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.50%...... $ 187,718
235,000 U.S. Treasury Bill............................... 4.91% 08/27/98 233,173
----------------
Total short-term securities (cost: $420,936)............................ 420,891
----------------
Total investments in securities (cost: $6,554,793) (d).................. $ 6,942,090
----------------
----------------
</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% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$6,589,346. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $ 831,780
Gross unrealized depreciation..................... (479,036)
---------
Net unrealized appreciation....................... $ 352,744
---------
---------
</TABLE>
85
<PAGE>
Macro-Cap Value Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
COMMON STOCKS (96.4%)
CAPITAL GOODS (5.5%)
Machinery (1.4%)
1,600 Cooper Industries, Inc................................................. $ 87,900
----------------
Manufacturing (2.0%)
2,900 Allied Signal, Inc..................................................... 128,688
----------------
Waste Disposal (2.1%)
3,700 Waste Management, Inc.................................................. 129,500
----------------
COMMUNICATION SERVICES (7.6%)
Telephone (5.0%)
300 Cincinnati Bell........................................................ 8,588
1,400 Frontier Corporation................................................... 44,100
4,500 SBC Communications, Inc................................................ 180,000
1,300 Wisconsin Energy Corporation........................................... 39,488
----------------
272,176
----------------
Telephone Long Distance (2.6%)
1,300 MCI Communications..................................................... 75,562
1,800 Worldcom, Inc. (b)..................................................... 87,188
----------------
162,750
----------------
CONSUMER CYCLICAL (21.6%)
Auto Related (1.2%)
1,200 Goodyear Tire & Rubber................................................. 77,325
----------------
Broadcasting (1.6.%)
2,400 Comcast................................................................ 97,425
----------------
Household Products (3.3%)
2,300 Procter & Gamble Company............................................... 209,444
----------------
Consumer Products (10.6%)
3,100 Anheuser-Busch Companies, Inc.......................................... 146,281
1,000 Fruit of the Loom (b).................................................. 33,188
1,200 Mattel, Inc............................................................ 50,775
2,800 Mirage Resorts, Inc. (b)............................................... 59,675
2,900 Pepsico, Inc........................................................... 119,444
3,100 Philip Morris Companies................................................ 122,062
420 Ralston Purina Group................................................... 49,061
700 Seagram Ltd. (c)....................................................... 28,656
3,600 Stone Container Corporation (b)........................................ 56,250
----------------
665,392
----------------
Retail (4.9%)
1,300 Circuit City Stores.................................................... 60,938
1,100 Federated Department Stores (b)........................................ 59,194
5,700 K Mart Corporation (b)................................................. 109,725
700 Sears Roebuck & Company................................................ 42,744
1,300 TJX Company............................................................ 31,362
----------------
303,963
----------------
ENERGY (5.5%)
Oil--Energy (5.5%)
600 Atlantic Richfield Company............................................. 46,875
700 British Petroleum PLC ADR (c).......................................... 61,775
3,500 Input/Output, Inc. (b)................................................. 62,344
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
ENERGY--CONTINUED
300 Schlumberger Ltd....................................................... $ 20,494
5,200 Tosco Corporation...................................................... 152,750
----------------
344,238
----------------
FINANCIAL (17.5%)
Banks (4.6%)
500 Astoria Financial Corporation.......................................... 26,750
200 Citicorp............................................................... 29,850
2,134 First Union Corporation................................................ 124,308
200 Keycorp................................................................ 7,125
400 Long Island Bancorp, Inc............................................... 24,300
1,800 Norwest Corporation.................................................... 67,275
----------------
279,608
----------------
Consumer Finance (.8%)
700 Associates First Capital Corporation................................... 53,812
----------------
Finance--Diversified (2.7%)
2,800 Federal National Mortgage Association.................................. 170,100
----------------
Insurance (5.8%)
300 Allstate Corporation................................................... 27,469
1,900 Marsh & McLennan Company............................................... 114,831
1,300 MBIA, Inc.............................................................. 97,338
2,100 Travelers Group Incorporated........................................... 127,312
----------------
366,950
----------------
Real Estate Investment Trust (3.1%)
1,000 Simon DeBartolo Group.................................................. 32,500
3,367 Starwood Lodging....................................................... 162,668
----------------
195,168
----------------
Savings and Loans (.5%)
700 Washington Mutual, Inc................................................. 30,406
----------------
HEALTHCARE (16.5%)
Chemicals and Drugs (12.4%)
1,800 Alza Corporation....................................................... 77,850
800 E.I. du Pont de Nemours and Company.................................... 59,700
4,900 Humana, Inc. (b)....................................................... 152,819
700 Eli Lilly & Company.................................................... 46,244
3,300 Monsanto Company....................................................... 184,388
700 Pfizer................................................................. 76,081
1,000 Rohm & Haas Company.................................................... 103,938
1,100 Warner Lambert Company................................................. 76,313
----------------
777,333
----------------
Health Products/Care (4.1%)
800 American Home Products................................................. 41,400
1,400 Bristol-Myers Squibb Company........................................... 160,913
1,200 U.S. Surgical.......................................................... 54,750
----------------
257,063
----------------
INTERNATIONAL CABLE (.1%)
Internet & Telephone Ventures (.1%)
200 Telecom-TCI Ventures................................................... 4,012
----------------
</TABLE>
See accompanying notes to investments in securities.
86
<PAGE>
Macro-Cap Value Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
TECHNOLOGY (14.4%)
<C> <S> <C>
1,600 Cisco Systems, Inc..................................................... $ 147,300
3,200 Coltec Industies, Inc. (b)............................................. 63,600
1,300 Computer Associates International...................................... 72,231
1,700 CompUSA (b)............................................................ 30,706
2,800 EMC Corporation........................................................ 125,475
1,300 First Data Corporation................................................. 43,306
500 IBM Corporation........................................................ 57,406
3,300 International Game Technology.......................................... 80,025
1,000 Oracle Corporation..................................................... 24,562
1,100 PP&L Resources, Inc.................................................... 24,956
1,600 Quantum Corporation (b)................................................ 33,200
2,900 Sun Microsystems (b)................................................... 125,969
1,000 Texas Instruments, Inc................................................. 58,312
1,600 Valero Energy Corporation.............................................. 53,200
----------------
940,248
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
TRANSPORTATION (4.0%)
2,200 Service Corporation International...................................... $ 94,325
3,600 Union Pacific Corporation.............................................. 158,850
----------------
253,175
----------------
UTILITIES (3.7%)
Electric (3.7%)
1,800 GTE Corporation........................................................ 100,125
1,700 New England Electric................................................... 73,525
1,300 Northern States Power.................................................. 37,212
----------------
210,862
----------------
Total common stocks (cost: $5,914,363)......................................... 6,017,538
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (8.6%)
$436,000 U.S. Treasury Bill............................... 4.84% 07/23/98 434,682
77,000 U.S. Treasury Bill............................... 4.94% 07/09/98 76,907
24,000 U.S. Treasury Bill............................... 4.84% 07/16/98 23,949
-----------
Total short-term securities (cost: $532,506)......................... 535,538
-----------
Total Investment in securities (cost: $6,446,869) (d)................ $ 6,553,076
-----------
-----------
</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 1.0% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$6,466,305. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 329,486
Gross unrealized depreciation.......... (242,715)
------------
Net unrealized appreciation............ $ 86,771
------------
------------
</TABLE>
87
<PAGE>
Micro-Cap Growth Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (84.8%)
CAPITAL GOODS (4.5%)
Electrical Equipment (1.8%)
2,400 Advanced Lighting Technologies (b)............... $ 55,800
4,800 Barringer Technologies, Inc. (b)................. 45,300
----------------
101,100
----------------
Waste Management (2.7%)
3,200 Eastern Environmental Services, Inc. (b)......... 108,800
2,300 Waste Connections Incorporated (b)............... 45,712
----------------
154,512
----------------
COMMUNICATION SERVICES (5.2%)
Cellular (.7%)
4,300 Boston Communications Group (b).................. 38,162
----------------
Telecommunication (3.6%)
1,900 ITC Deltacom, Inc. (b)........................... 81,195
1,300 Metromedia Fiber Network (b)..................... 60,612
1,500 MGC Communications (b)........................... 22,875
2,800 Polycom, Inc. (b)................................ 42,175
----------------
206,857
----------------
Telephone (.9%)
1,300 Nextlink Communications, Inc. (b)................ 49,237
----------------
CONSUMER CYCLICAL (22.8%)
Auto (.5%)
1,800 Lithia Motors, Inc. (b).......................... 26,550
----------------
Building Materials (1.4%)
1,800 Engle Homes Incorporated......................... 28,125
2,500 Modtech, Inc. (b)................................ 49,687
----------------
77,812
----------------
Houseware (.5%)
2,100 Global-Tech Appliances, Inc. (b)................. 30,187
----------------
Leisure (2.6%)
3,900 Family Golf Centers (b).......................... 98,719
2,000 SCP Pool Corporation (b)......................... 49,000
----------------
147,719
----------------
Lodging--Hotel (2.1%)
2,400 Cavanaughs Hospitality Corporation (b)........... 31,350
4,000 Silverleaf Resorts, Inc. (b)..................... 61,000
1,600 Suburban Lodges of America (b)................... 24,200
----------------
116,550
----------------
Retail (5.7%)
2,400 Bebe Stores Incorporated (b)..................... 31,500
2,000 Children's Place Retail Stores (b)............... 19,625
1,700 Gadzooks, Inc. (b)............................... 46,856
2,400 Hot Topic, Inc. (b).............................. 57,000
2,000 Kenneth Cole Productions (b)..................... 51,750
1,500 Maxwell Shoe Company, Inc. (b)................... 29,812
3,400 Quiksilver, Inc. (b)............................. 67,787
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
1,300 School Specialty, Inc. (b)....................... $ 21,287
----------------
325,617
----------------
Service (8.5%)
1,300 Abacus Direct Corporation (b).................... 67,519
1,500 Ambassadors International (b).................... 45,469
2,300 Carriage Services Incorporated (b)............... 57,788
2,400 ChiRex, Inc. (b)................................. 42,150
4,700 Coinstar, Inc. (b)............................... 43,475
2,100 Getty Images, Inc. (b)........................... 46,725
1,000 Lason, Inc. (b).................................. 54,500
3,300 Mac-Gray Corporation (b)......................... 42,075
3,200 Pegasus Systems, Inc. (b)........................ 82,000
----------------
481,701
----------------
Textiles (1.5%)
2,200 Ashworth, Inc. (b)............................... 30,525
2,000 Novel Denim Holdings Ltd. (b).................... 52,000
----------------
82,525
----------------
CONSUMER STAPLES (5.5%)
Broadcasting (.9%)
3,700 Cumulus Media, Inc. (b).......................... 53,881
----------------
Restaurants (1.0%)
1,500 Papa John's International, Inc. (b).............. 59,156
----------------
Service (3.6%)
1,600 Eagle Geophysical, Inc. (b)...................... 16,800
3,300 Metzler Group, Inc. (b).......................... 120,863
3,400 Seitel, Inc. (b)................................. 55,038
700 SOS Staffing Services (b)........................ 12,294
----------------
204,995
----------------
ENERGY (3.4%)
Oil & Gas (3.4%)
3,750 Cross Timbers Oil Company........................ 71,484
2,100 Edge Petroleum Corporation (b)................... 24,281
800 Evergreen Resources, Inc. (b).................... 15,000
2,800 HS Resources, Inc. (b)........................... 40,775
7,300 Unit Corporation (b)............................. 44,256
----------------
195,796
----------------
FINANCIAL (2.9%)
Real Estate Investment Trust (2.1%)
3,400 Golf Trust of America, Inc....................... 116,875
----------------
Savings and Loans (.8%)
1,800 Haven Bancorp Incorporated....................... 46,125
----------------
HEALTH CARE (11.6%)
Biotechnology (2.2%)
2,900 Celgene Corporation (b).......................... 30,813
2,400 Digene Corporation (b)........................... 23,400
3,600 Fuisz Technologies (b)........................... 39,825
5,000 Lifecell Corporation (b)......................... 30,625
----------------
124,663
----------------
</TABLE>
See accompanying notes to investments in securities.
88
<PAGE>
Micro-Cap Growth Portfolio
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
HEALTH CARE--CONTINUED
<C> <S> <C>
Drugs (5.8%)
3,100 Algos Pharmaceuticals (b)........................ $ 83,700
1,900 Alkermes, Inc. (b)............................... 33,963
1,900 Anesta Corporation (b)........................... 27,431
4,200 Guilford Pharmaceuticals, Inc. (b)............... 74,025
2,000 Pathogenesis Corporation (b)..................... 58,000
2,500 Shire Pharmaceuticals ADR (b)(c)................. 53,438
----------------
330,557
----------------
Hospital Management (1.1%)
2,400 Horizon Health Corporation (b)................... 42,000
2,000 Promedco Management Company (b).................. 20,500
----------------
62,500
----------------
Medical Products/Supplies (.8%)
2,200 Hanger Orthopedic Group (b)...................... 44,825
----------------
Special Services (1.7%)
2,500 Equity Corporation (b)........................... 60,000
1,500 Impath, Inc. (b)................................. 36,469
----------------
96,469
----------------
TECHNOLOGY (27.8%)
2,700 Applied Micro Circuits Corporation (b)........... 69,863
2,100 Aspen Technology, Inc. (b)....................... 106,050
3,800 Atlantic Data Services, Inc. (b)................. 72,913
1,400 Broadvision, Inc. (b)............................ 33,425
3,400 Cognizant Tech Solutions Corporation (b)......... 41,013
1,700 Concentric Network Corporation (b)............... 51,531
1,800 Culturalaccessworldwide, Inc. (b)................ 17,550
2,300 Envoy Corporation (b)............................ 108,963
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
2,800 Global Imaging Systems, Inc. (b)................. $ 39,200
2,800 Icon Cmt Corporation (b)......................... 51,800
2,700 Insight Enterprises, Inc. (b).................... 108,000
1,300 Inspire Insurance Solutions (b).................. 43,225
1,100 International Integration, Inc. (b).............. 18,975
1,900 International Telecommunication Data Systems
(b)............................................ 55,100
3,200 Intevac Incorporated (b)......................... 34,400
2,500 JDA Software Group, Inc. (b)..................... 109,375
2,300 Maxwell Technologies, Inc. (b)................... 53,475
1,600 New Era of Networks, Inc. (b).................... 48,800
1,500 Omtool Ltd. (b).................................. 11,438
1,600 Photronics Incorporated (b)...................... 35,300
3,000 RF Micro Devices, Inc. (b)....................... 32,625
2,900 SCC Communications Corporation (b)............... 35,525
5,700 Software AG Systems, Inc. (b).................... 166,725
5,400 Technisource Incorporated (b).................... 59,400
2,000 Tier Technologies, Inc. (b)...................... 35,625
2,700 TSI International Software Ltd. (b).............. 61,763
1,100 Unigraphics Solutions, Inc. (b).................. 15,400
2,400 USWeb Corporation (b)............................ 56,850
----------------
1,574,309
----------------
TRANSPORTATION (1.1%)
Transport Services (1.1%)
1,400 Carey International, Inc. (b).................... 39,200
600 Preview Travel, Inc. (b)......................... 20,625
----------------
59,825
----------------
4,808,505
Total common stock (cost: $4,383,016).......................
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (14.6%)
$204,474 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
5.50%............................................................... 204,474
355,000 U.S. Treasury Bill.............................. 5.04% 07/23/98 353,961
272,000 U.S. Treasury Bill.............................. 5.02% 08/27/98 269,885
-------------
Total short-term securities (cost: $828,317).......................... 828,320
-------------
Total investments in securities (cost: $5,211,333) (d)................ $ 5,636,825
-------------
-------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The portfolio held .9% of net assets in foreign securities as of June 30,
1998.
(d) At June 30, 1998 the cost of securities for federal income tax purposes was
$5,211,333. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $911,720
Gross unrealized depreciation.......... (486,228)
--------
Net unrealized appreciation............ $425,492
--------
--------
</TABLE>
89
<PAGE>
Real Estate Securities Portfolio
INVESTMENTS IN SECURITIES
JUNE 30, 1998
(UNAUDITED)
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (88.4%)
CONSUMER CYCLICAL (7.2%)
Building Materials (1.1%)
2,800 D.R. Horton Incorporated......................... $ 58,450
----------------
Lodging--Hotel (6.1%)
3,400 Capstar Hotel Company (b)........................ 95,200
7,300 Host Marriott Corporation (b).................... 130,031
2,800 Prime Hospitality Corporation (b)................ 48,825
1,000 Promus Hotel Corporation (b)..................... 38,500
----------------
312,556
----------------
FINANCIAL (81.2%)
Finance--Diversified (.9%)
2,900 Asset Investors Corporation...................... 46,219
----------------
Investment Bankers/Brokers ( -- )
320 Reckson Service Industries (b)................... 1,060
----------------
Real Estate (15.4%)
7,500 Burnham Pacific Property, Inc.................... 106,406
8,700 Catellus Development (b)......................... 153,881
4,100 Crescent Real Estate Equity Company.............. 137,862
7,700 Patriot American Hospitality..................... 184,319
4,300 Starwoood Lodging Trust.......................... 207,744
----------------
790,212
----------------
Real Estate Investment Trust (64.9%)
2,700 Apartment Investment and Management Company...... 106,650
5,400 Arden Realty Group, Inc.......................... 139,725
2,900 Avalon Bay Communities, Inc...................... 110,200
4,900 Boston Properties, Inc........................... 169,050
5,700 Camden Property Trust............................ 169,575
5,100 Carramerica Realty Corporation................... 144,712
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
1,700 Charles E. Smith Residential Realty, Inc......... $ 54,400
4,800 Corporate Office Properties...................... 42,600
6,100 Eastgroup Properties............................. 122,381
2,700 Essex Property Trust............................. 83,700
4,300 Excel Realty Trust, Inc.......................... 123,894
3,600 Felcor Suite Hotels, Inc......................... 112,950
4,100 First Industrial Realty Trust.................... 130,431
2,000 Franchise Finance Corporation of America......... 51,875
5,600 Glenborough Realty Trust, Inc.................... 147,700
3,300 Highwoods Properties, Inc........................ 106,631
4,200 Home Properties New York, Inc.................... 112,087
5,000 Kilroy Realty.................................... 125,000
4,530 Koger Equity Incorporated........................ 91,449
1,900 Lennar Corporation............................... 56,050
2,000 LNR Property Corporation......................... 51,250
3,800 Macerich Company................................. 111,387
2,500 Mack-Cali Realty................................. 85,938
1,800 Meditrust Corporation............................ 50,288
7,100 Pacific Gulf Properties, Inc..................... 151,319
4,500 Philips International Realty (b)................. 74,250
4,000 Reckson Associates Realty Corporation............ 94,500
5,600 Regency Realty Corporation....................... 140,700
1,300 Spieker Properties, Inc.......................... 50,375
7,100 Storage Trust Realty............................. 165,963
7,800 Sunstone Hotel Investors......................... 103,838
1,500 Urban Shopping Centers, Inc...................... 47,250
----------------
3,328,118
----------------
4,536,615
Total common stock (cost: $4,657,751).......................
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (9.7%)
$ 95,972 Temporary Investment Fund--Temp Fund Portfolio, current rate 5.50%.... 95,972
302,000 U.S. Treasury Bill.............................. 5.06% 08/27/98 299,652
105,000 U.S. Treasury Bill.............................. 5.17% 10/01/98 103,664
-------------
Total short-term securities (cost: $499,265).......................... 499,288
-------------
Total investments in securities (cost: $5,157,016) (c)................ $ 5,035,903
-------------
-------------
</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 June 30, 1998 the cost of securities for federal income tax purposes was
$5,157,213. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 62,786
Gross unrealized depreciation.......... (184,096)
---------
Net unrealized depreciation............ $(121,310)
---------
---------
</TABLE>
90
<PAGE>
(This page has been left blank intentionally.)
91
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<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 schedule for
detailed listing*.................... $409,005,013 $155,803,018 $67,335,876 $570,590,653 $112,115,639
Cash in bank on demand deposit......... -- 340,454 1,094 1,494,109 2,977,907
Receivable for Fund shares sold........ 383,261 1,657,735 322,558 483,051 1,361,710
Receivable for investment securities
sold................................. 1,168,433 1,498,747 -- 1,145,671 7,725,670
Dividends and accrued interest
receivable........................... 303,299 2,227,007 113,392 2,993,779 870,519
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- -- --
------------ ------------ ----------- ------------ ------------
Total assets....................... 410,860,006 161,526,961 67,772,920 576,707,263 125,051,445
------------ ------------ ----------- ------------ ------------
LIABILITIES
Bank overdraft......................... -- -- -- -- --
Payable for Fund shares repurchased.... 93,486 47,228 181,607 246,455 44,325
Dividends payable to shareholders...... -- -- 7,312 -- --
Payable for investment securities
purchased............................ -- 1,521,286 -- -- 12,458,353
Payable to Minnesota Mutual............ 171,359 72,726 32,823 249,822 51,167
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- -- --
------------ ------------ ----------- ------------ ------------
Total liabilities.................. 264,845 1,641,240 221,742 496,277 12,553,845
------------ ------------ ----------- ------------ ------------
Net assets applicable to outstanding
capital stock........................ $410,595,161 $159,885,721 $67,551,178 $576,210,986 $112,497,600
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
Represented by:
Capital stock--authorized 10 trillion
shares
of $.01 par value**................ $ 1,691,842 $ 1,256,220 $ 675,512 $ 2,776,096 $ 950,017
Additional paid-in capital........... 308,251,804 151,560,302 66,875,666 433,609,844 108,410,066
Undistributed net investment
income............................. 857,216 4,451,680 -- 7,255,063 3,444,820
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 9,028,903 788,644 -- 20,739,736 (2,512,643)
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign
currencies......................... 90,765,396 1,828,875 -- 111,830,247 2,205,340
------------ ------------ ----------- ------------ ------------
Total--representing net assets
applicable to outstanding
capital stock.................. $410,595,161 $159,885,721 $67,551,178 $576,210,986 $112,497,600
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
Net asset value per share of
outstanding capital stock............ $ 2.43 $ 1.27 $ 1.00 $ 2.08 $ 1.18
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
*Identified Cost...................... $318,239,617 $153,974,143 $67,335,876 $458,760,406 $109,910,299
**Outstanding Shares................... 169,184,162 125,621,985 67,551,178 277,609,558 95,001,736
</TABLE>
See accompanying notes to financial statements.
92
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT GOVERNMENT
INDEX 500 APPRECIATION STOCK COMPANY BOND 1998 BOND 2002
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing*.................... $490,932,672 $367,235,593 $328,624,753 $ 209,240,476 $5,180,173 $4,788,725
Cash in bank on demand deposit......... -- -- 2,518 -- 55 --
Receivable for Fund shares sold........ 15,582,207 390,199 380,544 279,328 110 4,953
Receivable for investment securities
sold................................. 6,706 1,424,786 -- 2,304,915 -- --
Dividends and accrued interest
receivable........................... 498,597 128,077 1,164,223 66,176 44 73
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- -- -- --
------------ ------------ -------------- ------------- ----------- -----------
Total assets....................... 507,020,182 369,178,655 330,172,038 211,890,895 5,180,382 4,793,751
------------ ------------ -------------- ------------- ----------- -----------
LIABILITIES
Bank overdraft......................... -- -- -- -- -- --
Payable for Fund shares repurchased.... 238,899 157,257 186,433 3,771,358 206 242
Dividends payable to shareholders...... -- -- -- -- -- --
Payable for investment securities
purchased............................ -- 2,641,652 27,547 858,363 -- --
Payable to Minnesota Mutual............ 170,095 224,925 259,657 132,879 1,722 1,551
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- -- -- --
------------ ------------ -------------- ------------- ----------- -----------
Total liabilities.................. 408,994 3,023,834 473,637 4,762,600 1,928 1,793
------------ ------------ -------------- ------------- ----------- -----------
Net assets applicable to outstanding
capital stock........................ $506,611,188 $366,154,821 $329,698,401 $ 207,128,295 $5,178,454 $4,791,958
------------ ------------ -------------- ------------- ----------- -----------
------------ ------------ -------------- ------------- ----------- -----------
Represented by:
Capital stock--authorized 10 trillion
shares
of $.01 par value**................ $ 1,413,420 $ 1,117,873 $ 1,818,308 $ 1,144,410 $ 49,818 $ 43,376
Additional paid-in capital........... 307,832,170 212,042,384 250,209,488 159,339,204 4,911,268 4,403,489
Undistributed net investment
income............................. 2,416,831 -- 5,254,605 -- 192,976 140,581
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 4,550,329 25,152,900 6,622,300 (2,521,183) 2,867 (1,930)
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign
currencies......................... 190,398,438 127,841,664 65,793,700 49,165,864 21,525 206,442
------------ ------------ -------------- ------------- ----------- -----------
Total--representing net assets
applicable to outstanding
capital stock.................. $506,611,188 $366,154,821 $329,698,401 $ 207,128,295 $5,178,454 $4,791,958
------------ ------------ -------------- ------------- ----------- -----------
------------ ------------ -------------- ------------- ----------- -----------
Net asset value per share of
outstanding capital stock............ $ 3.58 $ 3.28 $ 1.81 $ 1.81 $ 1.04 $ 1.10
------------ ------------ -------------- ------------- ----------- -----------
------------ ------------ -------------- ------------- ----------- -----------
*Identified Cost...................... $300,534,234 $239,393,929 $262,826,112 $ 160,074,612 $5,158,648 $4,582,283
**Outstanding Shares................... 141,342,002 111,787,256 181,830,752 114,441,004 4,981,830 4,337,613
<CAPTION>
MATURING MATURING SMALL
GOVERNMENT GOVERNMENT VALUE COMPANY
BOND 2006 BOND 2010 STOCK VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing*.................... $4,869,081 $4,053,987 $ 220,075,567 $ 6,543,516
Cash in bank on demand deposit......... -- -- -- 3,086
Receivable for Fund shares sold........ 9,166 9,431 1,510,984 15,024
Receivable for investment securities
sold................................. -- 20,000 13,096,530 --
Dividends and accrued interest
receivable........................... 68 26 404,550 13,984
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- --
----------- ----------- ------------- -----------
Total assets....................... 4,878,315 4,083,444 235,087,631 6,575,610
----------- ----------- ------------- -----------
LIABILITIES
Bank overdraft......................... -- 3,500 -- --
Payable for Fund shares repurchased.... 273 211 14,069,119 1,001
Dividends payable to shareholders...... -- -- -- --
Payable for investment securities
purchased............................ -- -- 2,555,731 --
Payable to Minnesota Mutual............ 1,584 1,315 147,962 4,540
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)....................... -- -- -- --
----------- ----------- ------------- -----------
Total liabilities.................. 1,857 5,026 16,772,812 5,541
----------- ----------- ------------- -----------
Net assets applicable to outstanding
capital stock........................ $4,876,458 $4,078,418 $ 218,314,819 $ 6,570,069
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Represented by:
Capital stock--authorized 10 trillion
shares
of $.01 par value**................ $ 40,312 $ 30,996 $ 1,234,195 $ 61,298
Additional paid-in capital........... 4,268,606 3,448,056 195,211,635 6,172,676
Undistributed net investment
income............................. 124,111 120,185 1,670,545 34,642
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 2,264 (7,969) (2,864,666) (24,787)
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign
currencies......................... 441,165 487,150 23,063,110 326,240
----------- ----------- ------------- -----------
Total--representing net assets
applicable to outstanding
capital stock.................. $4,876,458 $4,078,418 $ 218,314,819 $ 6,570,069
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Net asset value per share of
outstanding capital stock............ $ 1.21 $ 1.32 $ 1.77 $ 1.07
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
*Identified Cost...................... $4,427,916 $3,566,837 $ 197,012,457 $ 6,217,276
**Outstanding Shares................... 4,031,249 3,099,550 123,419,531 6,129,810
</TABLE>
93
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF ASSETS AND LIABILITIES--CONTINUED
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL INDEX 400 MACRO-CAP MICRO-CAP REAL ESTATE
BOND MID-CAP VALUE GROWTH SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
value--see accompanying schedule for
detailed listing*.................... $ 23,835,475 $6,942,090 $6,553,076 $5,636,825 $5,035,903
Cash in bank on demand deposit......... 740,131 42 5,280 60,749 471
Receivable for Fund shares sold........ 32,478 15,457 66,953 7,144 12,907
Receivable for investment securities
sold................................. 578,990 -- 116,967 83,673 58,348
Dividends and accrued interest
receivable........................... 532,914 4,832 6,168 2,922 27,350
Unrealized appreciation on forward
foreign currency contracts held, at
value (note 4)....................... 180,704 -- -- -- --
------------ ----------- ----------- ----------- ------------
Total assets....................... 25,900,692 6,962,421 6,748,444 5,791,313 5,134,979
------------ ----------- ----------- ----------- ------------
LIABILITIES
Bank overdraft......................... -- -- -- -- --
Payable for Fund shares repurchased.... 1,363 895 612 613 234
Dividends payable to shareholders...... -- -- -- -- --
Payable for investment securities
purchased............................ 20,120 415,281 411,568 112,545 --
Payable to Minnesota Mutual............ 33,158 2,685 4,113 5,308 2,893
Unrealized depreciation on forward
foreign currency contracts held, at
value (note 4)....................... 203,942 -- -- -- --
------------ ----------- ----------- ----------- ------------
Total liabilities.................. 258,583 418,861 416,293 118,466 3,127
------------ ----------- ----------- ----------- ------------
Net assets applicable to outstanding
capital stock........................ $ 25,642,109 $6,543,560 $6,332,151 $5,672,847 $5,131,852
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Represented by:
Capital stock--authorized 10 trillion
shares
of $.01 par value**................ $ 249,803 $ 60,467 $ 57,686 $ 58,390 $ 52,412
Additional paid-in capital........... 24,706,678 6,075,374 5,783,131 5,734,097 5,157,952
Undistributed net investment
income............................. 114,596 18,120 17,270 -- 48,997
Accumulated net realized gains
(losses) from investments and
foreign currency transactions...... 296,508 2,302 367,857 (545,132) (6,396)
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign
currencies......................... 274,524 387,297 106,207 425,492 (121,113)
------------ ----------- ----------- ----------- ------------
Total--representing net assets
applicable to outstanding
capital stock.................. $ 25,642,109 $6,543,560 $6,332,151 $5,672,847 $5,131,852
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
Net asset value per share of
outstanding capital stock............ $ 1.03 $ 1.08 $ 1.10 $ 0.97 $ 0.98
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
*Identified Cost...................... $ 23,540,266 $6,554,793 $6,446,869 $5,211,333 $5,157,016
**Outstanding Shares................... 24,980,261 6,046,740 5,768,552 5,839,000 5,241,225
</TABLE>
See accompanying notes to financial statements.
94
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Interest........................... $ 316,810 $4,495,838 $1,698,405 $ 6,337,593 $3,662,846 $ 64,246
Dividends.......................... 1,515,607 374,158 -- 2,378,431 77,903 3,306,954
----------- ---------- ---------- ----------- ---------- -----------
Total investment income........ 1,832,417 4,869,996 1,698,405 8,716,024 3,740,749 3,371,200
----------- ---------- ---------- ----------- ---------- -----------
Expenses (note 5):
Investment advisory fee............ 906,421 367,455 152,649 1,335,528 259,910 873,824
Custodian fees..................... 5,092 4,244 1,843 11,142 5,183 4,102
Administrative service fee......... 15,000 15,000 15,000 15,000 15,000 15,000
Auditing and accounting services... 9,079 4,283 3,179 31,533 6,209 5,429
Legal fees......................... 244 121 73 335 97 290
Registration fees.................. 18 -- 356 -- 815 816
Printing and shareholder reports... 32,873 19,847 4,178 59,740 7,150 25,777
Directors' fees.................... 2,705 1,193 515 4,077 829 2,893
Insurance.......................... 1,487 928 637 1,738 736 1,534
Licensing fee...................... -- -- -- -- -- 20,518
Other.............................. 2,282 5,245 4,808 1,868 -- 4,186
----------- ---------- ---------- ----------- ---------- -----------
Total expenses................. 975,201 418,316 183,238 1,460,961 295,929 954,369
Less fees and expenses waived or
absorbed by Minnesota Mutual..... -- -- -- -- -- --
----------- ---------- ---------- ----------- ---------- -----------
Total net expenses............. 975,201 418,316 183,238 1,460,961 295,929 954,369
----------- ---------- ---------- ----------- ---------- -----------
Investment income
(loss)--net.................. 857,216 4,451,680 1,515,167 7,255,063 3,444,820 2,416,831
----------- ---------- ---------- ----------- ---------- -----------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)........... 9,471,500 796,622 -- 22,157,162 380,427 5,068,403
Net change in unrealized
appreciation or depreciation on:
Investments.................... 55,264,016 (358,954) -- 34,794,766 (105,052 ) 60,482,393
----------- ---------- ---------- ----------- ---------- -----------
Net gains (losses) on
investments.................. 64,735,516 437,668 -- 56,951,928 275,375 65,550,796
----------- ---------- ---------- ----------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations............ $65,592,732 $4,889,348 $1,515,167 $64,206,991 $3,720,195 $67,967,627
----------- ---------- ---------- ----------- ---------- -----------
----------- ---------- ---------- ----------- ---------- -----------
</TABLE>
See accompanying notes to financial statements.
95
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF OPERATIONS--CONTINUED
PERIOD FROM JANUARY 1, 1998 TO JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MATURING MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT GOVERNMENT
APPRECIATION STOCK COMPANY BOND 1998 BOND 2002
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income
Interest........................... $ 174,163 $ 847,239 $ 397,404 $200,417 $146,598
Dividends (net of foreign
withholding taxes of $16,689 for
Global Bond Portfolio)........... 706,278 5,829,258 114,812 -- --
------------- -------------- ------------ ----------- -----------
Total investment income........ 880,441 6,676,497 512,216 200,417 146,598
------------- -------------- ------------ ----------- -----------
Expenses (note 5):
Investment advisory fee............ 1,222,271 1,101,150 734,473 3,198 2,671
Custodian fees..................... 3,484 234,511 5,060 2,056 3,855
Administrative service fee......... 15,000 15,000 15,000 15,000 15,000
Auditing and accounting services... 7,112 43,143 13,354 3,279 3,279
Legal fees......................... 226 221 155 43 43
Registration fees.................. -- 103 -- -- 5
Printing and shareholder reports... 29,108 23,915 22,874 441 266
Directors' fees.................... 2,252 2,401 1,549 53 31
Insurance.......................... 1,399 1,448 1,105 221 180
Other.............................. 1,330 -- 452 -- --
------------- -------------- ------------ ----------- -----------
Total expenses................. 1,282,182 1,421,892 794,022 24,291 25,330
Less fees and expenses waived or
absorbed by Minnesota Mutual..... -- -- -- (16,850) (19,313)
------------- -------------- ------------ ----------- -----------
Total net expenses............. 1,282,182 1,421,892 794,022 7,441 6,017
------------- -------------- ------------ ----------- -----------
Investment income
(loss)--net.................. (401,741) 5,254,605 (281,806) 192,976 140,581
------------- -------------- ------------ ----------- -----------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)........... 25,152,899 11,615,691 862,992 2,902 2,368
Foreign currency
transactions................. -- (166,623) -- -- --
Net change in unrealized
appreciation or depreciation on:
Investments.................... 37,862,593 17,214,902 16,847,618 (16,788) 27,473
------------- -------------- ------------ ----------- -----------
Net gains (losses) on
investments.................. 63,015,492 28,663,970 17,710,610 (13,886) 29,841
------------- -------------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ $62,613,751 $33,918,575 $ 17,428,804 $179,090 $170,422
------------- -------------- ------------ ----------- -----------
------------- -------------- ------------ ----------- -----------
</TABLE>
(a) Period from April 24, 1998, commencement of operations, to June 30, 1998.
See accompanying notes to financial statements.
96
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING SMALL
GOVERNMENT GOVERNMENT VALUE COMPANY GLOBAL INDEX 400
BOND 2006 BOND 2010 STOCK VALUE BOND MID-CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Interest........................... $132,532 $127,112 $ 476,177 $ 8,889 $ 714,279 $ 1,177
Dividends (net of foreign
withholding taxes of $16,689 for
Global Bond Portfolio)........... -- -- 2,066,588 50,563 -- 32,072
----------- ----------- ----------- --------- ----------- ---------
Total investment income........ 132,532 127,112 2,542,765 59,452 714,279 33,249
----------- ----------- ----------- --------- ----------- ---------
Expenses (note 5):
Investment advisory fee............ 5,263 4,328 832,581 20,675 75,431 11,003
Custodian fees..................... 2,633 3,322 6,834 1,500 1,306 1,500
Administrative service fee......... 15,000 15,000 15,000 15,000 15,000 15,000
Auditing and accounting services... 3,279 3,279 2,904 7,312 60,744 7,487
Legal fees......................... 43 42 165 43 53 43
Registration fees.................. 7 -- 1,311 279 1,722 316
Printing and shareholder reports... 249 192 9,635 8,387 24,870 72
Directors' fees.................... 29 22 1,549 129 209 85
Insurance.......................... 181 179 1,176 537 547 223
Other.............................. -- -- 1,065 1,319 20,196 5,256
----------- ----------- ----------- --------- ----------- ---------
Total expenses................. 26,684 26,364 872,220 55,181 200,078 40,985
Less fees and expenses waived or
absorbed by Minnesota Mutual..... (18,263) (19,439) -- (30,371) -- (25,856)
----------- ----------- ----------- --------- ----------- ---------
Total net expenses............. 8,421 6,925 872,220 24,810 200,078 15,129
----------- ----------- ----------- --------- ----------- ---------
Investment income
(loss)--net.................. 124,111 120,187 1,670,545 34,642 514,201 18,120
----------- ----------- ----------- --------- ----------- ---------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)........... 12,777 726 (2,621,118) 28,870 354,753 30,420
Foreign currency
transactions................. -- -- -- -- (53,222) --
Net change in unrealized
appreciation or depreciation on:
Investments.................... 94,946 143,624 5,789,299 138,606 436,347 336,610
----------- ----------- ----------- --------- ----------- ---------
Net gains (losses) on
investments.................. 107,723 144,350 3,168,181 167,476 737,878 367,030
----------- ----------- ----------- --------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations............ $231,834 $264,537 $ 4,838,726 $202,118 $ 1,252,079 $385,150
----------- ----------- ----------- --------- ----------- ---------
----------- ----------- ----------- --------- ----------- ---------
<CAPTION>
REAL
MACRO-CAP MICRO-CAP ESTATE
VALUE GROWTH SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO(a)
---------- ---------- ----------
<S> <C> <C> <C>
Investment income
Interest........................... $ 4,643 $ 8,258 $ 5,249
Dividends (net of foreign
withholding taxes of $16,689 for
Global Bond Portfolio)........... 35,624 9,588 50,020
---------- ---------- ----------
Total investment income........ 40,267 17,846 55,269
---------- ---------- ----------
Expenses (note 5):
Investment advisory fee............ 18,950 27,310 5,227
Custodian fees..................... 1,500 1,500 625
Administrative service fee......... 15,000 15,000 5,000
Auditing and accounting services... 30,156 7,487 3,650
Legal fees......................... 43 43 750
Registration fees.................. 335 337 862
Printing and shareholder reports... 67 55 1,497
Directors' fees.................... 65 83 121
Insurance.......................... 273 273 279
Other.............................. 501 1,140 --
---------- ---------- ----------
Total expenses................. 66,890 53,228 18,011
Less fees and expenses waived or
absorbed by Minnesota Mutual..... (43,893) (22,194) (11,739)
---------- ---------- ----------
Total net expenses............. 22,997 31,034 6,272
---------- ---------- ----------
Investment income
(loss)--net.................. 17,270 (13,188) 48,997
---------- ---------- ----------
Realized and unrealized gains (losses)
on investments and foreign
currencies:
Net realized gains (losses) from:
Investments (note 3)........... 421,577 (432,732) (6,396)
Foreign currency
transactions................. -- -- --
Net change in unrealized
appreciation or depreciation on:
Investments.................... 184,298 883,657 (121,113)
---------- ---------- ----------
Net gains (losses) on
investments.................. 605,876 450,925 (127,509)
---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............ $ 623,145 $ 437,737 $ (78,512)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
97
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD FROM JANUARY 1, 1998 TO JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH PORTFOLIO BOND PORTFOLIO
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net........ $ 857,216 $ 3,415,607 $ 4,451,680 $ 8,612,808
Net realized gains on investments.... 9,471,500 53,880,278 796,622 1,986,620
Net change in unrealized appreciation
or depreciation of investments..... 55,264,016 28,157,592 (358,954) 1,681,772
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations........ 65,592,732 85,453,477 4,889,348 12,281,200
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net............... (3,415,606) (2,348,607) (8,612,808) (7,069,687)
Net realized gains................... (54,322,875) (60,686,820) (1,814,285) --
------------ ------------ ------------ ------------
Total distributions................ (57,738,481) (63,035,427) (10,427,093) (7,069,687)
------------ ------------ ------------ ------------
Capital share transactions (note 6):
Proceeds from sales.................. 47,699,389 65,672,298 30,846,193 42,632,087
Proceeds from issuance of shares as a
result of reinvested
distributions...................... 57,738,481 63,035,427 10,427,093 7,069,687
Payments for redemption of shares.... (33,513,109) (68,774,181) (15,673,614) (40,975,071)
------------ ------------ ------------ ------------
Increase in net assets from capital
share transactions................... 71,924,761 59,933,544 25,599,672 8,726,703
------------ ------------ ------------ ------------
Total increase in net assets....... 79,779,012 82,351,594 20,061,927 13,938,216
Net assets at beginning of period...... 330,816,149 248,464,555 139,823,794 125,885,578
------------ ------------ ------------ ------------
Net assets at end of period*........... $410,595,161 $330,816,149 $159,885,721 $139,823,794
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
* Including undistributed net
investment income of................. $ 857,216 $ 3,415,606 $ 4,451,680 $ 8,612,808
</TABLE>
See accompanying notes to financial statements.
98
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION MORTGAGE SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- -------------------------- --------------------------
1998 1997 1998 1997 1998 1997
------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net........ $ 1,515,167 $ 3,620,845 $ 7,255,063 $ 14,159,977 $ 3,444,820 $ 5,857,983
Net realized gains on investments.... -- -- 22,157,162 34,718,146 380,427 258,539
Net change in unrealized appreciation
or depreciation of investments..... -- -- 34,794,766 31,087,741 (105,052) 1,151,502
------------ ------------- ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations........ 1,515,167 3,620,845 64,206,991 79,965,864 3,720,195 7,268,024
------------ ------------- ------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net............... (1,515,167) (3,620,845) (14,159,977) (11,750,366) (5,857,983) (4,934,258)
Net realized gains................... -- -- (35,984,079) (24,394,804) -- --
------------ ------------- ------------ ------------ ------------ ------------
Total distributions................ (1,515,167) (3,620,845) (50,144,056) (36,145,170) (5,857,983) (4,934,258)
------------ ------------- ------------ ------------ ------------ ------------
Capital share transactions (note 6):
Proceeds from sales.................. 53,886,666 225,862,015 51,310,617 84,127,999 20,594,990 35,207,120
Proceeds from issuance of shares as a
result of reinvested
distributions...................... 1,507,854 3,620,875 50,144,056 36,145,170 5,857,983 4,934,258
Payments for redemption of shares.... (41,426,632) (227,360,220) (46,526,736) (71,582,893) (11,050,685) (19,234,019)
------------ ------------- ------------ ------------ ------------ ------------
Increase in net assets from capital
share transactions................... 13,967,888 2,122,670 54,927,937 48,690,276 15,402,288 20,907,359
------------ ------------- ------------ ------------ ------------ ------------
Total increase in net assets....... 13,967,888 2,122,670 68,990,872 92,510,970 13,264,500 23,241,125
Net assets at beginning of period...... 53,583,290 51,460,620 507,220,114 414,709,144 99,233,100 75,991,975
------------ ------------- ------------ ------------ ------------ ------------
Net assets at end of period*........... $ 67,551,178 $ 53,583,290 $576,210,986 $507,220,114 $112,497,600 $ 99,233,100
------------ ------------- ------------ ------------ ------------ ------------
------------ ------------- ------------ ------------ ------------ ------------
* Including undistributed net
investment income of................. $ -- $ -- $ 7,255,063 $ 14,159,977 $ 3,444,820 $ 5,857,983
<CAPTION>
INDEX 500 CAPITAL APPRECIATION
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net........ $ 2,416,831 $ 3,885,375 $ (401,741) $ (299,161)
Net realized gains on investments.... 5,068,403 2,363,824 25,152,899 17,638,408
Net change in unrealized appreciation
or depreciation of investments..... 60,482,393 70,383,844 37,862,593 46,106,787
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations........ 67,967,627 76,633,043 62,613,751 63,446,034
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net............... (3,885,375) (2,857,956) -- --
Net realized gains................... (2,435,409) (3,610,752) (17,585,344) (21,514,696)
------------ ------------ ------------ ------------
Total distributions................ (6,320,784) (6,468,708) (17,585,344) (21,514,696)
------------ ------------ ------------ ------------
Capital share transactions (note 6):
Proceeds from sales.................. 95,157,562 146,405,647 37,745,059 56,948,898
Proceeds from issuance of shares as a
result of reinvested
distributions...................... 6,320,784 6,468,708 17,585,344 21,514,696
Payments for redemption of shares.... (37,264,720) (46,683,389) (28,869,225) (40,197,982)
------------ ------------ ------------ ------------
Increase in net assets from capital
share transactions................... 64,213,626 106,190,966 26,461,178 38,265,612
------------ ------------ ------------ ------------
Total increase in net assets....... 125,860,469 176,355,301 71,489,585 80,196,950
Net assets at beginning of period...... 380,750,719 204,395,418 294,665,236 214,468,286
------------ ------------ ------------ ------------
Net assets at end of period*........... $506,611,188 $380,750,719 $366,154,821 $294,665,236
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
* Including undistributed net
investment income of................. $ 2,416,831 $ 3,885,375 $ -- $ --
</TABLE>
99
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
PERIOD FROM JANUARY 1, 1998 TO JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL STOCK SMALL COMPANY
PORTFOLIO PORTFOLIO
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net................. $ 5,254,605 $ 5,975,639 $ (281,806) $ (89,665)
Net realized gains (losses) on investments and
foreign currency transactions............... 11,449,068 9,490,907 862,992 (998,806)
Net change in unrealized appreciation or
depreciation of investments and translations
of assets and liabilities in foreign
currencies.................................. 17,214,902 11,143,244 16,847,618 14,048,307
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations................................ 33,918,575 26,609,790 17,428,804 12,959,836
------------ ------------ ------------ ------------
Distributions to shareholders from:
Investment income--net........................ (8,175,659) (7,116,929) -- (2,423)
Net realized gains............................ (8,049,161) (3,550,501) -- --
------------ ------------ ------------ ------------
Total distributions......................... (16,224,820) (10,667,430) -- (2,423)
------------ ------------ ------------ ------------
Capital share transactions (note 6):
Proceeds from sales........................... 43,256,704 86,689,935 33,123,246 64,976,826
Proceeds from issuance of shares as a result
of reinvested distributions................. 16,224,820 10,667,430 -- 2,423
Payments for redemption of shares............. (34,647,314) (39,736,890) (26,340,487) (39,563,684)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from capital
share transactions............................ 24,834,210 57,620,475 6,782,759 25,415,565
------------ ------------ ------------ ------------
Total increase (decrease) in net assets..... 42,527,965 73,562,835 24,211,563 38,372,978
Net assets at beginning of period............... 287,170,436 213,607,601 182,916,732 144,543,754
------------ ------------ ------------ ------------
Net assets at end of period*.................... $329,698,401 $287,170,436 $207,128,295 $182,916,732
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
* Including undistributed net investment income
of............................................ $ 5,254,605 $ 8,175,659 $ -- $ --
</TABLE>
See accompanying notes to financial statements.
100
<PAGE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT MATURING GOVERNMENT
BOND 1998 PORTFOLIO BOND 2002 PORTFOLIO BOND 2006 PORTFOLIO
------------------------ ---------------------- ----------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net................. $ 192,976 $ 382,323 $ 140,581 $ 234,884 $ 124,111 $ 211,152
Net realized gains (losses) on investments and
foreign currency transactions............... 2,902 1,855 2,368 8,948 12,777 3,169
Net change in unrealized appreciation or
depreciation of investments and translations
of assets and liabilities in foreign
currencies.................................. (16,788) (12,097) 27,473 73,430 94,946 206,632
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets resulting from
operations................................ 179,090 372,081 170,422 317,262 231,834 420,953
----------- ----------- ---------- ---------- ---------- ----------
Distributions to shareholders from:
Investment income--net........................ (382,323) (326,014) (30,884) (205,875) (36,152) (176,812)
Net realized gains............................ (1,890) (14,263) (13,246) (30,370) -- (47,621)
----------- ----------- ---------- ---------- ---------- ----------
Total distributions......................... (384,213) (340,277) (44,130) (236,245) (36,152) (224,433)
----------- ----------- ---------- ---------- ---------- ----------
Capital share transactions (note 6):
Proceeds from sales........................... 131,989 1,064,613 665,232 709,005 1,095,932 743,478
Proceeds from issuance of shares as a result
of reinvested distributions................. 384,213 340,277 44,130 236,245 36,152 224,433
Payments for redemption of shares............. (1,368,668) (1,299,683) (252,138) (717,810) (351,495) (359,380)
----------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets from capital
share transactions............................ (852,466) 105,207 457,224 227,440 780,589 608,531
----------- ----------- ---------- ---------- ---------- ----------
Total increase (decrease) in net assets..... (1,057,589) 137,011 583,516 308,457 976,271 805,051
Net assets at beginning of period............... 6,236,043 6,099,032 4,208,442 3,899,985 3,900,187 3,095,136
----------- ----------- ---------- ---------- ---------- ----------
Net assets at end of period*.................... $ 5,178,454 $ 6,236,043 $4,791,958 $4,208,442 $4,876,458 $3,900,187
----------- ----------- ---------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ---------- ----------
* Including undistributed net investment income
of............................................ $ 192,976 $ 382,323 $ 140,581 $ 30,884 $ 124,111 $ 36,152
<CAPTION>
MATURING GOVERNMENT
BOND 2010 PORTFOLIO VALUE STOCK PORTFOLIO
---------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net................. $ 120,187 $ 166,131 $ 1,670,545 $ 1,762,513
Net realized gains (losses) on investments and
foreign currency transactions............... 726 16,729 (2,621,118) 16,644,728
Net change in unrealized appreciation or
depreciation of investments and translations
of assets and liabilities in foreign
currencies.................................. 143,624 238,794 5,789,299 5,389,098
---------- ---------- ------------ ------------
Net increase in net assets resulting from
operations................................ 264,537 421,654 4,838,726 23,796,339
---------- ---------- ------------ ------------
Distributions to shareholders from:
Investment income--net........................ (166,131) (118,592) -- (2,259,682)
Net realized gains............................ (3,318) (24,752) (344,373) (17,911,742)
---------- ---------- ------------ ------------
Total distributions......................... (169,449) (143,344) (344,373) (20,171,424)
---------- ---------- ------------ ------------
Capital share transactions (note 6):
Proceeds from sales........................... 999,169 887,081 45,326,351 118,592,216
Proceeds from issuance of shares as a result
of reinvested distributions................. 169,450 143,344 344,373 20,171,424
Payments for redemption of shares............. (361,670) (945,169) (39,943,652) (31,482,289)
---------- ---------- ------------ ------------
Increase (decrease) in net assets from capital
share transactions............................ 806,949 85,256 5,727,072 107,281,351
---------- ---------- ------------ ------------
Total increase (decrease) in net assets..... 902,037 363,566 10,221,425 110,906,266
Net assets at beginning of period............... 3,176,383 2,812,817 208,093,394 97,187,128
---------- ---------- ------------ ------------
Net assets at end of period*.................... $4,078,420 $3,176,383 $218,314,819 $208,093,394
---------- ---------- ------------ ------------
---------- ---------- ------------ ------------
* Including undistributed net investment income
of............................................ $ 120,185 $ 166,131 $ 1,670,545 $ --
</TABLE>
101
<PAGE>
Advantus Series Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
PERIOD FROM JANUARY 1, 1998 TO JUNE 30, 1998 AND YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SMALL COMPANY GLOBAL BOND
VALUE PORTFOLIO PORTFOLIO
------------------------ ------------------------
1998 1997(a) 1998 1997(b)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)--net........ $ 34,642 $ 14,790 $ 514,201 $ 250,450
Net realized gains (losses) on
investments and foreign currency
transactions....................... 28,870 (53,657) 301,531 (71,587)
Net change in unrealized appreciation
or depreciation of investments and
translation of assets and
liabilities in foreign
currencies......................... 138,606 187,634 436,347 (161,823)
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations....................... 202,118 148,767 1,252,079 17,040
----------- ----------- ----------- -----------
Distributions to shareholders from:
Investment income--net............... (14,790) -- (186,888) (250,450)
Excess distributions of net
investment income.................. -- -- -- (119,550)
Net realized gains................... -- -- -- (21,580)
Excess distributions of net realized
gains.............................. -- -- -- (5,023)
----------- ----------- ----------- -----------
Total distributions................ (14,790) -- (186,888) (396,603)
----------- ----------- ----------- -----------
Capital share transactions (note 6):
Proceeds from sales.................. 4,056,920 6,154,243 2,042,185 26,248,677
Proceeds from issuance of shares as a
result of reinvested
distributions...................... 14,790 -- 186,888 396,603
Payments for redemption of shares.... (2,866,274) (1,125,705) (2,670,875) (1,246,997)
----------- ----------- ----------- -----------
Increase (decrease) in net assets from
capital share transactions........... 1,205,436 5,028,538 (441,802) 25,398,283
----------- ----------- ----------- -----------
Total increase in net assets....... 1,392,764 5,177,305 623,389 25,018,720
Net assets at beginning of period...... 5,177,305 -- 25,018,720 --
----------- ----------- ----------- -----------
Net assets at end of period*........... $ 6,570,069 $ 5,177,305 $25,642,109 $25,018,720
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
* Including undistributed net
investment income of................. $ 34,642 $ 14,790 $ 114,596 $ (212,717)
</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.
(e) Period from April 24, 1998, commencement of operations, to June 30, 1998.
See accompanying notes to financial statements.
102
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE
INDEX 400 MID-CAP MACRO-CAP MICRO-CAP SECURITIES
PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
------------------------ ----------------------- ----------------------- ------------
1998 1997(a) 1998 1997(c) 1998 1997(d) 1998(e)
----------- ----------- ----------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)--net........ $ 18,120 $ 11,340 $ 17,270 $ 20,572 $ (13,188) $ (3,373) $ 48,997
Net realized gains (losses) on
investments and foreign currency
transactions....................... 30,420 (27,501) 421,577 (51,812) (432,732) 27,129 (6,396)
Net change in unrealized appreciation
or depreciation of investments and
translation of assets and
liabilities in foreign
currencies......................... 336,610 50,687 184,298 (78,091) 883,657 (458,165) (121,113)
----------- ----------- ----------- ---------- ----------- ---------- ------------
Net increase (decrease) in net
assets resulting from
operations....................... 385,150 34,526 623,145 (109,331) 437,737 (434,409) (78,512)
----------- ----------- ----------- ---------- ----------- ---------- ------------
Distributions to shareholders from:
Investment income--net............... (11,340) -- (372) (20,200) -- -- --
Excess distributions of net
investment income.................. -- -- -- -- -- -- --
Net realized gains................... (187) (430) -- (1,908) -- (139,529) --
Excess distributions of net realized
gains.............................. -- -- -- -- -- -- --
----------- ----------- ----------- ---------- ----------- ---------- ------------
Total distributions................ (11,527) (430) (372) (22,108) -- (139,529) --
----------- ----------- ----------- ---------- ----------- ---------- ------------
Capital share transactions (note 6):
Proceeds from sales.................. 3,571,043 5,678,904 2,697,462 5,357,270 1,918,722 5,479,740 5,220,295
Proceeds from issuance of shares as a
result of reinvested
distributions...................... 11,527 430 372 22,108 -- 139,529 --
Payments for redemption of shares.... (2,464,523) (661,540) (1,911,880) (324,515) (1,274,537) (454,406) (9,931)
----------- ----------- ----------- ---------- ----------- ---------- ------------
Increase (decrease) in net assets from
capital share transactions........... 1,118,047 5,017,794 785,954 5,054,863 644,185 5,164,863 5,210,364
----------- ----------- ----------- ---------- ----------- ---------- ------------
Total increase in net assets....... 1,491,670 5,051,890 1,408,727 4,923,424 1,081,922 4,590,925 5,131,852
Net assets at beginning of period...... 5,051,890 -- 4,923,424 -- 4,590,925 -- --
----------- ----------- ----------- ---------- ----------- ---------- ------------
Net assets at end of period*........... $ 6,543,560 $ 5,051,890 $ 6,332,151 $4,923,424 $ 5,672,847 $4,590,925 $5,131,852
----------- ----------- ----------- ---------- ----------- ---------- ------------
----------- ----------- ----------- ---------- ----------- ---------- ------------
* Including undistributed net
investment income of................. $ 18,120 $ 11,340 $ 17,270 $ 372 $ -- $ -- $ 48,997
</TABLE>
103
<PAGE>
Advantus Series Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(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, Global Bond (formerly International
Bond), Index 400 Mid-Cap, Macro-Cap Value, Micro-Cap Growth, Real Estate
Securities). 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 Maximize investment return
Portfolios........................................
Value Stock Portfolio.............................. Long-term accumulation of capital
Small Company Value Portfolio...................... Long-term accumulation of capital
Global Bond Portfolio.............................. Maximize current income
Index 400 Mid-Cap Portfolio........................ Provide investment results
corresponding to the S&P 400 Mid-Cap
Index
Macro-Cap Value Portfolio.......................... Maximize total return
Micro-Cap Growth Portfolio......................... Long-term capital appreciation
Real Estate Securities Portfolio................... Above average income and long-term
capital growth
</TABLE>
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 16, 1997, the Board of Directors approved the addition of the Real
Estate Securities Portfolio. On April 24, 1998, Minnesota Mutual purchased
4,000,000 shares of capital stock, which represented the initial capital in this
portfolio at $1.00 per share. The portfolio became effectively registered under
the Securities Exchange Act of 1933 on May 1, 1998.
On September 18, 1998 (the Target Date), the Maturing Government Bond 1998
Portfolio will be converted to cash and reinvested in another of the Fund's
Portfolios at the direction of the contract owner. If the contract owner does
not complete an instruction form directing what should be done with liquidation
proceeds, the proceeds will be automatically invested in the Money Market
Portfolio.
104
<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 in the financial statements. 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 Global Bond, are valued at market. For
International Stock, Macro-Cap Value and Global 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 Global 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
Global Bond and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent pricing
service. International Stock and Global Bond are subject to the credit risk that
the other party will not complete the obligations of the contract.
FEDERAL TAXES
The Funds 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.
105
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
For federal income tax purposes, the following Portfolios had capital loss
carryovers at June 30, 1998, 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>
UNDISTRIBUTED
NET ADDITIONAL PAID
INVESTMENT IN
INCOME CAPITAL
---------------- ---------------
<S> <C> <C>
Capital Appreciation.......................................................... $ 401,742 $ (401,742)
Small Company................................................................. 281,807 (281,807)
Micro-Cap Growth.............................................................. 13,188 (13,188)
</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.
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 June 30, 1998, the Bond and Mortgage Securities Portfolios
had entered into outstanding, when-issued or forward commitments of $1,525,078
and $5,602,617, respectively. The Portfolios have segregated assets, with the
Portfolio's respective custodians, to cover such when-issued and forward
commitments.
(3) INVESTMENT SECURITY TRANSACTIONS
For the period ended June 30, 1998, the cost of purchases and proceeds from
sales of investment securities aggregated $174,959,356 and $161,882,905,
respectively, for Money Market. For the other portfolios, the cost of purchases
and proceeds from sales of investment securities, other than temporary
investments in short-term securities, for the period ended June 30, 1998 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Growth................................................................................ $149,084,352 $122,819,027
Bond.................................................................................. 177,534,538 164,705,896
Asset Allocation...................................................................... 374,296,201 348,157,424
Mortgage Securities................................................................... 73,531,933 59,100,645
Index 500............................................................................. 100,994,824 55,694,275
Capital Appreciation.................................................................. 115,755,680 108,607,862
International Stock................................................................... 27,330,699 31,773,203
Small Company......................................................................... 58,515,743 53,331,394
</TABLE>
106
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) INVESTMENT SECURITY TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Maturing Government Bond 1998......................................................... $ 711,710 $ 1,734,271
Maturing Government Bond 2002......................................................... 952,580 392,481
Maturing Government Bond 2006......................................................... 1,180,054 337,290
Maturing Government Bond 2010......................................................... 827,824 83,284
Value Stock........................................................................... 107,427,307 94,815,549
Small Company Value................................................................... 1,842,329 489,235
Global Bond........................................................................... 36,188,076 34,314,231
Index 400 Mid Cap..................................................................... 2,061,745 953,071
Macro-Cap Value....................................................................... 5,804,213 4,873,884
Micro-Cap Growth...................................................................... 2,147,157 1,796,034
Real Estate Securities................................................................ 5,298,654 634,605
</TABLE>
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On June 30, 1998, Global Bond had entered into forward currency contracts
that obligate Global 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>
08/13/98 250,000 US$ 12,500,000 THB $ 46,483 $ --
08/25/98 250,000 US$ 437,500,000 KRW 51,974 --
09/09/98 250,000 US$ 8,127,500 TWD -- 13,398
10/20/98 500,000 US$ 161,775,000 GRD 21,969 --
11/04/98 20,000 US$ 55,375,000 HUF -- 6,249
07/02/98 312,144 US$ 555,928 DEM -- 3,809
07/02/98 196,915 US$ 349,321 DEM -- 3,171
07/06/98 870,000 US$ 119,536,260 JPY -- 8,483
07/13/98 853,906 US$ 1,520,124 DEM -- 10,096
07/15/98 1,215,403 US$ 172,052,474 JPY 26,335 --
07/15/98 625,000 US$ 1,118,956 DEM -- 3,795
10/20/98 500,000 US$ 156,535,000 GRD 5,062 --
07/02/98 2,415,148 US$ 4,330,360 DEM -- 13,395
07/15/98 1,246,224 US$ 2,235,725 DEM -- 5,029
08/03/98 116,667 US$ 700,000 ZAR 980 --
08/13/98 3,700,000 THB 80,000 US$ -- 7,759
08/13/98 3,041,500 THB 70,000 US$ -- 2,140
08/25/98 138,840,000 KRW 89,000 US$ -- 6,831
08/13/98 4,100,000 THB 100,000 US$ 2,754 --
08/25/98 129,495,000 KRW 89,000 US$ -- 381
09/09/98 8,127,500 TWD 239,961 US$ 3,360 --
10/20/98 161,775,000 GRD 520,344 US$ -- 1,625
07/02/98 192,000 GBP 312,143 US$ -- 8,444
07/02/98 120,000 GBP 196,915 US$ -- 3,452
08/03/98 700,000 ZAR 130,902 US$ 13,255 --
08/25/98 169,165,000 KRW 111,292 US$ -- 5,469
07/13/98 524,000 GBP 853,906 US$ -- 19,267
07/13/98 2,075,000 AUD 1,236,575 US$ -- 52,487
07/15/98 2,189,799 DEM 1,215,403 US$ -- 295
07/02/98 1,460,000 GBP 2,415,147 US$ -- 22,655
10/20/98 115,000 XEU 127,650 US$ 725 --
07/06/98 119,536,260 JPY 864,838 US$ 3,322 --
07/15/98 172,052,474 JPY 1,246,223 US$ 4,485 --
08/03/98 440,000 NZD 222,540 US$ -- 5,712
----------- -----------
$ 180,704 $ 203,942
----------- -----------
----------- -----------
</TABLE>
107
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(4) FORWARD FOREIGN CURRENCY CONTRACTS--(CONTINUED)
AUD Australia Dollar
DEM German Mark
GBP British Pound
GRD Greek Drachma
HUF Hungarian Forint
JPY Japanese Yen
KRW Korean Wan
NZD New Zealand Dollar
US$ United States Dollar
THB Thailand Baht
TWD Taiwan Dollar
XEU European Currency Unit
ZAR South African Rand
(5) EXPENSES AND RELATED PARTY TRANSACTIONS
The Fund has an investment advisory agreement with Advantus Capital
Management, Inc. (Advantus Capital). Prior to June 1, 1998, Advantus Capital was
a wholly-owned subsidiary of MIMLIC Asset Management Company (MIMLIC Management)
which in turn was a wholly-owned subsidiary of Minnesota Mutual. On June 1,
1998, Advantus Capital merged with MIMLIC Management retaining the Advantus
Capital name and becoming a wholly-owned subsidiary of Minnesota Mutual. Under
the advisory 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%
Maturing Government Bond 1998...................................................... .25% (.05% prior to May 1,
1998)
Maturing Government Bond 2002...................................................... .25% (.05% prior to May 1,
1998)
Maturing Government Bond 2006...................................................... .25%
Maturing Government Bond 2010...................................................... .25%
Value Stock........................................................................ .75%
Small Company Value................................................................ .75%
Global Bond........................................................................ .60%
Index 400 Mid Cap.................................................................. .40%
Macro-Cap Value.................................................................... .70%
Micro-Cap Growth................................................................... 1.10%
Real Estate Securities............................................................. .75%
</TABLE>
108
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
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 Managment, 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
Global Bond Julius Bear Investment Management, Inc. .35%
Macro-Cap Value J.P. Morgan Investment Managment, Inc. .45%
Micro-Cap Growth Wall Street Associates .85%
</TABLE>
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 period
ended June 30, 1998, Minnesota Mutual voluntarily agreed to absorb $16,850,
$19,313, $18,263, $19,439, $30,371, $25,856, $43,893, $22,194 and $11,739 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, Micro-Cap Growth and
Real Estate Securities Portfolios, respectively.
Each Portfolio pays an administrative services fee to Minnesota Mutual for
accounting, legal and other administrative services which Minnesota Mutual
provides. The administrative service fee for each portfolio is $2,500 per month.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of portfolios for the period ended June 30, 1998
(period from April 24, 1998 to June 30, 1998 for Real Estate Securities) and
year ended December 31, 1997 (period from September 15, 1997 to December 31,
1997 for Small Company Value, Index 400 Mid-Cap, Global Bond, Macro-Cap Value
and Micro-Cap Growth) were as follows:
<TABLE>
<CAPTION>
GROWTH BOND
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 20,354,314 29,784,127 24,247,434 33,365,340
Issued for reinvested distributions.......................... 25,337,264 32,682,993 8,381,732 5,823,498
Redeemed..................................................... (14,358,695) (30,648,643) (12,488,735) (31,803,822)
----------- ------------ ----------- -----------
31,332,883 31,818,477 20,140,431 7,385,016
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 53,886,666 225,862,019 25,578,925 44,618,940
Issued for reinvested distributions.......................... 1,507,854 3,620,869 25,210,015 20,976,850
Redeemed..................................................... (41,426,632) (227,350,218) (23,229,772) (37,920,814)
----------- ------------ ----------- -----------
13,967,888 2,132,670 27,559,168 27,674,976
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
109
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
MORTGAGE SECURITIES INDEX 500
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 17,436,026 29,866,001 27,982,615 51,876,275
Issued for reinvested distributions.......................... 5,053,091 4,427,420 1,818,869 2,584,456
Redeemed..................................................... (9,421,535) (16,400,913) (11,136,383) (16,640,621)
----------- ------------ ----------- -----------
13,067,582 17,892,508 18,665,101 37,820,110
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 12,430,942 22,411,218 23,840,612 51,182,808
Issued for reinvested distributions.......................... 5,619,457 9,939,280 8,756,985 6,814,559
Redeemed..................................................... (9,587,488) (15,804,911) (19,147,608) (23,353,360)
----------- ------------ ----------- -----------
8,462,911 16,545,587 13,449,989 34,644,007
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT
SMALL COMPANY BOND 1998
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 19,234,008 41,068,398 123,091 1,006,641
Issued for reinvested distributions.......................... -- 1,733 376,546 330,829
Redeemed..................................................... (15,346,953) (24,691,193) (1,278,712) (1,224,441)
----------- ------------ ----------- -----------
3,887,055 16,378,938 (779,075) 113,029
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT
BOND 2002 BOND 2006
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 608,414 660,746 1,221,450 667,008
Issued for reinvested distributions.......................... 40,864 221,259 30,991 197,541
Redeemed..................................................... (231,267) (680,560) (587,128) (327,654)
----------- ------------ ----------- -----------
418,011 201,445 665,313 536,895
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT
BOND 2010 VALUE STOCK
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 1,054,295 755,090 26,169,009 64,605,973
Issued for reinvested distributions.......................... 135,253 133,829 186,228 11,674,522
Redeemed..................................................... (547,795) (832,150) (23,116,083) (17,200,384)
----------- ------------ ----------- -----------
641,753 56,769 3,239,154 59,080,111
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SMALL COMPANY VALUE GLOBAL BOND
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 3,891,761 6,127,395 2,017,500 26,237,804
Issued for reinvested distributions.......................... 13,584 -- 184,986 402,914
Redeemed..................................................... (2,793,672) (1,109,258) (2,639,022) (1,223,921)
----------- ------------ ----------- -----------
1,111,673 5,018,137 (436,536) 25,416,797
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
110
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
INDEX 400 MID-CAP MACRO-CAP VALUE
------------------------- ------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sold......................................................... 3,035,853 5,613,515 2,553,882 5,370,493
Issued for reinvested distributions.......................... 10,384 429 342 22,690
Redeemed..................................................... (2,013,511) (599,930) (1,838,803) (340,052)
----------- ------------ ----------- -----------
1,032,726 5,014,014 715,421 5,053,131
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE
MICRO-CAP GROWTH SECURITIES
------------------------- -----------
1998 1997 1998
----------- ------------ -----------
<S> <C> <C> <C> <C>
Sold......................................................... 1,898,721 5,489,670 5,251,299
Issued for reinvested distributions.......................... -- 156,935 --
Redeemed..................................................... (1,233,313) (473,013) (10,074)
----------- ------------ -----------
665,408 5,173,592 5,241,225
----------- ------------ -----------
----------- ------------ -----------
</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 June
30, 1998, investments in securities of Bond, Asset Allocation, Mortgage
Securities, International Stock and Global Bond include issues that are
illiquid. The aggregate values of illiquid securities held by Bond, Asset
Allocation, Mortgage Securities, International Stock and Global Bond at June 30,
1998 were $15,765,624, $17,339,157, $10,201,260, $8,703,909 and $497,601,
respectively, which represent 9.9%, 3.0%, 9.1%, 2.6% and 1.9% 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 compliant. 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.
111
<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>
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1, 1998 --------------------------------------------------------
TO JUNE 30, 1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $2.40 $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).................. .44 .62 .32 .41 -- .06
------- -------- -------- -------- -------- --------
Total from investment operations........ .44 .64 .34 .43 .02 .08
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income........ (.02) (.02) (.02) (.02) (.02) (.03)
Distributions from capital gains............ (.39) (.56) (.19) (.07) (.04) (.03)
------- -------- -------- -------- -------- --------
Total distributions..................... (.41) (.58) (.21) (.09) (.06) (.06)
------- -------- -------- -------- -------- --------
Net asset value, end of period.................. $2.43 $2.40 $2.34 $2.21 $1.87 $1.91
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)................................ 19.4% 33.4% 17.2% 24.3% .8% 4.7%
Net assets, end of period (in thousands)........ $ 410,595 $330,816 $248,465 $201,678 $157,369 $125,745
Ratio of expenses to average daily net assets... .54%(d) .55% .59% .55% .56% .58%
Ratio of net investment income to average daily
net assets.................................... .47%(d) 1.16% 1.04% 1.04% 1.22% 1.21%
Portfolio turnover rate (excluding short-term
securities)................................... 35.0% 120.1% 154.7% 91.9% 42.0% 51.0%
Average commission rate on stock transactions
(b)........................................... $.0577 $.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. For periods less than one year,
total return presented has not been annualized.
(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 common
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.
(d) Adjusted to an annual basis.
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1, 1998 --------------------------------------------------------
TO JUNE 30, 1998 1997(b) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $1.33 $1.28 $1.33 $1.16 $1.30 $1.26
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income......................... .03 .08 .06 .07 .04 .05
Net gains or losses on securities (both
realized and unrealized).................... .01 .04 (.03) .15 (.10) .07
------- -------- -------- -------- -------- --------
Total from investment operations.......... .04 .12 .03 .22 (.06) .12
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.......... (.08) (.07) (.07) (.05) (.05) (.06)
Distributions from capital gains.............. (.02) -- (.01) -- (.03) (.02)
------- -------- -------- -------- -------- --------
Total distributions....................... (.10) (.07) (.08) (.05) (.08) (.08)
------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $1.27 $1.33 $1.28 $1.33 $1.16 $1.30
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a).................................. 3.2% 9.4% 3.0% 19.8% (4.6)% 10.3%
Net assets, end of period (in thousands).......... $159,886 $139,824 $125,886 $101,045 $74,679 $43,927
Ratio of expenses to average daily net assets..... .57%(c) .57% .56% .58% .61% .64%
Ratio of net investment income to average daily
net assets...................................... 6.06%(c) 6.39% 6.36% 6.57% 6.12% 5.57%
Portfolio turnover rate (excluding short-term
securities)..................................... 117.3% 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. For periods less than one year,
total return presented has not been annualized.
(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.
(c) Adjusted to an annual basis.
113
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1, 1998 --------------------------------------------------------
TO JUNE 30, 1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................... .02 .05 .05 .05 .04 .03
------ -------- -------- -------- -------- --------
Total from investment operations..... .02 .05 .05 .05 .04 .03
------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..... (.02) (.05) (.05) (.05) (.04) (.03)
------ -------- -------- -------- -------- --------
Total distributions.................. (.02) (.05) (.05) (.05) (.04) (.03)
------ -------- -------- -------- -------- --------
Net asset value, end of period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ -------- -------- -------- -------- --------
------ -------- -------- -------- -------- --------
Total return (a)............................. 2.5% 5.1% 4.9% 5.4% 3.7% 2.7%
Net assets, end of period (in thousands)..... $ 67,551 $ 53,583 $ 51,461 $ 30,166 $ 23,107 $ 18,423
Ratio of expenses to average daily net assets
(b)........................................ .60%(d) .59% .60% .64% .65% .65%
Ratio of net investment income to average
daily net assets (b)....................... 4.96%(d) 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. For periods less than one year,
total return presented has not been annualized.
(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.
(d) Adjusted to an annual basis.
114
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1, 1998 --------------------------------------------------------
TO JUNE 30, 1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $2.03 $1.87 $1.83 $1.52 $1.59 $1.57
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income....................... .03 .05 .05 .06 .04 .03
Net gains or losses on securities (both
realized and unrealized).................. .22 .27 .16 .31 (.07) .07
------- -------- -------- -------- -------- --------
Total from investment operations........ .25 .32 .21 .37 (.03) .10
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income........ (.06) (.05) (.06) (.05) (.03) (.04)
Distributions from capital gains............ (.14) (.11) (.11) (.01) (.01) (.04)
------- -------- -------- -------- -------- --------
Total distributions..................... (.20) (.16) (.17) (.06) (.04) (.08)
------- -------- -------- -------- -------- --------
Net asset value, end of period.................. $2.08 $2.03 $1.87 $1.83 $1.52 $1.59
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)................................ 12.6% 19.0% 12.5% 25.0% (1.4)% 6.5%
Net assets, end of year (in thousands).......... $ 576,211 $507,220 $414,709 $349,010 $272,629 $250,011
Ratio of expenses to average daily net assets... .55%(d) .55% .54% .55% .56% .57%
Ratio of net investment income to average daily
net assets.................................... 2.72%(d) 3.10% 3.09% 3.75% 3.31% 2.63%
Portfolio turnover rate (excluding short-term
securities)................................... 69.2% 140.2% 120.1% 157.0% 123.6% 85.7%
Average commission rate on stock transactions
(b)........................................... $ .0543 $ .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. For periods less than one year,
total return presented has not been annualized.
(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.
(d) Adjusted to an annual basis.
115
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY 1, YEAR ENDED DECEMBER 31,
1998 TO JUNE 30, ------------------------------------------------------------
1998 1997(b) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.21 $1.19 $1.21 $1.10 $1.22 $1.19
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .03 .07 .08 .08 .07 .06
Net gains or losses on securities
(both realized and unrealized).... .01 .03 (.02) .11 (.11) .05
------- -------- -------- -------- -------- --------
Total from investment
operations................... .04 .10 .06 .19 (.04) .11
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.07) (.08) (.08) (.08) (.05) (.06)
Distributions from capital gains.... -- -- -- -- (.03) (.02)
------- -------- -------- -------- -------- --------
Total distributions............. (.07) (.08) (.08) (.08) (.08) (.08)
------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $1.18 $1.21 $1.19 $1.21 $1.10 $1.22
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)........................ 3.7% 9.1% 5.3% 18.0% (3.4)% 9.3%
Net assets, end of period (in
thousands)............................ $ 112,498 $99,233 $ 75,992 $ 69,746 $ 59,666 $ 63,902
Ratio of expenses to average daily net
assets................................ .57%(c) .59% .58% .58% .60% .63%
Ratio of net investment income to
average daily net assets.............. 6.63%(c) 7.08% 6.94% 7.09% 6.55% 5.87%
Portfolio turnover rate (excluding
short-term securities)................ 59.4% 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. For periods less than one year,
total return presented has not been annualized.
(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.
(c) Adjusted to an annual basis.
116
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY 1, YEAR ENDED DECEMBER 31,
1998 TO JUNE 30, --------------------------------------------------------
1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $3.10 $2.41 $2.02 $1.52 $1.53 $1.43
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .02 .03 .03 .03 .03 .02
Net gains or losses on securities
(both realized and unrealized).... .51 .73 .40 .51 (.01) .11
------- -------- -------- -------- -------- --------
Total from investment
operations................... .53 .76 .43 .54 .02 .13
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.03) (.03) (.03) (.03) (.02) (.02)
Distributions from capital gains.... (.02) (.04) (.01) (.01) (.01) (.01)
------- -------- -------- -------- -------- --------
Total distributions............. (.05) (.07) (.04) (.04) (.03) (.03)
------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $3.58 $3.10 $2.41 $2.02 $1.52 $1.53
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)........................ 17.3% 32.4% 21.6% 36.8% 1.2% 9.8%
Net assets, end of period (in
thousands)............................ $ 506,611 $380,751 $204,395 $123,999 $ 73,432 $ 56,209
Ratio of expenses to average daily net
assets................................ .44%(d) .45% .45% .47% .50% .55%
Ratio of net investment income to
average daily net assets.............. 1.11%(d) 1.33% 1.77% 2.08% 2.34% 2.27%
Portfolio turnover rate (excluding
short-term securities)................ 13.3% 8.3% 15.2% 4.8% 5.9% 4.8%
Average commission rate on stock
transactions (b)...................... $.0301 $.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.
(d) Adjusted to an annual basis.
117
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY 1, YEAR ENDED DECEMBER 31,
1998 TO JUNE 30, --------------------------------------------------------
1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $2.85 $2.47 $2.16 $1.81 $1.80 $1.68
------- -------- -------- -------- -------- --------
Income from investment operations:
Net gains or losses on securities
(both realized and unrealized).... .60 .62 .37 .40 .04 .17
------- -------- -------- -------- -------- --------
Total from investment
operations................... .60 .62 .37 .40 .04 .17
------- -------- -------- -------- -------- --------
Less distributions:
Distributions from capital gains.... (.17) (.24) (.06) (.05) (.03) (.05)
------- -------- -------- -------- -------- --------
Total distributions............. (.17) (.24) (.06) (.05) (.03) (.05)
------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $3.28 $2.85 $2.47 $2.16 $1.81 $1.80
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)........................ 21.1% 28.3% 17.6% 22.8% 2.3% 10.4%
Net assets, end of period (in
thousands)............................ $ 366,155 $294,665 $214,468 $163,520 $115,607 $ 84,840
Ratio of expenses to average daily net
assets................................ .79%(d) .80% .85% .80% .83% .86%
Ratio of net investment income (loss) to
average daily net assets.............. (.25)%(d) (.12)% (.09)% (.15)% (.09)% .12%
Portfolio turnover rate (excluding
short-term securities)................ 34.9% 74.0% 62.9% 51.1% 68.4% 95.9%
Average commission rate on stock
transactions (b)...................... $.0600 $.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.
(d) Adjusted to an annual basis.
118
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY 1, YEAR ENDED DECEMBER 31,
1998 TO JUNE 30, --------------------------------------------------------
1998 1997(c) 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $1.71 $1.60 $1.41 $1.24 $1.31 $.92
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................... .03 .03 .03 .03 .01 .02
Net gains or losses on securities (both
realized and unrealized)............... .17 .15 .24 .14 (.01) .39
------- -------- -------- -------- -------- --------
Total from investment operations..... .20 .18 .27 .17 -- .41
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..... (.05) (.05) (.04) -- (.03) (.01)
Distributions from capital gains......... (.05) (.02) (.04) -- (.04) (.01)
------- -------- -------- -------- -------- --------
Total distributions.................. (.10) (.07) (.08) -- (.07) (.02)
------- -------- -------- -------- -------- --------
Net asset value, end of period............... $1.81 $1.71 $1.60 $1.41 $1.24 $1.31
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
Total return (a)............................. 11.8% 11.9% 19.8% 14.2% (.3)% 44.2%
Net assets, end of period (in thousands)..... $ 329,698 $287,170 $213,608 $140,770 $107,490 $ 61,106
Ratio of expenses to average daily net
assets..................................... .90%(d) .97% 1.06% 1.04% 1.24% 1.55%
Ratio of net investment income to average
daily net assets........................... 3.34%(d) 2.29% 2.53% 2.69% 1.68% 1.04%
Portfolio turnover rate (excluding short-term
securities)................................ 9.6% 12.5% 11.5% 20.3% 12.9% 12.7%
Average commission rate on stock transactions
(b)........................................ $.0091 $.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. For periods less than one year,
total return presented has not been annualized.
(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.
(d) Adjusted to an annual basis.
119
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM MAY 3,
1998 TO YEAR ENDED DECEMBER 31, 1993 TO
JUNE 30, --------------------------------------------------- DECEMBER 31,
1998 1997(f) 1996 1995 1994 1993(a)
---------------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $1.65 $1.54 $1.60 $1.23 $1.16 $1.00
------- --------- --------- --------- --------- ------
Income from investment
operations:
Net gains or losses on
securities (both
realized and
unrealized)............. .16 .11 .10 .39 .07 .17
------- --------- --------- --------- --------- ------
Total from investment
operations......... .16 .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...................... $1.81 $1.65 $1.54 $1.60 $1.23 $1.16
------- --------- --------- --------- --------- ------
------- --------- --------- --------- --------- ------
Total return (b).............. 9.4% 7.8% 6.5% 32.1% 6.2% 17.4%
Net assets, end of period (in
thousands).................. $207,128 $ 182,917 $ 144,544 $ 98,895 $ 51,105 $ 13,043
Ratio of expenses to average
daily net assets (c)........ .81%(d) .82% .81% .84% .90% .90%(d)
Ratio of net investment income
(loss) to average daily net
assets (c).................. (.29)%(d) (.05)% .24% .15% .24% (.02)%(d)
Portfolio turnover rate
(excluding short-term
securities)................. 29.3% 63.8% 74.4% 61.3% 28.1% 34.9%
Average commission rate on
stock transactions (e)...... $.0542 $.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, respectively. 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.
120
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 1998 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY PERIOD
1, FROM MAY 2,
1998 TO YEAR ENDED DECEMBER 31, 1994 TO
JUNE 30, ------------------------------------- DECEMBER 31,
1998 1997(e) 1996 1995 1994(a)
-------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.08 $1.08 $1.04 $.95 $.99
----- --------- --------- --------- -----
Income from investment operations:
Net investment income............... .05 .06 .06 .06 .04
Net gains or losses on securities
(both realized and unrealized).... (.02) -- (.02) .09 (.04)
----- --------- --------- --------- -----
Total from investment
operations................... .03 .06 .04 .15 --
----- --------- --------- --------- -----
Less distributions:
Dividends from net investment
income............................ (.07) (.06) -- (.06) (.04)
----- --------- --------- --------- -----
Total distributions............. (.07) (.06) -- (.06) (.04)
----- --------- --------- --------- -----
Net asset value, end of period.......... $1.04 $1.08 $1.08 $1.04 $.95
----- --------- --------- --------- -----
----- --------- --------- --------- -----
Total return (b)........................ 3.2% 6.1% 4.1% 16.0% .1%
Net assets, end of period (in
thousands)............................ $ 5,178 $ 6,236 $ 6,099 $ 5,057 $ 3,402
Ratio of expenses to average daily net
assets (c)............................ .26%(d) .20% .20% .20% .20%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.83%(d) 6.08% 6.19% 6.22% 6.45%(d)
Portfolio turnover rate (excluding
short-term securities)................ 9.3% 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 $16,850, $34,208, $27,510, $22,794
and $21,714 in expenses for the period ended June 30, 1998, the years ended
December 31, 1997, 1996 and 1995 and the period from May 2, 1994 to
December 31, 1994, respectively. Had the Portfolio paid all fees and
expenses, the ratio of expenses to average net assets would have been .86%,
.74%, .72%, .72%, and 1.12%, respectively, and the ratio of net investment
income to average daily net assets would have been 6.23%, 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.
121
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY PERIOD
1, FROM MAY 2,
1998 TO YEAR ENDED DECEMBER 31, 1994 TO
JUNE 30, ------------------------------------- DECEMBER 31,
1998 1997(e) 1996 1995 1994(A)
-------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.07 $1.05 $1.09 $.93 $.98
----- --------- --------- --------- -----
Income from investment operations:
Net investment income............... .03 .06 .06 .07 .04
Net gains or losses on securities
(both realized and unrealized).... .01 .02 (.04) .16 (.04)
----- --------- --------- --------- -----
Total from investment
operations................... .04 .08 .02 .23 --
----- --------- --------- --------- -----
Less distributions:
Dividends from net investment
income............................ (.01) (.05) (.06) (.07) (.05)
Distributions from net realized
gains............................. -- (.01) -- -- --
----- --------- --------- --------- -----
Total distributions............. (.01) (.06) (.06) (.07) (.05)
----- --------- --------- --------- -----
Net asset value, end of period.......... $1.10 $1.07 $1.05 $1.09 $.93
----- --------- --------- --------- -----
----- --------- --------- --------- -----
Total return (b)........................ 3.9% 8.5% 1.7% 25.0% .3%
Net assets, end of period (in
thousands)............................ $ 4,792 $ 4,208 $ 3,900 $ 3,049 $ 2,575
Ratio of expenses to average daily net
assets (c)............................ .27%(d) .20% .20% .20% .20%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.30%(d) 5.99% 6.52% 6.52% 7.18%(d)
Portfolio turnover rate (excluding
short-term securities)................ 8.8% 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 $19,313, $36,833, $31,158, $24,709
and $23,298 in expenses for the period ended June 30, 1998, the years ended
December 31, 1997, 1996 and 1995, and the period from May 2, 1994 to
December 31, 1994, respectively. Had the Portfolio paid all fees and
expenses, the ratio of expenses to average daily net assets would have been
1.14%, 1.14%, 1.14%, 1.06% and 1.52%, respectively, and the ratio of net
investment income to average daily net assets would have been 5.43%, 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.
122
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY PERIOD
1, FROM MAY 2,
1998 TO YEAR ENDED DECEMBER 31, 1994 TO
JUNE 30, ------------------------------------- DECEMBER 31,
1998 1997(e) 1996 1995 1994(a)
-------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.16 $1.09 $1.17 $.92 $.97
----- --------- --------- --------- -----
Income from investment operations:
Net investment income............... .03 .07 .06 .07 .05
Net gains or losses on securities
(both realized and unrealized).... .03 .07 (.07) .25 (.05)
----- --------- --------- --------- -----
Total from investment
operations................... .06 .14 (.01) .32 --
----- --------- --------- --------- -----
Less distributions:
Dividends from net investment
income............................ (.01) (.06) (.06) (.07) (.05)
Distributions from net realized
gains............................. -- (.01) (.01) -- --
----- --------- --------- --------- -----
Total distributions............. (.01) (.07) (.07) (.07) (.05)
----- --------- --------- --------- -----
Net asset value, end of period.......... $1.21 $1.16 $1.09 $1.17 $.92
----- --------- --------- --------- -----
----- --------- --------- --------- -----
Total return (b)........................ 5.4% 12.6% (1.2)% 34.7% .1%
Net assets, end of period (in
thousands)............................ $ 4,876 $ 3,900 $ 3,095 $ 2,570 $ 1,860
Ratio of expenses to average daily net
assets (c)............................ .40%(d) .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 5.90%(d) 6.23% 6.43% 6.56% 7.45%(d)
Portfolio turnover rate (excluding
short-term securities)................ 8.1% 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 $18,263, $37,425, $31,536, $25,199
and $24,803 in expenses for the period ended June 30, 1998, the years ended
December 31, 1997, 1996 and 1995 and the period from May 2, 1994 to
December 31, 1994, respectively. Had the Portfolio paid all fees and
expenses, the ratio of expenses to average daily net assets would have been
1.27%, 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 5.03%, 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.
123
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY PERIOD
1, FROM MAY 2,
1998 TO YEAR ENDED DECEMBER 31, 1994 TO
JUNE 30, ------------------------------------- DECEMBER 31,
1998 1997(e) 1996 1995 1994(a)
-------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.29 $1.17 $1.21 $.91 $.96
----- --------- --------- --------- -----
Income from investment operations:
Net investment income............... .04 .07 .05 .07 .05
Net gains or losses on securities
(both realized and unrealized).... .06 .11 (.09) .30 (.05)
----- --------- --------- --------- -----
Total from investment
operations................... .10 .18 (.04) .37 --
----- --------- --------- --------- -----
Less distributions:
Dividends from net investment
income............................ (.07) (.05) -- (.07) (.05)
Distributions from net realized
gains............................. -- (.01) -- -- --
----- --------- --------- --------- -----
Total distributions............. (.07) (.06) -- (.07) (.05)
----- --------- --------- --------- -----
Net asset value, end of period.......... $1.32 $1.29 $1.17 $1.21 $.91
----- --------- --------- --------- -----
----- --------- --------- --------- -----
Total return (b)........................ 6.7% 17.9% (3.4)% 41.2% (.3)%
Net assets, end of period (in
thousands)............................ $ 4,078 $ 3,176 $ 2,813 $ 1,384 $ 1,071
Ratio of expenses to average daily net
assets (c)............................ .40%(d) .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 6.94%(d) 6.18% 6.40% 6.58% 7.79%(d)
Portfolio turnover rate (excluding
short-term securities)................ 2.4% 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 $19,439, $38,967, $33,042, $26,308
and $25,888 in expenses for the period ended June 30, 1998, the years
ending December 31, 1997, 1996 and 1995 and the period from May 2, 1994 to
December 31, 1994, respectively. Had the Portfolio paid all fees and
expenses, the ratio of expenses to average daily net assets would have been
1.52%, 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 5.82%, 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.
124
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM JANUARY PERIOD
1, FROM MAY 2,
1998 TO YEAR ENDED DECEMBER 31, 1994 TO
JUNE 30, ------------------------------------- DECEMBER 31,
1998 1997(f) 1996 1995 1994(a)
-------------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.73 $1.59 $1.31 $1.04 $1.01
------- --------- --------- --------- -----
Income from investment operations:
Net investment income............... .01 .01 .01 .01 --
Net gains or losses on securities
(both realized and unrealized).... .03 .32 .39 .33 .04
------- --------- --------- --------- -----
Total from investment
operations................... .04 .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.......... $1.77 $1.73 $1.59 $1.31 $1.04
------- --------- --------- --------- -----
------- --------- --------- --------- -----
Total return (b)........................ 2.3% 21.2% 31.0% 33.0% 4.6%
Net assets, end of period (in
thousands)............................ $218,315 $ 208,093 $ 97,187 $ 31,825 $ 8,771
Ratio of expenses to average daily net
assets (c)............................ .79%(d) .80% .83% .89% .90%(d)
Ratio of net investment income to
average daily net assets (c).......... 1.50%(d) 1.13% 1.28% 1.25% 2.07%(d)
Portfolio turnover rate (excluding
short-term securities)................ 45.8% 115.4% 88.6% 164.2% 49.5%
Average commission rate on stock
transactions (e)...................... $.0563 $.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, respectively. 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.
125
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS
SMALL COMPANY VALUE PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM OCTOBER 1,
1998 TO 1997 TO
JUNE 30, DECEMBER 31,
1998 1997(a)
-------------------------- --------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 1.03 $ 1.01
----- -----
Income from investment operations:
Net gains or losses on securities (both realized and
unrealized)........................................... .04 .02
----- -----
Total from investment operations.................... .04 .02
----- -----
Net asset value, end of period.............................. $1.07 $1.03
----- -----
----- -----
Total return (b)............................................ 4.2% 2.3%
Net assets, end of period (in thousands).................... $ 6,570 $ 5,177
Ratio of expenses to average daily net assets (c)(e)........ .90% .90%
Ratio of net investment income to average daily net assets
(c)(e).................................................... 1.26% 1.13%
Portfolio turnover rate (excluding short-term securities)... 9.3% 13.0%
Average commission rate on common stock transactions (d).... $.0543 $.0600
</TABLE>
- --------------------------
(a) The shares of the Portfolio became effectively registered under the
Securities Act of 1993 on May 1, 1997, but shares were not available to the
public until October 1, 1997.
(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 $30,371 and $11,517 in expenses for
the period ended June 30, 1998 and the period ended December 31, 1997,
respectively. Had the Portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been 2.00% and 1.78%,
respectively, and the ratio of net investment income to average daily net
assets would have been .16% and .25%, respectively.
(d) 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 common stocks for the period by the total
number of related shares purchased and sold.
(e) Adjusted to an annual basis.
126
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
GLOBAL BOND PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM OCTOBER 1,
1998 TO 1997 TO
JUNE 30, DECEMBER 31,
1998 1997(a)
--------------------------- ---------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $.98 $1.00
------ ------
Income from investment operations:
Net investment income (loss)............................ (.01) (.02)
Net gains or losses on securities (both realized and
unrealized)........................................... .07 .020
------ ------
Total from investment operations.................... .06 --
------ ------
Less distributions:
Dividends from net investment income.................... (.01) (.01)
Excess distributions of net investment income........... -- (.01)
------ ------
Total distributions................................. (.01) (.02)
------ ------
Net asset value, end of period.............................. $1.03 $.98
------ ------
------ ------
Total return (b)............................................ 5.0% .1%
Net assets, end of period (in thousands).................... $ 25,642 $ 25,019
Ratio of expenses to average daily net assets (c)........... 1.60% 1.60%
Ratio of net investment income to average daily net assets
(c)....................................................... 4.10% 3.66%
Portfolio turnover rate (excluding short-term securities)... 156.7% 120.5%
</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) 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) Adjusted to an annual basis.
127
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 400 MID-CAP PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM OCTOBER 1,
1998 TO 1997 TO
JUNE 30, DECEMBER 31,
1998 1997(a)
-------------------------- --------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $1.01 $1.00
----- -----
Income from investment operations:
Net gains or losses on securities (both realized and
unrealized)........................................... .07 .01
----- -----
Total from investment operations.................... .07 .01
----- -----
Net asset value, end of period.............................. $1.08 $1.01
----- -----
----- -----
Total return (b)............................................ 8.1% .1%
Net assets, end of period (in thousands).................... $ 6,544 $ 5,052
Ratio of expenses to average daily net assets (c)(e)........ .55% .55%
Ratio of net investment income to average daily net assets
(c)(e).................................................... .66% .89%
Portfolio turnover rate (excluding short-term securities)... 17.2% 4.9%
Average commission rate on common stock transactions (d).... $ .0290 $ .0200
</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) 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 $25,856 and $14,670 in expenses for
the period ended June, 30, 1998 and the period ended December 31, 1997,
respectively. Had the Portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been 1.49% and 1.69%,
respectively, and the ratio of net investment income to average daily net
assets would have been (.28%) and (.26%), respectively.
(d) 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 common stocks for the period by the total
number of related shares purchased and sold.
(e) Adjusted to an annual basis.
128
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MACRO-CAP VALUE PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM OCTOBER 15,
1998 TO 1997 TO
JUNE 30, DECEMBER 31,
1998 1997(a)
------------------------- -------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $.97 $1.00
----- -----
Income from investment operations:
Net gains or losses on securities (both realized and
unrealized)........................................... .13 (.02)
----- -----
Total from investment operations.................... .13 (.02)
----- -----
Less distributions:
Dividends from net investment income.................... -- (.01)
----- -----
Total distributions................................. -- (.01)
----- -----
Net asset value, end of period.............................. $1.10 $.97
----- -----
----- -----
Total return (b)............................................ 12.7% (2.1)%
Net assets, end of period (in thousands).................... $6,332 $4,923
Ratio of expenses to average daily net assets (c)(d)........ .85% .85%
Ratio of net investment income to average daily net assets
(c)(d).................................................... .64% 2.04%
Portfolio turnover rate (excluding short-term securities)... 93.2% 36.7%
Average commission rate on common stock transactions (e).... $.0020 $.0353
</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 15, 1997.
(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 $43,893 and 22,940 in expenses for
the period ended June 30, 1998 and the period ended December 31, 1997,
respectively. Had the portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been 2.47% and 3.13%,
respectively, and the ratio of net investment income to average daily net
assets would have been (.98%) and (.24%), respectively.
(d) Adjusted to an annual basis.
(e) 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 common stocks for the period by the total
number of related shares purchased and sold.
129
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MICRO-CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD PERIOD
FROM JANUARY 1, FROM OCTOBER 1,
1998 TO 1997 TO
JUNE 30, DECEMBER 31,
1998 1997(a)
------------------------- -------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $.89 $1.06
----- -----
Income from investment operations:
Net gains or losses on securities (both realized and
unrealized)........................................... .08 (.14)
----- -----
Total from investment operations.................... .08 (.14)
----- -----
Less distributions:
Distributions from net realized gains................... -- (.03)
----- -----
Total distributions................................. -- (.03)
----- -----
Net asset value, end of period.............................. $.97 $.89
----- -----
----- -----
Total return (b)............................................ 9.3% (13.2)%
Net assets, end of period (in thousands).................... $5,673 $4,591
Ratio of expenses to average daily net assets (c)(e)........ 1.25% 1.25%
Ratio of net investment income to average daily net assets
(c)(e).................................................... (.53)% (.24)%
Portfolio turnover rate (excluding short-term securities)... 37.8% 28.9%
Average commission rate on common stock transactions (d).... $.0567 $.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) 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 $22,194 and $11,102 in expenses for
the period ended June 30, 1998 and the period ended December 31, 1997,
respectively. Had the Portfolio paid all fees and expenses, the ratio of
expenses to average daily net assets would have been 2.14% and 2.03%,
respectively, and the ratio of net investment income to average daily net
assets would have been (1.42%) and (1.02%), respectively.
(d) 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 common stocks for the period by the total
number of related shares purchased and sold.
(e) Adjusted to an annual basis.
130
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
REAL ESTATE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
PERIOD
FROM MAY 1,
1998 TO
JUNE 30,
1998(a)
--------------
<S> <C>
Net asset value, beginning of period................................................................. $1.01
-----
Income from investment operations:
Net investment income............................................................................ .01
Net gains or losses on securities (both realized and unrealized)................................. (.04)
-----
Total from investment operations............................................................. (.03)
-----
Net asset value, end of period....................................................................... $.98
-----
-----
Total return (b)..................................................................................... (3.8)%
Net assets, end of period (in thousands)............................................................. $ 5,132
Ratio of expenses to average daily net assets (c)(e)................................................. .90%
Ratio of net investment income to average daily net assets (c)(e).................................... 7.03%
Portfolio turnover rate (excluding short-term securities)............................................ 14.8%
Average commission rate on common stock transactions (d)............................................. $ .0488
</TABLE>
- ------------------------
(a) The inception of the portfolio was May 1, 1998 when the shares of the
portfolio became effectively registered under the Securities Act of 1933.
(b) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares. For periods less than one year,
total return has not been annualized.
(c) Minnesota Mutual voluntarily absorbed $11,739 in expenses for the period
ended June 30, 1998. Had the Portfolio paid all fees and expenses, the
ratio of expenses to average daily net assets would have been 2.58% and the
ratio of net investment income to average daily net assets would have been
5.35%.
(d) 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 common stocks for the period by the total
number of related shares purchased and sold.
(e) Adjusted to an annual basis.
131
<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]
<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. 34490 Rev. 8-1998
