<PAGE>
ADVANTUS SERIES FUND, INC.
A N N U A L R E P O R T D E C E M B E R 3 1, 1 9 9 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 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 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
INDEPENDENT AUDITORS' REPORT.............................................. 40
INVESTMENTS IN SECURITIES
Growth Portfolio.......................................................... 41
Bond Portfolio............................................................ 43
Money Market Portfolio.................................................... 46
Asset Allocation Portfolio................................................ 48
Mortgage Securities Portfolio............................................. 52
Index 500 Portfolio....................................................... 55
Capital Appreciation Portfolio............................................ 62
International Stock Portfolio............................................. 63
Small Company Portfolio................................................... 67
Maturing Government Bond 2002 Portfolio................................... 69
Maturing Government Bond 2006 Portfolio................................... 70
Maturing Government Bond 2010 Portfolio................................... 71
Value Stock Portfolio..................................................... 72
Small Company Value Portfolio............................................. 74
Global Bond Portfolio..................................................... 76
Index 400 Mid-Cap Portfolio............................................... 78
Macro-Cap Value Portfolio................................................. 83
Micro-Cap Growth Portfolio................................................ 85
Real Estate Securities Portfolio.......................................... 87
FINANCIAL STATEMENTS
Statements of Assets and Liabilities...................................... 88
Statements of Operations.................................................. 91
Statements of Changes in Net Assets....................................... 94
Notes to Financial Statements............................................. 99
<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 41.
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
DECEMBER 31, 1998*
PERCENTAGE OF RETURN
<S> <C>
Growth 34.7%
Bond 6.1%
Money Market 5.0%
Asset Allocation 23.7%
Mortgage Securities 6.6%
Index 500 28.0%
Capital Appreciation 30.8%
International Stock 6.6%
Small Company 1.3%
MGB 2002 9.6%
MGB 2006 14.4%
MGB 2010 14.3%
Value Stock 1.8%
Small Company Value -6.8%
Global Bond 16.2%
Index 400 Mid-Cap 16.7%
Macro-Cap Value 22.3%
Micro-Cap Growth 13.4%
Real Estate Securities -14.9%
</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. Please refer to the
individual Portfolio reviews for information regarding the standardized
performance for 1, 5 and 10 years.
* Performance is presented for the period from May 1, 1998 (date of
inception) to December 31, 1998 for Real Estate Securities Portfolio.
2
<PAGE>
LETTER FROM THE PRESIDENT
[PHOTO]
Dear Shareholders:
Throughout 1998, the global economy was steeped in volatility, uncertainty,
and--in some cases--utter chaos. Some of the bleak economic realities that
permeated the global economy throughout most of the year brightened in the
fourth quarter. The U.S. economy and markets remained strong despite periodic
volatility and several out-of-the-ordinary events.
For most of the year, Asia was mired in a world of economic hurt. Asian
countries suffered from a glut of economic ills that devalued currencies and
shook businesses and governments. Even now, the Japanese economy continues to
spiral downward. Similarly, a bleak economic outlook looms over Russia, whose
economy remains in default, and Brazil, who continues to resist the
International Monetary Fund's demands for economic reforms and deficit
reductions.
To hold the line against continued global economic ills, central banks based in
the United States and Europe pumped tremendous liquidity into world markets.
This strategy drove down interest rates and calmed some erratic world markets.
Keep in mind that the problems did not disappear, but the swift and concerted
efforts of the United States and several Western European countries and their
central banks averted increasing global problems.
We believe the United States' economy remains very strong. The fourth quarter
ending December 31, 1998 marked the longest period of economic expansion in our
country's history, 28 quarters (as measured by positive GDP). Low inflation
continues, as well. The Federal Reserve has been vigilant and deserves much
credit for our country's excellent economic status. The Federal Reserve's
proactive, accommodating stance has bolstered confidence in our economy to
investors both here and abroad.
Year ending December 31, 1998 marked four years of double-digit returns in the
major stock market indices. We finished 1998 with new highs in the large cap
indices and with investment inflows returning to the market--all on the heels of
a litany of serious issues, including presidential impeachment. The bond market
was strong and delivered high single-digit returns for much of the year, but was
fraught with volatility. Despite the bull market in bonds, U.S. Treasuries led
the way due to the "flight to quality" caused by investors seeking safe
investment haven away from Asian and other falling markets. In the third
quarter, the corporate bonds and mortgage securities had their worst relative
performance period in over a decade. The tables turned quickly in the fourth
quarter, due largely to the Federal Reserve's cuts to short-term interest rates
and a greater confidence in the state of the global economy. The flight to
quality seemed to change directions, and many investors moved away from
Treasuries and back into the corporate and mortgage realm.
Looking forward, we expect economic and political tumult in Russia, parts of
Asia, Japan, and Latin America, particularly Brazil, will continue. In Asia, we
believe a slow recovery is underway and will likely progress throughout 1999;
the exception to recovery is Japan. On the European continent, early indications
in 1999 favor the euro. We anticipate that countries linked by the euro will
likely benefit. Producers can sell efficiently across borders without the
expense and burden of currency exchanges. In the U.S., we expect strong economic
conditions to continue. Growth will likely slow, but it is likely to continue,
and we believe inflation is likely to stay at a low level with interest rates
dropping even more. We see the long-term fundamentals for the U.S. stock and
bond markets remaining positive.
In 1998, some investments delivered stellar results while others lagged. The
volatility experienced in both the stock market and bond market in 1998
illustrates the importance of maintaining a diversified portfolio. Taking a
closer look at how you have allocated your investment is both appropriate and
prudent. We recommend that you work with your Ascend Financial Services
investment professional to review your financial goals and, if necessary,
rebalance your assets appropriately.
Sincerely,
/s/ William N. Westhoff
William N. Westhoff, President
Advantus Series Fund, Inc.
3
<PAGE>
GROWTH PORTFOLIO
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[PHOTO]
The Growth
Portfolio seeks
the long-term
accumulation of
capital, with current income
as a secondary objective. It
invests primarily in common
stocks and other equity
securities.
PERFORMANCE
The Growth Portfolio generated a total return of 34.70 percent* for the year
ended December 31, 1998. In comparison, the Russell 1000 Growth Index** returned
38.72 percent for the same period.
PERFORMANCE ANALYSIS
We believe the "large capitalization growth stocks" were one of the best places
to be in 1998 as their performance far exceeded the rest of the U.S. equity
markets. Within this class of stocks, it was the very largest companies,
especially in the technology sector, that provided the biggest gains. Stocks
like Microsoft, Lucent, Wal-Mart, Cisco Systems, Home Depot all posted 1998
gains over 100 percent.*
In the uncertain and volatile market of 1998, investors placed a greater and
greater premium on companies where the earnings growth visibility was high and
the level of company volatility was low. As a result, the valuations on these
types of very large companies expanded to levels not seen in recent history,
both on an absolute and relative (to the broader market) basis.
The Technology Sector was by far the strongest sector of the market for
1998. Internet spending helped propel the growth along with very strong growth
in the telecommunications equipment industry. The Portfolio had meaningful
participation in the Technology Sector with stocks such as Lucent, Cisco
Systems, Microsoft and MCI/Worldcom all posting excellent performance. A lack of
investing in "pure" internet stocks such as America Online, Yahoo, etc. was one
of the primary reasons the technology stocks in this Portfolio did not keep pace
with those of the index.
Healthcare was the second highest performing sector. New and better drugs
selling at higher prices into a fast growing demographic allowed the
Pharmaceutical companies to lead the way in the Health Sector. Stocks in the
Portfolio had meaningful participation in this sector as well, such as Pfizer,
Guidant, Merck, and Warner Lambert.
Other stocks that had a meaningfully positive contribution to performance
were Safeway (food retailer), Tyco International (conglomerate), EMC Corp.
(computer data storage), Intel (semiconductors), and Carnival Cruise Line.
The Consumer Staples lagged the overall market during 1998. Consumer Staples
stocks were hurt by slowing international demand, their primary growth market,
along with unfavorable currency swings. A clear example of this was Coca-Cola
Company where these factors caused earnings projections to be missed and the
stock price to end the year exactly where is started the year at $67. Owning
less in the Consumer Staples sector relative to the index helped the Portfolio.
The successful investment process utilized by the Portfolio weeds out the
under performing companies whose operating results do not meet our expectations.
Over the past year the list of companies whose operating fundamentals did not
meet our expectations and thus were liquidated include Computer Associates
(software), ADC Telecommunications (telecom equipment), Safeskin (medical
supplies), CNF Transportation (shipping) and Tellabs (telecom equipment).
OUTLOOK
The long-term fundamentals for the U.S. stock market are still positive.
Industrialized countries around the world are suffering from slow economic
growth and over capacity. With global demand low and the ability to produce
high, inflation will likely remain benign. Commodity prices are falling and will
likely stay depressed until worldwide economic activity begins to strengthen.
Despite the global downturn, the U.S has been an island of prosperity in the
global marketplace. Strong domestic growth with low inflation and an
accommodative Federal Reserve has kept both stocks and bonds performing well.
The Federal Reserve made three swift 25 basis point cuts (.75 percent in total)
in the Fed Funds rates to help avoid a global financial crisis.
The upcoming year will likely be filled with volatility, strong industry
rotation, and anticipation as we approach the "year 2000" issue. We will
continue to implement our disciplined methodology in managing the Portfolio by
investing in companies we believe are able to sustain above average earnings
growth through an economic cycle while quickly sifting out those who do not meet
our expectations. Performance for the year 1998 validates the success of this
strategy.
4
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- -------------------------------------------------- ------- -------------- ----------
<S> <C> <C> <C>
General Electric Company.......................... 276,400 $ 28,210,075 6.1%
Microsoft Corporation............................. 146,400 20,303,850 4.4%
Intel............................................. 140,400 16,646,175 3.6%
Tyco International, Ltd........................... 187,742 14,162,787 3.1%
Cisco Systems, Inc................................ 149,350 13,861,547 3.0%
Safeway, Inc...................................... 204,500 12,461,719 2.7%
Carnival Corporation.............................. 252,000 12,096,000 2.6%
Lucent Technologies, Inc. ........................ 107,200 11,792,000 2.6%
Family Dollar Stores.............................. 535,500 11,781,000 2.6%
Omnicom Group..................................... 197,900 11,478,200 2.5%
-------------- ----------
$ 152,793,353 33.2%
-------------- ----------
-------------- ----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 1.9%
Utilities 1.1%
Communication Services 2.3%
Financial 5.8%
Capital Goods 10.6%
Consumer Staples 16.6%
Health Care 19.6%
Consumer Cyclical 19.9%
Technology 22.2%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN GROWTH PORTFOLIO,
RUSSELL 1000 GROWTH INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 34.70%
Five year 21.41%
Ten year 17.22%
Russell
1000
Growth Growth
Portfolio CPI Index
12/31/88 10,000 10,000 10,000
12/31/89 12,601 10,455 13,593
12/31/90 12,627 11,101 13,558
12/31/91 16,929 11,432 19,137
12/31/92 17,745 11,772 20,095
12/31/93 18,575 12,094 20,674
12/31/94 18,725 12,434 22,410
12/31/95 23,272 12,748 30,744
12/31/96 27,263 13,170 37,852
12/31/97 36,373 13,402 49,389
12/31/98 48,993 13,618 68,509
</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 December 31, 1988 through
December 31, 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] The Bond
Portfolio seeks
as high a level
of long-term
total return as is consistent
with prudent investment risk.
Preservation of capital is a
secondary objective. The Bond
Portfolio invests in
long-term, fixed income, high
quality debt instruments.
PERFORMANCE
For the year ended December 31, 1998, the Bond Portfolio returned 6.08 percent.*
The Portfolio's benchmark, the Lehman Brothers Government Corporate Bond
Index,** returned 9.47 percent for the same period.
PERFORMANCE ANALYSIS
The past year, 1998, was a challenging year for fixed income investors, and
especially for corporate bond investors. At the beginning of the year, yields in
the U.S. Treasury market were attractive and there was a high degree of comfort
in the corporate bond market. With strong corporate earnings and a sound U.S.
economy, corporate bonds appeared fairly valued. As global events began to
unfold, investor sentiment swung heavily toward the safety of the U.S. Treasury
market. Russia defaulting on their debt, rumors of hedge funds collapsing, fear
of a bear market in stocks, global recession, low interest rates around the
world and the Federal Reserve reluctant to ease monetary policy made U.S.
Treasuries the only safe place to be. Interest rates plunged lower as liquidity
in corporate bonds and mortgage-backed securities disappeared. In the latter
part of the year, the Federal Reserve cut key short-term interest rates
aggressively, stocks rebounded to pre-crash highs, fears of a global meltdown
subsided and investors began a slow return to the corporate bond market.
After the dust settled, the yield on the 30-year U.S. Treasury Bond
decreased 83 basis points to 5.09 percent. In the fourth quarter, 4.69 percent,
the lowest yield ever recorded on a 30-year U.S. Treasury Bond was reached.
Yields on intermediate maturity notes moved anywhere from 110 to 116 basis
points lower over the course of the year.
Within the fixed income market there are three major sectors: government,
corporate and mortgage-backed securities. During the year, returns from
corporate bonds and mortgaged-backed securities suffered as investors sought
safety in U.S. Treasury securities. Corporate bond spreads hit their widest
level in this decade. Fear of buying risk assets reached its height just prior
to the Federal Reserve's quick and decisive action to ease monetary policy. An
accommodative Federal Reserve gave fixed income investors confidence to purchase
corporate bonds late in the year. The renewed buyer interest in this sector
caused spreads to move modestly tighter in the more liquid, higher credit
quality names. Although spreads tightened in the fourth quarter, they are still
wide based on historical levels.
Our longer-term view on interest rates is positive. The fundamentals of the
fixed income market have pointed to lower interest rates for some time. To take
advantage of this outlook, the Portfolio duration has been kept longer than the
benchmark index (Lehman Brothers Government Corporate Index) over the course of
the year. This was a positive factor as interest rates declined.
While the duration call was right, the decision to emphasize corporate bonds
negatively impacted performance. The root cause of this year's below market
performance has the overweighing of the spread sectors, especially the triple
B-rated corporate securities which because of unusual market conditions, proved
to be less liquid at that point in time. Nineteen ninety-eight marked the worst
relative performance of corporate bonds in this decade. While the ride to wider
spreads (lower prices) was painful, owning corporate bonds through the cycle
will reward longer-term investors. Entering 1999, corporate bond spreads are at
the most attractive levels since the 1990 recession.
OUTLOOK
Our top-down view calls for moderately lower interest rates and improvement in
the spread sectors, corporate bonds and mortgage-backed securities. The duration
of the Portfolio will be kept longer than the benchmark index reflecting our
positive outlook on interest rates. The over allocation to spread product
(non-Treasury) will continue as spreads are still near their cyclical wide. In
the corporate bond market, emphasis will be on the higher quality, more liquid
names. As conditions improve, there will be an opportunity to selectively move
into some BBB-rated names.
The long-term fundamentals for the U.S. bond market are still positive.
Industrialized countries around the world are suffering from slow economic
growth and over capacity. We anticipate that with global demand low and the
ability to produce high, inflation will likely remain benign. Commodity prices
are falling and will likely stay depressed until worldwide economic activity
begins to strengthen. Despite the global downturn, the U.S. has been an island
of prosperity in the global marketplace. Strong domestic growth with low
inflation and an accommodative Federal Reserve has kept both stocks and bonds
performing well. Since late September, the Federal Reserve made three swift 25
basis point cuts (.75 percent in total) in the Fed Funds rates to help avoid a
global financial crisis. From here, the Federal Reserve will be monitoring the
U.S. economy closely and will not ease further until there is hard evidence that
a domestic economic slowdown underway. Looking ahead to 1999, economic growth
will likely slow as global pressures finally reach the U.S. When this happens,
interest rates will likely move moderately lower and we anticipate that the
Federal Reserve would ease rates modestly to engineer another soft landing.
6
<PAGE>
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------ ------------ -----------
<S> <C> <C>
U.S. Treasury Bond--6.000%, 02/15/26........................ $ 18,878,625 11.5%
FNMA--5.875%, 02/02/06...................................... 7,779,495 4.8%
U.S. Treasury Bond--4.975%, 05/15/06........................ 6,941,778 4.2%
U.S. Treasury Bond--5.500%, 02/29/00........................ 6,258,125 3.8%
PNC Bank Corporation--6.728%,01/25/07....................... 5,804,986 3.6%
Enron Corporation--9.125%, 04/01/03......................... 5,527,155 3.4%
Toyota Motor Credit--5.625%, 11/13/03....................... 5,526,548 3.4%
Time Warner, Inc. 144A Issue--6.100%, 12/30/01.............. 5,467,688 3.3%
Morgan Stanley Dean Witter--6.875%, 03/01/07................ 5,307,800 3.2%
Raytheon Company--6.450%, 08/15/02.......................... 5,145,165 3.1%
------------ -----------
$ 72,637,365 44.3%
------------ -----------
------------ -----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury 23.4%
U.S. Government
Agencies 16.7%
AAA Rated 11.5%
AA Rated 7.2%
A Rated 12.2%
BBB Rated 18.0%
BB Rated 2.8%
Preferred Stock 5.5%
Cash and Other
Assets/Liabilities 2.7%
</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 6.08%
Five year 6.44%
Ten year 8.60%
Lehman
Brothers
Government
Corporate
Bond Bond
Portfolio Index CPI
12/31/88 10,000 10,000 10,000
12/31/89 11,265 11,423 10,455
12/31/90 12,079 12,370 11,101
12/31/91 14,205 14,365 11,432
12/31/92 15,152 15,456 11,772
12/31/93 16,706 17,200 12,094
12/31/94 15,945 16,599 12,434
12/31/95 19,094 19,499 12,748
12/31/96 19,660 20,064 13,170
12/31/97 21,513 22,022 13,402
12/31/98 22,820 24,108 13,618
</TABLE>
On the chart above you can see how the Bond Portfolio's total
return compared to the Lehman Brothers Government Corporate Bond Index
and the Consumer Price Index. The three lines represent the total
return of a hypothetical $10,000 investment made on December 31, 1988
through December 31, 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]
The Money Market
Portfolio seeks
maximum current
income to the extent
consistent with liquidity and
the preservation of capital.
It invests in short-term
money market instruments and
other debt securities that
mature within 397 days.
INVESTMENT IN THE MONEY
MARKET PORTFOLIO IS NEITHER
INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE
CAN BE NO ASSURANCE THAT THE
PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE
PERFORMANCE
The Money Market Portfolio's total return for the year ended December 31, 1998
was 4.97 percent.* The three-month U.S. Treasury Bill returned 5.31 percent for
the same period.
PERFORMANCE ANALYSIS
The year just ended was an extremely tumultuous one in many respects, as a
number of watershed events profoundly impacted financial markets worldwide. The
most notable events included Russia's default on its debt; the near collapse of
Long Term Capital Management (one of the nation's largest hedge firms);
recession in Japan and financial crisis in several other Asian economies; the
collapse of oil and other commodity prices; and the major decline in U.S. stock
markets, fueled in part by the Russian payment default. Considering all that
occurred over the past year, it's really no surprise that risk premiums, or
spreads, on financial assets are wider now than a year ago.
Throughout 1998, however, inflation was essentially benign. This fact,
coupled with a softer growth outlook in the U.S. and three interest rate cuts by
the Federal Reserve in response to several global crises, paved the way for
lower interest rates. Over the course of the year interest rates in the U.S.
declined meaningfully across the yield curve compared to year end 1997 levels.
The yield on the three-month U.S. Treasury Bill declined 88 basis points over
the year to yield just 4.46 percent at year end. This is still below the Fed
Funds rate, which is targeted at 4.75 percent.
In response to investors' reaction to the global crises, the Federal Reserve
was forced into action in late September, lowering the Federal Funds rate by 25
basis points to 5.25 percent. During the fourth quarter the Federal Reserve
lowered the Federal Funds rate by 25 basis points on two additional occasions
(50 basis points in total, 75 basis points for the year) in an attempt to
restore liquidity to the financial markets and boost investor confidence.
Despite the volatility that we continue to experience from quarter to
quarter and across different markets and sectors, high-quality U.S. corporate
commercial paper continues to offer excellent safety and liquidity. The
Portfolio's assets are invested in high quality corporate commercial paper
(i.e., commercial paper that is rated A-1 or higher by Standard and Poors and
P-1 by Moody's) and agency-backed obligations at year end.
The Portfolio's holdings continue to be well diversified over a variety of
stable industries and do not include any holdings in the much more volatile bank
and brokerage sectors. Our goal has been to maintain or extend the average days
to maturity of the Portfolio and, to that end, the average days to maturity at
period end was 60 days, slightly longer than the money market fund industry
average. For the Portfolio, we will continue to purchase the highest quality
commercial paper and seek to maintain the average days to maturity in the
Portfolio in a range from 60 to 70 days.
OUTLOOK
With three separate 25 basis point cuts in the Federal Funds rate over a
seven-week period ending November 17, the Federal Reserve has successfully
restored liquidity to the markets and boosted investor confidence. However, as
confirmed by the minutes from the November 17 FOMC meeting, the Fed has now
shifted to a "neutral" position regarding interest rates from its previous bias
to ease interest rates. As a result, unless a major event occurs that has
negative global implications or until there are demonstrable signs that U.S.
economic activity has meaningfully slowed, we believe that the Federal Reserve
will likely be on hold for at least a few months relative to further interest
rate changes. Notwithstanding this belief, we maintain a bias toward slightly
lower interest rates over the next few months, particularly short-term interest
rates.
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
7/7/98 61
7/14/98 60
7/21/98 56
7/28/98 55
8/4/98 53
8/11/98 50
8/18/98 54
8/25/98 52
9/1/98 51
9/8/98 45
9/15/98 53
9/22/98 49
9/29/98 47
10/6/98 48
10/13/98 50
10/20/98 51
10/27/98 75
11/3/98 76
11/10/98 74
11/17/98 71
11/24/98 69
12/1/98 68
12/8/98 70
12/15/98 65
12/22/98 62
12/29/98 55
12/31/98 60
</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%
7/7/98 5.31%
7/14/98 5.37%
7/21/98 4.80%
7/28/98 5.03%
8/4/98 5.26%
8/11/98 5.11%
8/18/98 5.15%
8/25/98 5.17%
9/1/98 5.03%
9/8/98 5.05%
9/15/98 5.10%
9/22/98 5.06%
9/29/98 5.12%
10/6/98 5.07%
10/13/98 5.02%
10/20/98 4.86%
10/27/98 4.86%
11/3/98 5.64%
11/10/98 4.25%
11/17/98 4.71%
11/24/98 4.79%
12/1/98 4.56%
12/8/98 4.25%
12/15/98 4.84%
12/22/98 4.51%
12/29/98 4.49%
12/31/98 4.44%
</TABLE>
The seven-day compound yield is computed by determining the net change in
the value of a hypothetical account having a balance of one share at the
beginning of a seven calendar day period, dividing that change by seven, adding
one to the quotient, raising the sum to the 365th power and subtracting one from
the result.
*Historical performance is not an indication of future performance. Investment
returns on principal values will fluctuate so that shares upon redemption may
be worth more or less than their original cost. Performance figures of the Fund
do not reflect charges pursuant to the terms of the variable life insurance
policies and variable annuity contracts funded by separate accounts that invest
in the Fund's shares. When such charges are deducted, actual investment
performance in a variable policy or contract will be lower.
9
<PAGE>
ASSET ALLOCATION PORTFOLIO
PERFORMANCE UPDATE
THOMAS GUNDERSON, CFA
PORTFOLIO MANAGER
[PHOTO]
The Asset
Allocation
Portfolio seeks
as high a level
of long-term
total rate of return as is
consistent with prudent
investment risk. It invests
in common stocks and other
equity securities, bonds and
money market instruments. The
mix of investments is varied
by the Portfolio's management
as economic conditions
indicate.
PERFORMANCE
The Asset Allocation Portfolio generated a total return of 23.65 percent* for
the year ended December 31, 1998. In comparison, the Russell 1000 Growth Index**
returned 38.72 percent, and the Lehman Brothers Aggregate Bond Index+ returned
8.69 percent for the same period. A blended index comprised of 60 percent
Russell 1000 Growth Index** and 40 percent Lehman Brothers Aggregate Bond Index+
returned 26.80 percent for the year ended December 31, 1998.
PERFORMANCE ANALYSIS
We believe the large capitalization growth stocks were one of the best places to
be in 1998 as their performance far exceeded the rest of the U.S. equity and
fixed income markets. Within this class of stocks, it was the very largest
companies, such as Microsoft, Lucent and Wal-Mart, that provided gains over 100
percent.*
In the uncertain and volatile market of 1998, stock investors placed a
greater and greater premium on companies where the earnings growth visibility
was high and the level of company volatility was low. As a result, the
valuations on these types of very large companies expanded to levels not seen in
recent history, both on an absolute and relative (to the broader market) basis.
Indeed, 1998 was a challenging year for fixed income investors, and
especially for corporate bond investors. At the beginning of the year, yields in
the U.S. Treasury market were attractive and there was a high degree of comfort
in the corporate bond market. With strong corporate earnings and a sound U.S.
economy corporate bonds appeared fairly valued. As global events began to
unfold, investor sentiment swung heavily toward the safety of the U.S. Treasury
market. Russia defaulting on its debt, the possible collapse of sizable hedge
funds, fear of a bear market in stocks, global recession, low interest rates
around the world and the Federal Reserve reluctant to ease monetary policy made
U.S. Treasuries the only safe place to be. Interest rates plunged lower as
liquidity in corporate bonds and mortgage-backed securities disappeared.
Corporate bond spreads hit their widest level in this decade. In the latter part
of the year, the Federal Reserve cut key short-term interest rates aggressively,
stocks rebounded to pre-crash highs, fears of a global meltdown subsided and
investors began a slow return to the corporate bond market.
The Portfolio effectively managed its assets through the volatility and
posted an excellent year of performance as measured against other similar
balanced or asset allocation portfolios. The asset mix in this portfolio started
the year at 55 percent stocks, 35 percent bonds, and 10 percent cash. In
January, 5 percent was added to stocks of the "large capitalization growth"
variety, while in March and April another 5 percent was added to stocks
primarily in the "REIT" category, as they were significantly lagging the market
and provided an attractive current yield and total return. An additional 5
percent was added to stocks during the market sell off in August and September
as events provided a good buying opportunity. Stocks closed the year at 70
percent of the portfolio, with bonds at 28 percent with the remaining 2 percent
invested in short term money market securities.
Technology was by far the strongest sector of the stock market for 1998.
Internet spending helped propel the growth along with very strong growth in the
telecommunications equipment industry. The Portfolio had meaningful
participation in the Technology Sector with stocks such as Lucent, Cisco
Systems, Microsoft and MCI/Worldcom all posting excellent performance.
Healthcare was the second highest performing sector. New and better drugs
selling at higher prices into a fast growing demographic allowed the
pharmaceutical companies to lead the way in the Health Sector. Stocks in the
Portfolio, such as Pfizer, Guidant and Merck, had meaningful participation in
this sector.
REITS and Consumer Staples lagged the overall market during 1998. REITS
lagged the market for a variety of reasons including the expectations of slowing
earnings growth. Consumer Staples stocks were hurt by slowing international
demand, their primary growth market, along with unfavorable currency swings. A
clear example of this was Coca-Cola Company, where these factors caused earnings
projections to be missed and the stock price to end the year exactly where it
started the year at $67.
Over the past year the list of companies whose operating fundamentals did
not meet our expectations and thus were liquidated include Computer Associates
(Software), ADC Telecommunications (telecom equipment), Safeskin, (medical
supplies), CNF Transportation (shipping), and Tellabs (telecom equipment).
OUTLOOK
The long-term fundamentals for the U.S. stock and bond market are still
positive. Industrialized countries around the world are suffering from slow
economic growth and over capacity. We anticipate that with global demand low and
the ability to produce high, inflation will remain benign. Commodity prices are
falling and will likely stay depressed until worldwide economic activity begins
to strengthen.
The upcoming year will likely be filled with volatility, strong industry
rotation, and anticipation as we approach the "year 2000" issue. As always, we
will seek to position the portfolio to meaningfully participate in significant
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.................................... 238,552 $ 24,347,213 5.5%
Microsoft Corporation....................................... 133,600 18,528,650 4.1%
Intel....................................................... 122,900 14,571,331 3.3%
Cisco Systems, Inc.......................................... 146,475 13,594,711 3.0%
Tyco International, Ltd..................................... 177,598 13,397,549 3.0%
------------- ----------
$ 84,439,454 18.9%
------------- ----------
------------- ----------
</TABLE>
BOND PORTFOLIO CHARACTERISTICS--QUALITY BREAKDOWN
<TABLE>
<CAPTION>
% OF BOND
RATING PORTFOLIO
- ------------------------------------------------------------ ----------
<S> <C>
U.S. Treasury............................................... 28.1%
U.S. Government Agencies.................................... 15.6%
AAA rated................................................... 13.9%
AA rated.................................................... 7.7%
A rated..................................................... 9.1%
BBB rated................................................... 20.9%
BB rated.................................................... 4.7%
----------
100.0%
----------
----------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 25.6%
Common Stocks 70.1%
Preferred Stocks 1.8%
Cash and Other
Assets/Liabilities 2.5%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN ASSET ALLOCATION PORTFOLIO,
RUSSELL 1000 GROWTH INDEX, LEHMAN BROTHERS AGGREGATE BOND INDEX,
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> <C> <C>
One year 23.65%
Five year 15.33%
Ten year 14.10%
Asset Allocation Blended Russell 1000 Growth Lehman Brothers Aggregate
Thousands Portfolio CPI Index Index Bond Index
12/31/88 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/89 $12,018 $10,455 $12,716 $13,593 $11,453
12/31/90 $12,452 $11,101 $13,181 $13,557 $12,476
12/31/91 $16,048 $11,432 $17,255 $19,138 $14,472
12/31/92 $17,214 $11,772 $18,296 $20,096 $15,544
12/31/93 $18,327 $12,094 $19,338 $20,677 $17,060
12/31/94 $18,071 $12,434 $19,428 $21,227 $16,561
12/31/95 $22,591 $12,748 $25,152 $29,118 $19,620
12/31/96 $25,415 $13,170 $28,917 $35,851 $20,332
12/31/97 $30,241 $13,402 $35,299 $46,777 $22,296
12/31/98 $37,392 $13,618 $44,873 $64,886 $24,234
</TABLE>
On the chart above you can see how the Asset Allocation
Portfolio's total return compared to the Russell 1000 Growth Index,
Lehman Brothers Aggregate Bond Index, a blended index of 60 percent
Russell 1000 Growth Index and 40 percent Lehman Brothers Aggregate
Bond Index and the Consumer Price Index. The lines represent the
cumulative total return of a hypothetical $10,000 investment made on
December 31, 1988 through December 31, 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 Index is comprised of the Lehman
Brothers Government/Corporate Index, the Lehman Brothers
Mortgage-Backed Securities Index and the Lehman Brothers
Asset-Backed Securities Index.
11
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO] The Mortgage
Securities
Portfolio seeks a
high level of
current income consistent
with prudent investment risk.
The Mortgage Securities
Portfolio will invest
primarily in mortgage-related
securities.
PERFORMANCE
The Mortgage Securities Portfolio generated a total return of 6.57 percent* for
the year ended December 31, 1998. The Lehman Brothers Mortgage-Backed Index,**
the Portfolio's benchmark, returned 6.96 percent for the same time period.
Lipper Analytical Service's U.S. Mortgage Fund Category,+ the Portfolio's peer
group, returned 5.80 percent for the same time period.
PERFORMANCE ANALYSIS
It certainly has been an interesting year. For the first seven months of the
year, the bond market traded in a relatively narrow range as investors watched
anxiously as many global markets either slowed or entered into a recession. By
the third quarter, it was apparent that the U.S. could no longer remain an oasis
of prosperity capable of functioning independently of world events. Sharp
declines in overseas markets and turmoil in the U.S. capital markets lead to a
massive "flight to quality" rally, driving yields on the ten-year treasury bond
below 4.20 percent, a full 1.0 percent below the previous generational low set
in October 1993. Mortgage rates followed treasury rates lower and produced a
powerful refinancing wave that helped push mortgage spreads (over treasuries)
out to levels not seen since 1986.
We saw 1998 was the year to be in prepayment-protected securities and carry
more duration than the Index. In an effort to position the Portfolio along these
themes, we were underweight in new issue current coupon and premium coupon
mortgage pass-through securities. Better value was found in secondary issues and
issues not included in the Index but offering good prepayment stories. This
trade into more prepayment challenged securities served as a harbor against the
prepayment storm, but the price of admission was a willingness to accept less
liquidity. This was a fair trade given current market fundamentals and relative
pricing levels. To accomplish this value driven mission we increase our
ownership of commercial mortgage securities and other high quality
collaterialized mortgage obligations (CMOs) while focusing our ownership of
premium coupon securities in very seasoned issues.
Likewise, we participated in several trades that allowed us to swap
prepayment risk for credit risk. While these were all investment grade
securities, our preference was to increase our ownership of AA-rated securities
given the historically narrow level of spreads between different rated classes.
Many of these nonagency mortgage securities continue to enjoy strong
fundamentals as seen by the high number of securities that either received
ratings upgrades or are currently candidates for an upgrade. Unfortunately, this
sector of the mortgage market experienced more than its share of spread widening
that came to define the fixed income markets during the second half of the year.
Even though these securities offered solid prepayment protection going into the
rally, their prices did not appreciate as much as one would have anticipated
given the change in the general level of interest rates. While some strategies
worked better than others did in this liquidity-driven environment, all these
activities allowed us to build upon an already broadly diversified portfolio of
mortgage securities, capable of delivering competitive performance in a more
holistic manner over the long term.
The duration of the Portfolio ranged from 5 percent to 14 percent longer
than Lehman Brothers Mortgage-Backed Index** (approximately 2.2 years at
year-end) while the overall credit quality of the Portfolio remains very high at
AA2.
OUTLOOK
The Federal Reserve has clearly signaled that it is safe for investors to wade
back into mortgages and corporate markets. As investors once again embrace the
value-investing themes that drove the market prior to the third quarter of 1998,
we look forward to a period of strong relative performance from mortgages: The
sector is fundamentally cheap and in good technical shape.
The mortgage market has already priced in some very aggressive prepayment
and recessionary assumptions. Unless rates rally by more than 50 basis points,
the fear of another refinancing peak appears to be overstated as prepayments are
likely to stabilize or trend lower. Likewise, non-agency mortgage securities
that are not subject to the same types of credit considerations as corporates
have widened as much as, or in some cases more, than corporates. Fortunately,
most of this spread widening appears to be due to liquidity considerations and
supply issues and not solely credit concerns, as housing fundamentals remain
very strong. Unless the economy enters a recession--which is NOT our
forecast--this market should benefit as spreads tighten. As of this writing,
mortgage securities have remained among the highest-yielding asset classes
available in the fixed income market.*
12
<PAGE>
HIGH QUALITY ASSETS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA Rated 46.0%
AA Rated 15.3%
A Rated 19.7%
BBB Rated 13.4%
B Rated 1.6%
Preferred Stock 1.6%
Cash and Other
Assets/Liabilities 2.4%
</TABLE>
SOLID LIQUIDITY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Public Issues 56.9%
Private Placements 3.8%
Private 144A Issue 35.3%
Preferred Stock 1.6%
Cash and Other
Assets/Liabilities 2.4%
</TABLE>
PRUDENT SECTOR DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FHLMC MBS 4.3%
FNMA MBS 13.4%
GNMA MBS 4.1%
Vendee MBS 3.5%
Asset Backed Securities 1.9%
CMOs/MRBs 10.5%
Whole Loan MBS 45.7%
Commercial MBS 11.8%
Corporate/Agency Bonds 0.8%
Preferred Stock 1.6%
Cash and Other
Assets/Liabilities 2.4%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MORTGAGE SECURITIES PORTFOLIO,
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 6.57%
Five year 6.90%
Ten year 8.89%
Lehman Brothers
Mortgage Mortgage-
Securities Backed Securities
Portfolio Index CPI
12/31/1988 10,000 10,000 10,000
12/31/1989 11,351 11,533 10,455
12/31/1990 12,421 12,771 11,101
12/31/1991 14,441 14,778 11,432
12/31/1992 15,361 15,805 11,772
12/31/1993 16,782 16,857 12,094
12/31/1994 16,216 16,585 12,434
12/31/1995 19,136 19,370 12,748
12/31/1996 20,142 20,380 13,170
12/31/1997 21,983 22,314 13,402
12/31/1998 23,428 23,866 13,618
</TABLE>
On the chart above you can see how the Mortgage Securities
Portfolio's total return compared to the Lehman Brothers
Mortgage-Backed Securities Index and the Consumer Price Index. The
three lines represent the total return of a hypothetical $10,000
investment made on December 31, 1988 through December 31, 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).
+Average return of 51 mortgage-backed securities funds according to Lipper
Analytical Services.
13
<PAGE>
INDEX 500 PORTFOLIO
PERFORMANCE UPDATE
KEVIN ZWART
PORTFOLIO MANAGER
[PHOTO]
The Index 500
Portfolio seeks
investment
results that
correspond generally to the
price and yield performance
of the common stocks included
in the Standard and Poor's
Corporation 500 Composite
Stock Index (S&P 500).+ It is
designed to provide an
economical and convenient
means of maintaining a broad
position in the equity market
as part of an overall
investment strategy.
PERFORMANCE
For the year ended December 31, 1998, the Index 500 Portfolio returned 27.99
percent.* This compares to the S&P 500 Index,** which earned 28.57 percent for
the same period.
PERFORMANCE ANALYSIS
Even though the year end return was in the top 20 of all time for the S&P 500
Index,** about 70 percent of the return was generated by the largest 50 stocks
in the index. The largest stocks have continued to outperform smaller stocks.
The Technology sector has carried the index for the past year. In addition
to being the highest weighted sector in the index, it also returned 76.4 percent
for the year. Lucent and Microsoft were the two stocks with the largest
contribution to the index this year. Transportation stocks ended the year flat,
and the Basic Materials sector was the only sector in the red for the year,
owing much of its loss to an 8.4 percent decline in the chemicals segment.
OUTLOOK
Over the last five years the S&P 500 Index** has averaged a total return of over
20 percent. This has been the best five year period in over 70 years. While
money continues to flow into the markets it is difficult to see how long these
kind of increases can continue. Throughout 1999 it will be important for sectors
other than technology to increase performance. So we could likely continue
seeing the same kind of returns that we have grown used to since 1995.
14
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ------------ -----------
<S> <C> <C> <C>
Microsoft Corporation....................................... 130,800 $ 18,140,325 3.4%
General Electric Company.................................... 173,400 17,697,637 3.3%
Intel....................................................... 89,200 10,575,775 2.0%
Wal-Mart Stores............................................. 118,700 9,666,631 1.8%
Coca-Cola Company........................................... 152,200 9,515,412 1.8%
Exxon Corporation........................................... 129,500 9,469,688 1.8%
Merck & Co., Inc............................................ 63,200 9,333,850 1.7%
International Business Machines............................. 50,200 9,274,450 1.7%
Pfizer, Inc................................................. 69,400 8,705,363 1.6%
Lucent Technologies, Inc.................................... 70,300 7,733,000 1.4%
------------ -----
$110,112,131 20.5%
------------ -----
------------ -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Transportation .9%
Utilities 3.0%
Cash and Other
Assets/Liabilities .2%
Basic Materials 3.4%
Capital Goods 7.7%
Communication Services 8.6%
Consumer Cyclical 9.8%
Consumer Staples 14.0%
Energy 5.6%
Financial 17.0%
Health Care 12.0%
Technology 17.8%
</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 27.99%
Five year 23.33%
Ten year 18.54%
Index 500 S&P 500
Portfolio Index CPI
12/31/88 10,000 10,000 10,000
12/31/89 13,065 13,165 10,455
12/31/90 12,553 12,751 11,101
12/31/91 16,287 16,634 11,432
12/31/92 17,490 17,901 11,772
12/31/93 19,196 19,708 12,094
12/31/94 19,422 19,954 12,434
12/31/95 26,576 27,420 12,748
12/31/96 32,328 32,607 13,170
12/31/97 42,791 43,482 13,402
12/31/98 54,764 55,908 13,618
</TABLE>
On the chart above you can see how the Index 500 Portfolio's total
return compared to the S&P 500 Index (as adjusted for dividend
reinvestment) and the Consumer Price Index. The three lines represent
the total return of a hypothetical $10,000 investment made on December
31, 1988 through December 31, 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 Index is a broad, unmanaged index of 500 common stocks
which are representative of the U.S. stock market overall.
15
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
PERFORMANCE UPDATE
CLARK WINSLOW, CFA
WINSLOW CAPITAL
MANAGEMENT
[PHOTO] The Capital
Appreciation
Portfolio seeks
growth of
capital.
Investments will be made
based upon their potential
for capital appreciation.
While Advantus Capital
Management, Inc. acts as
investment adviser for the
Portfolio, Winslow Capital
Management, Inc. provides
investment advice to the
Capital Appreciation
Portfolio under a subadvisory
agreement.
PERFORMANCE
For the year ended December 31, 1998, the Capital Appreciation Portfolio
returned 30.83 percent.* This compares with the S&P 500 Index,** which returned
28.57 percent, and the Russell 1000 Growth Index,+ which returned 38.72 percent
for the same period.
PERFORMANCE ANALYSIS
As we discussed in the mid-year summary, the largest market capitalization
companies outperformed the broad market. This bias persisted in the second half
of 1998. For the year ending December 31, 1998, the performance of the S&P 500
Index** was narrower than in all but one of the past ten years. The 20 largest
growth stocks now comprise over one third of the S&P 500 Index** market value,
slightly exceeding the peak in 1973. If you did not own a few select stocks, the
index was difficult to beat. For the last four quarters, the S&P 500 Index**
outperformed 86 percent of U.S. equity mutual fund managers.
In addition to the equity market maintaining a narrow focus on market
capitalization, nearly half of the return in the large cap indices was accounted
for in megacap technology stocks. We are certainly believers in the Internet and
are convinced it will have an important impact on everyone's life and business.
However, when we look at the skyrocketing stock price relative to foreseeable
fundamentals, we are astounded.
The investment philosophy implemented by Winslow Capital Management in the
Portfolio is based on the belief that investing in companies with persistent
earnings growth will provide superior results over the long term. Through
fundamental research of these companies, we identify stocks that are
attractively valued relative to their estimated future earnings growth. 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 most of which have performed strongly in the
recent past.
The best performing sectors in the Portfolio for 1998 were Consumer Services
and Technology. The best performing holdings in the Consumer Services sector
were Home Depot and Wal-Mart; both appreciated over 100 percent.* The average
consumer stock in the Portfolio advanced nearly 60 percent.* In addition, our
stock selection in the Consumer Services sector added value relative to the S&P
500 Index.** The strongest performing technology stock was Cisco Systems. It
gained 150 percent* for the year ending December 31, 1998. The average
technology holding in the Portfolio gained more than 59 percent.* Due to
excessive valuations, the Portfolio has only minor exposure to Internet Mania.
OUTLOOK
Although there are many risks to contend with--Brazil and Latin American
potential economic chaos, Asian/Japanese economic weakness, U.S. trade deficit,
Year 2000 computer uncertainties and the like, we believe the U.S. economy is
likely to produce moderate Gross Domestic Product growth in the 2 percent area
with negligible inflation. Profits are likely to be down a bit in the first half
of 1999 but will likely improve in the second half for some net growth for the
year.
The stock market, in our view, consists of two parts--a relatively small
number of "anointed" stocks and "all others". The former seem overvalued
compared to the latter which particularly includes midcap stocks. We are
building our portfolios principally from "all other". With minimal earnings
growth in the economy and a record high price/earnings ratio, it seems more
likely the market indices--S&P 500 at 1270 and Dow Jones at 9550--will churn
around awhile with more volatility before achieving some potential net gain by
year end. The increase in worldwide liquidity is certainly benefiting financial
assets, but the opportunity for gain appears to be best in the "all other"
non-megacap stocks.
Winslow Capital follows a fundamental "bottom up" investment process that
leads us to companies with consistent and sustainable earnings growth.
Above-average growth is a necessity, but valuation of the stock is also
important. These investment philosophy guidelines have led us to identify
opportunities in the Consumer Services, Technology and Healthcare sectors
heading into 1999.
16
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- -------------- ----------
<S> <C> <C> <C>
Sterling Commerce, Inc...................................... 362,000 $ 16,290,000 4.3%
Home Depot, Inc............................................. 247,599 15,149,964 4.0%
Network Associates.......................................... 220,000 14,575,000 3.9%
Tyco International, Ltd..................................... 191,600 14,453,825 3.8%
MCI Worldcom, Inc........................................... 194,700 13,969,725 3.7%
HBO & Company............................................... 468,100 13,428,619 3.5%
Federal National Mortgage Association....................... 178,000 13,172,000 3.5%
AES Corporation............................................. 271,200 12,848,100 3.4%
Waste Management, Inc....................................... 275,200 12,831,200 3.4%
ADC Telecommunications, Inc................................. 363,400 12,628,150 3.3%
-------------- -----
$ 139,346,583 36.8%
-------------- -----
-------------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 3.5%
Utilities 3.3%
Communication Services 6.7%
Consumer Staples 7.7%
Capital Goods 9.1%
Health Care 11.1%
Financial 11.3%
Consumer Cyclical 12.7%
Technology 34.6%
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 30.83%
Five year 19.90%
Ten year 18.62%
Russell
Capital 1000
Appreciation Growth
Portfolio Index CPI
12/31/1988 $10,000 $10,000 $10,000
12/31/1989 $13,819 $13,593 $10,455
12/31/1990 $13,536 $13,558 $11,101
12/31/1991 $19,193 $19,137 $11,432
12/31/1992 $20,161 $20,095 $11,772
12/31/1993 $22,265 $20,674 $12,094
12/31/1994 $22,766 $22,410 $12,434
12/31/1995 $27,952 $30,744 $12,748
12/31/1996 $32,875 $37,852 $13,170
12/31/1997 $42,166 $49,389 $13,402
12/31/1998 $55,166 $68,509 $13,618
</TABLE>
On the chart above you can see how the Capital Appreciation
Portfolio's total return compared to the Russell 1000 Growth Index and
the Consumer Price Index. The three lines represent the total return
of a hypothetical $10,000 investment made on December 31, 1988 through
December 31, 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 S&P 500 Index is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
+The Russell 1000 Growth Index contains stock from the Russell 1000 with a
greater than average growth orientation. The Russell 1000 is 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.
17
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
PERFORMANCE UPDATE
GARY CLEMONS
TEMPLETON INVESTMENT
COUNSEL
[PHOTO] The International
Stock Portfolio
seeks long-term
capital growth. The Portfolio
will invest primarily in
common stocks of companies
and governments outside the
United States. While Advantus
Capital Management, Inc. acts
as investment adviser for the
portfolio, Templeton
Investment Counsel, Inc.
provides investment advice to
the International Stock
Portfolio under a subadvisory
agreement.
PERFORMANCE
During the 12 months under review, global financial markets experienced
unprecedented volatility and uncertainty. Japan continued its unending ability
to disappoint investors with their feeble attempt to stimulate their economy,
the Russian economy is on the verge of collapse and the infamous Asian contagion
revisited Latin America. Investors learned the negative implications of global
corporate interdependence, as the events in Asia, Latin America and Russia
resulted in economic slowdowns and expectations for weak global GDP growth in
1999. In this environment, the International Stock Portfolio returned 6.61
percent* for the year ended December 31, 1998, compared to the Morgan Stanley
Capital EAFE Index** return of 20.33 percent for the same period.
PERFORMANCE ANALYSIS
The Portfolio benefited from a high exposure to the solid performing European
markets, which represented approximately 61.6 percent of total assets as of the
end of the period. The Portfolio benefited from a high weighting, of
approximately 9 percent, in the strong performing market of France, which
appreciated 42.1 percent* during the period. Interest rate convergence in
preparation for the EMU led to lower rates in several nations fueling the
markets rise. European financial equities were among the Portfolio's top
performers during the period, including French bank Banque National de Paris
(BNP), French Financial services company Axa and Dutch insurer Aegon which
advanced 56.5 percent,* 89.5 percent* and 184 percent,* respectively.
The Latin American markets performed poorly during 1998 with many markets
falling excess of 30 percent. With approximately 7.5 percent of the Portfolio
assets in Latin American equities, performance was adversely impacted. Brazilian
was most detrimental to performance with our two holdings, Telebras and
Petrobras falling 77.25 percent* and 50.5 percent,* respectively. 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. We will continue to
devote attention toward discovering quality investments in the Latin American
Region.
OUTLOOK
Market weakness during the first half of the year created buying opportunities
in Asia, which we capitalized upon, increasing our Asian exposure to 10.9
percent of total assets, with the majority invested in Hong Kong. Although Japan
continues to falter we are starting to see signs of positive change. Small steps
by the government, such as allowing insolvent banks to fail, bode well for
future restructuring throughout Japan. We expect that our Asian exposure will
increase the coming year with Japan being a country offering some opportunity.
18
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ --------- ----------- -----------
<S> <C> <C> <C>
Aegon....................................................... 96,208 $11,800,832 4.2%
AXA......................................................... 54,927 7,950,619 2.8%
Telecom Italia SPA.......................................... 1,105,000 6,957,151 2.5%
Merita Bank................................................. 1,085,000 6,887,802 2.5%
Telefonica De Esp........................................... 150,000 6,668,151 2.4%
Zurich Allied............................................... 9,000 6,665,453 2.4%
Rhone-Polenc................................................ 122,325 6,286,865 2.2%
Philips Electronics......................................... 93,800 6,286,596 2.2%
Ing Groep................................................... 94,686 5,766,780 2.1%
Argentaria Bancaria ADR..................................... 108,000 5,562,000 2.0%
----------- -----
$70,832,249 25.3%
----------- -----
----------- -----
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN INTERNATIONAL STOCK PORTFOLIO,
EAFE INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 6.61%
Five year 10.23%
Since inception
(May 1, 1992) 12.45%
International Stock EAFE
Portfolio Index CPI
5/01/1992 $10,000 $10,000 $10,000
12/31/1992 $9,319 $8,156 $10,179
12/31/1993 $13,434 $10,843 $10,458
12/31/1994 $13,391 $11,722 $10,752
12/31/1995 $15,296 $13,088 $11,024
12/31/1996 $18,324 $13,916 $11,388
12/31/1997 $20,511 $14,198 $11,589
12/31/1998 $21,866 $17,084 $11,775
</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 the inception date of the
International Stock Portfolio (May 1, 1992) through December 31, 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 from European, Asian and Far Eastern markets.
19
<PAGE>
SMALL COMPANY PORTFOLIO
PERFORMANCE UPDATE
JIM TATERA, CFA
CHIEF EQUITY PORTFOLIO
MANAGER
[PHOTO]
The Small Company
Portfolio seeks
long-term
accumulation of capital. It
invests primarily in common
stocks of small companies,
defined in terms of either
market capitalization or
gross revenues that are less
than $1.5 billion.
Typically, at least 65
percent of the portfolio will
be invested in stocks of
small companies. In addition,
we will buy stocks of larger
companies that we feel are
growing significantly faster
than the market overall.
PERFORMANCE
The Small Company Portfolio returned 1.27 percent* for the year ended December
31, 1998. The Portfolio's benchmark, the Russell 2000 Growth Index** returned
1.24 percent for the same period. While small-cap stocks continued to lag large
cap throughout the year, the Portfolio outperformed its benchmark.
PERFORMANCE ANALYSIS
The equity markets were both volatile and narrow in 1998. In many respects, the
past year reminds me of a roller coaster with all its ups and downs and many
turns. It is no wonder the market and investors have felt whipped around at
times. The list of events that caused these feelings would include worldwide
economic turmoil, U.S. recession fears, a hedge fund meltdown and Federal
Reserve interest rate cuts.
Driven by investors' needs for liquidity and the perceptions of earnings
certainty (i.e.: safety) large cap stocks outperformed small cap despite the
fact that earnings growth among smaller companies has, in recent quarters, been
greater than that of the larger companies. Also, despite strong earnings for
many of our companies, liquidity concerns drove small cap prices down numerous
times throughout the year. Many high quality, small cap growth companies have
been undeservedly priced down due to this continued bias toward larger
companies. As always we used these opportunities to add to our favorite
companies at cheap valuations. Overall, the Portfolio's holdings are growing
their earnings at over 30 percent per year in an environment where overall
corporate profits in the U. S. have weakened. Our objective has always been to
invest in companies with strong operating momentum and outstanding management.
In other words, we try to identify those companies with strong management teams,
which can grow the company into something special.
Despite a difficult environment for retail and apparel, the Portfolio had
two significant contributors, Tropical Sportswear (men's apparel) and
Abercrombie & Fitch (specialty retailer). Both are executing their game plans
better than the competition and taking advantage of opportunities to expand
their businesses in very profitable ways. For example, Tropical Sportswear
acquired the Farah brand and incorporated it into their focused manufacturing
and distribution systems. This allowed them to expand their strong relationships
with key retailers like Wal-Mart that will substantially enhance growth
opportunities and profitability for Tropical Sportswear. Abercrombie & Fitch,
which focuses on young adult men and women, is capitalizing on the strength of
this segment and especially their lifestyle brand image, which targets a very
specific market yet also appeals to a broad group of customers. Their recent
expansion into children's stores has started off strong and will be another
growth leg for the company.
CKS Group, which advanced nearly 150 percent* for the year, benefited from
the development of the Internet as it designs and implements Internet home pages
and then supplements this development with marketing services. It is the perfect
combination of services for companies that will utilize the Internet as a
distribution channel. CKS Group merged with USWeb late in the year to create the
largest and most diversified Internet development/marketing company in the
country.
NCO Group, which provides collection services to a wide array of businesses
and government agencies, was another stock contributing to the Portfolio's
performance, returning nearly 75 percent* for the year. NCO Group had made a
number of acquisitions in the past year to become the dominant collection
company. It aims to ultimately become a full cycle receivables company that will
be able to handle a company's receivables from billing to collection. The
company's revenues increased by 99 percent* in the past 12 months with earnings
advancing 55 percent.*
Other service-oriented companies which were outstanding performers for the
Portfolio, included Acxiom Corp, which provides direct marketing services and
data to businesses. Another, United Rentals, has become the key consolidator in
the rental services industry. Both companies had significant revenue and
earnings growth.
Among the successes there were also disappointments. Two stocks that fell
short of our expectations were Stage Stores and Fairfield Communities. Stage
Stores is a department store retailer in small towns in the central and south
central parts of the country, which was impacted negatively by the adverse
weather conditions early in the year and ultimately, the drought experienced in
many markets they serve. Fairfield Communities, which markets vacation
properties and manages resort properties, also had difficulty throughout the
year due to the poor performance of an acquisition that took longer to turn
around than expected.
OUTLOOK
We believe the relative under performance of small companies and the extreme
volatility of the overall market has created tremendous opportunities in small
growth companies. Valuations continue to be near record low levels even after
the outstanding fourth quarter advance in the Portfolio.
With uncertainty looming regarding President Clinton's impeachment, the Euro
debut and Year 2000 issues, 1999 shapes up as a potentially volatile period. As
always, we continue to focus on the ultimate drivers
20
<PAGE>
of stock prices, namely, interest rates and corporate earnings. Interest rates
appear to be sustaining their low levels and stable trends while corporate
profits continue to be mixed. Our research efforts focus on the fundamental
trends in revenues and earnings growth. We strive to find those companies with
superior growth opportunities independent of specific economic events. We remain
confident in our abilities to uncover such companies and that the current
portfolio is positioned likewise. Finally, we would like to thank you for your
continued support and investment in the Small Company Portfolio.
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Acxiom Corporation.......................................... 249,100 $ 7,722,100 4.1%
United Rentals, Inc......................................... 220,500 7,304,062 3.9%
Sunrise Assisted Living, Inc................................ 120,333 6,242,274 3.3%
NCO Group, Inc.............................................. 137,950 6,207,750 3.3%
DII Group, Inc.............................................. 263,900 6,152,169 3.3%
USWebb...................................................... 220,200 5,807,775 3.1%
Kaydon Corporation.......................................... 144,900 5,805,056 3.1%
Tropical Sportswear International........................... 160,900 5,772,287 3.1%
Copart, Inc................................................. 157,800 5,108,775 2.7%
Mastech Corporation......................................... 178,050 5,096,681 2.7%
----------- -----
$61,218,929 32.6%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 3.9%
Basic Materials 5.9%
Capital Goods 9.3%
Consumer Cyclical 23.0%
Consumer Staples 1.7%
Energy 1.4%
Financial 3.3%
Health Care 16.1%
Technology 31.7%
Transportation 3.7%
</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 1.27%
Five year 10.24%
Since inception
(May 3, 1993) 12.11%
Russell
2000
Small Company Growth
Portfolio CPI Index
5/03/93 $10,000 $10,000 $10,000
12/31/93 $11,733 $10,132 $12,234
12/31/94 $12,456 $10,416 $11,938
12/31/95 $16,449 $10,680 $15,641
12/31/96 $17,509 $11,033 $17,401
12/31/97 $18,867 $11,227 $19,654
12/31/98 $19,106 $11,408 $19,898
</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 the inception date of the
Small Company Portfolio (May 3, 1993) through December 31, 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 2002 PORTFOLIO
MATURING GOVERNMENT BOND 2006 PORTFOLIO
MATURING GOVERNMENT BOND 2010 PORTFOLIO
PERFORMANCE UPDATE
KENT WEBER, CFA
PORTFOLIO MANAGER
[PHOTO] The Maturing
Government Bond
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 2002,
2006 and 2010 liquidation
dates of each Portfolio.
PERFORMANCE
For the one-year period ended December 31, 1998, the Maturing Government Bond
Portfolios generated the following returns:
<TABLE>
<S> <C>
Maturing Government Bond 2002 Portfolio................ 9.61 percent*
Maturing Government Bond 2006 Portfolio................ 14.37 percent*
Maturing Government Bond 2010 Portfolio................ 14.28 percent*
</TABLE>
For the one-year period ended December 31, 1998, the Ryan Lab's Treasury
Strip Indexes** of comparable maturity generated the following returns:
<TABLE>
<S> <C>
Ryan Lab's Inc. September 2002 Index**................. 10.31 percent
Ryan Lab's Inc. September 2006 Index**................. 14.98 percent
Ryan Lab's Inc. September 2010 Index**................. 15.84 percent
</TABLE>
PERFORMANCE ANALYSIS
Our investment activities continue to focus on tracking performance of the
respective indices. Over the long run, by selectively using Government Agency
securities in concert with U.S. Treasury securities, the Portfolios each
benefited from enhanced diversification and also from the receipt of additional
income (over that of U.S Treasury securities). However, in our pursuit to reap
the benefits for this style, we can expect to encounter short periods of high
volatility, which can push yield spreads wider on Agency securities. This is
exactly the environment in which we operated in during the second half of the
year, as Treasury returns led all fixed-income sectors higher. Agency securities
are now priced at extremely attractive levels. Therefore, we will
opportunistically look to increase our ownership of Agency securities.
As time passes, the duration of each Portfolio continues to roll forward
toward its respective maturity. The effective duration of each Portfolio is as
follows:
<TABLE>
<S> <C>
Maturing Government Bond 2002 Portfolio................ 3.70 years
Maturing Government Bond 2006 Portfolio................ 7.60 years
Maturing Government Bond 2010 Portfolio................ 11.40 years
</TABLE>
OUTLOOK
The secular bull market in interest rates that has graced the capital market
since the early 1980s, has most likely reached the mature phase in its cycle.
Going forward, returns are not likely to pierce double digits. Instead more
moderate returns should prevail as income, and not capital gains, drives returns
in the fixed income market.
22
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
FHLMC 13.3%
U.S. Treasury Strip 40.5%
FICO Strip 10.5%
Israel GTC 9.3%
TVA Strip 13.5%
FNMA Strip 11.6%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury Strip 51.6%
FICO Strip 13.5%
Israel GTC 5.7%
Israel State Aid 9.9%
RFC Strip 9.6%
FNMA Strip 8.4%
Cash and Other
Assets/Liabilities 1.3%
</TABLE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Treasury Strip 49.7%
FICO Strip 12.0%
Turkey GTC 4.9%
Israel State Aid 14.8%
Israel GTC 1.3%
RFC Strip 3.2%
FNMA Strip 13.6%
Cash and Other
Assets/Liabilities .5%
</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 2002, 2006 and 2010 Index of U.S. Treasury Strips
consists of all active zero-coupon U.S. Treasury issues with maturities in
September 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 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 9.61%
Since inception
(May 2, 1994) 9.33%
Ryan Labs
Inc.
September
Maturing 2002 Index
Government of
Bond 2002 Treasury
Portfolio Strips CPI
5/02/1994 $10,000 $10,000 $10,000
12/31/1994 $10,028 $9,952 $10,190
12/31/1995 $12,537 $12,569 $10,447
12/31/1996 $12,754 $12,728 $10,793
12/31/1997 $13,838 $13,897 $10,983
12/31/1998 $15,168 $15,330 $11,160
</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 the inception date of the Maturing Government Bond
2002 Portfolio (May 2, 1994) through December 31, 1998.
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2006
PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2006 INDEX OF TREASURY STRIPS
AND CONSUMER PRICE INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 14.37%
Since inception
(May 2,1994) 12.27%
Ryan Labs,
Inc.
September
Maturing 2006
Government Index of
2006 Treasury
Portfolio Strips CPI
5/02/1994 10,000 10,000 10,000
12/31/1994 10,013 9,988 10,190
12/31/1995 13,490 13,532 10,447
12/31/1996 13,327 13,351 10,793
12/31/1997 15,009 15,116 10,983
12/31/1998 17,165 17,380 11,160
</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 the inception date of the Maturing Government Bond
2006 Portfolio (May 2, 1994) through December 31, 1998.
24
<PAGE>
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 TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 14.28%
Since inception
(May 2, 1994) 13.84%
Maturing Ryan Labs, Inc.
Government September 2010
Bond 2010 Index of Treasury
Portfolio Strips CPI
5/2/1994 $10,000 $10,000 $10,000
12/31/1994 $9,970 $9,931 $10,190
12/31/1995 $14,080 $14,313 $10,447
12/31/1996 $13,599 $13,880 $10,793
12/31/1997 $16,028 $16,251 $10,983
12/31/1998 $18,317 $18,824 $11,160
</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 the inception date of the Maturing Government Bond
2010 Portfolio (May 2, 1994) through December 31, 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] The Value Stock
Portfolio seeks
long-term
accumulation of capital. The
Portfolio invests primarily
in equity securities of
companies, which, in the
opinion of the Adviser, have
market values, which appear
low relative to their
underlying value or future
growth potential.
PERFORMANCE
For the year ended December 31, 1998 the Value Stock Portfolio posted a total
return of 1.75 percent.* In comparison its benchmark, the Russell 1000 Value
Index** returned 15.63 percent and the S&P Barra Value Index+ returned 14.69
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
Most of the Portfolio's underperformance was recorded in the first six months of
the year as significant anticipated gains in certain commodity prices failed to
materialize. During the fourth quarter, we significantly changed the complexion
of the Portfolio. The weighted average market capitalization was increased
significantly, valuation measures such as price to earnings, price to book value
and price to cash flow were reduced and the dividend yield increased. Also,
investments, which assumed significant increases in the prices of certain
commodities such as oil, have been, for the most part, eliminated.
The Communications, Consumer Staples, Capital Goods and Energy sectors
provided the best relative performance for the Portfolio during the period while
Financial, Basic Materials and Technology were the worst. Additions to the
Portfolio include Service Corp. International, the nation's largest operator of
funeral homes, Diebold, the largest producer of Automatic Teller Machines
(ATM's) and Union Pacific, the largest operator of rail systems in the U.S. Each
of these investments, while very different in the types of businesses they
operate, share several common characteristics: a significant price decline prior
to purchase and a commensurate shrinkage in valuation, sound fundamentals and,
in our opinion, modest risk.
OUTLOOK
The Portfolio will, no doubt, experience further changes in the future but at
the present time we are comfortable with the Portfolio's makeup. We will
continue to be diligent in our search for companies which meet our criteria for
investing and will not hesitate to add any which appear to have better prospects
than any of our current holdings. While it is sometimes tempting to participate
in current trends such as buying earnings momentum at any price, we remain
committed to our discipline of investing in companies which we believe are being
inefficiently priced in the market and have some downside protection in the
event of a market decline.
26
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Exxon Corporation........................................... 99,095 $ 7,246,322 3.5%
International Business Machines............................. 38,200 7,057,450 3.5%
SBC Communications, Inc..................................... 120,510 6,462,349 3.2%
Hormel Foods Corporation.................................... 193,000 6,320,750 3.1%
Everest Reinsurance Holdings................................ 158,190 6,159,523 3.0%
Diebold..................................................... 164,890 5,884,512 2.9%
AT&T Corporation............................................ 75,515 5,682,504 2.8%
Federal National Mortgage Association....................... 76,310 5,646,940 2.8%
Philip Morris Companies, Inc................................ 103,075 5,514,512 2.7%
Teco Energy................................................. 192,965 5,439,201 2.7%
----------- -----
$61,414,063 30.2%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 6.0%
Basic Materials 8.8%
Capital Goods 4.9%
Consumer Cyclical 7.7%
Consumer Staples 8.7%
Energy 10.8%
Financial 24.2%
Communication Services 11.9%
Technology 4.6%
Transportation 2.5%
Utilities 9.9%
</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 1.75%
Since inception
(May 2, 1994) 18.92%
Russell
S&P 1000
Value Stock Barra Value Value
Portfolio Index CPI Index
5/02/1994 $10,000 $10,000 $10,000 $10,000
12/31/1994 $10,457 $10,062 $10,190 $10,209
12/31/1995 $13,904 $13,784 $10,448 $14,124
12/31/1996 $18,207 $16,816 $10,793 $17,181
12/31/1997 $22,065 $21,859 $10,984 $23,223
12/31/1998 $22,452 $25,072 $11,160 $26,855
</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 the
inception date of the Value Stock Portfolio (May 2, 1994) through
December 31, 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
MARK HENNEMAN, CFA
PORTFOLIO MANAGER
[PHOTO] The Small
Company
Value
Portfolio
seeks the
long-term accumulation of
capital. It invests primarily
in the equity securities of
small companies, defined in
terms of market
capitalization and which
appear to have market values
that are low relative to
their underlying value or
future earnings and growth
potential.
PERFORMANCE
For the year ended December 31, 1998, the Small Company Value Portfolio returned
- -6.75 percent.* The Russell 2000 Value Index** returned -6.44 percent for the
same 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
Small cap value stocks had a wild and largely unprofitable year. After posting
reasonable returns through the first two quarters, fears of an Asian economic
meltdown and its effect on domestic companies caused a steep correction in the
third quarter. Since early October, when the market bottomed, several important
things have happened that caused the market to recover: 1) the Fed cut interest
rates further, which increased confidence on the part of investors that the
United States would avoid a recession. 2) Asian and Latin American economies,
while not out of the woods, appear to have stabilized. 3) Fund flows into
domestic equity funds continues.
While the Portfolio recovered significantly in the fourth quarter, the
rebound fell short of showing positive returns for the year. As the market
recovered, investors favored the largest capitalization companies because of
their liquidity and perceived lower risk. Once again in 1998, small
capitalization stocks underperformed large capitalization stocks
The best performing sectors in the Portfolio were: Consumer Staples,
Consumer Cyclicals, Healthcare and Technology. Each of those sectors produced
positive double digit returns. The worst performing sectors were:
Transportation, Basic Materials and Finance. Each of those sectors were down
more than 20 percent.*
Relative to the Russell 2000 Value Index,** the Portfolio's best performing
sectors were: Consumer Staples, Consumer Cyclicals, and Energy. In the case of
Energy, the return of the Portfolio was negative 8 percent,* but the Energy
stocks in the Russell 2000 Value Index** were down 44 percent. The Portfolio was
positioned with companies that either benefited from or were able to withstand a
difficult pricing environment for crude oil.
Finance was the worst performing sector relative to the benchmark. The
Portfolio was overexposed to companies with yield curve risk. As the yield curve
flattened, these stocks performed poorly. That issue has been corrected and
relative performance of the Finance Sector has stabilized.
The Portfolio held several stocks that performed well. Both Allied Group and
First Brands were acquired and the stocks performed well. Tropical Sportswear
produces high quality casual and dress men's apparel and provides major apparel
retailers with comprehensive brand management programs. The company made a great
acquisition of Savane International Corp. (formerly Farah Inc.) for $98.5
million. Tropical Sportswear has been able to leverage this acquisition very
successfully, and has landed some significant new accounts. The stock was up 259
percent* in 1998. The stock continues to be a core holding in the Portfolio but
has been trimmed back several times during the year.
A recent addition to the Portfolio is Robert Mondavi Corp. which produces
and sells premium table wines. In 1997 and early 1998, the company did a poor
job of purchasing the grapes necessary to meet the strong demand for its
product. Its relationship with the retail trade and its earnings suffered. We
recognized early that the company had solved its problem and that its brand name
recognition continued to be strong with customers despite recent problems. The
stock has appreciated 57 percent* since it was purchased in the third quarter.
OUTLOOK
Since becoming the portfolio manager on October 1, 1998, focusing on
diversifying the Portfolio to include more stocks was a priority for me. The
Portfolio's holdings have increased from 50 stocks to 87 stocks. Since small
companies tend to have limited product or geographic diversification, we added
greater diversity, thus further limiting certain risks. We will continue to look
for undervalued companies with stable to improving fundamentals. We will also
maintain a diversified portfolio to protect against unforeseen macroeconomic
events.
While Asia is by no means thriving, the economic problems appear to have
stabilized and the region's impact on domestic companies appears to be well
quantified. We know more about President Clinton's problems than we would
probably like, but the impeachment proceedings are closer to an end and are not
likely to be an issue to the market going forward. On the positive side, the fed
funds rate is 75 basis points lower than it was in July. This tends to be very
positive for small stocks. Small stocks are inexpensive relative to the large
stocks by virtually any measure. While it is impossible to predict when a rally
will begin for the small stocks, it is likely that a rally could be very
substantial because of the relative undervaluation of small stocks.
28
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Sierra Pacific Resources.................................... 5,000 $ 190,000 2.3%
First Brands Corporation.................................... 4,800 189,300 2.3%
Piedmont Natural Gas Company................................ 5,200 187,850 2.2%
Sovereign Bancorp, Inc...................................... 12,480 177,840 2.1%
International Multifoods Corporation........................ 6,700 172,944 2.1%
Tropical Sportswear International Corporation............... 4,800 172,200 2.1%
Peoples Heritage Financial Group, Inc....................... 8,300 166,000 2.0%
Wicor, Inc.................................................. 7,000 152,688 1.8%
Earthgrains Company......................................... 4,800 148,500 1.8%
WPS Resources Corporation................................... 4,200 148,050 1.8%
----------- -----
$ 1,705,372 20.5%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Health Care 1.6%
Transportation 3.2%
Utilities 11.0%
Energy 3.9%
Technology 4.4%
Basic Materials 5.6%
Capital Goods 9.5%
Consumer Staples 11.2%
Cash and Other
Assets/Liabilities 4.0%
Consumer Cyclical 14.3%
Financial 31.3%
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year -6.75%
Since inception
(October 1, 1997) -3.70%
Small
Company Russell
Value 2000 Value
Portfolio Index CPI
10/1/97 $10,000 $10,000 $10,000
12/31/97 $10,229 $10,168 $10,019
12/31/98 $9,539 $9,513 $10,179
</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 the inception date of the
Small Company Value Portfolio (October 1, 1997) through December 31,
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 low
price to book ratios. The Russell 2000 are the 2,000 smallest companies in the
Russell 3000.
29
<PAGE>
GLOBAL BOND PORTFOLIO
PERFORMANCE UPDATE
EDWARD DOVE
JULIUS BAER INVESTMENT
MANAGEMENT
WAYNE SCHMIDT, CFA
ADVANTUS CAPITAL
MANAGEMENT
[PHOTO]
[PHOTO] 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 posted a total return of 16.18 percent* for the year
ended December 31, 1998. This compares to the Salomon Brothers World Government
Bond Index** return of 15.38 percent and the Salomon Brothers Non-U.S. World
Government Bond Index+ of 17.79 percent for the same period.
PERFORMANCE ANALYSIS
Global Commentary: The effects of the Asian crisis dominated the beginning of
the year. This led to a global slowdown in growth that continued through the
entire year. Rate cuts were the order of the day, as all of the world's major
economies cut interest rates to spur growth.
Bond yields fell on the back of rate cuts, producing some of the best bond
market returns in recent history. In addition, inflation remained subdued as
global commodity prices declined across the board. In all, the year produced
ideal conditions for bond investors.
European bond markets were the clear winners during the year, as all markets
in Europe produced double-digit returns in local currency terms. The UK led the
way at 19.55 percent for the year. The Portfolio's overweight position in
European markets was a primary driver of performance for 1998.
The most volatile market was Japan, as the yen strengthened dramatically
during the fourth quarter. A local currency return of 0.50 percent translated
into 15.85 percent in U.S. dollar terms for 1998. Even so, Japan placed 13th out
of 18 markets in the index for the year.
Long duration was a positive contributor to performance for 1998 as the fall
in yields was most dramatic at the long end of the curve worldwide. At the peak
early in the fourth quarter, the Portfolio was over 7 years in duration, versus
an index of 5.5 years.
U.S. Commentary: Nineteen ninety-eight was a challenging year for fixed income
investors, and especially for corporate bond and mortgage investors. At the
beginning of the year, yields in the U.S. Treasury market were attractive and
there was a high degree of comfort in the corporate and mortgage sector. As
global events began to unfold, investor sentiment swung heavily toward the
safety of the U.S. Treasury market. Interest rates plunged lower as liquidity in
corporate bonds and mortgage-backed securities disappeared. In the latter part
of the year, the Federal Reserve cut key short-term interest rates aggressively,
stocks rebounded to pre-crash highs, fears of a global meltdown subsided and
investors began a slow return to the corporate bond market.
After the dust settled, the yield on the 30-year U.S. Treasury Bond
decreased 83 basis points to 5.09 percent. In the fourth quarter, 4.69 percent,
the lowest yield ever recorded on a 30-year U.S. Treasury Bond was reached.
Yields on intermediate maturity notes moved anywhere from 110 to 116 basis
points lower over the course of the year.
The Portfolio's emphasis on corporate bonds and mortgage-backed securities
was in the higher quality, more liquid issues, which insulated it from pain felt
by many investors in these sectors. Entering 1999, corporate bond and
mortgage-backed spreads are at the most attractive levels since the 1990
recession.
OUTLOOK
Global Outlook: The outlook for global bond markets looks positive, as
disinflationary pressures remain strong. Weakness in commodity prices, with oil
having fallen 25 percent since late September, will support lower growth in
Europe and Latin America. If U.S. growth shows expected signs of slowing over
the coming months, bond markets will benefit from the potential for lower
interest rates.
The Portfolio will continue to overweight the European markets based on this
slow growth scenario. A market we are watching closely is Japan, where yield
spreads have moved dramatically in favor of Japanese bonds. However, the
currency remains suspect following a large rally in the fourth quarter of 1998.
30
<PAGE>
Currency preference remains unchanged, with the euro as the favorite,
followed by the U.S. dollar and the yen. Pound sterling will come under pressure
as the prospect for rate cuts continues. Here we will maintain hedges out of
sterling into the euro to protect value in the Portfolio.
U.S. Outlook: The long-term fundamentals for the U.S. bond market are still
positive. Industrialized countries around the world are suffering from slow
economic growth and over capacity. With global demand low and the ability to
produce high, inflation will likely remain benign. Commodity prices are falling
and will likely stay depressed until worldwide economic activity begins to
strengthen. Despite the global downturn, the U.S has been an island of
prosperity in the global marketplace. Strong domestic growth with low inflation
and an accommodative Federal Reserve has kept both stocks and bonds performing
well. We anticipate that economic growth will likely slow as global pressures
finally reach the U.S. When this happens, interest rates will likely move
moderately lower and the Federal Reserve would ease rates modestly to engineer
another soft landing.
TEN LARGEST BOND HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF BOND
COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------ ----------- ----------
<S> <C> <C>
U.S. Treasury Note (U.S. Dollar)--6.000%, 02/15/26.......... $ 3,301,706 11.0%
Sweden (Swedish Krona)--6.500%, 10/25/06.................... 1,575,275 5.3%
U.S. Treasury Strip (U.S. Dollar)--4.710%, 05/15/04......... 1,168,034 3.9%
FNGL (U.S. Dollar)--7.000%, 12/01/28........................ 1,018,351 3.4%
Glaxo (British Sterling Pound)--8.750%, 12/01/05............ 1,002,563 3.3%
International Bank Reconstruction and Development (British
Sterling Pound)--7.125%, 07/03/07......................... 967,659 3.2%
U.S. Treasury Note (U.S. Dollar)--5.500%, 08/15/28.......... 943,313 3.2%
Denmark (Danish Kroner)--7.000%, 12/15/04................... 779,935 2.6%
FNMA (U.S. Dollar)--6.500%, 01/01/29........................ 754,695 2.5%
Deutschland Republic (Deutsch Mark)--6.500%, 07/04/27....... 748,675 2.5%
----------- -----
$12,260,206 40.9%
----------- -----
----------- -----
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C>
One year 16.18%
Since inception
(October 1, 1997) 12.79%
Salomon Salomon
Global Brothers Brothers
Bond World Government Bond Non-U.S. World Government
Portfolio Index CPI Bond Index
10/1/97 $10,000 $10,000 $10,000 $10,000
12/31/97 $10,008 $10,021 $10,019 $9,861
12/31/98 $11,626 $11,555 $10,179 $11,615
</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 the
inception date of the Global Bond Portfolio (October 1, 1997)
through December 31, 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. World Government Bond 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
KEVIN ZWART
PORTFOLIO MANAGER
[PHOTO] The Index 400
Mid-Cap Portfolio
seeks to provide
investment results generally
corresponding to the
aggregate price and dividend
performance of publicly
traded common stocks that
comprise the Standard &
Poor's 400 MidCap Index (S&P
400).+ It is designed to
provide an economical and
convenient means of
maintaining a diversified
portfolio in this equity
security area as part of an
over-all investment strategy.
PERFORMANCE
The Index 400 Mid-Cap Portfolio posted a total return of 16.68 percent* for the
year ended December 31, 1998. This compares to the S&P 400 MidCap Index,** which
earned 19.09 percent for the same period.
PERFORMANCE ANALYSIS
Despite a 4 percent gain on the last day of the year, 1998 was a difficult year
for mid-cap stocks. While the S&P 400 MidCap Index** was up over 19 percent for
the year, technology was responsible for 13.4 percent of the return. Of that
13.4 percent, 7.1 percent was attributed to America Online (AOL), the largest
weight in the index. Consumer cyclicals were also very positive, contributing
2.7 percent to the index for the year.
Massive inflow of investors' dollars continued to propel the large-cap
stocks, which demonstrated investors' preferences for positions in larger
companies. Mid-cap stocks remained a distant second in 1998, as evidenced by the
S&P 400 MidCap Index's** underperformance of the larger S&P 500 Index++ by the
largest margin since the inception of the mid-cap index.
OUTLOOK
AOL's increase this year took it to nearly 6 percent of the S&P 400 Index.**
Because of AOL's tremendous growth, it was moved to the S&P 500 Index++ at the
end of 1998. This will return "control" of the index to the smaller stocks. As
money continues to move into equity markets, the question to answer in 1999 is
when will investors move to smaller stocks as the place to find the best value?
We believe the value currently exists, so time will tell.
32
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
S&P 400 Mid-Cap Depository Receipt.......................... 2,100 $ 153,169 1.5%
AFLAC, Inc.................................................. 3,000 132,000 1.3%
Office Depot, Inc........................................... 2,800 103,425 1.0%
Network Associates.......................................... 1,500 99,375 1.0%
McKesson Corporation........................................ 1,100 86,969 .8%
Cintas...................................................... 1,200 84,525 .8%
Harley-Davidson, Inc........................................ 1,700 80,537 .8%
Lexmark International Group................................. 800 80,400 .8%
Cadence Design Systems, Inc................................. 2,500 74,375 .7%
Linear Technology Corporation............................... 800 71,650 .7%
----------- ---
$ 966,425 9.4%
----------- ---
----------- ---
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 2.4%
Capital Goods 7.9%
Communication Services 2.4%
Consumer Cyclical 15.3%
Basic Materials 5.9%
Financial 14.7%
Health Care 10.5%
Consumer Staples 9.4%
Technology 15.5%
Transportation 1.7%
Utilities 11.2%
Energy 3.1%
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C> <C> <C>
One year 16.68%
Since inception
(October 1, 1997) 13.17%
Index 400 S&P 400
Mid-Cap MidCap
Portfolio Index CPI
10/1/97 $10,000 $10,000 $10,000
12/31/97 $10,006 $10,083 $10,019
12/31/98 $11,675 $12,008 $10,179
</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 the inception
date of the Index 400 Mid-Cap Portfolio (October 1, 1997) through
December 31, 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.
+"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.
++The S&P 500 Index is a broad, unmanaged index of 500 common
stocks which are representative of the U.S. stock market
overall.
33
<PAGE>
MACRO-CAP VALUE PORTFOLIO
PERFORMANCE UPDATE
MICHAEL J. KELLY
J.P. MORGAN INVESTMENT
MANAGEMENT
[PHOTO] The Macro-Cap
Value Portfolio
seeks to provide
high total
return. It pursues this
objective by investing in
equity securities that the
sub-adviser believes, through
the use of dividend discount
models, to be undervalued
relative to their long-term
earnings power, creating a
diversified portfolio of
equity securities which
typically will have a
price/earnings ratio and
price to book ratio that
reflects a value orientation.
While Advantus Capital
Management, Inc. acts as
investment advisor for the
Portfolio, J.P. Morgan
Investment Management Inc.
provides investment advice to
the Macro-Cap Value Portfolio
under a subadvisory
agreement.
PERFORMANCE
The Macro-Cap Value Portfolio returned 22.33 percent* for the year ended
December 31, 1998. The S&P 500 Index** returned 28.57 percent during this
period, while the S&P Value Index+ returned 14.5 percent for the same period.
PERFORMANCE ANALYSIS
U.S. stock markets staged an impressive rise during the fourth quarter, driving
results for the full year and extending the S&P 500 Index's** streak of 20
percent plus returns to an unprecedented four years. Liquidity flooded financial
markets as the Federal Reserve cut interest rates three times in the space of 6
weeks in September, October, and November. As such, early fourth quarter stock
market advances were fairly broad based. However, gains that elevated the S&P
500 Index** to a record 1241 became increasingly more narrow as analysts lowered
earning expectations and as interest rates stagnated.
The market ended a very volatile year in a rally driven by size and growth.
The largest 50 stocks outperformed the rest of the market, gaining 40 percent
versus the 17 percent for the other 450 stocks in the index. The top market-cap
quintile (above $18B) was the only market-cap segment within the index to
outperform during the year. Moreover, relative performance deteriorated steadily
with declining market cap, with the mid- to small-tiers lagging the composite
index in excess of 20 percent. So while the S&P 500 Index** closed the year near
its all-time high, the average stock in the index finished 19 percent BELOW its
52-week high. Following another well-established trend, growth stocks beat value
stocks by a wide margin in 1998: the S&P Growth Index+ was up 42.0 percent, well
ahead of 14.5 percent gain in the S&P Value Index.+
The persistence of these patterns has led to a very narrow market--a
challenging environment for active managers, particularly those relying on
valuation-driven stock selection techniques. Against this backdrop, and relative
to most value managers, the Portfolio delivered very solid results.
Stock selection in the technology sector proved favorable in 1998. Within
the S&P 500 Index,** technology was one of only four sectors to outperform for
the year. Prospects for growth appeared better, particularly as the PC industry
worked its way through an inventory correction. Evidence that Y2K would be a net
boost to tech spending, at least for the first half of 1999, also emboldened
investors. Meanwhile, internet stocks scaled new heights amid frenzied trading,
and offered a new rational for multiple expansion among some of the larger, more
established technology companies including EMC Corp, Sun Microsystems, Compaq
Computer, and IBM--all overweight positions in the Portfolio.
Holdings in the consumer stable sector also boosted performance. Anheuser
Busch shares rallied on news of volume and pricing gains; and Philip Morris
stock rose with the announcement of a tobacco settlement.
Energy stocks were among the weaker constituents of the index as well as the
Portfolio. Late-breaking potential catalysts, including Exxon's $75B acquisition
of Mobil as well as the attack on Iraq, failed to reinvigorate interest in the
sector as oil prices remained depressed. Portfolio holdings skewed towards
refining (Tosco and Valero Energy) and oil service stocks (Input/Output)
detracted from performance as shares of large, integrated oil companies fared
better in this environment.
OUTLOOK
For 1999, we expect moderation with respect to earnings, economic growth, and
share price appreciation. Positive seasonal trends and monetary conditions
should support the market as we enter the new year. However, any one of a host
of macro uncertainties has the potential to deflect stocks from extending their
recent gains: the impeachment of the president, the impact of the Euro, the year
2000 problem, or further international financial turmoil or international
hostilities.
34
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
% OF
MARKET STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Monsanto Company............................................ 7,400 $ 351,500 3.3%
BankAmerica Corporation..................................... 5,707 343,133 3.2%
American Home Products Corporation.......................... 5,700 320,981 3.0%
Philip Morris Companies, Inc................................ 5,900 315,650 3.0%
MCI Worldcom, Inc........................................... 4,385 314,624 3.0%
International Business Machines............................. 1,700 314,075 2.9%
Bristol-Myers Squibb Company................................ 2,100 281,006 2.6%
Procter & Gamble Company.................................... 3,000 273,938 2.6%
Waste Management, Inc....................................... 5,855 272,989 2.6%
Mobil Corporation........................................... 3,100 270,088 2.5%
----------- -----
$ 3,057,984 28.7%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 3.9%
Capital Goods 8.5%
Communication Services 5.9%
Basic Materials 7.5%
Consumer Cyclical 14.0%
Consumer Staples 10.4%
Energy 7.0%
Financial 12.9%
Health Care 9.0%
Technology 16.4%
Transportation 2.3%
Utilities 2.2%
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 22.33%
Since inception
(October 15, 1997) 15.99%
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
12/31/98 $11,973 $13,227 $10,179
</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 the
inception date of the Macro-Cap Value Portfolio (October 15, 1997)
through December 31, 1998 and on October 1, 1997 through December 31,
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 Index is a broad, unmanaged index of 500 common stocks
which are representative of the U.S. stock market overall.
+The S&P Value Index and S&P Growth Index are constructed by sorting
the S&P 500 Index companies based on their price/book ratios, with
the low price/book ratios comprising the value index and high
price/book ratios making up the growth index.
35
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
PERFORMANCE UPDATE
WILLIAM JEFFREY, III,
KENNETH F. MCCAIN AND
RICHARD S. COONS
WALL STREET ASSOCIATES
[PHOTO]
[PHOTO]
[PHOTO]
The Micro-Cap
Growth Portfolio
seeks long-term
capital
appreciation. It
pursues this
objective by
investing
primarily in
equity securities
of smaller
companies which
the sub-adviser
believes are in an early
stage or transitional point
in their development and have
demonstrated or have the
potential for above average
revenue growth. It will
invest primarily in common
stocks and stock equivalents
of micro-cap companies. While
Advantus Capital Management,
Inc. acts as investment
advisor for the Portfolio,
Wall Street Associates
provides investment advice to
the Micro-Cap Growth
Portfolio under a subadvisory
agreement.
PERFORMANCE
The Micro-Cap Growth Portfolio returned 13.44 percent* for the year ended
December 31, 1998. The Portfolio's benchmark, the Russell 2000 Growth Index,**
returned 1.24 percent for the same period.
PERFORMANCE ANALYSIS
Small-caps faced a difficult market environment through the first nine months of
1998, as investors showed a preference for liquidity. The Portfolio was down
12.9 percent* in the first nine months of the year. All of the Portfolio's gains
came in the fourth quarter when small-caps rallied, so our detailed comments
primarily address the fourth quarter. The Portfolio gained 29.97 percent* in the
fourth quarter versus the Russell 2000 Growth Index** fourth quarter return of
23.65 percent. For the calendar year 1998, the Portfolio significantly
outperformed its benchmark.
Stock performance correlated directly with capitalization tiers in 1998.
Concerns about the health of the global economy (particularly Asia) sent
investors scurrying for the perceived stability of the larger, more liquid
securities.
The Portfolio is concentrated in the Technology (31 percent), Consumer
Cyclical (23 percent) and Health Care (9 percent) sectors of the market. Sector
allocation proved beneficial as all of these sectors outperformed the benchmark
in the fourth quarter and in calendar year 1998. Stock selection in both the
Consumer Cyclical and Technology sectors added substantially to Portfolio
performance in 1998, particularly in the fourth quarter. The Portfolio's
Technology stocks as a group gained 61 percent,* while the Consumer Cyclical
stocks gained 33 percent* during this period. Investments in the Consumer
Staples and Communication Services sectors also produced strong returns, though
represented a smaller portion of portfolio assets.
OUTLOOK
Our outlook for small-cap stocks is quite optimistic, and we believe that
positive market forces are in place for an extension of the recent small-cap
rally. Relative valuations remain near historic lows and absolute valuations are
attractive. Cash flows into aggressive growth mutual funds have increased and
many funds still have excess cash sitting on the sidelines. The healthy cash
levels combined with a slow IPO market should, we believe, provide plenty of
support for small-cap stocks, as investors seek to capitalize on investments
with rapidly growing earnings.
As we have mentioned in past reports, the catalyst for an extended period of
small-cap leadership will likely result from strong relative earnings growth.
Large-cap earnings are expected to be flat, at best, while small-caps are still
expected to post strong double-digit growth in earnings. Despite the favorable
earnings outlook, small-caps are still trading at a 20 percent discount to
larger issues, as a result of the liquidity premium given to larger issues
during most of 1998. The combination of historically low valuations and a
superior earnings outlook should likely fuel investors' desires to own small-cap
companies, thus likely continuing the small-cap rally well in to 1999.
36
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ ------- ----------- ----------
<S> <C> <C> <C>
Insight Enterprises, Inc.................................... 4,550 $ 231,481 3.3%
Metromedia Fiber Network.................................... 6,300 211,050 3.0%
Metzier Group, Inc.......................................... 4,100 199,619 2.9%
RF Micro Devices, Inc....................................... 4,200 194,775 2.8%
Telebanc Financial Corporation.............................. 5,200 176,800 2.6%
Pegasus Systems, Inc........................................ 4,500 162,000 2.3%
Quiksilver, Inc............................................. 5,100 153,000 2.2%
Golf Trust of America, Inc.................................. 5,000 138,750 2.0%
New Era of Networks, Inc.................................... 3,100 136,400 2.0%
Viatel, Inc................................................. 5,800 132,675 1.9%
----------- -----
$ 1,736,550 25.0%
----------- -----
----------- -----
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 13.7%
Capital Goods .4%
Communication Services 8.1%
Consumer Cyclical 22.6%
Consumer Staples 7.7%
Energy 1.2%
Financial 4.2%
Health Care 9.1%
Technology 31.0%
Transportation 2.0%
</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>
AVERAGE ANNUAL TOTAL
RETURN:
<S> <C> <C> <C>
One year 13.44%
Since inception
(October 1, 1997) -1.23%
Russell
Micro-Cap 2000
Growth Growth
Portfolio Index CPI
10/1/1997 $10,000 $10,000 $10,000
12/31/1997 $8,680 $9,181 $10,019
12/31/1998 $9,846 $9,295 $10,179
</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 the inception date of the
Micro-Cap Growth Portfolio (October 1, 1997) through December 31,
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.
37
<PAGE>
REAL ESTATE SECURITIES PORTFOLIO
PERFORMANCE UPDATE
JOE BETLEJ, CFA
PORFOLIO MANAGER
[PHOTO]
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
Index).+
PERFORMANCE
The Real Estate Securities Portfolio was added to the Advantus Series Fund on
May 1, 1998. The Portfolio's return for the period from May 1 (date of
inception) to December 31, 1998 was -14.90 percent.* This compares to the
Wilshire Associates Real Estate Securities Index (WARESI)** return of -14.32 for
the same period.
PERFORMANCE ANALYSIS
Shifting perspectives in the real estate market highlighted the year for Real
Estate Securities. Fears of weakening fundamentals for real estate markets
(rents and occupancies) caused by a rapid increase in new construction starts
and a slowing economy, as well as negative news surrounding regulatory
legislation on a small number of Real Estate Investment Trusts (REITs) caused
the market to perceive more risk within the sector. Many holders of real estate
securities moved to the sidelines, putting further pressure on equity real
estate securities. The market had three messages for companies: 1). we won't let
you impair the operating fundamentals by overbuilding; 2). you must generate
higher yields to compensate for the inherent risk of this sector; and 3). you
must be more selective when employing precious capital in the market because the
equity window won't always be open. REITs began dropping out of the acquisition
and development game, capitalization rates began to rise for purchases of real
estate, and multiples assigned to the sector decreased. Compounding these issues
was the collapse of the Commercial Mortgage Backed Securities (CMBS) market and
year end tax-loss selling.
Our opinion, however, is that these forces placed the real estate securities
in an overcorrected position when the values of these stocks plummeted during
this year. Most companies are trading at less than their underlying asset value,
dividend yields spread over intermediate-term Treasuries are at the wide end of
their trading range, and multiples for real estate securities have fallen, while
multiples for the broader market have expanded. Property level fundamentals
still remain solid in most markets, new construction has slowed, and the economy
remains in a slow growth mode, which leaves this group as a classical value
play--the market is overly discounting the future benefits of these real estate
companies. Real estate is now being priced as rationally as it had been for a
long time.
The strongest performing sectors were Apartments, Shopping Center, Regional
Mall, and Net Lease. These sectors typically show strength in weakening economic
conditions or have long term leases that give these companies a lot of strength
through market downturns. The best performing companies within the sector focus
more on property level cashflow and less on growth of the portfolio. During the
third quarter, we added Homebuilders to the Portfolio and have achieved very
strong returns with this group after the market had oversold them. The weakest
performing sector was hotels. Overbuilding particularly hit the operating side
causing occupancies to slip for this property type. The growth in Revenue Per
Available Room (REVPAR) slowed during the year, forcing the market multiple for
this group to contract quite substantially. Additionally, the hotel sector's
exposure to paired-share REITs, which were the subject of the regulatory reform
mentioned above, kept a dark cloud over these companies for a good portion of
the year.
As volatility built up for real estate equity securities during the year, we
took a more conservative position within the Portfolio. We became more in line
with the property type weights within the index. Our average exposure to an
individual company became smaller as we added a few more names to the Portfolio
to better diversify the Portfolio. Consistent with our investment process, as we
began to see the real estate markets approaching their peak, we began to focus
more on dividends (and their quality) within the Portfolio. Relative performance
improved as we proceeded through the year, and we feel that we are in good
position for 1999.
OUTLOOK
Our outlook for 1999 is positive for real estate stocks, consistent with a "soft
landing" economic environment as engineered by the Federal Reserve. This
scenario suggests modest, consistent growth and relatively stable interest
rates. We see modest growth for the group in 1999 with minimal downside risk.
The capital markets discipline has substantially slowed down new development,
lowering the risk of overbuilding. Given these factors, property level
cashflows, balance sheets and dividend coverage appear healthy and should likely
remain so throughout the year for many of the companies we own. REIT earnings
estimates have been stripped of any incremental acquisitions or developments
that cannot be supported by the current balance sheet. We see this trimming as
setting the stage for some upside earnings announcements, and perhaps calling a
bottom of the current market cycle. Company management should have learned some
tough lessons during 1998 and will need to establish better credibility by
employing capital more judiciously and proving the sector as it truly is--a
consistent, modest growth business with a strong dividend and the ability to
selectively add value along the way. We continue to recommend Real Estate
Securities Portfolio as a strong addition to a well-diversified investment
portfolio.
38
<PAGE>
TEN LARGEST STOCK HOLDINGS
<TABLE>
<CAPTION>
MARKET % OF STOCK
COMPANY SHARES VALUE PORTFOLIO
- ------------------------------------------------------------ --------- ------------ -------------
<S> <C> <C> <C>
Avalon Bay Communities, Inc................................. 5,200 $ 178,100 3.5%
Arden Realty Group, Inc..................................... 7,600 176,225 3.5%
Catellus Development Corporation............................ 12,300 176,044 3.4%
Camden Property Trust....................................... 6,500 169,000 3.3%
New Plan Excel Realty Trust................................. 7,500 166,406 3.3%
Macerich Company............................................ 5,900 151,188 3.0%
Highwoods Properties, Inc................................... 5,800 149,350 2.9%
Gables Residential Trust.................................... 6,400 148,400 2.9%
Simon Property Group, Inc................................... 5,100 145,350 2.8%
Apartment Investment and Management Company................. 3,800 141,312 2.8%
------------ -------------
$ 1,601,375 31.4%
------------ -------------
------------ -------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash and Other
Assets/Liabilities 4.2%
Consumer Cyclical 10.9%
Financial 84.9%
</TABLE>
COMPARISON OF CHANGE IN INVESTMENT VALUE*
A HYPOTHETICAL $10,000 INVESTMENT IN REAL ESTATE SECURITIES PORTFOLIO,
WILSHIRE ASSOCIATES REAL ESTATE SECURITIES INDEX AND CONSUMER PRICE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN (NOT
ANNUALIZED)
<S> <C> <C> <C>
FROM MAY 1, 1998
(INCEPTION DATE)
TO DECEMBER 31, 1998: -14.90%
Real Estate Securities
Real Estate Wilshire Associates
Securities Real Estate
Portfolio Securities Index CPI
5/1/98 $10,000 $10,000 $10,000
12/31/98 $8,510 $8,568 $10,098
</TABLE>
On the chart above you can see how the Real Estate Securities
Portfolio's total return compared to the Wilshire Associates Real
Estate Securities Index and the Consumer Price Index. The three lines
represent the total return of a hypothetical $10,000 investment made
on the inception date of the Real Estate Securities Portfolio (May 1,
1998) through December 31, 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 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 S&P 500 Index is a broad, unmanaged index of 500 common stocks which are
representative of the U.S. stock market overall.
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Advantus Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments in securities, of the Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 2002, Maturing
Government Bond 2006, Maturing Government Bond 2010, Value Stock Portfolio,
Small Company Value, Index 400 Mid-Cap, Global Bond, Macro-Cap Value, Micro-Cap
Growth and Real Estate Securities Portfolios of Advantus Series Fund, Inc. as of
December 31, 1998 and the related statements of operations, the statements of
changes in net assets and the financial highlights for the periods presented.
These financial statements and the financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers, and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Growth, Bond, Money Market,
Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, Maturing Government Bond 2002, Maturing
Government Bond 2006, Maturing Government Bond 2010, Value Stock, Small Company
Value, Index 400 Mid-Cap, Global Bond, Macro-Cap Value, Micro-Cap Growth and
Real Estate Securities Portfolios of Advantus Series Fund, Inc. as of December
31, 1998 and the results of their operations, changes in their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 12, 1999
40
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
COMMON STOCK (98.1%)
CAPITAL GOODS (10.6%)
Electrical Equipment (6.0%)
276,400 General Electric Company......................... $ 28,210,075
----------------
Manufacturing (3.0%)
187,742 Tyco International, Ltd.......................... 14,162,787
----------------
Office Equipment (.5%)
22,800 Lexmark International Group, Inc. (b)............ 2,291,400
----------------
Waste Management (1.1%)
109,200 Waste Management, Inc............................ 5,091,450
----------------
COMMUNICATION SERVICES (2.3%)
Telecommunication (2.3%)
153,158 MCI Worldcom, Inc. (b)........................... 10,989,086
----------------
CONSUMER CYCLICAL (19.9%)
Auto (1.7%)
146,500 Danaher Corporation.............................. 7,956,781
----------------
Building Materials (1.5%)
242,400 Masco Corporation................................ 6,969,000
----------------
Houseware (1.5%)
309,700 Leggett & Platt, Inc............................. 6,813,400
----------------
Retail (7.4%)
535,500 Family Dollar Stores............................. 11,781,000
127,600 Home Depot, Inc.................................. 7,807,525
134,700 Tandy Corporation................................ 5,547,956
114,200 Wal-Mart Stores.................................. 9,300,162
----------------
34,436,643
----------------
Service (7.8%)
236,700 Cendant Corporation (b).......................... 4,512,094
102,700 Equifax, Inc..................................... 3,511,056
57,500 Equity Corporation (b)........................... 1,527,344
197,900 Omnicom Group.................................... 11,478,200
136,500 Quintiles Transnational (b)...................... 7,285,687
221,500 Service Corporation International................ 8,430,844
----------------
36,745,225
----------------
CONSUMER STAPLES (16.6%)
Beverage (1.9%)
136,200 Coca-Cola Company................................ 9,108,375
----------------
Entertainment (2.6%)
252,000 Carnival Corporation............................. 12,096,000
----------------
Food & Health (.8%)
79,200 U.S. Foodservice (b)............................. 3,880,800
----------------
Household Products (4.0%)
39,100 Clorox Company................................... 4,567,369
268,800 Dial............................................. 7,761,600
68,900 Procter & Gamble Company......................... 6,291,431
----------------
18,620,400
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Retail (3.6%)
81,900 CVS Corporation.................................. $ 4,504,500
204,500 Safeway, Inc. (b)................................ 12,461,719
----------------
16,966,219
----------------
Service (1.4%)
81,000 Automatic Data Processing, Inc................... 6,495,187
----------------
Tobacco (2.3%)
202,400 Philip Morris Companies, Inc..................... 10,828,400
----------------
FINANCIAL (5.8%)
Commercial Finance (1.2%)
105,400 Finova Finance Trust............................. 5,685,012
----------------
Finance--Diversified (1.6%)
116,000 Federal Home Loan Mortgage Corporation........... 7,474,750
----------------
Insurance (3.0%)
14,600 American International Group..................... 1,410,725
59,700 Hartford Life.................................... 3,477,525
77,000 Nationwide Financial Services.................... 3,979,937
62,150 Sunamerica, Inc.................................. 5,041,919
----------------
13,910,106
----------------
HEALTH CARE (19.6%)
Drugs (10.6%)
72,600 American Home Products Corporation............... 4,088,287
82,900 Bristol-Myers Squibb Company..................... 11,093,056
63,850 Cardinal Health, Inc............................. 4,844,619
51,000 Eli Lilly & Company.............................. 4,532,625
66,100 Merck & Co., Inc................................. 9,762,144
80,600 Pfizer, Inc...................................... 10,110,263
93,800 Schering Plough Corporation...................... 5,182,450
----------------
49,613,444
----------------
Health Care--Diversified (3.5%)
94,600 Abbott Laboratories.............................. 4,635,400
84,000 Johnson & Johnson................................ 7,045,500
60,500 Warner-Lambert Company........................... 4,548,844
----------------
16,229,744
----------------
Hospital Management (1.6%)
346,300 Health Management Associates, Inc. (b)........... 7,488,738
----------------
Medical Products/Supplies (3.9%)
99,600 Guidant Corporation.............................. 10,980,900
271,700 Sybron International Corporation (b)............. 7,386,844
----------------
18,367,744
----------------
TECHNOLOGY (22.2%)
96,900 BMC Software, Inc. (b)........................... 4,318,106
180,500 Cadence Design Systems, Inc. (b)................. 5,369,875
149,350 Cisco Systems, Inc. (b).......................... 13,861,547
80,100 Compaq Computer Corporation...................... 3,359,194
92,900 Dell Computer Corporation (b).................... 6,799,119
</TABLE>
See accompanying notes to investments in securities.
41
<PAGE>
GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
TECHNOLOGY --CONTINUED
<C> <S> <C>
89,000 EMC Corporation.................................. $ 7,565,000
189,100 Galileo International, Inc....................... 8,225,850
140,400 Intel............................................ 16,646,175
107,200 Lucent Technologies, Inc......................... 11,792,000
146,400 Microsoft Corporation (b)........................ 20,303,850
111,300 Paychex, Inc..................................... 5,724,994
----------------
103,965,710
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
UTILITIES (1.1%)
Electric Companies (1.1%)
109,900 AES Corporation (b).............................. $ 5,206,513
----------------
Total common stock
(cost: $319,151,143)........................................... 459,602,989
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.0%)
$15,217,873 Temporary Investment Fund--Temp Fund Portfolio,
current rate 4.990%............................. 15,217,873
3,600,000 U.S. Treasury Bill.............. 4.390% 03/11/99 3,571,423
------------
Total short-term securities (cost: $18,787,890)... 18,789,296
------------
Total investments in securities (cost:
$337,939,033) (c)............................... $478,392,285
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $339,362,977. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $141,390,525
Gross unrealized depreciation.......... (2,361,217)
------------
Net unrealized appreciation............ $139,029,308
------------
------------
</TABLE>
42
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(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 (91.8%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (42.4%)
Federal Home Loan Mortgage Corporation (FHLMC) (.2%)
$ 349,630 ................................................. 6.500% 12/01/23 $ 350,081
----------------
Federal National Mortgage Association (FNMA) (10.9%)
7,500,000 ................................................. 5.875% 02/02/06 7,779,495
4,000,000 ................................................. 6.000% 05/15/08 4,220,688
999,683 ................................................. 6.000% 09/01/28 986,777
5,000,000 ................................................. 6.140% 03/24/03 5,043,945
496,711 ................................................. 6.500% 10/15/28 499,821
880,716 ................................................. 7.000% 09/01/17 895,054
----------------
19,425,780
----------------
Government National Mortgage Association (GNMA) (5.6%)
1,381,678 ................................................. 6.000% 07/15/28 1,369,602
4,934,966 ................................................. 6.500% 09/15/28 4,984,365
805,561 ................................................. 6.500% 09/15/28 813,624
663,161 ................................................. 7.000% 11/15/23 678,858
405,241 ................................................. 7.000% 10/15/25 414,760
652,454 ................................................. 7.000% 03/15/26 667,885
464,567 ................................................. 7.000% 05/15/26 475,554
310,106 ................................................. 8.000% 09/15/24 322,082
151,075 ................................................. 8.500% 10/15/22 161,147
189,434 ................................................. 8.500% 12/15/22 202,064
----------------
10,089,941
----------------
U.S. Treasury (23.3%)
9,850,000 U.S. Treasury Strip (d).......................... 4.975% 05/15/06 6,941,778
6,200,000 U.S. Treasury Bond............................... 5.500% 02/29/00 6,258,125
4,850,000 U.S. Treasury Bond............................... 5.500% 08/15/28 5,083,406
17,300,000 U.S. Treasury Bond............................... 6.000% 02/15/26 18,878,625
4,325,000 U.S. Treasury Bond............................... 6.375% 09/30/01 4,512,869
----------------
41,674,803
----------------
Other U.S. Government Obligations (2.4%)
4,250,000 Tennessee Valley Authority....................... 5.375% 11/13/08 4,266,108
----------------
Total U.S. government and agencies obligations (cost: $74,896,180).... 75,806,713
----------------
OTHER GOVERNMENT OBLIGATIONS (2.8%)
4,700,000 Quebec Province (b).............................. 7.000% 01/30/07 5,082,251
----------------
Total other government obligations (cost: $5,050,100)................. 5,082,251
----------------
CORPORATE OBLIGATIONS (46.6%)
BASIC MATERIALS (6.4%)
Chemicals (4.1%)
4,000,000 BF Goodrich Company.............................. 9.625% 07/01/01 4,356,892
2,784,244 Ciba Geigy Corporation 144A Issue (c)............ 7.240% 01/02/16 3,039,949
----------------
7,396,841
----------------
Paper and Forest (2.3%)
4,150,000 International Paper Company...................... 6.875% 07/10/00 4,207,370
----------------
CAPITAL GOODS (2.9%)
Aerospace/Defense (2.9%)
5,000,000 Raytheon Company................................. 6.450% 08/15/02 5,145,165
----------------
</TABLE>
See accompanying notes to investments in securities.
43
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
COMMUNICATION SERVICES (2.8%)
Telephone (2.8%)
$ 5,000,000 Cable and Wireless Communications (b)............ 6.625% 03/06/05 $ 5,047,690
----------------
CONSUMER STAPLES (5.4%)
Entertainment (3.1%)
5,415,000 Time Warner, Inc. 144A Issue (c)................. 6.100% 12/30/01 5,467,688
----------------
Household Products (2.3%)
3,850,000 Premark International, Inc....................... 10.500% 09/15/00 4,154,677
----------------
FINANCIAL (26.0%)
Asset-Backed Securities (.8%)
1,350,000 National Collegiate.............................. 7.240% 09/20/14 1,381,536
----------------
Auto Finance (3.1%)
5,500,000 Toyota Motor Credit.............................. 5.625% 11/13/03 5,526,548
----------------
Banks (4.9%)
5,500,000 PNC Bank Corporation............................. 6.728% 01/25/07 5,804,986
3,400,000 St. George Bank Capital Note 144A Issue (b)(c)... 8.485% 12/31/49 3,043,000
----------------
8,847,986
----------------
Collateralized Mortgage Obligations/Mortgage Revenue
Bonds (2.5%)
945,000 California Housing Finance Agency................ 8.160% 02/01/28 992,250
1,200,000 CSFB Finance Company 144A Issue (c).............. 7.092% 11/15/05 1,128,000
1,574,172 Prudential Home Mortgage Securities.............. 6.050% 04/25/24 1,557,910
798,000 Wyoming Community Development.................... 6.850% 06/01/10 795,442
----------------
4,473,602
----------------
Commercial Finance (2.9%)
5,000,000 General Electric Capital Corporation............. 6.290% 12/15/07 5,113,900
----------------
Consumer Finance (2.8%)
5,000,000 Associates Corporation of North America.......... 5.750% 11/01/03 5,035,715
----------------
Finance--Diversified (.8%)
3,500,000 Guangdong Enterprises 144A Issue (b)(c).......... 8.875% 05/22/07 1,400,000
----------------
Investment Bankers/Brokers (3.0%)
5,000,000 Morgan Stanley Dean Witter....................... 6.875% 03/01/07 5,307,800
----------------
Real Estate Investment Trust (3.1%)
4,800,000 Bradley Operating LP............................. 7.000% 11/15/04 4,569,696
1,000,000 Security Capital Pacific Trust................... 7.500% 02/15/14 948,110
----------------
5,517,806
----------------
Savings and Loans (2.1%)
3,500,000 Bank United Corporation.......................... 8.875% 05/01/07 3,693,620
----------------
UTILITIES (3.1%)
Natural Gas (3.1%)
5,000,000 Enron Corporation................................ 9.125% 04/01/03 5,527,155
----------------
Total corporate obligations (cost: $85,170,543)....................... 83,245,099
----------------
Total long-term debt securities (cost: $165,116,823).................. 164,134,063
----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<C> <S> <C>
PREFERRED STOCK (5.5%)
FINANCIAL (5.5%)
Real Estate Investment Trust (5.5%)
70,000 Duke Realty Investments, Inc. 7.99%.................................... 3,539,375
35,000 Nationwide Health Properties, Inc. 7.68%............................... 3,412,500
60,000 Prologis Trust 8.54%................................................... 2,970,000
------------
Total preferred stock (cost: $9,955,725)............................... 9,921,875
------------
</TABLE>
See accompanying notes to investments in securities.
44
<PAGE>
BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (.8%)
$ 1,389,345 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
4.990%.............................................................. $ 1,389,345
----------------
Total short-term securities (cost: $1,389,345)........................ 1,389,345
----------------
Total investments in securities (cost: $176,461,893) (e).............. $ 175,445,283
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) The Portfolio held 8.2% of net assets in foreign securities at December 31,
1998.
(c) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 1998, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- ------------------------------------------ ----------- -----------
<S> <C> <C>
CSFB Financial Company 144A Issue......... 5/15/96 $ 1,167,750
Ciba Geigy Corporation 144A Issue......... 12/24/96 2,784,244
Guangdong Enterprises 144A Issue.......... various 3,612,630
St. George Bank 144A Issue................ 6/12/97 3,400,000
Time Warner, Inc. 144A Issue.............. various 5,459,263
-----------
$16,423,887
-----------
-----------
</TABLE>
(d) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(e) At December 31, 1998 the cost of securities for federal income tax purposes
was $176,813,293. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......................... $ 2,012,436
Gross unrealized depreciation.......................... (3,380,446)
-----------
Net unrealized depreciation............................ $(1,368,010)
-----------
-----------
</TABLE>
45
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (89.6%)
BASIC MATERIALS (12.6%)
Agriculture Products (7.6%)
$3,000,000 Archer-Daniels Midland Company................... 5.481% 01/13/99 $ 2,994,604
6,600,000 Cargill, Inc..................................... 5.152% 03/05/99 6,541,824
----------------
9,536,428
----------------
Chemicals (5.0%)
5,340,000 E.I. DuPont De Nemours & Company................. 4.903% 02/25/99 5,300,835
1,000,000 E.I. DuPont De Nemours & Company................. 4.850% 05/07/99 983,533
----------------
6,284,368
----------------
CAPITAL GOODS (4.9%)
Electrical Equipment (2.6%)
3,300,000 Emerson Electric Company......................... 5.171% 02/12/99 3,280,481
----------------
Manufacturing (2.3%)
3,000,000 Johnson Controls................................. 4.797% 05/04/99 2,952,280
----------------
COMMUNICATION SERVICES (8.1%)
Telephone (8.1%)
3,640,000 Bellsouth Telecommunications..................... 5.192% 02/23/99 3,612,766
6,600,000 GTE Funding...................................... 5.253% 02/01/99 6,570,687
----------------
10,183,453
----------------
CONSUMER CYCLICAL (7.1%)
Publishing (7.1%)
4,025,000 Gannett Company (c).............................. 5.157% 01/15/99 4,017,054
2,500,000 McGraw-Hill Companies, Inc....................... 5.181% 03/22/99 2,471,930
2,000,000 McGraw-Hill Companies, Inc....................... 5.157% 03/24/99 1,977,096
500,000 McGraw-Hill Companies, Inc....................... 5.145% 03/31/99 493,805
----------------
8,959,885
----------------
CONSUMER STAPLES (15.1%)
Beverage (10.4%)
1,030,000 Coca-Cola Company................................ 5.012% 01/29/99 1,026,055
5,570,000 Coca-Cola Company................................ 5.204% 02/05/99 5,542,342
6,600,000 Pepsico, Inc..................................... 5.202% 01/19/99 6,583,113
----------------
13,151,510
----------------
Food (4.7%)
2,000,000 General Mills, Inc............................... 5.271% 01/08/99 1,997,980
3,930,000 HJ Heinz Company................................. 5.237% 02/18/99 3,903,118
----------------
5,901,098
----------------
ENERGY (4.1%)
Oil & Gas (4.1%)
500,000 Atlantic Richfield Company (c)................... 5.224% 03/03/99 495,672
3,270,000 Atlantic Richfield Company (c)................... 4.733% 04/23/99 3,223,191
1,440,000 Atlantic Richfield Company (c)................... 4.850% 05/07/99 1,416,288
----------------
5,135,151
----------------
FINANCIAL (13.4%)
Auto Finance (3.0%)
1,330,000 Ford Motor Credit................................ 5.647% 01/07/99 1,328,767
2,540,000 Ford Motor Credit................................ 5.210% 02/05/99 2,527,373
----------------
3,856,140
----------------
</TABLE>
See accompanying notes to investments in securities.
46
<PAGE>
MONEY MARKET PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C> <C> <C>
Banks (1.6%)
$2,000,000 Norwest Financial................................ 4.666% 04/09/99 $ 1,975,253
----------------
Consumer Finance (7.2%)
1,635,000 Associates Corporation of North America.......... 5.162% 02/12/99 1,625,346
2,000,000 Associates Corporation of North America.......... 5.228% 02/18/99 1,986,343
1,190,000 Ciesco LP........................................ 5.270% 01/14/99 1,187,771
4,375,000 Xerox Credit Corporation......................... 4.967% 06/04/99 4,285,201
----------------
9,084,661
----------------
Finance--Diversified (1.6%)
2,075,000 American General Corporation..................... 4.472% 07/23/99 2,024,530
----------------
HEALTH CARE (12.0%)
Drugs (6.8%)
6,600,000 Schering Corporation............................. 5.161% 02/02/99 6,570,273
2,015,000 Schering Corporation............................. 4.756% 03/09/99 1,997,560
----------------
8,567,833
----------------
Health Care--Diversified (5.2%)
6,600,000 Abbott Laboratories.............................. 5.109% 01/04/99 6,597,230
----------------
TECHNOLOGY (1.3%)
Technology (1.3%)
1,680,000 Motorola, Inc.................................... 5.088% 02/25/99 1,667,218
----------------
UTILITIES (11.0%)
Electric Companies (3.6%)
2,010,000 Carolina Power & Light Company................... 5.307% 01/25/99 2,003,011
2,000,000 Carolina Power & Light Company................... 5.499% 01/27/99 1,992,196
500,000 Carolina Power & Light Company................... 5.346% 02/11/99 497,015
----------------
4,492,222
----------------
Natural Gas (7.4%)
5,340,000 Consolidated Natural Gas......................... 5.233% 02/01/99 5,316,372
4,030,000 Laclede Gas Company.............................. 5.292% 01/14/99 4,022,419
----------------
9,338,791
----------------
Total commercial paper (cost: $112,988,532)........................ 112,988,532
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (5.4%)
2,500,000 Federal Home Loan Bank........................... 5.000% 10/28/99 2,500,000
4,400,000 Federal Home Loan Mortgage Corporation........... 4.690% 04/26/99 4,335,925
------------
Total U.S. government agency obligations (cost: $6,835,925)........ 6,835,925
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.4%)
5,567,110 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
4.990%.......................................................... 5,567,110
------------
Total short-term securities (cost: $5,567,110).................... 5,567,110
------------
Total investments in securities (cost: $125,391,567) (b).......... $125,391,567
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Also represents the cost of securities for federal income tax purposes at
December 31, 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.
47
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
COMMON STOCK (70.1%)
CAPITAL GOODS (7.0%)
Electrical Equipment (3.8%)
238,552 General Electric Company......................... $ 24,347,213
----------------
Manufacturing (2.1%)
177,598 Tyco International, Ltd.......................... 13,397,549
----------------
Office Equipment (.3%)
21,900 Lexmark International Group, Inc. (b)............ 2,200,950
----------------
Waste Management (.8%)
106,175 Waste Management, Inc............................ 4,950,409
----------------
COMMUNICATION SERVICES (1.6%)
Telecommunication (1.6%)
139,770 MCI Worldcom, Inc. (b)........................... 10,028,497
----------------
CONSUMER CYCLICAL (14.2%)
Auto (1.2%)
140,600 Danaher Corporation.............................. 7,636,337
----------------
Building Materials (1.2%)
27,200 D.R. Horton, Inc................................. 625,600
9,400 Kaufman & Broad Home Corporation................. 270,250
229,300 Masco Corporation................................ 6,592,375
35,700 Standard Pacific Corporation..................... 504,262
----------------
7,992,487
----------------
Houseware (.9%)
270,200 Leggett & Platt, Inc............................. 5,944,400
----------------
Lodging--Hotel (.3%)
50,100 Host Marriott Corporation........................ 692,006
32,800 Meristar Hospitality Corporation................. 608,850
26,200 Starwood Lodging Trust........................... 594,412
----------------
1,895,268
----------------
Retail (4.8%)
527,300 Family Dollar Stores............................. 11,600,600
111,700 Home Depot, Inc.................................. 6,834,644
133,800 Tandy Corporation................................ 5,510,887
78,300 Wal-Mart Stores.................................. 6,376,556
----------------
30,322,687
----------------
Service (5.8%)
229,800 Cendant Corporation (b).......................... 4,380,562
97,300 Equifax, Inc..................................... 3,326,444
39,600 Equity Corporation (b)........................... 1,051,875
34,700 Fairfield Communities, Inc. (b).................. 383,869
211,808 Omnicom Group.................................... 12,284,864
129,100 Quintiles Transnational (b)...................... 6,890,712
221,400 Service Corporation International................ 8,427,037
----------------
36,745,363
----------------
CONSUMER STAPLES (9.0%)
Beverage (1.2%)
112,800 Coca-Cola Company................................ 7,543,500
----------------
Entertainment (1.8%)
244,600 Carnival Corporation............................. 11,740,800
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
CONSUMER STAPLES--CONTINUED
Household Products (2.0%)
248,900 Dial............................................. $ 7,186,987
61,110 Procter & Gamble Company......................... 5,580,107
----------------
12,767,094
----------------
Retail (1.9%)
8,500 CVS Corporation.................................. 467,500
186,984 Safeway, Inc. (b)................................ 11,394,337
----------------
11,861,837
----------------
Service (.9%)
74,200 Automatic Data Processing, Inc................... 5,949,912
----------------
Tobacco (1.2%)
146,600 Philip Morris Companies, Inc..................... 7,843,100
----------------
FINANCIAL (8.5%)
Commercial Finance (.8%)
99,900 Finova Finance Trust............................. 5,388,356
----------------
Finance--Diversified (1.4%)
20,900 Asset Investors Corporation...................... 261,250
11,900 Crescent Real Estate Equipment Company........... 273,700
115,700 Federal Home Loan Mortgage Corporation........... 7,455,419
25,200 Simon Property Group, Inc........................ 718,200
----------------
8,708,569
----------------
Insurance (2.4%)
15,263 American International Group..................... 1,474,787
59,500 Hartford Life.................................... 3,465,875
84,500 Nationwide Financial Services, Inc............... 4,367,594
75,650 Sunamerica, Inc.................................. 6,137,106
----------------
15,445,362
----------------
Investment Bankers/Brokers ( -- )
2,088 Reckson Service Industries....................... 8,613
----------------
Real Estate (.2%)
72,400 Catellus Development Corporation (b)............. 1,036,225
----------------
Real Estate Investment Trust (3.7%)
25,800 Apartment Investment & Management Company........ 959,437
26,400 Archstone Communities Trust...................... 534,600
35,800 Arden Realty Group, Inc.......................... 830,112
32,800 Avalon Bay Communities, Inc...................... 1,123,400
9,300 Cabot Industrial Trust........................... 190,069
42,400 Camden Property Trust............................ 1,102,400
33,100 Carramerica Realty Corporation................... 794,400
57,000 Commercial Net Lease Realty...................... 755,250
53,000 Corporate Office Properties...................... 377,625
5,010 Crestline Capital Corporation (b)................ 73,271
15,700 Eastgroup Properties............................. 289,469
19,200 Equity Office Properties Trust................... 460,800
15,800 Equity Residential Property Trust................ 638,913
17,800 Essex Property Trust............................. 529,550
25,400 Felcor Lodging Trust, Inc........................ 585,788
</TABLE>
See accompanying notes to investments in securities.
48
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
28,600 First Industrial Realty Trust.................... $ 766,838
10,200 Franchise Finance Corporation of America......... 244,800
9,200 Gables Residential Trust......................... 213,325
37,100 Glenborough Realty Trust, Inc.................... 755,913
16,820 Golf Trust of America, Inc....................... 466,755
22,500 Highwoods Properties, Inc........................ 579,375
12,700 HRPT Properties Trust............................ 178,594
27,200 Innkeepers USA Trust............................. 321,300
33,900 Kilroy Realty.................................... 779,700
17,900 Lennar Corporation............................... 451,975
13,900 LNR Property Corporation......................... 277,131
24,700 Macerich Company................................. 632,938
18,100 Mack-Cali Realty................................. 558,838
38,880 New Plan Excel Realty Trust...................... 862,650
28,300 Pacific Gulf Properties, Inc..................... 567,769
37,800 Pan Pacific Retail Properties.................... 753,638
38,600 Philips International Realty..................... 593,475
4,200 Post Properties, Inc............................. 161,438
16,200 Prentiss Properties Trust........................ 361,463
11,900 Prologis Trust................................... 246,925
12,300 Public Storage, Inc.............................. 332,869
38,700 Regency Realty Corporation....................... 861,075
37,400 Storage Trust Realty............................. 874,225
17,200 Summit Properties, Inc........................... 296,700
56,300 Sunstone Hotel Investors......................... 531,331
13,100 Tower Realty Trust............................... 263,638
15,200 Trinet Corporation............................... 406,600
15,400 Urban Shopping Centers, Inc...................... 504,350
9,900 Vornado Realty Trust............................. 334,125
----------------
23,424,837
----------------
HEALTH CARE (13.7%)
Drugs (7.3%)
61,200 American Home Products Corporation............... 3,446,325
80,400 Bristol-Myers Squibb Company..................... 10,758,525
60,900 Cardinal Health, Inc............................. 4,620,788
49,500 Eli Lilly & Company.............................. 4,399,313
59,400 Merck & Co., Inc................................. 8,772,638
78,200 Pfizer, Inc...................................... 9,809,213
91,100 Schering Plough Corporation...................... 5,033,275
----------------
46,840,077
----------------
Health Care--Diversified (2.5%)
91,800 Abbott Laboratories.............................. 4,498,200
81,500 Johnson & Johnson................................ 6,835,813
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
HEALTH CARE--CONTINUED
58,700 Warner-Lambert Company........................... $ 4,413,506
----------------
15,747,519
----------------
Hospital Management (1.0%)
285,800 Health Management Associates, Inc. (b)........... 6,180,425
----------------
Medical Products/Supplies (2.9%)
96,600 Guidant Corporation.............................. 10,650,150
281,900 Sybron International Corporation (b)............. 7,664,156
----------------
18,314,306
----------------
TECHNOLOGY (15.3%)
92,500 BMC Software, Inc. (b)........................... 4,122,031
191,300 Cadence Design Systems, Inc. (b)................. 5,691,175
146,475 Cisco Systems, Inc. (b).......................... 13,594,711
75,600 Compaq Computer Corporation...................... 3,170,475
80,200 Dell Computer Corporation (b).................... 5,869,638
96,700 EMC Corporation (b).............................. 8,219,500
165,700 Galileo International, Inc....................... 7,207,950
122,900 Intel............................................ 14,571,331
95,400 Lucent Technologies, Inc......................... 10,494,000
133,600 Microsoft Corporation (b)........................ 18,528,650
119,175 Paychex, Inc..................................... 6,130,064
----------------
97,599,525
----------------
UTILITIES (.8%)
Electric Companies (0.8%)
109,300 AES Corporation (b).............................. 5,178,088
----------------
Total common stock
(cost: $291,850,694)........................................... 447,039,305
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (1.8%)
FINANCIAL (1.8%)
Real Estate Investment Trust (1.8%)
102,000 Duke Realty Investments, Inc.-- 7.99%............ 5,157,375
39,000 Nationwide Health Properties, Inc.--7.68%........ 3,802,500
50,000 Prologis Trust--8.54%............................ 2,475,000
----------------
Total preferred stock
(cost: $11,467,385)............................................ 11,434,875
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (25.6%)
GOVERNMENT OBLIGATIONS (12.2%)
Federal Home Loan Mortgage Corporation
(FHLMC) (.2%)
$ 1,052,317 ............................. 6.500% 12/01/23 1,053,674
----------------
Federal National Mortgage Association
(FNMA) (3.2%)
1,000,000 ............................. 5.875% 02/02/06 1,037,266
2,700,000 ............................. 6.000% 05/15/08 2,848,964
999,683 ............................. 6.000% 09/01/28 986,777
3,250,000 ............................. 6.140% 03/24/03 3,278,564
5,000,000 ............................. 6.350% 06/10/05 5,303,250
2,994,005 ............................. 6.500% 10/15/28 3,012,748
2,000,000 ............................. 6.500% 11/01/28 2,013,760
</TABLE>
See accompanying notes to investments in securities.
49
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
GOVERNMENT OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
$ 2,000,000 ............................. 6.500% 12/01/28 $ 2,013,760
----------------
20,495,089
----------------
Government National Mortgage
Association (GNMA) (0.6%)
889,913 ............................. 6.000% 08/15/28 882,136
704,866 ............................. 6.500% 09/15/28 711,921
1,620,965 ............................. 7.000% 10/15/25 1,659,041
161,942 ............................. 7.500% 06/20/02 165,008
74,684 ............................. 7.500% 07/20/02 76,097
399,705 ............................. 7.500% 05/15/24 412,007
----------------
3,906,210
----------------
Other Government Obligations (1.0%)
1,685,000 Nebraska Investment Finance
Authority.................. 6.600% 03/01/24 1,737,572
2,500,000 Tennessee Valley Authority... 5.375% 11/13/08 2,509,475
1,995,000 Wyoming Community
Development................ 6.850% 06/01/10 1,988,606
----------------
6,235,653
----------------
U.S. Treasury (7.2%)
18,800,000 Strip (e).................... 4.850% 05/15/06 13,249,281
5,100,000 ............................. 5.500% 08/15/28 5,345,438
10,400,000 ............................. 6.000% 02/15/26 11,349,000
6,900,000 ............................. 6.500% 08/15/05 7,581,375
4,450,000 ............................. 6.625% 03/31/02 4,703,094
1,500,000 ............................. 7.000% 07/15/06 1,708,125
1,800,000 ............................. 7.250% 08/15/04 2,024,438
----------------
45,960,751
----------------
Total government obligations (cost:
$77,040,097).................................... 77,651,377
----------------
CORPORATE OBLIGATIONS (13.4%)
BASIC MATERIALS (1.5%)
Chemicals (.9%)
5,011,639 Ciba Geigy Corporation 144A
Issue (d).................. 7.240% 01/02/16 5,471,908
----------------
Paper and Forest (.6%)
4,000,000 International Paper
Company.................... 6.875% 07/10/00 4,055,296
----------------
CAPITAL GOODS (.6%)
Aerospace/Defense (.6%)
3,500,000 Raytheon Company............. 5.700% 11/01/03 3,502,737
----------------
COMMUNICATION SERVICES (.9%)
Telephone (.9%)
5,900,000 Cable and Wireless
Communications (c)......... 6.625% 03/06/05 5,956,274
----------------
CONSUMER CYCLICAL (.3%)
Textiles (.3%)
2,750,000 Reliance Industries, Ltd.
144A Issue (c)(d).......... 10.250% 01/15/97 1,987,618
----------------
CONSUMER STAPLES (1.6%)
Entertainment (.8%)
5,100,000 Time Warner, Inc. 144A Issue
(d)........................ 6.100% 12/30/01 5,149,623
----------------
Household Products (.8%)
4,900,000 Premark International,
Inc........................ 10.500% 09/15/00 5,287,771
----------------
FINANCIAL (7.6%)
Asset Backed (.3%)
1,114,523 Paine Webber Mortgage
Acceptance Corporation..... 6.930% 02/25/24 1,104,381
1,000,000 Prudential Home Mortgage
Securities 144A Issue
(d)........................ 7.900% 04/28/22 1,000,000
----------------
2,104,381
----------------
Auto Finance (.9%)
5,500,000 Toyota Motor Credit.......... 5.625% 11/13/03 5,526,549
----------------
</TABLE>
See accompanying notes to investments in securities.
50
<PAGE>
ASSET ALLOCATION PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
CORPORATE OBLIGATIONS--CONTINUED
<C> <S> <C> <C> <C>
Banks (1.7%)
$ 7,178,000 PNC Bank Corporation......... 6.728% 01/25/07 $ 7,576,034
4,000,000 St. George Bank 144A Issue
(c)(d)..................... 8.485% 12/31/49 3,580,000
----------------
11,156,034
----------------
Commercial Finance (.8%)
5,250,000 General Electric Capital
Corporation................ 6.290% 12/15/07 5,369,595
----------------
Consumer Finance (.8%)
1,300,000 Associates Corporation of
North America.............. 5.750% 11/01/03 1,309,286
3,700,000 Associates Corporation of
North America.............. 6.625% 05/15/01 3,792,641
----------------
5,101,927
----------------
Finance--Diversified (.3%)
4,300,000 Guangdong Enterprises 144A
Issue (c)(d)............... 8.875% 05/22/07 1,720,000
----------------
Investment Bankers/Brokers (1.0%)
6,196,000 Morgan Stanley Dean Witter... 6.875% 03/01/07 6,577,426
----------------
Real Estate Investment Trust (1.2%)
6,250,000 Bradley Operating LP......... 7.000% 11/15/04 5,950,125
1,500,000 Security Capital Pacific
Trust...................... 7.500% 02/15/14 1,422,165
----------------
7,372,290
----------------
Savings and Loans (.6%)
3,750,000 Bank United Corporation...... 8.875% 05/01/07 3,957,450
----------------
UTILITIES (.9%)
Natural Gas (.9%)
5,000,000 Enron Corporation............ 9.125% 04/01/03 5,527,155
----------------
Total corporate obligations (cost: $89,053,210)... 85,824,034
----------------
Total long-term debt securities (cost:
$166,093,307)................................... 163,475,411
----------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.7%)
10,232,720 Temporary Investment Fund--Temp Fund Portfolio,
current rate 4.990%............................. 10,232,720
7,400,000 U.S. Treasury Bill........... 4.402% 03/11/99 7,341,259
----------------
Total short-term securities (cost: $17,571,084)... 17,573,979
----------------
Total investments in securities (cost:
$486,982,470) (f)............................... $ 639,523,570
----------------
----------------
</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 2.1% of net assets in foreign securities as of December
31, 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 December 31, 1998, which includes acquisition
date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- ------------------------------------------ ----------- -------------
<S> <C> <C>
Ciba Geigy Corporation 144A............... various $ 5,062,063
Guangdong Enterprises 144A................ various 4,438,374
Prudential Home Mortgage 144A............. 7/19/96 950,313
Reliance Industries, Ltd. 144A............ various 2,964,720
St. George Bank 144A...................... 6/12/97 4,000,000
Time Warner, Inc. 144A.................... various 5,141,708
-------------
$ 22,557,178
-------------
-------------
</TABLE>
(e) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(f) At December 31, 1998 the cost of securities for federal income tax purposes
was $489,561,795. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation............................ $162,250,972
Gross unrealized depreciation............................ (12,289,197)
------------
Net unrealized appreciation.............................. $149,961,775
------------
------------
</TABLE>
51
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ------------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (96.0%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (25.3%)
Federal Home Loan Mortgage Corporation (FHLMC) (4.3%)
$ 2,000,000 ................................................. 3.500% 06/15/07 $ 1,843,068
993,349 ................................................. 6.000% 09/01/18 987,031
1,580,189 ................................................. 6.500% 12/01/23 1,582,228
945,687 ................................................. 7.000% 12/01/22 959,702
------------------
5,372,029
------------------
Federal National Mortgage Association (FNMA) (13.4%)
670,035 ................................................. 6.000% 07/01/07 668,032
250,000 (c).............................................. 6.000% 01/15/19 250,705
312,688 ................................................. 6.500% 02/01/17 313,514
1,108,323 ................................................. 6.500% 03/01/17 1,111,093
3,168,939 ................................................. 6.500% 11/01/18 3,201,611
987,132 ................................................. 6.500% 09/01/28 993,924
2,078,840 ................................................. 6.500% 09/01/28 2,093,142
1,740,802 ................................................. 6.500% 10/01/28 1,751,700
997,778 ................................................. 6.500% 10/01/28 1,004,643
621,418 (g).............................................. 6.900% 06/25/19 629,707
1,080,850 ................................................. 7.000% 09/01/17 1,098,446
1,997,973 ................................................. 7.000% 12/01/28 2,036,694
1,403,759 ................................................. 8.000% 07/15/16 1,470,368
7,346 ................................................. 8.000% 05/01/22 7,629
------------------
16,631,208
------------------
Government National Mortgage Association (GNMA) (4.1%)
504,519 ................................................. 6.500% 10/15/28 509,569
1,398,073 ................................................. 6.500% 11/15/28 1,412,067
990,000 ................................................. 7.000% 12/15/28 1,012,899
500,000 (c).............................................. 7.000% 01/01/29 511,567
590,000 ................................................. 7.500% 12/15/28 608,314
1,072,868 ................................................. 8.000% 05/20/22 1,111,738
2,269 ................................................. 8.500% 03/15/22 2,420
------------------
5,168,574
------------------
Veterans Administration (Vendee) (3.5%)
611,538 Vendee Mortgage Trust Participation Certificates
(b)............................................ 7.210% 02/15/25 634,504
1,609,418 Vendee Mortgage Trust Participation Certificates
(b)............................................ 7.793% 02/15/25 1,691,323
1,906,130 Vendee Mortgage Trust Participation Certificates
(b)............................................ 8.293% 12/15/26 2,041,277
------------------
4,367,104
------------------
Total U.S. government and agencies obligations (cost:
$30,873,742)...................................................... 31,538,915
------------------
CORPORATE OBLIGATIONS (.8%)
1,000,000 Security Capital Pacific Trust................... 7.500% 02/15/14 948,110
------------------
Total corporate obligations (cost: $990,445)........................ 948,110
------------------
OTHER MORTGAGE-BACKED SECURITIES (69.9%)
Asset Backed (1.9%)
721,022 Structured Mortgage Asset Residential Trust 144A
Issue (d)...................................... 8.240% 03/15/06 360,511
2,000,000 Team Fleet Financing 144A Issue (e).............. 7.800% 05/15/03 2,024,110
------------------
2,384,621
------------------
Collateralized Mortgage Obligations/Mortgage Revenue Bonds
(10.5%)
938,588 American Housing Trust........................... 8.125% 06/25/18 965,610
361,422 Black Diamond Mortgage Trust 144A Issue (e)...... 6.780% 01/29/13 362,551
3,000,000 California Housing Finance Agency................ 7.760% 08/01/25 3,150,690
1,290,000 California Housing Finance Agency................ 8.160% 02/01/28 1,354,500
1,777,544 Countrywide Funding.............................. 7.000% 06/25/24 1,680,757
330,099 First Union Residential.......................... 7.046% 09/25/26 318,060
827,240 First Union Residential.......................... 7.066% 09/25/26 838,729
998,909 Kidder Peabody Mortgage Asset Trust.............. 7.450% 10/01/18 999,007
</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>
$ 1,000,000 Lehman Brothers Grantor Trust.................... 7.000% 12/01/22 $ 1,007,500
1,000,000 Pennsylvania Housing Finance..................... 7.410% 10/01/17 1,031,691
1,357,600 Wyoming Community Development.................... 6.850% 06/01/10 1,353,249
------------------
13,062,344
------------------
Commercial Mortgage-Backed Securities (11.8%)
-- Asset Securitization Corporation (d)(f).......... 9.076% 08/13/29 2,077,829
-- Asset Securitization Corporation 144A Issue
(d)(f)......................................... 9.076% 08/13/29 1,484,244
2,000,000 Covenant Retirement Community.................... 6.250% 12/01/22 1,998,090
1,840,030 Huntoon Page (d)................................. 7.000% 06/01/21 1,846,930
2,695,190 New York Dorm Authority (d)...................... 7.750% 04/01/28 2,870,378
1,761,950 Pleasant Hill Revenue Bond....................... 7.950% 09/20/15 1,932,027
2,314,693 Rosewood Care Center............................. 7.250% 11/01/13 2,420,451
------------------
14,629,949
------------------
Whole Loan Mortgage-Backed (45.7%)
3,021,648 Banco Hipotecario Nacional 144A Issue (d)(h)..... 7.916% 07/25/09 2,417,318
84,719 Bank of America Corporation...................... 8.375% 05/01/07 84,406
3,450,124 Bear Stearns Mortgage Securities, Inc............ 6.750% 04/30/30 3,411,656
1,309,296 Bear Stearns Mortgage Secutities, Inc............ 8.000% 11/25/29 1,335,221
3,055,040 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.615% 03/28/25 3,016,852
1,563,252 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.615% 03/28/25 1,535,895
1,368,043 Chase Mortgage Finance Corporation 144A Issue
(e)............................................ 6.958% 08/28/24 1,338,117
2,850,000 CSFB Finance Company 144A Issue (d).............. 7.092% 11/15/05 2,679,000
1,007,937 CSFB Mortgage Securities 144A Issue (e).......... 7.771% 05/30/23 1,002,897
159,053 First Bank Systems............................... 3.190% 03/25/08 142,142
1,722,000 GE Capital Mortgage Services..................... 6.350% 10/25/28 1,716,989
1,110,809 GE Capital Mortgage Services 144A Issue (e)...... 6.000% 10/25/08 1,089,981
1,153,772 GE Capital Mortgage Services 144A Issue (e)...... 6.000% 12/25/08 1,146,169
2,725,889 GE Capital Mortgage Services 144A Issue (e)...... 6.500% 04/25/24 2,671,998
1,312,430 International Capital Markets 144A Issue (d)..... 8.250% 09/01/15 1,332,116
1,686,224 Lehman Structured Securities 144A Issue (e)...... 6.616% 04/28/24 1,658,296
2,620,402 Metropolitan Asset Funding 144A Issue (e)........ 6.980% 05/20/12 2,622,040
2,265,723 Metropolitan Asset Funding 144A Issue (e)........ 7.130% 06/20/12 2,285,548
3,183,451 Morgan Stanley Capital 144A Issue (e)............ 6.975% 06/29/26 3,127,741
2,060,235 Morgan Stanley Capital 144A Issue (e)............ 6.975% 06/29/26 1,948,853
654,836 Paine Webber Mortgage Acceptance Corporation 144A
Issue (d)...................................... 8.125% 07/25/09 668,752
1,692,800 Paine Webber Mortgage Acceptance Corporation..... 6.750% 01/25/24 1,663,227
1,768,256 Prudential Home Mortgage......................... 6.050% 04/25/24 1,749,990
3,015,066 Prudential Home Mortgage......................... 6.500% 10/25/23 2,993,327
400,000 Prudential Home Mortgage......................... 8.000% 09/25/22 411,610
351,831 Prudential Home Mortgage 144A Issue (e).......... 7.500% 08/25/07 352,171
1,000,000 Prudential Home Mortgage 144A Issue (e).......... 7.900% 04/28/22 1,002,890
1,675,159 Prudential Home Mortgage 144A Issue (e).......... 7.900% 04/28/22 1,675,159
1,500,000 Prudential Home Mortgage 144A Issue (e).......... 7.900% 04/28/22 1,500,000
2,000,000 Prudential Home Mortgage 144A Issue (e).......... 7.900% 04/28/22 2,000,000
1,470,660 Prudential Home Mortgage 144A Issue (d).......... 8.000% 06/25/22 1,644,382
642,062 Prudential Home Mortgage Securities.............. 6.500% 04/25/26 623,904
1,200,000 Prudential Home Mortgage Securities.............. 7.000% 06/25/23 1,223,008
919,430 Prudential Home Mortgage Securities 144A Issue
(e)............................................ 7.250% 09/25/25 892,638
5,475 Travelers Mortgage Services, Inc................. 10.000% 06/25/01 5,456
1,804,752 Tyron Mortgage Funding........................... 7.750% 12/20/09 1,838,687
------------------
56,808,436
------------------
Total other mortgage-backed securities (cost: $86,372,961).......... 86,885,350
------------------
Total long-term debt securities (cost: $118,237,148)................ 119,372,375
------------------
</TABLE>
See accompanying notes to investments in securities.
53
<PAGE>
MORTGAGE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- -------
PREFERRED STOCK (1.6%)
<C> <S> <C> <C> <C>
FINANCIAL (1.6%)
Real Estate Investment Trust (1.6%)
39,000 Duke Realty Investment, Inc. 7.99%............... $ 1,971,938
------------------
Total preferred stock
(cost: $1,958,361)................................... 1,971,938
------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (2.4%)
$ 3,022,113 Temporary Investment Fund--Temp Fund Portfolio, current rate
4.990%............................................................ 3,022,113
------------
Total short-term securities (cost: $3,022,113)...................... 3,022,113
------------
Total investments in securities (cost: $123,217,622) (i)............ $124,366,426
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Represents a debt security with a weighted average net pass-through rate
which varies based on the pool of underlying collateral. The rate disclosed
is the rate in effect at December 31, 1998.
(c) At December 31, 1998 the total cost of investments issued on a when-issued
or forward commitment basis is $758,828.
(d) Represents ownership in an illiquid security. (See note 7 to the financial
statements.) Information concerning the illiquid securities held at December
31, 1998 including acquisition date and cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ------------
<S> <C> <C>
Asset Securitization Corporation....... 11/05/98 $ 2,146,959
Asset Securitization Corporation 144A Various 1,465,053
Issue*...............................
Banco Hipotecario Nacional 144A Various 2,692,854
Issue*...............................
CSFB Finance Company 144A Issue*....... 06/28/95 2,837,644
Huntoon Page........................... 10/28/97 1,846,485
International Capital Markets 144A Various 1,275,739
Issue*...............................
New York Dorm Authority................ 05/02/98 2,777,117
Paine Webber Mortgage Acceptance 06/17/98 670,395
Corporation 144A Issue*..............
Prudential Home Mortgage 144A Issue*... 10/01/97 1,606,903
Structured Mortgage Asset Residential 03/03/97 721,022
Trust 144A Issue*....................
------------
$ 18,040,171
------------
------------
*A 144A Issue represents a security which has not been registered
with the Securities and Exchange Commission under the Securities
Act of 1933.
</TABLE>
(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 it's
accrual period, but accrues additional principal at specific rates. The
interest rate disclosed represents current yield based upon estimated future
cash flows.
(h) At December 31, 1998 the Portfolio held 1.9% of net assets in foreign
securities.
(i) At December 31, 1998 the cost of securities for federal income tax purposes
was $123,305,066. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $2,173,145
Gross unrealized depreciation.......... (1,111,785)
----------
Net unrealized appreciation............ $1,061,360
----------
----------
</TABLE>
54
<PAGE>
INDEX 500 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (99.8%)
BASIC MATERIALS (3.4%)
Agriculture Products (.2%)
31,513 Archer Daniels Midland Company................... $ 541,630
12,700 Pioneer Hi-Bred International.................... 342,900
----------------
884,530
----------------
Aluminum (.2%)
11,875 Alcan Aluminum Limited (c)....................... 321,367
9,800 Aluminum Company of America...................... 730,712
3,800 Reynolds Metals Company.......................... 200,212
----------------
1,252,291
----------------
Chemicals (1.8%)
12,200 Air Products and Chemicals, Inc.................. 488,000
3,900 BF Goodrich Company.............................. 139,912
11,900 Dow Chemical Company............................. 1,082,156
60,700 DuPont........................................... 3,220,894
4,225 Eastman Chemical Company......................... 189,069
6,800 Ecolab, Inc...................................... 246,075
7,587 Engelhard Corporation............................ 147,946
1,900 FMC Corporation (b).............................. 106,400
3,200 Great Lakes Chemical Corporation................. 128,000
5,000 Hercules, Inc.................................... 136,875
5,700 International Flavors & Fragrances............... 251,869
31,700 Monsanto Company................................. 1,505,750
6,900 Morton International, Inc........................ 169,050
3,400 Nalco Chemical Company........................... 105,400
9,400 PPG Industries, Inc.............................. 547,550
8,300 Praxair, Inc..................................... 292,575
9,400 Rohm and Haas Company............................ 283,175
5,300 Sigma-Aldrich.................................... 155,687
7,100 Union Carbide Corporation........................ 301,750
4,000 W.R. Grace & Company (b)......................... 62,750
----------------
9,560,883
----------------
Iron and Steel (.1%)
10,362 Allegheny Teledyne, Inc.......................... 211,773
6,800 Bethlehem Steel Corporation (b).................. 56,950
4,600 Nucor Corporation................................ 198,950
4,540 USX--U.S. Steel Group, Inc....................... 104,420
5,000 Worthington Industries........................... 62,500
----------------
634,593
----------------
Mining (.2%)
2,000 Asarco, Inc...................................... 30,125
19,600 Barrick Gold Corporation (c)..................... 382,200
12,000 Battle Mountain Gold............................. 49,500
4,900 Cyprus Amax Minerals Company..................... 49,000
9,400 Freeport-McMoran Copper.......................... 98,112
11,100 Homestake Mining Company......................... 101,981
8,700 Inco, Ltd. (c)................................... 91,894
8,722 Newmont Mining Corporation....................... 157,541
3,100 Phelps Dodge Corporation......................... 157,712
13,200 Placer Dome, Inc. (c)............................ 151,800
----------------
1,269,865
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
BASIC MATERIALS--CONTINUED
Paper and Forest (.9%)
2,800 Bemis Company, Inc............................... $ 106,225
2,966 Boise Cascade Corporation........................ 91,946
5,000 Champion International Corporation............... 202,500
11,600 Fort James Corporation........................... 464,000
4,900 Georgia-Pacific Corporation...................... 286,956
16,200 International Paper Company...................... 725,962
28,800 Kimberly Clark Corporation....................... 1,569,600
5,700 Louisiana-Pacific Corporation.................... 104,381
5,500 Mead Corporation................................. 161,219
1,500 Potlatch Corporation............................. 55,312
3,000 Temple-Inland, Inc............................... 177,937
3,650 Union Camp Corporation........................... 246,375
5,300 Westvaco Corporation............................. 142,106
10,500 Weyerhaeuser Company............................. 533,531
5,800 Willamette Industries, Inc....................... 194,300
----------------
5,062,350
----------------
CAPITAL GOODS (7.7%)
Aerospace/Defense (1.5%)
29,600 Allied-Signal, Inc............................... 1,311,650
6,700 General Dynamics Corporation..................... 392,787
10,419 Lockheed Martin Corporation...................... 883,010
3,600 Northrop Grumman Corporation..................... 263,250
17,900 Raytheon Company (c)............................. 953,175
10,100 Rockwell International Corporation............... 490,481
8,600 Textron, Inc..................................... 653,062
53,230 The Boeing Company............................... 1,736,629
12,000 United Technologies Corporation.................. 1,305,000
----------------
7,989,044
----------------
Containers--Metal/Glass (.1%)
1,600 Ball Corporation................................. 73,200
6,600 Crown Cork & Seal Company, Inc................... 203,362
8,200 Owens-Illinois, Inc. (b)......................... 251,125
----------------
527,687
----------------
Electrical Equipment (4.1%)
11,500 AMP, Inc......................................... 598,719
37,700 CBS Corporation.................................. 1,234,675
6,100 Cooper Industries, Inc........................... 290,894
23,300 Emerson Electric Company......................... 1,457,706
173,400 General Electric Company......................... 17,697,637
6,700 Honeywell, Inc................................... 504,594
4,300 Raychem Corporation.............................. 138,944
8,700 Thermo Electron Corporation (b).................. 147,356
----------------
22,070,525
----------------
Engineering/Construction (.2%)
19,200 Caterpillar, Inc................................. 883,200
4,200 Fluor Corporation................................ 178,762
2,100 Foster Wheeler Corporation....................... 27,694
2,500 Harnischfeger Industries, Inc.................... 25,469
----------------
1,115,125
----------------
</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>
Machinery (.3%)
1,300 Briggs & Stratton Corporation.................... $ 64,837
3,900 Case Corporation................................. 85,069
2,000 Cincinnati Milacron, Inc......................... 38,500
12,900 Deere & Company.................................. 427,312
11,800 Dover Corporation................................ 432,175
8,700 Ingersoll Rand Company........................... 408,356
500 NACCO Industries, Inc............................ 46,000
----------------
1,502,249
----------------
Manufacturing (.9%)
1,500 Aeroquip-Vickers, Inc............................ 44,906
6,200 Avery Dennison Corporation....................... 279,387
13,200 Illinois Tool Works, Inc......................... 765,600
4,400 Johnson Controls................................. 259,600
2,300 Millipore Corporation............................ 65,406
2,100 National Service Industries, Inc................. 79,800
6,499 Pall Corporation................................. 164,506
5,800 Parker Hannifin Corporation...................... 189,950
4,412 Sealed Air (b)................................... 225,288
8,900 Tenneco, Inc..................................... 303,156
34,898 Tyco International, Ltd.......................... 2,632,618
----------------
5,010,217
----------------
Metal Fabrication ( -- )
3,200 Timken Company................................... 60,400
----------------
Office Equipment (.2%)
7,100 Ikon Office Solutions............................ 60,794
4,600 Moore Corporation Limited (c).................... 50,600
14,500 Pitney Bowes, Inc................................ 957,906
----------------
1,069,300
----------------
Trucks and Parts (.1%)
2,000 Cummins Engine Company, Inc...................... 71,000
3,450 Navistar International Corporation (b)........... 98,325
4,180 Paccar, Inc...................................... 171,902
----------------
341,227
----------------
Waste Management (.3%)
9,200 Browning-Ferris Industries....................... 261,625
30,130 Waste Management, Inc............................ 1,404,811
----------------
1,666,436
----------------
COMMUNICATION SERVICES (8.6%)
Cellular (.5%)
30,200 Airtouch Communications (b)...................... 2,178,175
15,000 Nextel Communications, Inc. (b).................. 354,375
----------------
2,532,550
----------------
Telecommunication (1.7%)
94,575 MCI Worldcom, Inc. (b)........................... 6,785,756
22,700 Sprint Corporation............................... 1,909,637
22,250 Sprint Corporation (b)........................... 514,532
----------------
9,209,925
----------------
Telephone (6.4%)
14,500 Alltel Corporation............................... 867,281
59,100 Ameritech Corporation............................ 3,745,462
96,135 AT&T Corporation................................. 7,234,159
82,818 Bell Atlantic Corporation........................ 4,705,098
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMUNICATION SERVICES--CONTINUED
105,600 Bellsouth Corporation............................ $ 5,266,800
9,000 Frontier Corporation............................. 306,000
51,800 GTE Corporation.................................. 3,493,262
32,100 MediaOne, Inc. (b)............................... 1,508,700
104,112 SBC Communications, Inc.......................... 5,583,006
26,403 U.S. West Communications Group................... 1,706,296
----------------
34,416,064
----------------
CONSUMER CYCLICAL (9.8%)
Auto (1.6%)
4,100 Cooper Tire & Rubber Company..................... 83,794
8,659 Dana Corporation................................. 353,952
7,100 Danaher Corporation.............................. 385,619
3,800 Eaton Corporation................................ 268,612
64,800 Ford Motor Company............................... 3,802,950
35,500 General Motors Corporation....................... 2,540,469
8,200 Goodyear Tire & Rubber Company................... 413,587
6,200 ITT Industries................................... 246,450
3,150 Snap-On, Inc..................................... 109,659
6,400 TRW, Inc......................................... 359,600
----------------
8,564,692
----------------
Building Materials (.2%)
2,100 Armstrong World Industries, Inc.................. 126,656
3,200 Centex Corporation............................... 144,200
3,550 Crane Company.................................... 107,166
1,800 Fleetwood Enterprises, Inc....................... 62,550
2,000 Kaufman & Broad Home Corporation................. 57,500
17,900 Masco Corporation................................ 514,625
2,900 Owens Corning.................................... 102,769
2,200 Pulte Corporation................................ 61,187
----------------
1,176,653
----------------
Distribution Durables (.1%)
9,450 Genuine Parts Company............................ 315,984
----------------
Hardware and Tools (.1%)
4,900 Black & Decker................................... 274,706
4,600 The Stanley Works................................ 127,650
----------------
402,356
----------------
Houseware (.2%)
12,200 Corning, Inc..................................... 549,000
4,800 Maytag Corporation............................... 298,800
4,000 Whirlpool Corporation............................ 221,500
----------------
1,069,300
----------------
Leisure (.1%)
5,200 Brunswick Corporation............................ 128,700
6,900 Hasbro, Inc...................................... 249,262
15,441 Mattel, Inc...................................... 352,248
----------------
730,210
----------------
Lodging--Hotel (.1%)
13,700 Hilton Hotels Corporation........................ 262,012
13,200 Marriott International........................... 382,800
----------------
644,812
----------------
Photography/Imagery (.6%)
17,000 Eastman Kodak Company............................ 1,224,000
2,300 Polaroid Corporation............................. 42,981
</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>
17,300 Xerox Corporation................................ $ 2,041,400
----------------
3,308,381
----------------
Publishing (.6%)
4,900 Dow Jones & Company, Inc......................... 235,812
15,000 Gannett Company.................................. 992,812
4,200 Knight Ridder, Inc............................... 214,725
5,300 McGraw-Hill Companies, Inc....................... 539,937
2,800 Meredith Corporation............................. 106,050
9,900 New York Times Company........................... 343,406
7,300 R.R. Donnelly & Sons Company..................... 319,831
4,500 The Times Mirror Company......................... 252,000
6,400 Tribune Company.................................. 422,400
----------------
3,426,973
----------------
Retail (5.2%)
3,700 American Greetings Corporation................... 151,931
8,100 Autozone, Inc. (b)............................... 266,794
5,300 Circuit City Stores, Inc......................... 264,669
5,700 Consolidated Stores Corporation (b).............. 115,069
11,400 Costco Companies, Inc. (b)....................... 822,937
23,200 Dayton Hudson Corporation........................ 1,258,600
5,800 Dillards, Inc.................................... 164,575
9,650 Dollar General Corporation....................... 227,981
11,100 Federated Department Stores (b).................. 483,544
8,200 Fred Meyer, Inc. (b)............................. 494,050
31,300 Gap, Inc......................................... 1,760,625
3,700 Harcourt General, Inc............................ 196,794
78,472 Home Depot, Inc.................................. 4,801,505
13,300 JC Penny Company................................. 623,437
1,800 Jostens, Inc..................................... 47,137
25,800 K Mart Corporation (b)........................... 395,062
8,300 Kohl's Corporation (b)........................... 509,931
18,500 Lowe's Companies, Inc............................ 946,969
12,100 May Department Stores Company.................... 730,537
15,200 Nike, Inc........................................ 616,550
7,800 Nordstrom, Inc................................... 270,562
3,300 Pep Boys......................................... 51,769
3,000 Reebok International, Ltd. (b)................... 44,625
20,700 Sears, Roebuck & Company......................... 879,750
9,100 Sherwin-Williams Company......................... 267,312
15,100 Staples, Inc. (b)................................ 659,681
5,300 Tandy Corporation................................ 218,294
11,900 The Limited, Inc................................. 346,587
16,700 TJX Companies, Inc............................... 484,300
13,750 Toys R Us (b).................................... 232,031
118,700 Wal-Mart Stores.................................. 9,666,631
----------------
28,000,239
----------------
Service (.9%)
45,082 Cendant Corporation (b).......................... 859,376
7,800 Equifax, Inc..................................... 266,662
5,300 H & R Block, Inc................................. 238,500
5,300 Harrah's Entertainment (b)....................... 83,144
7,200 Interpublic Group Company........................ 574,200
9,400 Mirage Resorts, Inc. (b)......................... 140,412
9,000 Omnicom Group.................................... 522,000
13,500 Service Corporation International................ 513,844
27,500 Tele-Communications, Inc. (b).................... 1,521,094
----------------
4,719,232
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Textiles (.1%)
3,700 Fruit of the Loom (b)............................ $ 51,106
3,400 Liz Claiborne, Inc............................... 107,312
1,800 Russell Corporation.............................. 36,562
900 Springs Industries, Inc.......................... 37,294
6,400 V.F. Corporation................................. 300,000
----------------
532,274
----------------
CONSUMER STAPLES (14.0%)
Beverage (2.9%)
1,900 Adolph Coors Company............................. 107,231
25,400 Anheuser-Busch................................... 1,666,875
3,600 Brown-Forman, Inc................................ 272,475
130,900 Coca-Cola Company................................ 8,753,937
21,300 Coca-Cola Enterprises............................ 761,475
78,500 Pepsico, Inc..................................... 3,213,594
18,300 Seagram Company, Ltd. (c)........................ 695,400
----------------
15,470,987
----------------
Broadcasting (.3%)
13,100 Clear Channel Communications (b)................. 713,950
19,500 Comcast Corporation.............................. 1,144,406
----------------
1,858,356
----------------
Entertainment (1.9%)
29,800 Carnival Corporation............................. 1,430,400
3,800 King World Productions, Inc. (b)................. 111,862
65,200 Time Warner, Inc................................. 4,046,475
18,830 Viacom (b)....................................... 1,393,420
108,846 Walt Disney Company.............................. 3,265,380
----------------
10,247,537
----------------
Food (2.2%)
15,200 Best Foods....................................... 809,400
23,600 Campbell Soup Company............................ 1,298,000
25,750 Conagra, Inc..................................... 811,125
8,200 General Mills, Inc............................... 637,550
7,600 Hershey Foods Corporation........................ 472,625
19,100 HJ Heinz Company................................. 1,081,537
21,400 Kellogg Company.................................. 730,275
7,200 Quaker Oats Company.............................. 428,400
16,400 Ralston-Purina Group............................. 530,950
49,200 Sara Lee Corporation............................. 1,386,825
34,700 Unilever N.V. (c)................................ 2,877,931
6,100 Wm. Wrigley Jr. Company.......................... 546,331
----------------
11,610,949
----------------
Food & Health (.1%)
17,800 SYSCO Corporation................................ 488,387
----------------
Household Products (2.6%)
5,500 Clorox Company................................... 642,469
15,600 Colgate Palmolive Company........................ 1,448,850
60,100 Gillette Company................................. 2,903,581
21,300 Minnesota Mining and Manufacturing............... 1,514,962
8,500 Newell Company................................... 350,625
71,668 Procter & Gamble Company......................... 6,544,184
7,900 Rubbermaid, Inc.................................. 248,356
3,000 Tupperware Corporation........................... 49,312
----------------
13,702,339
----------------
</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>
Personal Care (.1%)
2,900 Alberto-Culver Company........................... $ 77,394
13,900 Avon Products.................................... 615,075
----------------
692,469
----------------
Restaurants (.7%)
7,300 Darden Restaurants, Inc.......................... 131,400
37,000 McDonalds Corporation............................ 2,835,125
8,030 Tricon Global Restaurants (b).................... 402,504
6,700 Wendy's International, Inc....................... 146,144
----------------
3,515,173
----------------
Retail (1.4%)
13,000 Albertson's, Inc................................. 827,937
14,500 American Stores Company.......................... 535,594
20,500 CVS Corporation.................................. 1,127,500
13,500 Kroger Company (b)............................... 816,750
2,000 Longs Drug Stores Corporation.................... 75,000
13,600 Rite Aid Corporation............................. 674,050
26,100 Safeway, Inc. (b)................................ 1,590,469
6,300 Super Valu, Inc.................................. 176,400
1,900 The Great Atlantic & Pacific..................... 56,287
26,200 Walgreen Company................................. 1,534,337
7,800 Winn-Dixie Stores, Inc........................... 350,025
----------------
7,764,349
----------------
Service (.3%)
15,800 Automatic Data Processing, Inc................... 1,266,962
3,800 Ceridian Corporation (b)......................... 265,287
4,300 Deluxe Corporation............................... 157,219
----------------
1,689,468
----------------
Tobacco (1.5%)
9,100 Fortune Brands, Inc.............................. 287,787
129,100 Philip Morris Companies, Inc..................... 6,906,850
17,000 RJR Nabisco Holdings Corporation................. 504,687
9,700 UST, Inc......................................... 338,287
----------------
8,037,611
----------------
ENERGY (5.6%)
Oil (4.7%)
4,800 Amerada Hess Corporation......................... 238,800
35,500 Chevron Corporation.............................. 2,944,281
129,500 Exxon Corporation................................ 9,469,688
42,200 Mobil Corporation................................ 3,676,675
18,500 Occidental Petroleum Corporation................. 312,188
2,500 PennzEnergy Company.............................. 77,344
2,500 Pennzoil-Quaker State Company (b)................ 36,875
13,600 Phillips Petroleum Company....................... 579,700
113,900 Royal Dutch Petroleum (c)........................ 5,452,963
28,300 Texaco, Inc...................................... 1,496,363
12,700 Unocal Corporation............................... 370,681
16,200 USX--Marathon Group.............................. 488,025
----------------
25,143,583
----------------
Oil & Gas (.9%)
6,300 Anadarko Petroleum Corporation................... 194,513
5,200 Apache Corporation............................... 131,625
4,100 Ashland, Inc..................................... 198,338
17,000 Atlantic Richfield Company....................... 1,109,250
16,700 Baker Hughes, Inc................................ 295,381
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
ENERGY--CONTINUED
9,380 Burlington Resources, Inc........................ $ 335,921
1,200 Eastern Enterprises.............................. 52,500
23,100 Halliburton Company.............................. 684,338
2,600 Helmerich & Payne................................ 50,375
2,500 Kerr-McGee Corporation........................... 95,625
3,100 McDermott International, Inc..................... 76,531
5,600 Oryx Energy Company (b).......................... 75,250
4,400 Rowan Company (b)................................ 44,000
28,700 Schlumberger, Ltd................................ 1,323,788
4,900 Sunoco, Inc...................................... 176,706
13,100 Union Pacific Resources Group.................... 118,719
----------------
4,962,860
----------------
FINANCIAL (17.0%)
Auto Finance (.2%)
29,860 Fleet Financial Group, Inc....................... 1,334,369
----------------
Banks (6.8%)
15,500 Bank of Boston Corporation....................... 603,531
39,400 Bank of New York, Inc............................ 1,585,850
62,729 Bank One Corporation............................. 3,203,100
92,478 BankAmerica Corporation.......................... 5,560,213
5,100 Bankers Trust New York Corporation............... 435,731
15,100 BB&T Corporation................................. 608,719
46,068 Chase Manhattan Corporation...................... 3,135,503
8,150 Comerica......................................... 555,728
14,150 Fifth Third Bancorp.............................. 1,009,072
52,008 First Union Corporation.......................... 3,162,737
16,900 Firstar Corporation.............................. 1,575,925
11,090 Huntington Bancshares............................ 333,393
9,400 J.P. Morgan & Company, Inc....................... 987,588
23,200 KeyCorp.......................................... 742,400
13,700 Mellon Bank Corporation.......................... 941,875
8,000 Mercantile Bancorporation........................ 369,000
17,400 National City Corporation........................ 1,261,500
5,800 Northern Trust Corporation....................... 506,413
15,800 PNC Bank Corporation............................. 855,175
11,300 Regions Financial Corporation.................... 455,531
5,600 Republic New York Corporation.................... 255,150
8,500 State Street Corporation......................... 591,281
9,200 Summit Bancorp................................... 401,925
11,000 Suntrust Banks, Inc.............................. 841,500
13,800 Synovus Financial Corporation.................... 336,375
39,084 U.S. Bancorp..................................... 1,387,482
6,700 Union Planters Corporation....................... 303,594
10,900 Wachovia Corporation............................. 953,069
86,160 Wells Fargo Company.............................. 3,441,015
----------------
36,400,375
----------------
Commercial Finance (.1%)
8,960 Dun & Bradstreet Corporation..................... 282,800
----------------
Consumer Finance (1.3%)
24,100 American Express Company......................... 2,464,225
36,578 Associates First Capital Corporation............. 1,549,993
3,500 Capital One Financial Corporation................ 402,500
25,893 Household International, Inc..................... 1,026,005
39,631 MBNA Corporation................................. 988,286
8,800 SILM Holding Corporation......................... 422,400
----------------
6,853,409
----------------
</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>
Finance--Diversified (1.7%)
13,256 American General Corporation..................... $ 1,033,968
21,150 Charles Schwab Corporation....................... 1,188,366
35,800 Federal Home Loan Mortgage Corporation........... 2,306,863
55,700 Federal National Mortgage Association............ 4,121,800
5,900 MGIC Investment Corporation...................... 234,894
----------------
8,885,891
----------------
Insurance (4.3%)
7,655 Aetna, Inc....................................... 601,874
43,614 Allstate Corporation............................. 1,684,591
56,280 American International Group..................... 5,438,055
8,900 Aon Corporation.................................. 492,838
8,700 Chubb Corporation................................ 564,413
11,200 Cigna Corporation................................ 865,900
8,800 Cincinnati Financial Corporation................. 322,300
121,414 CitiGroup, Inc................................... 6,009,993
16,482 Conseco, Inc..................................... 503,731
12,300 ITT Hartford Group............................... 674,963
5,600 Jefferson-Pilot Corporation...................... 420,000
5,300 Lincoln National Corporation..................... 433,606
6,000 Loews Corporation................................ 589,500
13,450 Marsh & McLennen................................. 785,984
5,300 MBIA, Inc........................................ 347,481
3,900 Progressive Corporation.......................... 660,563
7,100 Provident Companies, Inc......................... 294,650
7,500 Providian Financial.............................. 562,500
7,400 Safeco Corporation............................... 317,738
12,417 St. Paul Companies, Inc.......................... 431,503
7,400 Torchmark Corporation............................ 261,313
3,300 Transamerica Corporation......................... 381,150
7,300 Unum Corporation................................. 426,138
----------------
23,070,784
----------------
Investment Bankers/Brokers (2.2%)
6,000 Bear Stearns Companies........................... 224,250
13,300 Franklin Resources, Inc.......................... 425,600
6,200 Lehman Brothers Holdings, Inc.................... 273,188
18,300 Merrill Lynch & Co., Inc......................... 1,221,525
30,830 Morgan Stanley Dean Witter....................... 2,188,930
59,400 S&P 500 Depositary Receipt....................... 7,306,200
----------------
11,639,693
----------------
Savings and Loans (.3%)
3,100 Golden West Financial Corporation................ 284,231
31,155 Washington Mutual, Inc........................... 1,189,732
----------------
1,473,963
----------------
Public Finance (.1%)
5,800 Countrywide Credit Industries.................... 291,088
----------------
HEALTH CARE (12.0%)
Biotechnology (.3%)
13,400 Amgen, Inc. (b).................................. 1,401,138
----------------
Drugs (7.7%)
70,300 American Home Products Corporation............... 3,958,769
53,400 Bristol-Myers Squibb Company..................... 7,145,588
10,550 Cardinal Health, Inc............................. 800,481
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
HEALTH CARE--CONTINUED
59,000 Eli Lilly & Company.............................. $ 5,243,625
63,200 Merck & Co., Inc................................. 9,333,850
69,400 Pfizer, Inc...................................... 8,705,363
26,755 Pharmacia & Upjohn............................... 1,515,002
79,500 Schering Plough Corporation...................... 4,392,375
----------------
41,095,053
----------------
Health Care--Diversified (2.6%)
82,200 Abbott Laboratories.............................. 4,027,800
3,400 Allergan, Inc.................................... 220,150
22,200 HealthSouth Rehabilitation Company (b)........... 342,713
71,900 Johnson & Johnson................................ 6,030,613
44,300 Warner-Lambert Company........................... 3,330,806
----------------
13,952,082
----------------
Hospital Management (.2%)
33,906 Columbia/HCA Healthcare Corporation.............. 839,174
16,200 Tenet Healthcare Corporation (b)................. 425,250
----------------
1,264,424
----------------
Managed Care (.1%)
5,700 HCR Manor Care (b)............................... 167,438
8,700 Humana (b)....................................... 154,969
10,300 United Health Care............................... 443,544
----------------
765,951
----------------
Medical Products/Supplies (1.1%)
4,500 Alza Corporation (b)............................. 235,125
3,000 Bausch & Lomb, Inc............................... 180,000
15,000 Baxter International, Inc........................ 964,688
13,100 Becton Dickinson & Company....................... 559,206
5,900 Biomet, Inc...................................... 237,475
20,800 Boston Scientific Corporation (b)................ 557,700
3,000 C.R. Bard........................................ 148,500
3,000 Fresenius Medical Care........................... 90
8,000 Guidant Corporation.............................. 882,000
3,800 Mallinckrodt, Inc................................ 117,088
24,700 Medtronic, Inc................................... 1,833,975
4,400 St. Jude Medical, Inc. (b)....................... 121,825
----------------
5,837,672
----------------
TECHNOLOGY (17.8%)
18,900 3 Com (b)........................................ 846,956
3,500 Adobe Systems, Inc............................... 163,625
7,500 Advanced Micro Devices, Inc. (b)................. 217,031
19,900 America Online, Inc.............................. 2,880,525
4,400 Andrew Corporation (b)........................... 72,600
7,000 Apple Computer, Inc. (b)......................... 286,563
19,300 Applied Materials, Inc. (b)...................... 823,869
11,400 Ascend Communications (b)........................ 749,550
2,500 Autodesk, Inc.................................... 106,719
10,800 BMC Software, Inc. (b)........................... 481,275
8,600 Cabletron Systems, Inc. (b)...................... 72,025
82,950 Cisco Systems, Inc. (b).......................... 7,698,797
88,964 Compaq Computer Corporation...................... 3,730,928
29,587 Computer Associates International................ 1,261,146
8,300 Computer Sciences Corporation.................... 534,831
9,100 Compuware Corporation (b)........................ 710,938
2,600 Data General (b)................................. 42,738
</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>
67,700 Dell Computer Corporation (b).................... $ 4,954,794
2,400 EG&G, Inc........................................ 66,750
25,900 Electronic Data Systems Corporation.............. 1,301,475
26,300 EMC Corporation (b).............................. 2,235,500
23,500 First Data Corporation........................... 744,656
8,200 Gateway 2000 (b)................................. 419,738
7,900 General Instrument Corporation (b)............... 268,106
4,200 Harris Corporation............................... 153,825
22,700 HBO & Company.................................... 651,206
55,800 Hewlett-Packard Company.......................... 3,811,838
8,800 IMS Health, Inc.................................. 663,850
89,200 Intel............................................ 10,575,775
50,200 International Business Machines.................. 9,274,450
4,500 KLA-Tencor Corporation (b)....................... 195,188
7,400 LSI Logic Corporation (b)........................ 119,325
70,300 Lucent Technologies, Inc......................... 7,733,000
11,200 Micron Technology, Inc. (b)...................... 566,300
130,800 Microsoft Corporation (b)........................ 18,140,325
31,500 Motorola, Inc.................................... 1,923,469
8,600 National Semiconductor Corporation (b)........... 116,100
34,400 Northern Telecom Limited (c)..................... 1,724,300
18,500 Novell, Inc. (b)................................. 335,313
51,175 Oracle Corporation (b)........................... 2,206,922
14,300 Parametric Technology Corporation (b)............ 234,163
8,600 Paychex, Inc..................................... 442,363
12,100 Peoplesoft, Inc. (b)............................. 229,144
2,600 Perkin-Elmer Corporation......................... 253,663
3,100 Scientific-Atlanta, Inc.......................... 70,719
12,800 Seagate Technology, Inc. (b)..................... 387,200
1,400 Shared Medical Systems........................... 69,825
9,900 Silicon Graphics, Inc. (b)....................... 127,463
19,900 Sun Microsystems, Inc. (b)....................... 1,703,938
2,400 Tektronix, Inc................................... 72,150
10,200 Tellabs, Inc. (b)................................ 699,338
20,600 Texas Instruments, Inc........................... 1,762,588
3,000 Thomas & Betts Corporation....................... 129,938
13,300 Unisys Corporation (b)........................... 458,019
5,200 W.W. Grainger, Inc............................... 216,450
----------------
95,719,282
----------------
TRANSPORTATION (.9%)
Air Freight (.1%)
7,800 Federal Express Corporation (b).................. 694,200
----------------
Airlines (.3%)
9,600 AMR Corporation.................................. 570,000
8,000 Delta Air Lines, Inc............................. 416,000
17,650 Southwest Airlines Company....................... 396,022
4,900 U.S. Airways Group, Inc. (b)..................... 254,800
----------------
1,636,822
----------------
Railroads (.5%)
24,919 Burlington Northern Santa Fe..................... 841,016
11,500 CSX Corporation.................................. 477,250
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
TRANSPORTATION--CONTINUED
19,900 Norfolk Southern Corporation..................... $ 630,581
13,100 Union Pacific Corporation........................ 590,319
----------------
2,539,166
----------------
Transport Services ( -- )
17,300 Laidlaw, Inc. (c)................................ 174,081
----------------
Trucking ( -- )
3,800 Ryder System, Inc................................ 98,800
----------------
UTILITIES (3.0%)
Electric Companies (2.4%)
9,300 AES Corporation (b).............................. 440,588
7,200 Ameren Corporation............................... 307,350
10,100 American Electric Power Company.................. 475,331
7,800 Baltimore Gas & Electric Company................. 240,825
8,000 Carolina Power & Light Company................... 376,500
11,100 Central & Southwest Corporation.................. 304,556
8,332 Cinergy.......................................... 286,413
12,300 Consolidated Edison, Inc......................... 650,363
10,350 Dominion Resources, Inc.......................... 483,863
7,600 DTE Energy Company............................... 325,850
19,050 Duke Energy Corporation.......................... 1,220,391
18,600 Edison International............................. 518,475
13,000 Entergy Corporation.............................. 404,625
12,500 FirstEnergy Corporation.......................... 407,031
9,500 FPL Group, Inc................................... 585,438
6,800 GPU, Inc......................................... 300,475
15,622 Houston Industries, Inc.......................... 501,857
5,800 New Century Energies, Inc........................ 282,750
9,800 Niagra Mohawk Power Corporation (b).............. 158,025
8,000 Northern States Power Company.................... 222,000
20,100 Pacific Gas & Electric Company................... 633,150
15,700 Pacificorp....................................... 330,681
11,800 Peco Energy Company.............................. 491,175
8,000 PP&L Resources, Inc.............................. 223,000
12,150 Public Service Enterprise Group.................. 486,000
36,700 Southern Company................................. 1,066,594
14,662 Texas Utilities Company.......................... 684,532
11,400 Unicom Corporation............................... 439,613
----------------
12,847,451
----------------
Natural Gas (.6%)
11,200 Coastal Corporation.............................. 391,300
4,450 Columbia Gas System, Inc......................... 256,988
5,100 Consolidated Natural Gas Company................. 275,400
17,300 Enron Corporation................................ 987,181
2,500 Nicor, Inc....................................... 105,625
1,700 Oneok, Inc....................................... 61,413
1,900 Peoples Energy Corporation....................... 75,763
12,666 Sempra Energy.................................... 321,400
5,700 Sonat, Inc....................................... 154,256
22,300 The Williams Company............................. 695,481
----------------
3,324,807
----------------
535,833,736
Total common stock (cost: $303,718,359).......................
----------------
</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%)
$ 847,626 Temporary Investment Fund--Temp Fund Portfolio, current rate
4.990%........................................................ $ 847,626
----------------
Total short-term securities (cost: $847,626).................... 847,626
----------------
Total investments in securities (cost: $304,565,985) (d)........ $ 536,681,362
----------------
----------------
</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 at December 31,
1998.
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $307,269,070. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $241,628,940
Gross unrealized depreciation.......... (12,216,648)
------------
Net unrealized appreciation............ $229,412,292
------------
------------
</TABLE>
61
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (96.5%)
CAPITAL GOODS (9.1%)
Electrical Equipment (2.1%)
256,600 CBS Corporation.................................. $ 8,403,650
----------------
Manufacturing (3.7%)
191,600 Tyco International, Ltd.......................... 14,453,825
----------------
Waste Management (3.3%)
275,200 Waste Management, Inc............................ 12,831,200
----------------
COMMUNICATION SERVICES (6.7%)
Cellular (3.1%)
169,900 Airtouch Communications (b)...................... 12,254,037
----------------
Telecommunication (3.6%)
194,700 MCI Worldcom, Inc. (b)........................... 13,969,725
----------------
CONSUMER CYCLICAL (12.7%)
Building Materials (2.0%)
280,400 Masco Corporation................................ 8,061,500
----------------
Retail (7.6%)
247,599 Home Depot, Inc.................................. 15,149,964
209,500 Office Depot, Inc. (b)........................... 7,738,406
83,800 Wal-Mart Stores.................................. 6,824,462
----------------
29,712,832
----------------
Service (1.9%)
398,600 Cendant Corporation (b).......................... 7,598,313
----------------
Textiles (1.2%)
75,900 Tommy Hilfiger Corporation (b)................... 4,554,000
----------------
CONSUMER STAPLES (7.7%)
Broadcasting (0.6%)
35,600 Jacor Communications, Inc. (b)................... 2,291,750
----------------
Entertainment (2.8%)
231,200 Carnival Corporation............................. 11,097,600
----------------
Restaurants (4.3%)
204,600 Papa John's International, Inc. (b).............. 9,027,975
141,800 Starbucks Corporation (b)........................ 7,958,525
----------------
16,986,500
----------------
FINANCIAL (11.3%)
Banks (4.5%)
114,352 BankAmerica Corporation.......................... 6,875,440
275,100 Wells Fargo Company.............................. 10,986,806
----------------
17,862,246
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
Consumer Finance (2.1%)
326,650 MBNA Corporation................................. $ 8,145,834
----------------
Finance--Diversified (4.7%)
178,000 Federal National Mortgage Association............ 13,172,000
132,900 MGIC Investment Corporation...................... 5,291,081
----------------
18,463,081
----------------
HEALTH CARE (11.1%)
Drugs (5.3%)
228,200 Bergen Brunswig Corporation...................... 7,958,475
96,150 Cardinal Health, Inc............................. 7,295,381
45,000 Pfizer, Inc...................................... 5,644,688
----------------
20,898,544
----------------
Health Care--Diversified (1.8%)
92,000 Warner-Lambert Company........................... 6,917,250
----------------
Special Services (4.0%)
303,600 Omnicare, Inc.................................... 10,550,100
180,300 Steris Corporation (b)........................... 5,127,281
----------------
15,677,381
----------------
TECHNOLOGY (34.6%)
363,400 ADC Telecommunications, Inc. (b)................. 12,628,150
263,100 BMC Software, Inc. (b)........................... 11,724,394
237,700 Cadence Design Systems, Inc. (b)................. 7,071,575
115,975 Cisco Systems, Inc. (b).......................... 10,763,930
124,700 Compuware Corporation (b)........................ 9,742,188
175,600 Fiserv (b)....................................... 9,032,425
468,100 HBO & Company.................................... 13,428,619
155,300 HNC Software, Inc. (b)........................... 6,279,944
40,900 Microsoft Corporation (b)........................ 5,672,319
220,000 Network Associates (b)........................... 14,575,000
362,000 Sterling Commerce, Inc. (b)...................... 16,290,000
158,400 Synopsys, Inc. (b)............................... 8,593,200
147,500 Tellabs, Inc. (b)................................ 10,112,969
----------------
135,914,713
----------------
UTILITIES (3.3%)
Electric Companies (3.3%)
271,200 AES Corporation (b).............................. 12,848,100
----------------
378,942,081
Total common stock (cost: $249,113,058).......................
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.5%)
$7,782,525 Temporary Investment Fund--Temp Fund Portfolio, current rate
4.990%............................................................. 7,782,525
5,970,000 U.S. Treasury Bond............................... 4.518% 02/04/99 5,947,791
------------
Total short-term securities (cost: $13,727,506)...................... 13,730,316
------------
Total investments in securities (cost: $262,840,564) (c)............. $392,672,397
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $263,769,709. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $131,545,284
Gross unrealized depreciation.......... (2,642,596)
------------
Net unrealized appreciation............ $128,902,688
------------
------------
</TABLE>
62
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
COMMON STOCK (86.6%)
ARGENTINA (3.4%)
Banks (1.8%)
108,000 Argentaria Bancaria ADR.......................... $ 5,562,000
Chemicals (1.6%)
176,400 YPF Sociedad Anonima ADR......................... 4,928,175
----------------
10,490,175
----------------
AUSTRALIA (4.8%)
Air Freight (.9%)
752,100 Mayne Nickless, Ltd.............................. 2,786,067
Airlines (.6%)
85,000 Qantas Airways ADR 144A Issue (c)................ 1,736,116
Banks (.5%)
102,304 National Australia Bank.......................... 1,540,949
Broadcasting (.8%)
1,203,360 Cable & Wireless Optus........................... 2,527,262
Houseware (.1%)
86,848 BTR PLC.......................................... 170,165
Insurance (.9%)
1,840,000 Reinsurance Australia Corporation................ 2,817,683
Manufacturing (.9%)
1,315,401 Pioneer International, Ltd....................... 2,778,676
Retail (.1%)
345,500 David Jones...................................... 380,786
----------------
14,737,704
----------------
AUSTRIA (.9%)
Electrical Equipment (.4%)
8,400 Evn.............................................. 1,187,846
Real Estate (.2%)
12,980 Bohler-Uddeholm 144A Issue (c)................... 603,394
Service (.3%)
10,850 Va Technologie 144A Issue (c).................... 939,066
----------------
2,730,306
----------------
BELGIUM (.2%)
Mining (.2%)
20,000 Union Miniere.................................... 760,160
----------------
BERMUDA (1.4%)
Insurance (1.4%)
59,400 Excel Limited.................................... 4,455,000
----------------
BRAZIL (.5%)
Oil & Gas (.5%)
137,900 Petrobras........................................ 1,563,676
----------------
CANADA (1.9%)
Banks (.4%)
50,000 Imperial Bank Canada............................. 1,242,236
Chemicals (.6%)
212,200 Agrium, Inc...................................... 1,843,487
Food (.1%)
37,690 Sobeys Canada, Inc............................... 418,915
Oil & Gas (.7%)
470,100 Ranger Oil, Ltd.................................. 2,086,069
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
CANADA--CONTINUED
Transport Services (.1%)
38,600 Laidlaw, Inc..................................... $ 388,412
----------------
5,979,119
----------------
CHILE (.4%)
Telecommunication (.4%)
59,500 Cia Telecom Chile ADR............................ 1,230,906
----------------
FINLAND (2.8%)
Banks (2.2%)
1,085,000 Merita Bank...................................... 6,887,802
Paper and Forest (.3%)
107,500 Metsa Serla B.................................... 879,532
Retail (.3%)
85,000 Amer Group Limited (b)........................... 883,130
----------------
8,650,464
----------------
FRANCE (9.3%)
Aluminum (.3%)
7,000 Pechiney......................................... 228,292
40,894 Pechiney ADR..................................... 659,416
2,000 Pechiney Certificate of Investment............... 72,553
Banks (2.1%)
17,800 Banque Nationale de Paris ADR.................... 1,463,850
61,300 Banque Nationale de Paris ADR 144A Issue (c)..... 5,050,164
Chemicals (3.1%)
122,325 Rhone-Polenc..................................... 6,286,865
27,862 Societe National Elf Aquitaine................... 3,216,436
Electrical Equipment (1.1%)
19,365 Alcatel Alsthom.................................. 2,367,029
4,837 Marine Wendel.................................... 950,821
Investment Bankers/Brokers (2.6%)
54,927 AXA.............................................. 7,950,619
Technology (.1%)
8,800 Alcatel ADR...................................... 215,050
----------------
28,461,095
----------------
GERMANY (2.3%)
Banks (1.6%)
82,050 Deutsche Bank.................................... 4,821,698
Chemicals (.7%)
49,400 Bayer............................................ 2,071,040
----------------
6,892,738
----------------
HONG KONG (6.7%)
Aerospace/Defense (.4%)
821,900 Hong Kong Aircraft Engineering................... 1,124,568
Airlines (1.3%)
674,000 Swire Pacific A.................................. 3,018,910
1,519,800 Swire Pacific B.................................. 1,010,310
Banks (1.2%)
145,414 HSBC Holdings.................................... 3,622,633
Electric Companies (.9%)
965,000 Hong Kong Electric Holdings...................... 2,927,224
Investment Bankers/Brokers (.2%)
113,000 Peregrine Investment Holdings (b)................ --
</TABLE>
See accompanying notes to investments in securities.
63
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
HONG KONG--CONTINUED
<C> <S> <C>
1,109,000 South China...................................... $ 569,023
Real Estate (.5%)
221,000 Hutchison Whampoa................................ 1,561,842
Restaurants (.3%)
3,201,000 Cafe de Coral Holdings........................... 1,001,978
Telecommunication (1.5%)
2,700,000 Hong Kong Telecom................................ 4,722,412
Textiles (.2%)
5,313,800 Yizheng Chem..................................... 486,995
Transport Services (.2%)
448,568 Jardine Strategic Holding........................ 650,424
----------------
20,696,319
----------------
INDONESIA (.2%)
Telecommunication (.2%)
62,600 Indosat ADS...................................... 762,937
----------------
ISRAEL (1.0%)
Drugs (1.0%)
78,700 Teva Pharmaceutical.............................. 3,202,106
----------------
ITALY (3.5%)
Auto (.7%)
639,760 Fiat SPA......................................... 2,223,130
Telecommunication (2.8%)
278,000 Sirti Italian.................................... 1,677,937
1,105,000 Telecom Italia SPA............................... 6,957,151
----------------
10,858,218
----------------
JAPAN (2.0%)
Drugs (1.1%)
105,000 Ono Pharmaceutical............................... 3,280,669
Electrical Equipment (.9%)
40,000 Sony Corporation................................. 2,913,790
Machinery ( -- )
90,000 Hitachi Zosen Company............................ 124,270
----------------
6,318,729
----------------
LUXEMBOURG (.7%)
Mining (.7%)
137,300 Minorco ADR...................................... 2,085,244
----------------
MEXICO (1.3%)
Electrical Equipment (.1%)
252,000 Vitro............................................ 379,273
Mining (.4%)
540,000 Grupo Mexico Series B............................ 1,270,909
Telecommunication (.8%)
53,610 Telefonos De Mexico ADR.......................... 2,610,137
----------------
4,260,319
----------------
NETHERLANDS (7.8%)
Building Materials ( -- )
16,520 European Vinyls Corporation International........ 130,930
Electrical Equipment (2.0%)
93,800 Philips Electronics.............................. 6,286,596
Insurance (3.8%)
96,208 Aegon............................................ 11,800,832
Investment Bankers/Brokers (1.9%)
94,686 Ing Groep........................................ 5,766,780
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
NETHERLANDS--CONTINUED
Retail (.1%)
16,703 Vendex........................................... $ 405,137
----------------
24,390,275
----------------
NEW ZEALAND (.7%)
Airlines (.2%)
481,000 Air New Zealand B................................ 753,657
Health Care -- Diversified (.5%)
1,654,000 Carter Holt Harvey............................... 1,478,416
----------------
2,232,073
----------------
NORWAY (1.9%)
Aluminum (.3%)
78,000 Elkem............................................ 934,292
Chemicals (1.3%)
575,580 Nycomed Amersham................................. 4,015,392
Oil & Gas (.3%)
98,000 Saga Petroleum................................... 896,515
----------------
5,846,199
----------------
PHILIPPINES (.5%)
Telecommunication (.5%)
54,000 Philippine Long Distance......................... 1,400,625
----------------
PORTUGAL (.9%)
Investment Bankers/Brokers (.9%)
85,560 Banco Portugues de Investimento.................. 2,898,516
----------------
SINGAPORE (.6%)
Air Freight (.2%)
78,000 Singapore Airlines............................... 572,173
Investment Bankers/Brokers (.4%)
509,739 Jardine Matheson................................. 1,315,127
----------------
1,887,300
----------------
SOUTH AFRICA (.3%)
Metal Fabrication (.3%)
78,879 Anglo American Platinum.......................... 1,081,562
----------------
SPAIN (6.3%)
Banks (.7%)
45,800 Banco de Andalucia............................... 2,077,955
Electric Companies (2.4%)
110,000 Endesa........................................... 2,913,837
250,000 Iberdrola........................................ 4,676,160
Oil & Gas (1.0%)
57,000 Repsol........................................... 3,039,874
Telecommunication (2.2%)
150,000 Telefonica Bonus Rights.......................... 133,152
150,000 Telefonica De Esp................................ 6,668,151
----------------
19,509,129
----------------
SWEDEN (5.0%)
Aluminum (.4%)
79,800 Granges.......................................... 1,149,828
Auto (1.7%)
35,000 Autoliv, Inc..................................... 1,254,310
178,500 Volvo............................................ 4,088,793
Banks (1.3%)
95,500 Svenska Handlesbanken A.......................... 4,022,291
Electrical Equipment (1.0%)
104,500 Electrolux....................................... 1,795,289
</TABLE>
See accompanying notes to investments in securities.
64
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
SWEDEN--CONTINUED
<C> <S> <C>
122,000 Stora Kopperberg B............................... $ 1,352,217
Publishing (.6%)
114,500 Esselte.......................................... 1,833,128
----------------
15,495,856
----------------
SWITZERLAND (5.7%)
Banks (1.0%)
18,525 Credit Suisse Group.............................. 2,900,433
370 Societe Genernale................................ 362,402
Electric Companies (.6%)
115,900 Gener............................................ 1,854,400
Electrical Equipment (.7%)
1,730 Asea Brown Boveri................................ 2,028,328
Investment Bankers/Brokers (2.1%)
9,000 Zurich Allied.................................... 6,665,453
Telecommunication (1.3%)
9,585 Swisscom......................................... 4,013,527
----------------
17,824,543
----------------
THAILAND (.9%)
Banks (.9%)
1,416,500 Bangkok Bank..................................... 2,934,738
----------------
UNITED KINGDOM (10.6%)
Air Freight (.6%)
309,782 BG PLC........................................... 1,952,548
Banks (.8%)
118,943 Barclays......................................... 2,561,910
Chemicals (1.0%)
1,775,000 Medeva........................................... 3,126,974
Construction (.2%)
257,100 Hepworth......................................... 685,799
Electric Companies (.6%)
208,775 National Power................................... 1,797,332
1,644,478 Albert Fisher Group.............................. 150,318
Engineering/Construction (.1%)
190,368 Fairview Holdings................................ 278,418
Food (1.7%)
380,736 Hillsdown Holdings............................... 480,903
387,833 Somerfield....................................... 2,581,471
322,900 Tate & Lyle...................................... 1,797,765
190,368 Terranova Foods.................................. 351,186
Houseware (.3%)
690,000 Elementis........................................ 957,537
Iron and Steel (1.1%)
2,225,400 British Steel.................................... 3,291,684
<CAPTION>
MARKET
SHARES VALUE(a)
- ----------- ----------------
<C> <S> <C>
UNITED KINGDOM--CONTINUED
Machinery (1.3%)
1,945,450 BTR PLC.......................................... $ 4,009,237
Manufacturing (.5%)
344,000 Rolls-Royce...................................... 1,423,567
Natural Gas (.5%)
821,100 Centrica PLC (b)................................. 1,651,207
Telecommunication (1.3%)
260,000 British Telecom.................................. 3,912,747
Water Utilities (.6%)
104,762 Thames Water..................................... 2,002,265
----------------
33,012,868
----------------
UNITED STATES (1.3%)
Auto (1.3%)
109,900 Autoliv, Inc..................................... 4,086,906
----------------
VENEZUELA (.8%)
Broadcasting (.8%)
130,900 Cia Anonima Telefonos............................ 2,331,656
----------------
269,067,461
Total common stock (cost: $226,104,930)........................
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (3.4%)
ARGENTINA (.5%)
Telephone (.5%)
61,330 Telefonica de Argentina ADR...................... 1,713,407
----------------
BRAZIL (1.0%)
Telecommunication (1.0%)
41,300 Telebras ADR..................................... 3,001,994
----------------
GERMANY (.5%)
Telecommunication (.5%)
46,192 Moebel Walther................................... 1,564,188
----------------
UNITED KINGDOM (.8%)
Water Utilities (.8%)
168,500 Hyder PLC........................................ 2,121,302
137,700 Hyder PLC........................................ 272,333
----------------
2,393,635
----------------
UNITED STATES (.6%)
Telecommunication (.6%)
42,300 SBC Communications, Inc.......................... 1,882,350
----------------
10,555,574
Total preferred stock (cost: $10,029,174)......................
----------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ----------- ----------------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (9.8%)
$16,336,566 Norwest Advantage Cash Investment Fund, current rate 5.059%........ 16,336,566
10,248,000 U.S. Treasury Bill............................... 3.850% 1/21/99 10,223,109
4,045,000 U.S. Treasury Bill............................... 4.390% 2/18/99 4,021,768
----------------
Total short-term securities (cost: $30,577,661).................... 30,581,443
----------------
Total investments in securities (cost: $266,711,765)(d)............ $ 310,204,478
----------------
----------------
</TABLE>
See accompanying notes to investments in securities.
65
<PAGE>
INTERNATIONAL STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
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) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 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
Bohler-Uddeholm 144A................... Various 824,910
Qantas Airways Limited ADR 144A........ Various 1,350,928
Va Technologie 144A.................... Various 1,026,767
-----------
$ 5,922,968
-----------
-----------
</TABLE>
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $271,789,398. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 76,976,786
Gross unrealized depreciation.......... (38,561,706)
------------
Net unrealized appreciation............ $ 38,415,080
------------
------------
</TABLE>
66
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
COMMON STOCK (96.1%)
BASIC MATERIALS (5.9%)
Agriculture Products (3.2%)
137,950 NCO Group, Inc. (b).............................. $ 6,207,750
----------------
Chemicals (2.7%)
181,078 Cambrex Corporation.............................. 4,345,872
24,770 The Valspar Corporation.......................... 924,231
----------------
5,270,103
----------------
CAPITAL GOODS (9.3%)
Engineering/Construction (5.3%)
54,700 Dycom Industries, Inc. (b)....................... 3,124,737
220,500 United Rentals, Inc. (b)......................... 7,304,062
----------------
10,428,799
----------------
Machinery (3.0%)
144,900 Kaydon Corporation............................... 5,805,056
----------------
Manufacturing (1.0%)
67,000 Graco, Inc....................................... 1,976,500
----------------
CONSUMER CYCLICAL (23.0%)
Auto (.9%)
67,100 CSK Auto Corporation (b)......................... 1,790,731
----------------
Building Materials (2.1%)
172,300 The Maxim Group, Inc. (b)........................ 4,135,200
----------------
Distribution Durables (2.2%)
187,500 MSC Industrial Direct Company (b)................ 4,242,187
----------------
Houseware (.2%)
12,800 Select Comfort Corporation (b)................... 338,400
----------------
Leisure (2.2%)
231,100 American Skiing Corporation (b).................. 1,776,581
99,310 National R V Holdings, Inc. (b).................. 2,557,232
----------------
4,333,813
----------------
Retail (2.0%)
41,800 Abercrombie & Fitch Company (b).................. 2,957,350
15,800 Kohls Corporation (b)............................ 970,712
----------------
3,928,062
----------------
Service (9.0%)
249,100 Acxiom Corporation (b)........................... 7,722,100
157,800 Copart, Inc. (b)................................. 5,108,775
346,700 Fairfield Communities, Inc. (b).................. 3,835,369
35,900 Sterigenics International, Inc. (b).............. 933,400
----------------
17,599,644
----------------
Special Services (1.4%)
79,000 Curative Health Services (b)..................... 2,646,500
----------------
Textiles (3.0%)
160,900 Tropical Sportswear International (b)............ 5,772,287
----------------
CONSUMER STAPLES (1.7%)
Broadcasting (1.7%)
144,600 United Video Satellite Group (b)................. 3,416,175
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
ENERGY (1.4%)
Oil (.7%)
190,400 Newpark Resources, Inc. (b)...................... $ 1,297,100
----------------
Oil & Gas (.7%)
53,700 J. Ray McDermott Holdings, Inc. (b).............. 1,312,294
----------------
FINANCIAL (3.3%)
Banks (1.1%)
87,000 GBC Bancorp...................................... 2,240,250
----------------
Commercial Finance (.2%)
9,800 Health Care Financial Partners (b)............... 390,775
----------------
Insurance (2.0%)
36,400 Reinsurance Group of America, Inc................ 2,548,000
97,900 Scottish Life & Annuity Holdings (b)............. 1,346,125
----------------
3,894,125
----------------
HEALTH CARE (16.1%)
Biotechnology (1.9%)
124,000 Pharmaceutical Product Development, Inc. (b)..... 3,727,750
----------------
Drugs (.3%)
104,400 Cygnus, Inc. (b)................................. 508,950
----------------
Hospital Management (3.2%)
120,333 Sunrise Assisted Living, Inc. (b)................ 6,242,274
----------------
Managed Care (1.1%)
195,084 Concentra Managed Care, Inc. (b)................. 2,084,960
----------------
Medical Products/Supplies (9.6%)
48,900 Amerisource Health Corporation (b)............... 3,178,500
192,500 Hanger Orthopedic Group (b)...................... 4,331,250
86,100 Patterson Dental Company (b)..................... 3,745,350
133,100 Sybron International Corporation (b)............. 3,618,656
133,566 Total Renal Care Holdings, Inc. (b).............. 3,948,552
----------------
18,822,308
----------------
TECHNOLOGY (31.7%)
3,700 America Online, Inc. (b)......................... 535,575
23,076 Computron Software (b)........................... 21,634
263,900 DII Group, Inc. (b).............................. 6,152,169
55,200 DuPont Photomasks, Inc. (b)...................... 2,342,550
10,500 Excite, Inc. (b)................................. 441,656
159,600 Gartner Group, Inc. (b).......................... 3,391,500
76,400 Global Imaging Systems, Inc. (b)................. 1,852,700
76,000 HNC Software, Inc. (b)........................... 3,073,250
87,300 Infinium Software, Inc. (b)...................... 545,625
9,300 Infoseek Corporation (b)......................... 459,188
51,400 Level One Communications, Inc. (b)............... 1,824,700
15,400 Lycos, Inc. (b).................................. 855,663
49,400 MAPICS, Inc. (b)................................. 815,100
178,050 Mastech Corporation (b).......................... 5,096,681
115,000 Maximus, Inc. (b)................................ 4,255,000
79,100 Orbotech, Ltd. (b)(c)............................ 3,747,363
61,600 Peapod, Inc. (b)................................. 419,650
14,500 Sapient Corporation (b).......................... 812,000
141,800 Saville Systems PLC ADR (b)(c)................... 2,694,200
147,600 Secure Computing Corporation (b)................. 2,813,625
</TABLE>
See accompanying notes to investments in securities.
67
<PAGE>
SMALL COMPANY PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
136,600 Softworks, Inc. (b).............................. $ 964,738
59,100 Terayon Communication Systems (b)................ 2,186,700
85,500 The Bisys Group, Inc. (b)........................ 4,413,938
30,900 Uniphase Corporation (b)......................... 2,143,688
220,200 USWebb (b)....................................... 5,807,775
52,500 Xylan Corporation (b)............................ 922,031
2,700 Yahoo!, Inc. (b)................................. 634,669
94,500 Zebra Technologies Corporation (b)............... 2,716,875
----------------
61,940,243
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
TRANSPORTATION (3.7%)
Air Freight (1.5%)
121,600 Eagle USA Airfreight, Inc. (b)................... $ 2,979,200
----------------
Airlines (2.2%)
133,800 Skywest, Inc..................................... 4,373,588
----------------
Total common stock
(cost: $137,599,267).......................................... 187,705,024
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.4%)
$ 3,631,266 Temporary Investment Fund--Temp Fund Portfolio, current rate 4.990%... 3,631,266
2,615,000 Ciesco LP........................................ 5.451% 01/06/99 2,612,779
1,485,000 U.S. Treasury Bill............................... 3.933% 01/07/99 1,484,596
2,900,000 U.S. Treasury Bill............................... 4.412% 03/11/99 2,876,980
------------
Total short-term securities (cost: $10,604,086)....................... 10,605,621
------------
Total investments in securities (cost: $148,203,353) (d).............. $198,310,645
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Portfolio held 3.3% of net assets in foreign securities as of December
31, 1998.
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $151,365,549. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $55,734,459
Gross unrealized depreciation.......... (8,789,363)
-----------
Net unrealized appreciation............ $46,945,096
-----------
-----------
</TABLE>
68
<PAGE>
MATURING GOVERNMENT BOND 2002 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (98.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (98.7%)
$1,085,000 Federal Home Loan Mortgage Corporation (b)....... 4.835% 08/15/02 $ 910,849
500,000 Financial Corporation Strip (b).................. 7.040% 06/27/02 420,744
360,000 Financial Corporation Strip (b).................. 6.362% 09/07/02 300,391
525,000 FNMA Strip (b)................................... 7.600% 02/01/02 451,494
425,000 FNMA Strip (b)................................... 6.367% 08/01/03 339,048
182,000 Israel Government Trust Certificates (b)......... 7.030% 05/15/02 154,461
325,000 Israel Government Trust Certificates (b)......... 5.946% 05/15/02 275,824
250,000 Israel Government Trust Certificates (b)......... 5.530% 11/15/02 208,312
1,150,000 Tennessee Valley Authority Strip (b)............. 7.400% 04/15/03 927,669
790,000 U.S. Treasury Strip (b).......................... 6.706% 08/15/02 667,897
2,450,000 U.S. Treasury Strip (b).......................... 5.676% 02/15/03 2,022,963
100,000 U.S. Treasury Principal Strip (b)................ 6.278% 02/15/03 82,536
----------------
Total long-term debt securities (cost: $6,470,611)................. 6,762,188
----------------
SHORT-TERM SECURITIES (1.3%)
91,969 Trust for Federal Securities--Federal Trust Fund, current rate
4.780%........................................................... 91,969
----------------
Total short-term securities (cost: $91,969)........................ 91,969
----------------
Total investments in securities (cost: $6,562,580) (c)............. $ 6,854,157
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $6,568,453. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $288,743
Gross unrealized depreciation.......... (3,039)
--------
Net unrealized appreciation............ $285,704
--------
--------
</TABLE>
69
<PAGE>
MATURING GOVERNMENT BOND 2006 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(a)
- ---------- ----------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES (98.7%)
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (98.7%)
$ 501,000 Financial Corporation Strip (b).................. 5.090% 11/11/06 $ 336,336
921,000 Financial Corporation Strip (b).................. 7.647% 09/07/07 588,647
810,000 FNMA Strip (b)................................... 7.620% 08/01/05 580,307
553,000 Israel Government Trust Certificate (b).......... 7.440% 11/15/05 393,260
1,000,000 Israel State Aid (b)............................. 6.578% 11/15/06 680,319
1,000,000 Resolution Funding Corporation Strip (b)......... 7.461% 07/15/07 655,929
3,785,000 U.S. Treasury Strip (b).......................... 5.949% 11/15/06 2,612,820
1,375,000 U.S. Treasury Strip (b).......................... 5.534% 02/15/07 929,815
----------------
Total long-term debt securities (cost: $6,037,225)................ 6,777,433
----------------
SHORT-TERM SECURITIES (1.3%)
88,896 Trust for Federal Securities--Federal Trust Fund, current rate
4.780%.......................................................... 88,896
----------------
Total short-term securities (cost: $88,896)....................... 88,896
----------------
Total investments in securities (cost: $6,126,121) (c)............ $ 6,866,329
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $6,143,374. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $730,697
Gross unrealized depreciation.......... (7,742)
--------
Net unrealized appreciation............ $722,955
--------
--------
</TABLE>
70
<PAGE>
MATURING GOVERNMENT BOND 2010 PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 3, 1999
(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%)
$ 412,000 Financial Corporation Strip (b).................. 5.490% 11/02/10 $ 213,247
945,000 Financial Corporation Strip (b).................. 7.920% 08/08/11 464,533
500,000 FNMA Strip (b)................................... 7.700% 02/12/10 273,429
950,000 FNMA Strip (b)................................... 5.695% 09/23/10 496,925
132,000 Israel Government Trust Certificate (b).......... 7.660% 05/15/10 71,417
515,000 Israel State Aid (b)............................. 8.264% 03/15/10 284,223
1,100,000 Israel State Aid (b)............................. 6.850% 08/15/11 553,464
350,000 Resolution Funding Corporation Strip (b)......... 7.590% 04/15/11 180,796
524,000 Turkey Government Trust Certificate (b).......... 6.687% 11/15/10 274,675
2,615,000 U.S. Treasury Strip (b).......................... 5.610% 05/15/10 1,457,729
1,975,000 U.S. Treasury Strip (b).......................... 6.266% 02/15/11 1,050,461
575,000 U.S. Treasury Strip (b).......................... 6.930% 08/15/11 296,504
----------------
Total long-term debt securities (cost: $4,923,165)................ $ 5,617,403
----------------
SHORT-TERM SECURITIES (.5%)
30,809 Trust for Federal Securities--Federal Trust Fund, current rate
4.780%.......................................................... 30,809
----------------
Total short-term securities (cost: $30,809)....................... 30,809
----------------
Total investments in securities (cost: $4,953,974) (c)............ $ 5,648,212
----------------
----------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) For zero coupon issues (strips) the interest rate disclosed is the effective
yield at the date of acquisition.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $4,970,012. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $684,458
Gross unrealized depreciation.......... (6,258)
--------
Net unrealized appreciation............ $678,200
--------
--------
</TABLE>
71
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(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 (8.8%)
Aluminum (1.5%)
60,380 Reynolds Metals Company.......................... $ 3,181,271
----------------
Chemicals (3.6%)
35,370 E.I. DuPont De Nemours & Company................. 1,876,821
149,550 Morton International, Inc........................ 3,663,975
74,240 Sigma-Aldrich.................................... 2,180,800
----------------
7,721,596
----------------
Paper and Forest (3.7%)
122,255 Fort James Corporation........................... 4,890,200
59,000 Louisianna-Pacific Corporation................... 1,080,437
67,550 Mead Corporation................................. 1,980,059
----------------
7,950,696
----------------
CAPITAL GOODS (4.9%)
Containers--Metal/Glass (.2%)
4,780 Crown Cork & Seal Company, Inc................... 147,284
7,600 Owens-Illinois, Inc. (b)......................... 232,750
----------------
380,034
----------------
Electrical Equipment (4.7%)
164,890 Diebold.......................................... 5,884,512
128,250 Raychem Corporation.............................. 4,144,078
----------------
10,028,590
----------------
COMMUNICATION SERVICES (11.9%)
Telecommunication (1.6%)
48,590 MCI Worldcom, Inc. (b)........................... 3,486,332
----------------
Telephone (10.3%)
75,515 AT&T Corporation................................. 5,682,504
63,090 Bell Atlantic Corporation........................ 3,584,301
81,250 Bellsouth Corporation............................ 4,052,344
33,455 GTE Corporation.................................. 2,256,122
120,510 SBC Communications, Inc.......................... 6,462,349
----------------
22,037,620
----------------
CONSUMER CYCLICAL (7.7%)
Auto (2.3%)
49,390 Ford Motor Company............................... 2,898,576
27,880 General Motors Corporation....................... 1,995,162
----------------
4,893,738
----------------
Publishing (.1%)
8,795 Reader's Digest Association...................... 221,524
----------------
Retail (2.2%)
47,795 CompUSA, Inc. (b)................................ 624,322
50,730 Consolidated Stores Corporation (b).............. 1,024,112
68,825 Federated Department Stores (b).................. 2,998,189
----------------
4,646,623
----------------
Service (3.1%)
28,000 Cendant Corporation (b).......................... 533,750
39,030 Equity Corporation International (b)............. 1,036,734
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
47,795 H & R Block, Inc................................. $ 2,150,775
52,895 Service Corporation International................ 2,013,316
17,845 Tele-Communications, Inc. (b).................... 987,052
----------------
6,721,627
----------------
CONSUMER STAPLES (8.7%)
Food (3.0%)
193,000 Hormel Foods Corporation......................... 6,320,750
----------------
Retail (1.4%)
283,580 Food Lion, Inc................................... 3,013,037
----------------
Service (1.7%)
97,660 Deluxe Corporation............................... 3,570,694
----------------
Tobacco (2.6%)
103,075 Philip Morris Companies, Inc..................... 5,514,512
----------------
ENERGY (10.8%)
Oil (9.9%)
40,465 Amoco Corporation................................ 2,443,074
27,560 Chevron Corporation.............................. 2,285,758
99,095 Exxon Corporation................................ 7,246,322
37,000 Mobil Corporation................................ 3,223,625
22,625 Texaco, Inc...................................... 1,196,297
173,335 YPF Sociedad Anonima (c)......................... 4,842,547
----------------
21,237,623
----------------
Oil & Gas (.9%)
12,585 Atlantic Richfield Company....................... 821,171
31,000 K N Energy, Inc.................................. 1,127,625
----------------
1,948,796
----------------
FINANCIAL (24.2%)
Auto Finance (.5%)
25,100 Fleet Financial Group, Inc....................... 1,121,656
----------------
Banks (8.3%)
61,830 Bank One Corporation............................. 3,157,194
74,080 BankAmerica Corporation.......................... 4,454,060
34,255 Chase Manhattan Corporation...................... 2,331,481
38,715 First Union Corporation.......................... 2,354,356
15,300 National City Corporation........................ 1,109,250
78,860 TCF Financial Corporation........................ 1,907,426
61,500 Wells Fargo Company.............................. 2,456,156
----------------
17,769,923
----------------
Consumer Finance (1.8%)
37,440 American Express Company......................... 3,828,240
----------------
Finance--Diversified (2.6%)
76,310 Federal National Mortgage Association............ 5,646,940
----------------
Insurance (6.8%)
32,180 Allstate Corporation............................. 1,242,953
25,490 American International Group..................... 2,462,971
158,190 Everest Reinsurance Holdings..................... 6,159,523
94,300 CitiGroup, Inc................................... 4,667,850
----------------
14,533,297
----------------
</TABLE>
See accompanying notes to investments in securities.
72
<PAGE>
VALUE STOCK PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
Investment Bankers/Brokers (.8%)
24,695 Morgan Stanley Dean Witter....................... $ 1,753,345
----------------
Real Estate Investment Trust (1.7%)
91,290 Equity Residential Properties.................... 3,691,539
----------------
Savings and Loans (1.7%)
262,805 Sovereign Bancorp, Inc........................... 3,744,971
----------------
TECHNOLOGY (4.6%)
54,000 Electronic Data Systems Corporation.............. 2,713,500
38,200 International Business Machines.................. 7,057,450
----------------
9,770,950
----------------
TRANSPORTATION (2.5%)
Air Freight (.2%)
9,080 Airborne Freight Corporation..................... 327,448
----------------
Railroads (1.0%)
49,545 Union Pacific Corporation........................ 2,232,622
----------------
Trucking (1.3%)
72,490 CNF Transportation............................... 2,722,906
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ---------- ----------------
<C> <S> <C>
UTILITIES (9.9%)
Electric Companies (8.4%)
46,200 AES Corporation (b).............................. $ 2,188,725
112,510 Dominion Resources, Inc.......................... 5,259,843
192,965 Teco Energy...................................... 5,439,201
108,530 Texas Utilities Company.......................... 5,066,994
----------------
17,954,763
----------------
Natural Gas (1.5%)
92,485 El Paso Energy Corporation....................... 3,219,634
----------------
Total common stock
(cost: $172,755,559).......................................... 201,193,297
----------------
</TABLE>
<TABLE>
<C> <S> <C>
PREFERRED STOCK (1.1%)
COMMUNICATION SERVICES (1.1%)
Telephone (1.1%)
35,210 Mediaone, Inc.................................... 2,341,465
----------------
Total preferred stock
(cost: $2,044,804)............................................ 2,341,465
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (4.5%)
$7,828,911 Temporary Investment Fund--Temp Fund Portfolio, current rate
4.990%............................................................ 7,828,911
430,000 U.S. Treasury Bill............................... 4.258% 01/07/99 429,883
1,350,000 U.S. Treasury Bill............................... 4.402% 03/11/99 1,339,284
------------
Total short-term securities (cost: $9,597,354)...................... 9,598,078
------------
Total investments in securities (cost: $184,397,717) (d)............ $213,132,840
------------
------------
</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 2.3% of net assets in foreign securities as of December
31, 1998.
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $184,522,367. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $34,677,528
Gross unrealized depreciation.......... (6,067,055)
-----------
Net unrealized appreciation............ $28,610,473
-----------
-----------
</TABLE>
73
<PAGE>
SMALL COMPANY VALUE PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (96.0%)
BASIC MATERIALS (5.6%)
Aluminum (.5%)
4,500 Century Aluminum Company......................... $ 42,469
----------------
Chemicals (3.8%)
5,700 A. Schulman, Inc................................. 129,319
1,800 Minerals Technologies, Inc....................... 73,687
6,900 Quest Diagnostics, Inc. (b)...................... 122,906
----------------
325,912
----------------
Paper and Forest (1.3%)
6,300 Wausau-Mosinee Paper Corporation................. 111,431
----------------
CAPITAL GOODS (9.5%)
Aerospace/Defense (.8%)
3,200 BE Aerospace, Inc. (b)........................... 67,200
----------------
Electrical Equipment (1.0%)
5,000 Watsco, Inc...................................... 83,750
----------------
Machinery (1.5%)
600 Tecumseh Products Company........................ 27,975
4,100 Westinghouse Air Brake Company................... 100,194
----------------
128,169
----------------
Manufacturing (3.0%)
4,600 A.O. Smith Corporation........................... 112,988
4,500 United Dominion Industries....................... 91,687
3,400 Walter Industries, Inc. (b)...................... 52,062
----------------
256,737
----------------
Metal Fabrication (3.2%)
6,000 Gibraltar Steel Corporation (b).................. 136,500
5,500 Tower Automotive, Inc. (b)....................... 137,156
----------------
273,656
----------------
CONSUMER CYCLICAL (14.3%)
Auto (2.0%)
800 Arvin Industries, Inc............................ 33,350
10,400 Intermet Corporation............................. 135,850
----------------
169,200
----------------
Building Materials (2.5%)
5,800 D.R. Horton, Inc................................. 133,400
2,800 Kaufman & Broad Home Corporation................. 80,500
----------------
213,900
----------------
Lodging--Hotel (.7%)
3,500 Meristar Hospitality Corporation................. 64,969
----------------
Publishing (1.3%)
7,300 Journal Register Company (b)..................... 109,500
----------------
Retail (3.5%)
3,400 Michaels Stores, Inc. (b)........................ 61,519
3,200 Shopko Stores (b)................................ 106,400
4,200 Zale Corporation (b)............................. 135,450
----------------
303,369
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Service (1.1%)
3,600 Equity Corporation International (b)............. $ 95,625
----------------
Textiles (3.2%)
1,700 American Woodmark Corporation.................... 58,225
1,800 Pillowtex Corporation............................ 48,150
4,800 Tropical Sportswear International Corporation
(b)............................................ 172,200
----------------
278,575
----------------
CONSUMER STAPLES (11.2%)
Beverage (2.0%)
900 Adolph Coors Company............................. 50,794
2,900 Robert Mondovi Corporation (b)................... 118,537
----------------
169,331
----------------
Food (2.4%)
6,000 Chiquita Brands International.................... 57,375
4,800 Earthgrains Company.............................. 148,500
----------------
205,875
----------------
Food & Health (2.5%)
6,700 International Multifoods Corporation............. 172,944
2,800 Merkert American Corporation (b)................. 42,350
----------------
215,294
----------------
Household Products (2.2%)
4,800 First Brands Corporation......................... 189,300
----------------
Restaurants (1.8%)
2,600 Bob Evans Farms.................................. 67,762
3,100 The Cheesecake Factory (b)....................... 91,935
----------------
159,697
----------------
Retail (.3%)
600 Longs Drug Stores Corporation.................... 22,500
----------------
ENERGY (3.9%)
Oil & Gas (3.9%)
3,600 Houston Exploration Company (b).................. 71,550
7,600 Oceaneering International, Inc. (b).............. 114,000
1,600 Seacor Smit, Inc. (b)............................ 79,100
5,900 Tesoro Petroleum Corporation (b)................. 71,537
----------------
336,187
----------------
FINANCIAL (31.3%)
Banks (7.1%)
2,300 BancorpSouth, Inc................................ 41,544
2,600 BankNorth Group, Inc............................. 97,825
5,750 Commercial Federal Corporation................... 133,328
1,900 Corus Bankshares, Inc............................ 61,275
8,300 Peoples Heritage Financial Group, Inc............ 166,000
6,200 Republic Bancorp, Inc............................ 84,475
1,300 UST Corporation.................................. 30,631
----------------
615,078
----------------
Finance--Diversified (1.4%)
5,100 Avis Rent A Car (b).............................. 123,356
----------------
</TABLE>
See accompanying notes to investments in securities.
74
<PAGE>
SMALL COMPANY VALUE PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
Insurance (7.1%)
4,200 Amerin (b)....................................... $ 99,225
5,600 Amerus Life Holdings............................. 125,300
1,800 Delphi Financial Group (b)....................... 94,388
1,800 Landamerica Financial Group...................... 100,463
600 NAC Re Corporation............................... 28,163
500 Reinsurance Group of America, Inc................ 35,000
4,075 RLI Corporation.................................. 135,494
----------------
618,033
----------------
Real Estate Investment Trust (13.6%)
3,100 Apartment Investment & Management Company........ 115,281
3,400 Camden Property Trust............................ 88,400
3,700 First Industrial Realty Trust.................... 99,206
1,800 Franchise Finance Corporation of America......... 43,200
5,800 Glenborough Realty Trust, Inc.................... 118,175
3,600 Kilroy Realty.................................... 82,800
6,500 Pacific Gulf Properties, Inc..................... 130,406
3,900 Pan Pacific Retail Properties.................... 77,756
3,300 Parkway Properties............................... 103,125
4,500 Prentiss Properties Trust........................ 100,406
3,000 Reckson Associates Realty Corporation............ 66,563
2,900 Regency Realty Corporation....................... 64,525
9,600 Sunstone Hotel Investors......................... 90,600
----------------
1,180,443
----------------
Savings and Loans (2.1%)
12,480 Sovereign Bancorp, Inc........................... 177,840
----------------
HEALTH CARE (1.6%)
Drugs (.2%)
900 Roberts Pharmaceutical Corporation (b)........... 19,575
----------------
Medical Products/Supplies (1.4%)
3,800 Conmed Corporation (b)........................... $ 125,400
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
TECHNOLOGY (4.4%)
Technology (4.4%)
10,300 Anicom, Inc. (b)................................. 94,631
6,200 Infinium Software, Inc. (b)...................... 38,750
4,400 Norstan, Inc. (b)................................ 78,100
2,500 SMART Modular Technologies, Inc. (b)............. 69,375
3,900 The Learning Company, Inc. (b)................... 101,156
----------------
382,012
----------------
TRANSPORTATION (3.2%)
Airlines (.5%)
1,800 Midwest Express Holdings (b)..................... 47,363
----------------
Railroads (1.1%)
6,500 U.S. Xpress Enterprises (b)...................... 97,500
----------------
Transport Services (1.6%)
5,100 Swift Transportation Company (b)................. 142,960
----------------
UTILITIES (11.0%)
Electric Companies (6.5%)
3,100 Minnesota Power, Inc............................. 136,400
3,300 Northwestern Corporation......................... 87,244
5,000 Sierra Pacific Resources......................... 190,000
4,200 WPS Resources Corporation........................ 148,050
----------------
561,694
----------------
Natural Gas (4.5%)
1,400 Atmos Energy Corporation......................... 45,150
5,200 Piedmont Natural Gas Company..................... 187,850
7,000 Wicor, Inc....................................... 152,688
----------------
385,688
----------------
Total common stock
(cost: $8,065,379).......................................... 8,299,588
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (6.9%)
$277,219 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
4.990%............................................................. 277,219
5,000 U.S. Treasury Bill............................... 3.663% 01/07/99 4,999
315,000 U.S. Treasury Bill............................... 4.384% 03/11/99 312,499
-----------
Total short-term securities (cost: $594,596)......................... 594,717
-----------
Total investments in securities (cost: $8,659,975) (c)............... $ 8,894,305
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $8,786,879. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $826,458
Gross unrealized depreciation.......... (719,032)
--------
Net unrealized appreciation............ $107,426
--------
--------
</TABLE>
75
<PAGE>
GLOBAL BOND PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(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 (96.1%)
CANADA (1.7%)
Government (1.7%)
500,000 Quebec Province (U.S. Dollar).................... 7.000% 01/30/07 $ 539,150
----------------
DENMARK (4.4%)
Government (4.4%)
4,300,000 Denmark (Danish Kroner).......................... 7.000% 12/15/04 779,935
1,000,000 Denmark (Danish Kroner).......................... 7.000% 11/10/24 201,198
210,000 Denmark (Danish Kroner).......................... 7.000% 11/10/24 42,252
1,743,000 Denmark (Danish Kroner).......................... 8.000% 03/15/06 338,004
----------------
1,361,389
----------------
GERMANY (4.1%)
Government (4.1%)
1,000,000 Deutschland Republic (Deutsch Mark).............. 6.500% 07/04/27 748,675
800,000 Germany (Deutsch Mark)........................... 6.000% 09/15/03 532,834
----------------
1,281,509
----------------
GREECE (7.6%)
Government (7.6%)
105,000,000 Hellenic Republic (Greek Drachma)................ 7.500% 05/20/13 395,773
100,000,000 Hellenic Republic (Greek Drachma)................ 8.700% 04/08/05 384,153
100,000,000 Hellenic Republic (Greek Drachma)................ 8.700% 04/08/05 385,372
164,000,000 Hellenic Republic (Greek Drachma)................ 8.900% 04/01/03 614,421
75,000,000 Hellenic Republic (Greek Drachma)................ 8.900% 03/21/04 286,803
82,000,000 Hellenic Republic (Greek Drachma)................ 9.200% 03/21/02 302,669
----------------
2,369,191
----------------
PHILIPPINES (.5%)
Government (.5%)
7,000,000 International Bank Reconstruction and Development
(Phillipine Peso).............................. 10.250% 04/11/02 152,103
----------------
SOUTH AFRICA (1.9%)
Government (1.9%)
3,823,000 South Africa (South Africa Rand)................. 12.500% 01/15/02 591,037
----------------
SWEDEN (5.1%)
Government (5.1%)
11,000,000 Sweden (Swedish Krona)........................... 6.500% 10/25/06 1,575,275
----------------
UNITED KINGDOM (11.7%)
Drugs (3.2%)
500,000 Glaxo (British Sterling Pound)................... 8.750% 12/01/05 1,002,563
Finance-Diversified (3.1%)
500,000 International Bank Reconstruction and Development
(British Sterling Pound)....................... 7.125% 07/03/07 967,659
Government (3.8%)
362,000 UK Treasury (British Sterling Pound)............. 9.750% 08/27/02 702,702
400,000 UK Treasury Strip (British Sterling Pound)(c).... 5.112% 12/07/05 468,460
Telecommunication (1.6%)
500,000 Cable and Wireless Communications (U.S.
Dollar)........................................ 6.625% 03/06/05 504,768
----------------
3,646,152
----------------
UNITED STATES (59.1%)
Auto Finance (1.6%)
500,000 Toyota Motor (U.S. Dollar)....................... 5.625% 11/13/03 502,050
Electric Companies (4.3%)
500,000 Consumer Energy 144A Issue (U.S. Dollar)(d)...... 6.375% 02/01/08 504,136
500,000 Enron Corporation (U.S. Dollar).................. 9.125% 04/01/03 552,715
250,000 Wisconsin Power & Light (U.S. Dollar)............ 7.000% 06/15/07 274,423
</TABLE>
See accompanying notes to investments in securities.
76
<PAGE>
GLOBAL BOND PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
PRINCIPAL(b) VALUE(a)
- -------------------- ----------------
UNITED STATES--CONTINUED
<C> <S> <C> <C> <C>
Entertainment (1.6%)
500,000 Time Warner 144A Issue (U.S. Dollar)(d).......... 6.100% 12/30/01 $ 507,734
U.S. Government and Agencies Obligations (45.1%)
245,709 FGCI (U.S. Dollar)............................... 6.000% 09/01/13 246,247
433,384 FHLMC (U.S. Dollar).............................. 6.500% 05/01/13 439,614
500,000 FHLMC (U.S. Dollar).............................. 6.500% 12/01/28 503,754
518,245 FNCL (U.S. Dollar)............................... 6.500% 09/01/28 521,160
249,501 FNGL (U.S. Dollar)............................... 6.500% 10/01/28 250,904
998,987 FNGL (U.S. Dollar)............................... 7.000% 12/01/28 1,018,351
600,000 FNMA (U.S. Dollar)............................... 5.875% 02/02/06 622,360
250,000 FNMA (U.S. Dollar)............................... 6.000% 05/15/08 263,793
750,000 FNMA (U.S. Dollar)............................... 6.500% 01/01/29 754,695
247,500 FNMA (U.S. Dollar)............................... 7.000% 12/15/13 252,891
504,395 FNMA (U.S. Dollar)............................... 6.000% 11/01/20 497,303
500,000 FNMA (U.S. Dollar)............................... 8.625% 11/10/04 515,350
403,602 GNMA (U.S. Dollar)............................... 7.000% 10/15/27 413,006
253,533 GNMA (U.S. Dollar)............................... 7.000% 06/15/28 259,316
344,641 GNMA (U.S. Dollar)............................... 7.500% 12/15/25 355,304
504,999 GNMA (U.S. Dollar)............................... 7.500% 09/15/27 520,654
453,128 GNMA (U.S. Dollar)............................... 7.000% 06/15/28 463,464
500,000 Tennessee Valley Authority (U.S. Dollar)......... 5.375% 11/13/08 503,200
900,000 U.S. Treasury Note (U.S. Dollar)................. 5.500% 08/15/28 943,313
3,020,000 U.S. Treasury Note (U.S. Dollar)................. 6.000% 02/15/26 3,301,706
1,500,000 U.S. Treasury Strip (U.S. Dollar)(c)............. 4.710% 05/15/04 1,168,034
350,000 U.S. Treasury Strip (U.S. Dollar)(c)............. 4.803% 05/15/06 246,662
Financial Services (4.9%)
500,000 Associates Corporation of North America (U.S.
Dollar)........................................ 6.625% 05/15/01 512,519
500,000 First Bank Minnesota (U.S. Dollar)............... 6.250% 08/15/05 502,154
500,000 General Electric Capital Corporation (U.S.
Dollar)........................................ 6.660% 05/01/18 508,762
Waste Management (1.6%)
500,000 Waste Management, Inc. (U.S. Dollar)............. 6.250% 10/15/00 506,250
----------------
18,431,824
----------------
Total long-term debt securities (cost: $29,120,694).......................... 29,947,630
----------------
SHORT-TERM SECURITIES (.8%)
232,710 Temporary Investment Fund-Temp Fund Portfolio (U.S. Dollars), current rate
4.990%..................................................................... 232,710
----------------
Total short-term securities (cost: $232,710)................................. 232,710
----------------
Total investments in securities (cost: $29,353,404) (e)...................... $ 30,180,340
----------------
----------------
</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) For zero coupon issues (strips) the interest rate disclosed is the
effective yield at the date of acquisition.
(d) Represents ownership in an illiquid security which has not been registered
with the Securities and Exchange Commission under the Securities Act of
1933. (See note 7 to the financial statements.) Information concerning the
illiquid securities held at December 31, 1998 including acquisition date and
cost, is as follows:
<TABLE>
<CAPTION>
ACQUISITION
SECURITY DATE COST
- --------------------------------------- ----------- ---------
<S> <C> <C>
Time Warner 144A Issue................. 11/20/98 $ 504,023
Consumer Energy 144A Issue............. 05/05/98 492,707
---------
$ 996,730
---------
---------
</TABLE>
(e) At December 31, 1998 the cost of securities for federal income tax purposes
was $29,379,365. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<CAPTION>
Gross unrealized appreciation.......... $891,939
<S> <C>
Gross unrealized depreciation.......... (90,964)
--------
Net unrealized appreciation............ $800,975
--------
--------
</TABLE>
77
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
COMMON STOCK (97.6%)
BASIC MATERIALS (5.9%)
Chemicals (2.8%)
900 A. Schulman, Inc................................. $ 20,419
1,200 Airgas, Inc. (b)................................. 10,725
1,000 Albemarle Corporation............................ 23,750
600 Cabot Corporation................................ 16,762
800 Crompton & Knowles............................... 16,550
1,000 Cytec Industries, Inc. (b)....................... 21,250
200 Dexter Corporation............................... 6,287
800 Ethyl Corporation................................ 4,650
300 Ferro Corporation................................ 7,800
900 Georgia Gulf..................................... 14,456
300 H.B. Fuller Company.............................. 14,437
1,100 IMC Global, Inc.................................. 23,512
500 Lubrizol Corporation............................. 12,844
500 Lyondell Petrochemical........................... 9,000
1,100 M.A. Hanna Company............................... 13,544
200 Minerals Technologies, Inc....................... 8,187
300 Olin Corporation................................. 8,494
800 RPM, Inc......................................... 12,800
1,100 Solutia, Inc..................................... 24,612
300 Wellman, Inc..................................... 3,056
1,000 Witco Corporation................................ 15,937
----------------
289,072
----------------
Construction (1.0%)
400 Martin Marietta Materials........................ 24,875
400 Southdown........................................ 23,675
400 Vulcan Materials................................. 52,625
----------------
101,175
----------------
Iron and Steel (.5%)
400 AK Steel Holding Corporation..................... 9,400
500 Carpenter Technology............................. 16,969
500 Inland Steel Industries, Inc..................... 8,437
300 Oregon Steel Mills, Inc.......................... 3,562
900 UCAR International (b)........................... 16,031
----------------
54,399
----------------
Paper and Forest (1.6%)
600 Bowater, Inc..................................... 24,862
200 Chesapeake Corporation........................... 7,375
800 Consolidated Paper, Inc.......................... 22,000
1,000 Georgia-Pacific Corporation...................... 23,812
1,400 Longview Fibre Company........................... 16,187
900 P.H. Glatfelter Company.......................... 11,137
200 Raynoier, Inc.................................... 9,187
1,150 Sonoco Products Company.......................... 34,069
1,000 Wausau-Mosinee Paper Corporation................. 17,687
----------------
166,316
----------------
CAPITAL GOODS (7.9%)
Aerospace/Defense (.6%)
300 Cordant Technologies, Inc........................ 11,250
300 Gencorp.......................................... 7,481
300 Precision Castparts Corporation.................. 13,275
100 Sequa Corporation (b)............................ 5,987
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
CAPITAL GOODS--CONTINUED
500 Sundstrand Corporation........................... $ 25,937
----------------
63,930
----------------
Electrical Equipment (2.9%)
1,000 American Power Conversion Corporation (b)........ 48,437
600 Diebold.......................................... 21,412
700 Hubbell, Inc..................................... 26,600
1,575 Molex, Inc....................................... 60,047
600 SCI Systems, Inc. (b)............................ 34,650
600 Solectron Corporation (b)........................ 55,762
600 Symbol Technologies.............................. 38,362
1,220 Vishay Intertechnology, Inc. (b)................. 17,690
----------------
302,960
----------------
Engineering/Construction (.5%)
600 Granite Construction, Inc........................ 20,137
200 Jacobs Engineering Group (b)..................... 8,150
300 Newport News Shipbuilding, Inc................... 10,031
1,900 Varco International, Inc. (b).................... 14,725
----------------
53,043
----------------
Machinery (.5%)
1,900 Agco Corporation................................. 14,962
307 Albany International Corporation................. 5,814
200 Kaydon Corporation............................... 8,012
700 Kennametal, Inc.................................. 14,875
200 Tecumseh Products Company........................ 9,325
----------------
52,988
----------------
Manufacturing (1.3%)
900 Ametek, Inc...................................... 20,081
200 Carlisle Companies, Inc.......................... 10,325
900 Donaldson Company, Inc........................... 18,675
300 Federal Signal Corporation....................... 8,212
600 Flowserve Corporation............................ 9,937
300 Nordson Corporation.............................. 15,412
300 Pentair, Inc..................................... 11,944
300 Stewart & Stevenson Services..................... 2,925
400 Teleflex, Inc.................................... 18,250
300 Trinity Industries............................... 11,550
300 York International Corporation................... 12,244
----------------
139,555
----------------
Metal Fabrication (.2%)
200 Maxxam, Inc. (b)................................. 11,475
400 Watts Industries, Inc............................ 6,650
----------------
18,125
----------------
Office Equipment (1.5%)
900 Herman Miller, Inc............................... 24,187
400 Hon Industries................................... 9,575
800 Lexmark International Group (b).................. 80,400
600 Standard Register................................ 18,562
1,400 Unisource World Wide, Inc........................ 10,150
700 Wallace Computer Services, Inc................... 18,462
----------------
161,336
----------------
</TABLE>
See accompanying notes to investments in securities.
78
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
CAPITAL GOODS--CONTINUED
<C> <S> <C>
Waste Management (.4%)
1,900 Allied Waste Industries, Inc. (b)................ $ 44,887
----------------
COMMUNICATION SERVICES (2.4%)
Cellular (.1%)
500 Vanguard Cellular Systems (b).................... 12,906
----------------
Telecommunication (.7%)
800 Comsat Corporation............................... 28,800
800 Qualcomm, Inc. (b)............................... 41,450
----------------
70,250
----------------
Telephone (1.6%)
300 Aliant Communications, Inc....................... 12,262
950 Century Telephone Enterprise..................... 64,125
1,600 Cincinnati Bell, Inc............................. 60,500
600 Telephone and Data Systems, Inc.................. 26,962
----------------
163,849
----------------
CONSUMER CYCLICAL (15.3%)
Auto (2.0%)
200 Arvin Industries, Inc............................ 8,337
400 Bandag, Inc...................................... 15,975
400 Borg-Warner Automotive, Inc...................... 22,325
700 Federal Mogul Corporation........................ 41,650
300 Harsco Corporation............................... 9,131
700 Lear Corporation (b)............................. 26,950
1,600 Mark IV Industries, Inc.......................... 20,800
700 Meritor Automotive............................... 14,831
200 Modine Manufacturing Company..................... 7,250
900 OEA, Inc......................................... 10,631
300 SPX Corporation (b).............................. 20,100
300 Superior Industries International................ 8,344
----------------
206,324
----------------
Building Materials (.4%)
600 American Standard Companies (b).................. 21,562
1,250 Clayton Homes.................................... 17,266
----------------
38,828
----------------
Construction (.1%)
300 Lancaster Colony Corporation..................... 9,637
----------------
Houseware (.6%)
500 Furniture Brands International (b)............... 13,625
2,200 Leggett & Platt, Inc............................. 48,400
----------------
62,025
----------------
Leisure (1.3%)
1,000 Callaway Golf Company............................ 10,250
700 Gtech Holdings Corporation (b)................... 17,937
1,700 Harley-Davidson, Inc............................. 80,537
1,100 International Game Technology.................... 26,744
----------------
135,468
----------------
Lodging--Hotel (.3%)
877 Promus Hotel Corporation (b)..................... 28,393
----------------
Publishing (1.4%)
1,300 A.H. Belo........................................ 25,919
500 Banta Corporation................................ 13,687
300 Houghton Mifflin Company......................... 14,175
300 Lee Enterprises.................................. 9,450
200 Media General, Inc............................... 10,600
300 Scholastic Corporation (b)....................... 16,087
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
100 Washington Post.................................. $ 57,794
----------------
147,712
----------------
Retail (6.3%)
600 Abercrombie & Fitch (b).......................... 42,450
700 Barnes and Noble, Inc. (b)....................... 29,750
1,400 Bed Bath & Beyond, Inc. (b)...................... 47,775
1,100 Best Buy Company, Inc. (b)....................... 67,512
500 BJ's Wholesale Club, Inc. (b).................... 23,156
700 Borders Group, Inc. (b).......................... 17,456
400 Claire's Stores, Inc............................. 8,200
800 CompUSA, Inc. (b)................................ 10,450
500 Dollar Tree Stores, Inc. (b)..................... 21,844
1,700 Family Dollar Stores............................. 37,400
400 Fastenal Company................................. 17,600
500 General Nutrition Companies (b).................. 8,125
2,300 Heilig-Meyers Company............................ 15,237
600 Lands' End, Inc. (b)............................. 16,162
500 Micro Warehouse, Inc. (b)........................ 16,906
2,800 Office Depot, Inc. (b)........................... 103,425
1,800 Officemax (b).................................... 21,825
400 Payless Shoesource, Inc. (b)..................... 18,950
400 Ross Stores, Inc................................. 15,750
1,428 Saks, Inc. (b)................................... 45,071
500 Tech Data Corporation (b)........................ 20,125
400 Tiffany & Company................................ 20,750
1,775 U.S. Filter Corporation (b)...................... 40,603
----------------
666,522
----------------
Service (1.7%)
1,500 Circus Circus Enterprises, Inc. (b).............. 17,156
300 Convergy's Corporation (b)....................... 6,712
300 Pittston Company................................. 9,562
900 Quintiles Transnational (b)...................... 48,037
300 Rollins.......................................... 5,250
600 Snyder Communications, Inc. (b).................. 20,250
600 Sotheby's Holdings............................... 19,200
900 Stewart Enterprises, Inc......................... 20,025
1,000 Viad............................................. 30,375
----------------
176,567
----------------
Textiles (1.2%)
1,700 Burlington Industries (b)........................ 18,700
1,200 Jones Apparel Group, Inc. (b).................... 26,475
700 Nine West Group, Inc. (b)........................ 10,894
1,500 Shaw Industries.................................. 36,375
400 Unifi, Inc....................................... 7,825
500 Warnaco Group.................................... 12,625
500 Westpoint Stevens, Inc. (b)...................... 15,781
----------------
128,675
----------------
CONSUMER STAPLES (9.4%)
Beverage (.2%)
900 Whitman Corporation.............................. 22,837
----------------
Broadcasting (.5%)
500 A.C. Nielsen Corporation (b)..................... 14,125
406 Chris-Craft Industries, Inc. (b)................. 19,564
600 TCA Cable TV, Inc................................ 21,412
----------------
55,101
----------------
Food (2.1%)
300 Dean Foods Company............................... 12,244
600 Dole Food Company................................ 18,000
</TABLE>
See accompanying notes to investments in securities.
79
<PAGE>
INDEX 400 MID-CAP PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
CONSUMER STAPLES--CONTINUED
<C> <S> <C>
900 Dreyer's Grand Ice Cream, Inc.................... $ 13,612
1,100 Flowers Industries............................... 26,331
800 Hormel Foods Corporation......................... 26,200
1,000 IBP, Inc......................................... 29,125
600 Interstate Bakeries.............................. 15,862
900 J.M. Smucker..................................... 22,275
400 Lance, Inc....................................... 7,975
700 McCormick & Company.............................. 23,669
400 Universal Foods.................................. 10,975
700 Vlasic Foods International (b)................... 16,669
----------------
222,937
----------------
Food & Health (.4%)
800 International Multifoods Corporation............. 20,650
500 U.S. Foodservice (b)............................. 24,500
----------------
45,150
----------------
Household Products (1.0%)
300 Church & Dwight Company, Inc..................... 10,781
1,000 Dial............................................. 28,875
1,000 Enesco Group..................................... 23,250
400 First Brands Corporation......................... 15,775
800 Premark International, Inc....................... 27,700
----------------
106,381
----------------
Personal Care (.2%)
400 Carter Wallace, Inc.............................. 7,850
1,600 Perrigo Company (b).............................. 14,100
----------------
21,950
----------------
Restaurants (1.5%)
400 Bob Evans Farms.................................. 10,425
600 Brinker International, Inc. (b).................. 17,325
1,800 Buffets, Inc. (b)................................ 21,488
600 Cracker Barrel Old Country Store................. 13,988
1,500 Lone Star Steakhouse & Saloon, Inc. (b).......... 13,781
500 Outback Steakhouse, Inc. (b)..................... 19,938
500 Sbarro, Inc. (b)................................. 13,094
900 Starbucks Corporation (b)........................ 50,513
----------------
160,552
----------------
Retail (.9%)
600 Hannaford Brothers Mortgage Company.............. 31,800
400 Ruddick.......................................... 9,200
2,400 Tyson Foods, Inc................................. 51,000
----------------
92,000
----------------
Service (2.5%)
1,200 Cintas........................................... 84,525
1,100 Concord EFS, Inc. (b)............................ 46,613
700 Kelly Services................................... 22,225
700 Manpower......................................... 17,631
1,100 Modis Professional Services, Inc. (b)............ 15,950
900 Ogden Corporation................................ 22,556
1,600 Olston Corporation............................... 11,800
900 Robert Half International (b).................... 40,219
----------------
261,519
----------------
Tobacco (.1%)
300 Universal Corporation............................ 10,538
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
ENERGY (3.1%)
Oil (.1%)
574 Pennzoil-Quaker State Company (b)................ $ 8,471
----------------
Oil & Gas (3.0%)
700 BJ Services (b).................................. 10,938
1,200 Ensco International.............................. 12,825
1,400 Global Marine (b)................................ 12,863
500 K.N. Energy...................................... 18,188
500 Murphy Oil....................................... 20,625
900 Nabors Industries (b)............................ 12,206
500 Noble Affiliates, Inc............................ 12,313
1,200 Noble Drilling Corporation (b)................... 15,525
600 Ocean Energy, Inc. (b)........................... 3,788
6,800 Parker Drilling Company (b)...................... 21,675
1,200 Pioneer Natural Resources........................ 10,500
800 Ranger Oil, Ltd. (b)............................. 3,550
1,400 Seagull Energy (b)............................... 8,838
500 Smith International, Inc. (b).................... 12,594
600 Tidewater........................................ 13,913
1,700 Tosco Corporation................................ 43,988
900 Transocean Offshore, Inc......................... 24,131
1,100 Ultramar Diamond Shamrock Corporation............ 26,675
500 Valero Energy Corporation........................ 10,625
785 Weatherford International, Inc. (b).............. 15,209
----------------
310,969
----------------
FINANCIAL (14.7%)
Banks (6.1%)
675 Associated Banc-Corporation...................... 23,077
400 CCB Financial Corporation........................ 22,800
600 City National Corporation........................ 24,975
2,250 First Security Corporation....................... 52,594
1,700 First Tennessee National Corporation............. 64,706
500 First Virginia Banks, Inc........................ 23,500
2,300 Hibernia Corporation............................. 39,963
500 Keystone Financial, Inc.......................... 18,500
1,200 Marshall & Ilsley Corporation.................... 70,125
700 Mercantile Bankshares Corporation................ 26,950
1,125 Old Kent Financial Corporation................... 52,313
900 Pacific Century Financial Corporation............ 21,938
600 Provident Financial Group........................ 22,650
1,850 Southtrust Corporation........................... 68,334
1,300 TCF Financial Corporation........................ 31,444
300 Wilmington Trust Corporation..................... 18,488
1,000 Zions Bancorporation............................. 62,375
----------------
644,732
----------------
Commercial Finance (.7%)
600 Finova Finance Trust............................. 32,363
1,650 North Fork Bancorporation........................ 39,497
----------------
71,860
----------------
Finance--Diversified (2.2%)
700 Ambac Financial Group............................ 42,131
600 MCN Financing.................................... 11,438
400 PMI Group........................................ 19,750
2,100 S&P 400 Mid-Cap Depository Receipt............... 153,169
----------------
226,488
----------------
Insurance (3.0%)
3,000 AFLAC, Inc....................................... 132,000
700 American Financial Group......................... 30,713
600 Everest Reinsurance Holdings..................... 23,363
</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)
- ------- ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
500 HSB Group........................................ $ 20,531
1,550 Old Republic Corporation......................... 34,875
700 Protective Life Corporation...................... 27,869
1,100 Reliastar Financial.............................. 50,738
----------------
320,089
----------------
Investment Bankers/Brokers (1.4%)
1,100 A.G. Edwards..................................... 40,975
1,450 Paine Webber Group, Inc.......................... 56,006
1,400 T. Rowe Price Associates......................... 47,950
----------------
144,931
----------------
Savings and Loans (1.3%)
1,686 Charter One Financial, Inc....................... 46,787
1,200 Dime Bancorp..................................... 31,725
1,000 Greenpoint Financial Corporation................. 35,125
1,800 Sovereign Bancorp, Inc........................... 25,650
----------------
139,287
----------------
HEALTH CARE (10.5%)
Biotechnology (1.6%)
400 Agouron Pharmaceuticals, Inc. (b)................ 23,500
800 Biogen, Inc. (b)................................. 66,400
800 Centocor, Inc. (b)............................... 36,100
800 Genzyme Corporation (b).......................... 39,800
----------------
165,800
----------------
Drugs (3.3%)
1,000 Bergen Brunswig Corporation...................... 34,875
2,000 Chiron Corporation (b)........................... 52,375
1,000 Forest Laboratories (b).......................... 53,188
700 ICN Pharmaceuticals, Inc......................... 15,838
1,100 McKesson Corporation............................. 86,969
1,500 Mylan Laboratories............................... 47,250
900 Watson Pharmaceuticals (b)....................... 56,588
----------------
347,083
----------------
Health Care--Diversified (.3%)
1,000 Ivax Corporation (b)............................. 12,438
1,800 Quorum Health Group (b).......................... 23,288
----------------
35,726
----------------
Hospital Management (.9%)
2,550 Health Management Association, Inc. (b).......... 55,144
500 Pacificare Health Systems, Inc. (b).............. 39,750
----------------
94,894
----------------
Managed Care (1.0%)
1,800 Beverly Enterprises (b).......................... 12,150
2,200 Concentra Managed Care, Inc. (b)................. 23,513
1,200 First Healthcare Group Corporation (b)........... 19,875
1,200 Foundation Health Systems (b).................... 14,325
1,400 Oxford Health Plan, Inc. (b)..................... 20,825
400 Trigon Healthcare Corporation (b)................ 14,925
----------------
105,613
----------------
Medical Products/Supplies (2.6%)
1,300 Acuson Corporation (b)........................... 19,338
1,200 Allegiance Corporation........................... 55,950
400 Dentsply International........................... 10,300
800 Hillenbrand Industries, Inc...................... 45,500
500 Lincare Holdings, Inc. (b)....................... 20,281
600 PSS World Medical, Inc. (b)...................... 13,800
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
HEALTH CARE--CONTINUED
1,000 Stryker Corporation.............................. $ 55,063
1,000 Sybron International Corporation (b)............. 27,188
900 Total Renal Care Holdings, Inc. (b).............. 26,606
----------------
274,026
----------------
Special Services (.8%)
1,900 Apria Healthcare Group, Inc. (b)................. 16,981
500 Covance, Inc. (b)................................ 14,563
1,000 Omnicare, Inc.................................... 34,750
600 Steris Corporation (b)........................... 17,063
----------------
83,357
----------------
TECHNOLOGY (15.5%)
1,500 ADC Telecommunications, Inc. (b)................. 52,125
1,000 Altera Corporation (b)........................... 60,875
1,800 Analog Devices, Inc. (b)......................... 56,475
1,200 Arrow Electronic, Inc. (b)....................... 32,025
1,700 Atmel Corporation (b)............................ 26,031
300 Avnet, Inc....................................... 18,150
200 Beckman Coulter, Inc............................. 10,850
2,500 Cadence Design Systems, Inc. (b)................. 74,375
600 Cambridge Tech Partners, Inc. (b)................ 13,275
1,200 Cirrus Logic, Inc. (b)........................... 11,775
500 Citrix Systems, Inc. (b)......................... 48,531
1,500 Comdisco, Inc.................................... 25,313
600 Comverse Technology (b).......................... 42,600
1,200 Cypress Semiconductor Corporation (b)............ 9,975
700 Electronic Arts, Inc. (b)........................ 39,288
950 Fiserv (b)....................................... 48,866
900 Fore Systems, Inc. (b)........................... 16,481
600 Imation (b)...................................... 10,500
2,000 Information Resources, Inc. (b).................. 20,375
1,800 Informix Corporation (b)......................... 17,775
2,300 Integrated Device Technology (b)................. 14,088
600 Intuit, Inc. (b)................................. 43,500
700 Keane, Inc. (b).................................. 27,956
400 Legato Systems, Inc. (b)......................... 26,375
800 Linear Technology Corporation.................... 71,650
600 Litton Industries, Inc. (b)...................... 39,150
1,400 Maxim Integrated Products (b).................... 61,163
2,100 Mentor Graphics (b).............................. 17,850
800 Microchip Technology, Inc. (b)................... 29,600
1,000 NCR Corporation (b).............................. 41,750
1,500 Network Associates (b)........................... 99,375
600 Nova Corporation (b)............................. 20,813
1,400 Platinum Technology, Inc. (b).................... 26,775
300 Policy Management Systems (b).................... 15,150
2,000 Quantum Corporation (b).......................... 42,500
800 Reynolds & Reynolds.............................. 18,350
1,200 Sensormatic Eletronics Corporation (b)........... 8,325
1,500 Sequent Computer Systems, Inc. (b)............... 18,094
900 Siebel Systems, Inc. (b)......................... 30,544
1,000 Sterling Commerce, Inc. (b)...................... 45,000
900 Sterling Software, Inc. (b)...................... 24,356
1,000 Storage Technology (b)........................... 35,563
1,100 Structural Dynamics Research (b)................. 21,863
1,000 Sungard Data Systems (b)......................... 39,688
700 Symantec (b)..................................... 15,006
800 Synopsys, Inc. (b)............................... 43,400
900 Teradyne, Inc. (b)............................... 38,138
600 Varian Associates, Inc........................... 22,725
</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)
- ------- ----------------
TECHNOLOGY--CONTINUED
<C> <S> <C>
900 Xilinx, Inc. (b)................................. $ 58,613
----------------
1,633,020
----------------
TRANSPORTATION (1.7%)
Air Freight (.1%)
400 Airborne Freight Corporation..................... 14,425
----------------
Airlines (.2%)
200 Alaska Airgroup, Inc. (b)........................ 8,850
500 ASA Holdings, Inc................................ 15,250
----------------
24,100
----------------
Railroads (.9%)
400 GATX Corporation................................. 15,150
1,100 Kansas City Southern Industries.................. 54,106
1,200 Wisconsin Central Transport (b).................. 20,625
----------------
89,881
----------------
Shipping (.2%)
500 Alexander & Baldwin, Inc......................... 11,625
900 Overseas Shipholding Group....................... 14,456
----------------
26,081
----------------
Trucking (.3%)
300 Arnold Industries, Inc........................... 4,838
500 CNF Transportation............................... 18,781
400 JB Hunt Transport Services....................... 9,200
----------------
32,819
----------------
UTILITIES (11.2%)
Electric Companies (9.0%)
1,200 Allegheny Energy, Inc............................ 41,400
400 Black Hills Corporation.......................... 10,550
300 Central Louisiana Electric....................... 10,294
500 CMP Group, Inc................................... 9,438
1,200 CMS Energy Corporation........................... 58,125
1,300 Conectiv, Inc.................................... 31,850
1,600 DPL, Inc......................................... 34,600
1,100 Florida Progress Corporation..................... 49,294
600 Hawaiian Electric Industries..................... 24,150
300 IDA Corporation, Inc............................. 10,856
600 Illinova Corporation............................. 15,000
500 Ipalco Enterprises, Inc.......................... $ 27,719
<CAPTION>
MARKET
SHARES VALUE(a)
- ------- ----------------
<C> <S> <C>
UTILITIES--CONTINUED
700 Kansas City Power & Light........................ 20,738
1,500 LG&E Energy Corporation.......................... 42,469
1,000 MidAmerican Energy Holdings...................... 26,875
400 Minnesota Power, Inc............................. 17,600
700 Montana Power Company............................ 39,594
400 Nevada Power Company............................. 10,400
800 New England Electric System...................... 38,500
900 New York State Electric & Gas.................... 50,850
1,200 Nipsco Industries, Inc........................... 36,525
1,400 Northeast Utilities (b).......................... 22,400
800 OGE Energy Corporation........................... 23,200
900 Pinnacle West Capital Corporation................ 38,138
1,100 Potomac Electric Power Company................... 28,944
1,100 Public Service Company of New Mexico............. 22,481
1,200 Puget Sound Energy, Inc.......................... 33,450
1,100 Scana Corporation................................ 35,475
1,300 Teco Energy...................................... 36,644
700 Utilicorp United, Inc............................ 25,681
1,300 Wisconsin Energy................................. 40,869
1,000 WPL Holdings..................................... 32,250
----------------
946,359
----------------
Natural Gas (1.6%)
400 AGL Resources, Inc............................... 9,225
1,200 El Paso Energy Corporation....................... 41,775
1,800 Keyspan Energy Corporation....................... 55,800
300 National Fuel Gas Company........................ 13,556
1,100 Questar Corporation.............................. 21,313
900 Washington Gas Light............................. 24,413
----------------
166,082
----------------
Power Products--Industrial (.3%)
600 CalEnergy Company, Inc. (b)...................... 20,813
501 Indiana Energy, Inc.............................. 12,337
----------------
33,150
----------------
Water Utilities (.3%)
800 American Water Works, Inc........................ 27,000
----------------
Total common stock
(cost: $9,635,490)......................................... 10,260,150
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (.6%)
$64,574 Temporary Investment Fund--Temp Fund Portfolio, current rate 4.990%.............. 64,574
---------------
Total short-term securities (cost: $64,574)...................................... 64,574
---------------
Total investments in securities (cost: $9,700,064) (c)........................... $ 10,324,724
---------------
---------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $9,795,548. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation..................... $1,430,035
Gross unrealized depreciation..................... (900,859)
---------
Net unrealized appreciation....................... $ 529,176
---------
---------
</TABLE>
82
<PAGE>
MACRO-CAP VALUE PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
COMMON STOCK (96.1%)
BASIC MATERIALS (7.5%)
Chemicals (4.6%)
600 Albermarle Corporation................................................. $ 14,250
259 Genzyme-Molecular Oncology (b)......................................... 843
7,400 Monsanto Company....................................................... 351,500
4,800 Rohm and Haas Company.................................................. 144,600
----------------
511,193
----------------
Iron and Steel (.5%)
2,500 Allegheny Teledyne, Inc................................................ 51,094
----------------
Paper and Forest (2.4%)
2,100 Kimberly Clark Corporation............................................. 114,450
9,697 Smurfit-Stone Container Corporation (b)................................ 153,334
----------------
267,784
----------------
CAPITAL GOODS (8.5%)
Aerospace/Defense (2.6%)
2,900 Allied-Signal, Inc..................................................... 128,506
8,300 Coltec Industies, Inc. (b)............................................. 161,850
----------------
290,356
----------------
Electrical Equipment (1.5%)
2,300 Cooper Industries, Inc................................................. 109,681
500 General Electric Company............................................... 51,031
----------------
160,712
----------------
Manufacturing (1.5%)
400 Tenneco, Inc........................................................... 13,625
2,066 Tyco International Ltd................................................. 155,854
----------------
169,479
----------------
Waste Management (2.9%)
2,700 Republic Services, Inc. (b)............................................ 49,781
5,855 Waste Management, Inc.................................................. 272,989
----------------
322,770
----------------
COMMUNICATION SERVICES (5.9%)
Telecommunication (2.8%)
4,385 MCI Worldcom, Inc. (b)................................................. 314,624
----------------
Telephone (3.1%)
2,600 GTE Corporation........................................................ 169,000
3,300 SBC Communications, Inc................................................ 176,962
----------------
345,962
----------------
CONSUMER CYCLICAL (14.0%)
Leisure (2.3%)
4,200 International Game Technology.......................................... 102,112
6,700 Mattel, Inc............................................................ 152,844
----------------
254,956
----------------
Lodging-Hotel (1.3%)
6,367 Starwood Hotels........................................................ 144,451
----------------
Retail (5.6%)
1,400 Autozone, Inc. (b)..................................................... 46,112
1,100 Circuit City Stores, Inc............................................... 54,931
2,200 Dayton Hudson Corporation.............................................. 119,350
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
2,400 Fred Meyer, Inc. (b)................................................... $ 144,600
1,050 Gap, Inc............................................................... 59,062
3,100 TJX Companies, Inc..................................................... 89,900
1,300 Wal-Mart Stores........................................................ 105,869
----------------
619,824
----------------
Service (4.8%)
4,900 Cendant Corporation (b)................................................ 93,406
5,400 Mirage Resorts, Inc. (b)............................................... 80,662
3,900 Service Corporation International...................................... 148,444
3,800 Tele-Communications, Inc. (b).......................................... 210,187
----------------
532,699
----------------
CONSUMER STAPLES (10.4%)
Beverage (2.3%)
1,300 Anheuser-Busch......................................................... 85,312
2,500 Pepsico, Inc........................................................... 102,344
1,700 Seagram Company Ltd. (c)............................................... 64,600
----------------
252,256
----------------
Broadcasting (.6%)
1,100 Comcast Corporation.................................................... 64,556
----------------
Entertainment (1.0%)
4,000 News Corporation Ltd. ADR (c).......................................... 105,750
----------------
Food (1.2%)
1,500 Campbell Soup Company.................................................. 82,500
1,660 Ralston-Ralston Purina Group........................................... 53,743
----------------
136,243
----------------
Household Products (2.5%)
3,000 Procter & Gamble Company............................................... 273,938
----------------
Tobacco (2.8%)
5,900 Philip Morris Companies, Inc........................................... 315,650
----------------
ENERGY (7.0%)
Oil (3.3%)
13,100 Input/Output, Inc. (b)................................................. 95,794
3,100 Mobil Corporation...................................................... 270,088
----------------
365,882
----------------
Oil & Gas (3.7%)
400 K N Energy............................................................. 14,550
6,900 Shell Transport & Trading Company ADR (c).............................. 256,594
5,300 Tosco Corporation...................................................... 137,138
----------------
408,282
----------------
FINANCIAL (12.9%)
Banks (4.9%)
5,707 BankAmercia Corporation................................................ 343,133
1,200 Bankers Trust Corporation (b).......................................... 102,525
3,200 KeyCorp................................................................ 102,400
----------------
548,058
----------------
Consumer Finance (.8%)
2,400 Newcourt Credit (c).................................................... 83,850
----------------
</TABLE>
See accompanying notes to investments in securities.
83
<PAGE>
MACRO-CAP VALUE PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
FINANCIAL--CONTINUED
<C> <S> <C>
Insurance (4.9%)
3,350 Citigroup Inc.......................................................... $ 165,825
1,600 Marsh & McLennen....................................................... 93,500
1,800 MBIA, Inc.............................................................. 118,013
2,800 Unum Corporation....................................................... 163,450
----------------
540,788
----------------
Savings and Loans (2.3%)
1,560 Astoria Financial Corporation.......................................... 71,370
4,700 Washington Mutual, Inc................................................. 179,481
----------------
250,851
----------------
HEALTH CARE (9.0%)
Biotechnology (1.1%)
2,500 Genzyme Corporation (b)................................................ 124,375
----------------
Drugs (6.0%)
5,700 American Home Products Corporation..................................... 320,981
2,100 Bristol-Myers Squibb Company........................................... 281,006
1,200 Forest Laboratories (b)................................................ 63,825
----------------
665,812
----------------
Health Care--Diversified (1.5%)
6,600 HEALTHSOUTH Corporation (b)............................................ 101,888
800 Warner-Lambert Company................................................. 60,150
----------------
162,038
----------------
Medical Products/Supplies (.4%)
800 ALZA Corporation (b)................................................... 41,800
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
TECHNOLOGY (16.4%)
Technology (16.4%)
1,700 Autodesk, Inc.......................................................... $ 72,569
2,750 Cisco Systems, Inc. (b)................................................ 255,234
3,000 Compaq Computer Corporation............................................ 125,813
1,800 EMC Corporation (b).................................................... 153,000
1,800 Intel.................................................................. 213,413
1,700 International Business Machines........................................ 314,075
1,300 Lucent Technologies, Inc............................................... 143,000
1,900 Microsoft Corporation (b).............................................. 263,506
1,000 Oracle Corporation (b)................................................. 43,125
1,800 Sun Microsystems, Inc. (b)............................................. 154,125
1,000 Texas Instruments, Inc................................................. 85,563
----------------
1,823,423
----------------
TRANSPORTATION (2.3%)
Railroads (2.3%)
5,700 Union Pacific Corporation.............................................. 256,856
----------------
UTILITIES (2.2%)
Electric Companies (2.2%)
500 Northern States Power Company.......................................... 13,875
5,500 PP&L Resources, Inc.................................................... 153,313
2,600 Wisconsin Energy....................................................... 81,738
----------------
248,926
----------------
Total common stock
(cost: $9,699,988)............................................................. 10,655,238
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (3.2%)
$354,000 U.S. Treasury Bill............................... 4.330% 01/21/99 353,108
------------
Total short-term securities (cost: $353,150).......................... 353,108
------------
Total investments in securities (cost: $10,053,138) (d)............... $ 11,008,346
------------
------------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) The Portfolio held 4.6% of net assets in foreign securities as of December
31, 1998.
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $10,191,477. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 1,424,560
Gross unrealized depreciation.......... (607,691)
------------
Net unrealized appreciation............ $ 816,869
------------
------------
</TABLE>
84
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
COMMON STOCK (86.3%)
CAPITAL GOODS (.4%)
Electrical Equipment (.4%)
4,000 Barringer Technologies, Inc. (b)................. $ 34,500
----------------
COMMUNICATION SERVICES (8.1%)
Telecommunication (7.6%)
6,300 ITC Deltacom, Inc. (b)........................... 96,075
6,300 Metromedia Fiber Network (b)..................... 211,050
4,100 Periphonics Corporation (b)...................... 54,069
5,400 Polycom, Inc. (b)................................ 120,150
5,800 Viatel, Inc. (b)................................. 132,675
----------------
614,019
----------------
Telephone (.5%)
1,300 Nextlink Communications, Inc. (b)................ 36,887
----------------
CONSUMER CYCLICAL (22.6%)
Auto (.5%)
2,300 Lithia Motors, Inc. (b).......................... 37,950
----------------
Building Materials (1.1%)
3,100 Engle Homes, Inc................................. 47,469
2,500 Modtech, Inc. (b)................................ 38,125
----------------
85,594
----------------
Leisure (3.7%)
6,200 Family Golf Centers (b).......................... 122,450
4,600 SCP Pool Corporation (b)......................... 69,575
3,500 Tweeter Home Entertainment (b)................... 100,625
----------------
292,650
----------------
Lodging--Hotel (1.2%)
2,800 Cavanaughs Hospitality Corporation (b)........... 30,100
6,800 Silverleaf Resorts, Inc. (b)..................... 63,325
----------------
93,425
----------------
Retail (3.2%)
3,300 Kenneth Cole Productions (b)..................... 61,875
4,100 Maxwell Shoe Company (b)......................... 44,844
5,100 Quiksilver, Inc. (b)............................. 153,000
----------------
259,719
----------------
Service (11.9%)
2,000 Abacus Direct Corporation (b).................... 91,000
5,800 American Bank Note Holographics, Inc. (b)........ 101,500
3,200 Carriage Services, Inc. (b)...................... 91,000
3,500 ChiRex, Inc. (b)................................. 74,812
4,700 Coinstar, Inc. (b)............................... 50,525
4,700 Compass International Services (b)............... 49,937
4,000 Getty Images, Inc. (b)........................... 68,750
2,100 Lason, Inc. (b).................................. 122,194
5,900 Mac-Gray Corporation (b)......................... 67,112
4,500 Pegasus Systems, Inc. (b)........................ 162,000
4,100 SM&A Corporation (b)............................. 77,900
----------------
956,730
----------------
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
CONSUMER CYCLICAL--CONTINUED
Textiles (1.0%)
3,800 Novel Denim Holdings, Ltd. (b)(c)................ $ 80,750
----------------
CONSUMER STAPLES (7.7%)
Broadcasting (1.3%)
6,200 Cumulus Media, Inc. (b).......................... 103,075
----------------
Food & Health (.7%)
3,700 Merkert American Corporation (b)................. 55,962
----------------
Restaurants (1.6%)
1,400 P.F. Chang's China Bistro, Inc. (b).............. 31,850
2,200 Papa John's International, Inc. (b).............. 97,075
----------------
128,925
----------------
Service (4.1%)
1,600 Eagle Geophysical, Inc. (b)...................... 6,200
4,100 Metzler Group, Inc. (b).......................... 199,619
7,300 National Equipment Services (b).................. 83,950
3,400 Seitel, Inc. (b)................................. 42,287
----------------
332,056
----------------
ENERGY (1.2%)
Oil & Gas (1.2%)
3,750 Cross Timbers Oil Company........................ 28,125
2,100 Edge Petroleum Corporation (b)................... 9,187
4,500 Veritas DGC, Inc. (b)............................ 58,500
----------------
95,812
----------------
FINANCIAL (4.2%)
Real Estate Investment Trust (1.7%)
5,000 Golf Trust of America, Inc....................... 138,750
----------------
Savings and Loans (2.5%)
1,800 Haven Bancorp, Inc............................... 27,000
5,200 Telebanc Financial Corporation (b)............... 176,800
----------------
203,800
----------------
HEALTH CARE (9.1%)
Biotechnology (2.7%)
4,100 Celgene Corporation (b).......................... 63,037
2,400 Digene Corporation (b)........................... 13,350
5,000 Fuisz Technologies (b)........................... 64,375
6,900 Lifecell Corporation (b)......................... 30,188
1,900 Pharmacyclics, Inc. (b).......................... 48,450
----------------
219,400
----------------
Drugs (5.3%)
4,900 Algos Pharmaceuticals (b)........................ 127,400
2,800 Alkermes, Inc. (b)............................... 62,125
3,800 Anesta Corporation (b)........................... 101,175
4,300 Guilford Pharmaceuticals, Inc. (b)............... 61,275
3,700 Shire Pharmaceuticals ADR (b)(c)................. 74,925
----------------
426,900
----------------
Medical Products/Supplies (1.1%)
2,200 Hanger Orthopedic Group (b)...................... 49,500
3,500 Schick Technologies, Inc. (b).................... 35,438
----------------
84,938
----------------
</TABLE>
See accompanying notes to investments in securities.
85
<PAGE>
MICRO-CAP GROWTH PORTFOLIO
INVESTMENTS IN SECURITIES--CONTINUED
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
TECHNOLOGY (31.0%)
<C> <S> <C>
400 American Xtal Technology, Inc. (b)............... $ 3,650
3,500 Applied Micro Circuits Corporation (b)........... 118,891
6,100 Atlantic Data Services (b)....................... 52,231
3,500 Bindview Development Corporation (b)............. 96,250
2,800 Broadvision, Inc. (b)............................ 89,600
2,700 Cognizant Tech Solutions (b)..................... 82,013
3,700 Concentric Network Corporation (b)............... 123,025
4,800 Deltek Systems, Inc. (b)......................... 81,000
3,100 Emulex Corporation (b)........................... 124,000
2,200 Global Imaging Systems, Inc. (b)................. 53,350
2,000 InfoSpace.com, Inc. (b).......................... 76,250
4,550 Insight Enterprises, Inc. (b).................... 231,481
2,550 Inspire Insurance Solutions (b).................. 46,856
3,200 International Integration (b).................... 54,400
1,900 International Telecommunications (b)............. 28,025
4,200 Intevac, Inc. (b)................................ 26,775
2,400 Maximus, Inc. (b)................................ 88,800
8,200 Maxtor Corporation (b)........................... 114,800
2,300 Maxwell Technologies, Inc. (b)................... 92,575
3,100 New Era of Networks, Inc. (b).................... 136,400
2,500 Photronics, Inc. (b)............................. 59,922
<CAPTION>
MARKET
SHARES VALUE(a)
- ------ ----------------
<C> <S> <C>
TECHNOLOGY--CONTINUED
2,600 QRS Corporation (b).............................. $ 124,800
4,200 RF Micro Devices, Inc. (b)....................... 194,775
3,700 SCC Communications Corporation (b)............... 17,344
5,500 Software AG Systems, Inc. (b).................... 99,688
2,200 Spyglass, Inc. (b)............................... 48,400
8,500 Technisource, Inc. (b)........................... 83,938
2,700 Tier Technologies, Inc. (b)...................... 46,575
3,700 USWeb Corporation (b)............................ 97,588
----------------
2,493,402
----------------
TRANSPORTATION (2.0%)
Airlines (.8%)
2,500 Atlantic Coast Airlines Holdings (b)............. 62,500
----------------
Transport Services (1.2%)
1,700 Carey International, Inc. (b).................... 29,750
3,800 Preview Travel, Inc. (b)......................... 70,063
----------------
99,813
----------------
Total common stock
(cost: $5,590,311)........................................ 6,937,557
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (15.0%)
$195,313 Temporary Investment Fund, Inc.--Temp Fund Portfolio, current rate
4.990%.............................................................. 195,313
500,000 U.S. Treasury Bond............................... 4.258% 01/07/99 499,864
410,000 U.S. Treasury Bond............................... 4.458% 02/04/99 408,475
100,000 U.S. Treasury Bond............................... 4.412% 03/11/99 99,206
-----------
Total short-term securities (cost: $1,202,431)........................ 1,202,858
-----------
Total investments in securities (cost: $6,792,742) (d)................ $ 8,140,415
-----------
-----------
</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 1.9% of net assets in foreign securities as of December
31, 1998.
(d) At December 31, 1998 the cost of securities for federal income tax purposes
was $6,809,243. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $1,970,527
Gross unrealized depreciation.......... (639,355)
----------
Net unrealized appreciation............ $1,331,172
----------
----------
</TABLE>
86
<PAGE>
REAL ESTATE SECURITIES PORTFOLIO
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
(Percentages of each investment category relate to total net assets.)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
COMMON STOCK (95.8%)
CONSUMER CYCLICAL (10.9%)
Building Materials (4.6%)
5,500 D.R. Horton, Inc................................. $ 126,500
1,400 Kaufman & Broad Home Corporation................. 40,250
5,500 Standard Pacific Corporation..................... 77,687
----------------
244,437
----------------
Lodging-Hotel (5.3%)
7,800 Host Marriott Corporation........................ 107,737
5,100 Meristar Hospitality Corporation................. 94,669
3,400 Starwood Lodging Trust........................... 77,137
----------------
279,543
----------------
Service (1.0%)
4,700 Fairfield Communities, Inc. (b).................. 51,994
----------------
FINANCIAL (84.9%)
Finance--Diversified (4.6%)
5,400 Asset Investors Corporation...................... 67,500
1,400 Crescent Real Estate Equity Company.............. 32,200
5,100 Simon Property Group, Inc........................ 145,350
----------------
245,050
----------------
Real Estate (3.3%)
12,300 Catellus Development Corporation (b)............. 176,044
----------------
Real Estate Investment Trust (77.0%)
3,800 Apartment Investment and Management Company...... 141,312
5,700 Archstone Communities Trust...................... 115,425
7,600 Arden Realty Group, Inc.......................... 176,225
5,200 Avalon Bay Communities, Inc...................... 178,100
2,200 Cabot Industrial Trust........................... 44,962
6,500 Camden Property Trust............................ 169,000
5,100 Carramerica Realty Corporation................... 122,400
8,900 Commercial Net Lease Realty...................... 117,925
7,000 Corporate Office Properties...................... 49,875
780 Crestline Capital Corporation (b)................ 11,407
3,500 Eastgroup Properties............................. 64,531
3,100 Equity Office Properties Trust................... 74,400
<CAPTION>
MARKET
SHARES VALUE(a)
- -------- ----------------
<C> <S> <C>
FINANCIAL--CONTINUED
3,100 Equity Residential Property Trust................ $ 125,356
2,600 Essex Property Trust............................. 77,350
2,500 Excel Legacy Corporation (b)..................... 10,000
4,000 Felcor Lodging Trust, Inc........................ 92,250
4,200 First Industrial Realty Trust.................... 112,612
1,700 Franchise Finance Corporation of America......... 40,800
6,400 Gables Residential Trust......................... 148,400
6,500 Glenborough Realty Trust, Inc.................... 132,438
2,550 Golf Trust of America, Inc....................... 70,763
5,800 Highwoods Properties, Inc........................ 149,350
1,900 HRPT Properties Trust............................ 26,719
6,900 Innkeepers USA Trust............................. 81,506
5,100 Kilroy Realty.................................... 117,300
3,400 Lennar Corporation............................... 85,850
2,800 LNR Property Corporation......................... 55,825
5,900 Macerich Company................................. 151,188
2,800 Mack-Cali Realty................................. 86,450
7,500 New Plan Excel Realty Trust...................... 166,406
4,700 Pacific Gulf Properties, Inc..................... 94,294
5,800 Pan Pacific Retail Properties.................... 115,638
5,200 Philips International Realty..................... 79,950
600 Post Properties, Inc............................. 23,063
2,300 Prentiss Properties Trust........................ 51,319
1,900 Prologis Trust................................... 39,425
1,700 Public Storage, Inc.............................. 46,006
6,300 Regency Realty Corporation....................... 140,175
5,600 Storage Trust Realty............................. 130,900
2,500 Summit Properties Incorporated................... 43,125
11,300 Sunstone Hotel Investors......................... 106,644
2,000 Tower Realty Trust............................... 40,250
2,400 Trinet Corporation............................... 64,200
2,400 Urban Shopping Centers, Inc...................... 78,600
1,500 Vornado Realty Trust............................. 50,625
----------------
4,100,339
----------------
Total common stock
(cost: $5,560,268).......................................... 5,097,407
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
- ----------
<C> <S> <C> <C> <C>
SHORT-TERM SECURITIES (5.2%)
$ 78,877 Temporary Investment Fund--Temp Fund Portfolio, current rate 4.990%... 78,877
200,000 U.S. Treasury Bond............................... 4.057% 03/11/99 198,412
-----------
Total short-term securities (cost: $277,189).......................... 277,289
-----------
Total investments in securities (cost: $5,837,457) (c)................ $ 5,374,696
-----------
-----------
</TABLE>
Notes to Investments in Securities
- ----------------------
(a) Securities are valued by procedures described in note 2 to the financial
statements.
(b) Presently non-income producing.
(c) At December 31, 1998 the cost of securities for federal income tax purposes
was $5,880,838. The aggregate unrealized appreciation and depreciation of
investments in securities based on this cost were:
<TABLE>
<S> <C>
Gross unrealized appreciation.......... $ 153,105
Gross unrealized depreciation.......... (659,247)
---------
Net unrealized depreciation............ $(506,142)
---------
---------
</TABLE>
87
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<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*............... $478,392,285 $175,445,283 $125,391,567 $639,523,570 $124,366,426
Cash in bank on demand
deposit................ 7 345,390 2,657 312,274 266,832
Receivable for Fund
shares sold............ 406,310 355,387 1,369,080 774,574 161,895
Receivable for investment
securities sold........ 2,812,794 -- -- 1,263,554 262,393
Dividends and accrued
interest receivable.... 407,982 2,799,112 39,817 3,032,735 1,017,605
Receivable from
Adviser................ -- -- -- -- --
Receivable for refundable
foreign income taxes
withheld............... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total assets..... 482,019,378 178,945,172 126,803,121 644,906,707 126,075,151
------------ ------------ ------------ ------------ ------------
LIABILITIES
Payable for Fund shares
repurchased............ 594,653 111,372 618,789 708,400 97,522
Dividends payable to
shareholders........... -- -- 7,328 -- --
Payable for investment
securities purchased... 13,042,554 41,167 -- 6,201,395 1,619,539
Payable to Adviser....... 255 24 32 192 --
Payable for foreign taxes
withheld............... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total
liabilities.... 13,637,462 152,563 626,149 6,909,987 1,717,061
------------ ------------ ------------ ------------ ------------
Net assets applicable to
outstanding capital
stock.................. $468,381,916 $178,792,609 $126,176,972 $637,996,720 $124,358,090
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Represented by:
Capital
stock--authorized
10 trillion shares
of $.01 par
value**............ $ 1,710,735 $ 1,367,120 $ 1,261,770 $ 2,799,635 $ 1,021,245
Additional paid-in
capital............ 313,076,930 165,729,740 124,915,202 438,514,448 116,920,529
Undistributed
(distributions in
excess of) net
investment
income............. 1,551,114 9,315,816 -- 14,000,766 7,552,106
Accumulated net
realized gains
(losses) from
investments and
foreign currency
transactions....... 11,589,885 3,396,543 -- 30,140,771 (2,284,594)
Unrealized
appreciation
(depreciation) on
investments and
translation of
assets and
liabilities in
foreign
currencies......... 140,453,252 (1,016,610) -- 152,541,100 1,148,804
------------ ------------ ------------ ------------ ------------
Total--representing
net assets
applicable to
outstanding
capital
stock.......... $468,381,916 $178,792,609 $126,176,972 $637,996,720 $124,358,090
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net asset value per share
of outstanding capital
stock.................. $ 2.74 $ 1.31 $ 1.00 $ 2.28 $ 1.22
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
* Identified cost....... $337,939,033 $176,461,893 $125,391,567 $486,982,470 $123,217,622
** Shares outstanding.... 171,073,483 136,711,959 126,176,972 279,963,543 102,124,500
</TABLE>
See accompanying notes to financial statements.
88
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT GOVERNMENT GOVERNMENT
INDEX 500 APPRECIATION STOCK COMPANY BOND 2002 BOND 2006 BOND 2010
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in
securities, at market
value--see accompanying
schedule for detailed
listing*............... $536,681,362 $392,672,397 $310,204,478 $ 198,310,645 $6,854,157 $6,866,329 $5,648,212
Cash in bank on demand
deposit................ 2,397 5 2,201 10,203 81 -- 10
Receivable for Fund
shares sold............ 1,725,667 428,421 328,604 411,036 21 3,580 282
Receivable for investment
securities sold........ 3,955,086 -- -- 25,830 -- -- --
Dividends and accrued
interest receivable.... 592,162 48,140 943,308 48,965 238 270 253
Receivable from
Adviser................ -- -- 20,110 -- -- -- --
Receivable for refundable
foreign income taxes
withheld............... -- -- 330,694 -- -- -- --
------------ ------------ -------------- ------------- ----------- ----------- -----------
Total assets..... 542,956,674 393,148,963 311,829,395 198,806,679 6,854,497 6,870,179 5,648,757
------------ ------------ -------------- ------------- ----------- ----------- -----------
LIABILITIES
Payable for Fund shares
repurchased............ 624,932 347,738 358,041 193,413 317 322 304
Dividends payable to
shareholders........... -- -- -- -- -- -- --
Payable for investment
securities purchased... 5,472,135 1,313 594,768 3,266,606 -- -- --
Payable to Adviser....... 116 265 -- 102 -- -- --
Payable for foreign taxes
withheld............... -- -- 4,033 -- -- -- --
------------ ------------ -------------- ------------- ----------- ----------- -----------
Total
liabilities.... 6,097,183 349,316 956,842 3,460,121 317 322 304
------------ ------------ -------------- ------------- ----------- ----------- -----------
Net assets applicable to
outstanding capital
stock.................. $536,859,491 $392,799,647 $310,872,553 $ 195,346,558 $6,854,180 $6,869,857 $5,648,453
------------ ------------ -------------- ------------- ----------- ----------- -----------
------------ ------------ -------------- ------------- ----------- ----------- -----------
Represented by:
Capital
stock--authorized
10 trillion shares
of $.01 par
value**............ $ 1,373,068 $ 1,110,765 $ 1,797,204 $ 1,166,045 $ 61,987 $ 54,811 $ 40,070
Additional paid-in
capital............ 292,823,052 210,752,157 247,110,047 162,394,677 6,503,413 6,093,604 4,689,177
Undistributed
(distributions in
excess of) net
investment
income............. 5,083,595 -- 10,322,676 -- 3,076 327 231,080
Accumulated net
realized gains
(losses) from
investments and
foreign currency
transactions....... 5,464,399 51,104,892 8,132,978 (18,321,456) (5,873) (19,093) (6,112)
Unrealized
appreciation
(depreciation) on
investments and
translation of
assets and
liabilities in
foreign
currencies......... 232,115,377 129,831,833 43,509,648 50,107,292 291,577 740,208 694,238
------------ ------------ -------------- ------------- ----------- ----------- -----------
Total--representing
net assets
applicable to
outstanding
capital
stock.......... $536,859,491 $392,799,647 $310,872,553 $ 195,346,558 $6,854,180 $6,869,857 $5,648,453
------------ ------------ -------------- ------------- ----------- ----------- -----------
------------ ------------ -------------- ------------- ----------- ----------- -----------
Net asset value per share
of outstanding capital
stock.................. $ 3.91 $ 3.54 $ 1.73 $ 1.68 $ 1.11 $ 1.25 $ 1.41
------------ ------------ -------------- ------------- ----------- ----------- -----------
------------ ------------ -------------- ------------- ----------- ----------- -----------
* Identified cost....... $304,565,985 $262,840,564 $266,711,765 $ 148,203,353 $6,562,580 $6,126,121 $4,953,974
** Shares outstanding.... 137,306,816 111,076,451 179,720,368 116,604,545 6,198,657 5,481,122 4,006,959
<CAPTION>
SMALL
VALUE COMPANY
STOCK VALUE
PORTFOLIO PORTFOLIO
------------- -----------
<S> <C> <C>
ASSETS
Investments in
securities, at market
value--see accompanying
schedule for detailed
listing*............... $ 213,132,840 $ 8,894,305
Cash in bank on demand
deposit................ 6 3,799
Receivable for Fund
shares sold............ 206,913 21,637
Receivable for investment
securities sold........ 783,573 43,953
Dividends and accrued
interest receivable.... 308,168 22,857
Receivable from
Adviser................ -- --
Receivable for refundable
foreign income taxes
withheld............... -- --
------------- -----------
Total assets..... 214,431,500 8,986,551
------------- -----------
LIABILITIES
Payable for Fund shares
repurchased............ 164,192 4,598
Dividends payable to
shareholders........... -- --
Payable for investment
securities purchased... 221,318 336,083
Payable to Adviser....... 91 2
Payable for foreign taxes
withheld............... -- --
------------- -----------
Total
liabilities.... 385,601 340,683
------------- -----------
Net assets applicable to
outstanding capital
stock.................. $ 214,045,899 $ 8,645,868
------------- -----------
------------- -----------
Represented by:
Capital
stock--authorized
10 trillion shares
of $.01 par
value**............ $ 1,216,502 $ 91,173
Additional paid-in
capital............ 192,494,321 8,925,040
Undistributed
(distributions in
excess of) net
investment
income............. 3,275,701 --
Accumulated net
realized gains
(losses) from
investments and
foreign currency
transactions....... (11,675,748) (604,675)
Unrealized
appreciation
(depreciation) on
investments and
translation of
assets and
liabilities in
foreign
currencies......... 28,735,123 234,330
------------- -----------
Total--representing
net assets
applicable to
outstanding
capital
stock.......... $ 214,045,899 $ 8,645,868
------------- -----------
------------- -----------
Net asset value per share
of outstanding capital
stock.................. $ 1.76 $ .95
------------- -----------
------------- -----------
* Identified cost....... $ 184,397,717 $ 8,659,975
** Shares outstanding.... 121,650,177 9,117,285
</TABLE>
89
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES--CONTINUED
DECEMBER 31, 1998
<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*............... $ 30,180,340 $ 10,324,724 $11,008,346 $8,140,415 $5,374,696
Cash in bank on demand
deposit................ 376,312 -- 907 -- --
Receivable for Fund
shares sold............ 10,048 30,866 50,169 25,105 7,346
Receivable for investment
securities sold........ -- 1,116,054 228,805 -- 157,773
Dividends and accrued
interest receivable.... 595,892 9,814 12,584 3,420 51,024
Unrealized appreciation
on forward foreign
currency contracts
held, at value (note
4)..................... 23,758 -- -- -- --
------------ ------------ ------------ ----------- ------------
Total assets..... 31,186,350 11,481,458 11,300,811 8,168,940 5,590,839
------------ ------------ ------------ ----------- ------------
LIABILITIES
Bank overdraft........... -- -- -- -- 116,234
Payable for Fund shares
repurchased............ 5,799 8,729 16,119 2,816 275
Payable for investment
securities purchased... -- 961,479 196,726 131,675 151,869
Payable to Adviser....... -- -- -- 4 --
Unrealized depreciation
on forward foreign
currency contracts
held, at value (note
4)..................... 28,483 -- -- -- --
------------ ------------ ------------ ----------- ------------
Total
liabilities.... 34,282 970,208 212,845 134,495 268,378
------------ ------------ ------------ ----------- ------------
Net assets applicable to
outstanding capital
stock.................. $ 31,152,068 $ 10,511,250 $11,087,966 $8,034,445 $5,322,461
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Represented by:
Capital
stock--authorized
10 trillion shares
of $.01 par
value**............ $ 297,076 $ 91,448 $ 97,298 $ 79,657 $ 63,984
Additional paid-in
capital............ 29,701,273 9,180,026 9,967,463 7,538,552 6,116,393
Undistributed
(distributions in
excess of) net
investment
income............. 212,891 -- 1,597 -- --
Accumulated net
realized gains
(losses) from
investments and
foreign currency
transactions....... 115,069 615,116 66,400 (931,437) (395,155)
Unrealized
appreciation
(depreciation) on
investments and
translation of
assets and
liabilities in
foreign
currencies......... 825,759 624,660 955,208 1,347,673 (462,761)
------------ ------------ ------------ ----------- ------------
Total--representing
net assets
applicable to
outstanding
capital
stock.......... $ 31,152,068 $ 10,511,250 $11,087,966 $8,034,445 $5,322,461
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Net asset value per share
of outstanding capital
stock.................. $ 1.05 $ 1.15 $ 1.14 $ 1.01 $ .83
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
* Identified cost....... $ 29,353,404 $ 9,700,064 $10,053,138 $6,792,742 $5,837,457
** Shares outstanding.... 29,707,607 9,144,810 9,729,767 7,965,718 6,398,392
</TABLE>
See accompanying notes to financial statements.
90
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONEY ASSET MORTGAGE
GROWTH BOND MARKET ALLOCATION SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Investment Income
Interest............. $ 528,886 $ 9,415,042 $3,965,979 $ 11,702,623 $ 8,029,968
Dividends (net of
foreign withholding
taxes of $631,121
for International
Stock Portfolio)... 3,076,067 773,187 -- 5,262,656 155,805
------------ ----------- ---------- ------------ -----------
Total investment
income......... 3,604,953 10,188,229 3,965,979 16,965,279 8,185,773
------------ ----------- ---------- ------------ -----------
Expenses (note 5):
Investment advisory
fee................ 1,933,104 797,554 365,699 2,789,366 558,926
Custodian fees....... 8,553 8,561 4,618 18,718 11,553
Administrative
services fee....... 30,000 30,000 30,000 30,000 30,000
Auditing and
accounting
services........... 17,958 9,466 6,358 33,066 12,417
Legal fees........... 2,108 1,860 1,766 2,290 1,813
Registration fees.... 35 -- 712 -- 1,630
Printing and
shareholder
reports............ 51,615 20,926 15,038 75,373 13,785
Directors' fees...... 7,542 3,187 1,413 11,326 2,169
Insurance............ 2,623 859 998 3,516 1,374
Other................ 301 -- 782 858 --
------------ ----------- ---------- ------------ -----------
Total expenses... 2,053,839 872,413 427,384 2,964,513 633,667
Less fees and
expenses waived or
absorbed by
Minnesota Life..... -- -- -- -- --
------------ ----------- ---------- ------------ -----------
Total net
expenses....... 2,053,839 872,413 427,384 2,964,513 633,667
------------ ----------- ---------- ------------ -----------
Investment income
(loss)--net.... 1,551,114 9,315,816 3,538,595 14,000,766 7,552,106
------------ ----------- ---------- ------------ -----------
Realized and unrealized
gains (losses) on
investments and foreign
currencies:
Net realized gains
(losses) from:
Investments (note
3)............. 12,032,482 3,404,521 -- 31,558,197 608,476
Net change in
unrealized
appreciation or
depreciation on:
Investments...... 104,951,872 (3,204,439) -- 75,505,619 (1,161,588)
------------ ----------- ---------- ------------ -----------
Net gains
(losses) on
investments.... 116,984,354 200,082 -- 107,063,816 (553,112)
------------ ----------- ---------- ------------ -----------
Net increase (decrease)
in net assets resulting
from operations........ $118,535,468 $ 9,515,898 $3,538,595 $121,064,582 $ 6,998,994
------------ ----------- ---------- ------------ -----------
------------ ----------- ---------- ------------ -----------
</TABLE>
See accompanying notes to financial statements.
91
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF OPERATIONS--CONTINUED
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MATURING
CAPITAL INTERNATIONAL SMALL GOVERNMENT
INDEX 500 APPRECIATION STOCK COMPANY BOND 2002
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income
Interest............. $ 112,962 $ 585,329 $ 1,154,365 $ 747,976 $317,002
Dividends (net of
foreign withholding
taxes of $631,121
for International
Stock Portfolio)... 7,030,298 1,321,048 9,686,186 201,570 --
------------ ------------- -------------- ------------- -----------
Total investment
income......... 7,143,260 1,906,377 10,840,551 949,546 317,002
------------ ------------- -------------- ------------- -----------
Expenses (note 5):
Investment advisory
fee................ 1,883,032 2,474,808 2,179,226 1,377,138 10,114
Custodian fees....... 11,076 6,699 465,382 9,509 6,446
Administrative
services fee....... 30,000 30,000 30,000 30,000 30,000
Auditing and
accounting
services........... 10,858 14,358 189,631 6,158 6,558
Legal fees........... 2,200 2,070 2,061 1,929 1,704
Registration fees.... 1,632 -- 205 -- 10
Printing and
shareholder
reports............ 61,916 45,776 49,791 26,829 630
Directors' fees...... 8,821 6,414 6,091 3,651 100
Insurance............ 2,939 2,353 2,382 1,598 245
S&P Licensing fee.... 47,078 -- -- -- --
Other................ 113 1,055 1,300 1,113 68
------------ ------------- -------------- ------------- -----------
Total expenses... 2,059,665 2,583,533 2,926,069 1,457,925 55,875
Less fees and
expenses waived or
absorbed by
Minnesota Life..... -- -- -- -- (37,949)
------------ ------------- -------------- ------------- -----------
Total net
expenses....... 2,059,665 2,583,533 2,926,069 1,457,925 17,926
------------ ------------- -------------- ------------- -----------
Investment income
(loss)--net.... 5,083,595 (677,156) 7,914,482 (508,379) 299,076
------------ ------------- -------------- ------------- -----------
Realized and unrealized
gains (losses) on
investments and foreign
currencies:
Net realized gains
(losses) from:
Investments (note
3)............. 5,982,474 51,782,047 15,541,183 (14,937,281) 53,290
Foreign currency
transactions... -- -- (173,243) -- --
Net change in
unrealized
appreciation or
depreciation on:
Investments...... 102,199,332 39,852,762 (5,100,409) 17,789,046 112,608
Translation of
assets and
liabilities in
foreign
currency....... -- -- 31,259 -- --
------------ ------------- -------------- ------------- -----------
Net gains
(losses) on
investments.... 108,181,806 91,634,809 10,298,790 2,851,765 165,898
------------ ------------- -------------- ------------- -----------
Net increase (decrease)
in net assets resulting
from operations........ $113,265,401 $90,957,653 $18,213,272 $ 2,343,386 $464,974
------------ ------------- -------------- ------------- -----------
------------ ------------- -------------- ------------- -----------
</TABLE>
(a) Period from April 24, 1998, commencement of operations, to December 31,
1998.
See accompanying notes to financial statements.
92
<PAGE>
<TABLE>
<CAPTION>
MATURING MATURING SMALL
GOVERNMENT GOVERNMENT VALUE COMPANY GLOBAL INDEX 400 MACRO-CAP
BOND 2006 BOND 2010 STOCK VALUE BOND MID-CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Interest............. $308,484 $247,952 $ 748,010 $ 22,083 $ 1,605,570 $ 4,211 $ 15,190
Dividends (net of
foreign withholding
taxes of $631,121
for International
Stock Portfolio)... -- -- 4,209,226 131,352 -- 83,215 89,396
----------- ----------- ------------ ----------- ----------- ----------- -----------
Total investment
income......... 308,484 247,952 4,957,236 153,435 1,605,570 87,426 104,586
----------- ----------- ------------ ----------- ----------- ----------- -----------
Expenses (note 5):
Investment advisory
fee................ 12,908 10,545 1,593,193 47,485 160,962 26,300 47,602
Custodian fees....... 5,607 6,221 7,947 978 10,857 1,983 13,078
Administrative
services fee....... 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Auditing and
accounting
services........... 6,558 6,558 7,858 16,258 91,616 16,608 77,639
Legal fees........... 1,704 1,703 1,948 1,706 1,726 1,706 1,705
Registration fees.... 13 1 2,621 558 3,445 631 670
Printing and
shareholder
reports............ 616 508 32,399 15,279 2,032 509 484
Directors' fees...... 99 81 3,837 110 454 114 114
Insurance............ 247 243 1,732 295 549 295 297
S&P Licensing fee.... -- -- -- -- -- 10,000 --
Other................ 67 64 -- 3,162 147 962 668
----------- ----------- ------------ ----------- ----------- ----------- -----------
Total expenses... 57,819 55,924 1,681,535 115,831 301,788 89,108 172,257
Less fees and
expenses waived or
absorbed by
Minnesota Life..... (37,165) (39,052) -- (58,848) -- (52,946) (114,468)
----------- ----------- ------------ ----------- ----------- ----------- -----------
Total net
expenses....... 20,654 16,872 1,681,535 56,983 301,788 36,162 57,789
----------- ----------- ------------ ----------- ----------- ----------- -----------
Investment income
(loss)--net.... 287,830 231,080 3,275,701 96,452 1,303,782 51,264 46,797
----------- ----------- ------------ ----------- ----------- ----------- -----------
Realized and unrealized
gains (losses) on
investments and foreign
currencies:
Net realized gains
(losses) from:
Investments (note
3)............. 14,313 2,583 (11,432,200) (559,881) 1,143,837 829,653 558,046
Foreign currency
transactions... -- -- -- -- 655,192 -- --
Net change in
unrealized
appreciation or
depreciation on:
Investments...... 393,989 350,712 11,461,312 46,696 1,154,681 573,973 1,033,299
Translation of
assets and
liabilities in
foreign
currency....... -- -- -- -- (167,099) -- --
----------- ----------- ------------ ----------- ----------- ----------- -----------
Net gains
(losses) on
investments.... 408,302 353,295 29,112 (513,185) 2,786,611 1,403,626 1,591,345
----------- ----------- ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ $696,132 $584,375 $ 3,304,813 $ (416,733) $ 4,090,393 $ 1,454,890 $1,638,142
----------- ----------- ------------ ----------- ----------- ----------- -----------
----------- ----------- ------------ ----------- ----------- ----------- -----------
<CAPTION>
MICRO-CAP REAL ESTATE
GROWTH SECURITIES
PORTFOLIO PORTFOLIO(a)
----------- ------------
<S> <C> <C>
Investment Income
Interest............. $ 32,964 $ 13,976
Dividends (net of
foreign withholding
taxes of $631,121
for International
Stock Portfolio)... 14,071 190,858
----------- ------------
Total investment
income......... 47,035 204,834
----------- ------------
Expenses (note 5):
Investment advisory
fee................ 60,544 23,859
Custodian fees....... 3,658 2,903
Administrative
services fee....... 30,000 20,000
Auditing and
accounting
services........... 16,608 7,100
Legal fees........... 1,706 1,704
Registration fees.... 674 1,724
Printing and
shareholder
reports............ 416 1,740
Directors' fees...... 93 121
Insurance............ 290 242
S&P Licensing fee.... -- --
Other................ 1,771 974
----------- ------------
Total expenses... 115,760 60,367
Less fees and
expenses waived or
absorbed by
Minnesota Life..... (46,960) (31,736)
----------- ------------
Total net
expenses....... 68,800 28,631
----------- ------------
Investment income
(loss)--net.... (21,765) 176,203
----------- ------------
Realized and unrealized
gains (losses) on
investments and foreign
currencies:
Net realized gains
(losses) from:
Investments (note
3)............. (819,037) (395,155)
Foreign currency
transactions... -- --
Net change in
unrealized
appreciation or
depreciation on:
Investments...... 1,805,838 (462,761)
Translation of
assets and
liabilities in
foreign
currency....... -- --
----------- ------------
Net gains
(losses) on
investments.... 986,801 (857,916)
----------- ------------
Net increase (decrease)
in net assets resulting
from operations........ $ 965,036 $(681,713)
----------- ------------
----------- ------------
</TABLE>
(a) Period from April 24, 1998, commencement of operations, to December 31,
1998.
93
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
MONEY
GROWTH BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ 1,551,114 $ 3,415,607 $ 9,315,816 $ 8,612,808 $ 3,538,595 $ 3,620,845
Net realized gains on
investments............ 12,032,482 53,880,278 3,404,521 1,986,620 -- --
Net change in unrealized
appreciation or
depreciation of
investments............ 104,951,872 28,157,592 (3,204,439) 1,681,772 -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net
assets resulting from
operations............. 118,535,468 85,453,477 9,515,898 12,281,200 3,538,595 3,620,845
------------- ------------- ------------- ------------- ------------- -------------
Distributions to
shareholders from:
Investment income --
net.................... (3,415,606) (2,348,607) (8,612,808) (7,069,687) (3,538,595) (3,620,845)
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) (3,538,595) (3,620,845)
------------- ------------- ------------- ------------- ------------- -------------
Capital share
transactions (note 6):
Proceeds from sales:..... 97,160,616 65,672,298 64,234,944 42,632,087 166,500,747 225,862,015
Shares issued as a result
of reinvested
distributions.......... 57,738,481 63,035,427 10,427,093 7,069,687 3,538,595 3,620,875
Payments for redemption
of shares.............. (78,130,317) (68,774,181) (34,782,027) (40,975,071) (97,445,660) (227,360,220)
------------- ------------- ------------- ------------- ------------- -------------
Increase in net assets
from capital share
transactions........... 76,768,780 59,933,544 39,880,010 8,726,703 72,593,682 2,122,670
------------- ------------- ------------- ------------- ------------- -------------
Total increase in net
assets................. 137,565,767 82,351,594 38,968,815 13,938,216 72,593,682 2,122,670
Net assets at beginning
of year................ 330,816,149 248,464,555 139,823,794 125,885,578 53,583,290 51,460,620
------------- ------------- ------------- ------------- ------------- -------------
Net assets at end of
year*.................. $ 468,381,916 $ 330,816,149 $ 178,792,609 $ 139,823,794 $ 126,176,972 $ 53,583,290
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
* including undistributed
net investment income
of..................... $ 1,551,114 $ 3,415,606 $ 9,315,816 $ 8,612,808 $ -- $ --
</TABLE>
See accompanying notes to financial statements.
94
<PAGE>
<TABLE>
<CAPTION>
ASSET MORTGAGE
ALLOCATION SECURITIES INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ 14,000,766 $ 14,159,977 $ 7,552,106 $ 5,857,983 $ 5,083,595 $ 3,885,375
Net realized gains
(losses) on
investments............ 31,558,197 34,718,146 608,476 258,539 5,982,474 2,363,824
Net change in unrealized
appreciation or
depreciation of
investments............ 75,505,619 31,087,741 (1,161,588) 1,151,502 102,199,332 70,383,844
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net
assets resulting from
operations............. 121,064,582 79,965,864 6,998,994 7,268,024 113,265,401 76,633,043
------------- ------------- ------------- ------------- ------------- -------------
Distributions to
shareholders from:
Investment income --
net.................... (14,159,977) (11,750,366) (5,857,983) (4,934,258) (3,885,375) (2,857,956)
Net realized gains....... (35,984,079) (24,394,804) -- -- (2,435,409) (3,610,752)
------------- ------------- ------------- ------------- ------------- -------------
Total distributions...... (50,144,056) (36,145,170) (5,857,983) (4,934,258) (6,320,784) (6,468,708)
------------- ------------- ------------- ------------- ------------- -------------
Capital share
transactions (note 6):
Proceeds from sales:..... 109,955,098 84,127,999 42,032,571 35,207,120 172,079,899 146,405,647
Shares issued as a result
of reinvested
distributions.......... 50,144,056 36,145,170 5,857,983 4,934,258 6,320,784 6,468,708
Payments for redemption
of shares.............. (100,243,074) (71,582,893) (23,906,575) (19,234,019) (129,236,528) (46,683,389)
------------- ------------- ------------- ------------- ------------- -------------
Increase in net assets
from capital share
transactions........... 59,856,080 48,690,276 23,983,979 20,907,359 49,164,155 106,190,966
------------- ------------- ------------- ------------- ------------- -------------
Total increase in net
assets................. 130,776,606 92,510,970 25,124,990 23,241,125 156,108,772 176,355,301
Net assets at beginning
of year................ 507,220,114 414,709,144 99,233,100 75,991,975 380,750,719 204,395,418
------------- ------------- ------------- ------------- ------------- -------------
Net assets at end of
year*.................. $ 637,996,720 $ 507,220,114 $ 124,358,090 $ 99,233,100 $ 536,859,491 $ 380,750,719
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
* including undistributed
net investment income
of..................... $ 14,000,766 $ 14,159,977 $ 7,552,106 $ 5,857,983 $ 5,083,595 $ 3,885,375
<CAPTION>
CAPITAL INTERNATIONAL
APPRECIATION STOCK
PORTFOLIO PORTFOLIO
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ (677,156) $ (299,161) $ 7,914,482 $ 5,975,639
Net realized gains
(losses) on
investments............ 51,782,047 17,638,408 15,367,940 9,490,907
Net change in unrealized
appreciation or
depreciation of
investments............ 39,852,762 46,106,787 (5,069,150) 11,143,244
------------- ------------- ------------- -------------
Net increase in net
assets resulting from
operations............. 90,957,653 63,446,034 18,213,272 26,609,790
------------- ------------- ------------- -------------
Distributions to
shareholders from:
Investment income --
net.................... -- -- (8,175,659) (7,116,929)
Net realized gains....... (17,585,344) (21,514,696) (8,049,161) (3,550,501)
------------- ------------- ------------- -------------
Total distributions...... (17,585,344) (21,514,696) (16,224,820) (10,667,430)
------------- ------------- ------------- -------------
Capital share
transactions (note 6):
Proceeds from sales:..... 72,728,540 56,948,898 77,740,160 86,689,935
Shares issued as a result
of reinvested
distributions.......... 17,585,344 21,514,696 16,224,820 10,667,430
Payments for redemption
of shares.............. (65,551,782) (40,197,982) (72,251,315) (39,736,890)
------------- ------------- ------------- -------------
Increase in net assets
from capital share
transactions........... 24,762,102 38,265,612 21,713,665 57,620,475
------------- ------------- ------------- -------------
Total increase in net
assets................. 98,134,411 80,196,950 23,702,117 73,562,835
Net assets at beginning
of year................ 294,665,236 214,468,286 287,170,436 213,607,601
------------- ------------- ------------- -------------
Net assets at end of
year*.................. $ 392,799,647 $ 294,665,236 $ 310,872,553 $ 287,170,436
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
* including undistributed
net investment income
of..................... $ -- $ -- $ 7,914,482 $ 8,175,659
</TABLE>
95
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
MATURING MATURING
SMALL GOVERNMENT GOVERNMENT
COMPANY BOND 2002 BOND 2006
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- --------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ (508,379) $ (89,665) $ 299,076 $ 234,884 $ 287,830 $ 211,152
Net realized gains
(losses) on
investments............ (14,937,281) (998,806) 53,290 8,948 14,313 3,169
Net change in unrealized
appreciation or
depreciation of
investments............ 17,789,046 14,048,307 112,608 73,430 393,989 206,632
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 2,343,386 12,959,836 464,974 317,262 696,132 420,953
------------- ------------- ------------ ------------ ------------ ------------
Distributions to
shareholders from:
Investment income --
net.................... -- (2,423) (326,884) (205,875) (321,152) (176,812)
-- -- -- -- -- --
Tax return of capital.... -- -- -- -- -- --
Net realized gains....... -- -- (68,111) (30,370) (25,396) (47,621)
Excess distribution of
net realized gains..... -- -- -- -- -- --
------------- ------------- ------------ ------------ ------------ ------------
Total distributions...... -- (2,423) (394,995) (236,245) (346,548) (224,433)
------------- ------------- ------------ ------------ ------------ ------------
Capital share
transactions (note 6):
Proceeds from sales:..... 58,982,956 64,976,826 2,802,444 709,005 3,615,922 743,478
Shares issued as a result
of reinvested
distributions.......... -- 2,423 394,995 236,245 346,548 224,433
Payments for redemption
of shares.............. (48,896,516) (39,563,684) (621,680) (717,810) (1,342,384) (359,380)
------------- ------------- ------------ ------------ ------------ ------------
Increase in net assets
from capital share
transactions........... 10,086,440 25,415,565 2,575,759 227,440 2,620,086 608,531
------------- ------------- ------------ ------------ ------------ ------------
Total increase in net
assets................. 12,429,826 38,372,978 2,645,738 308,457 2,969,670 805,051
Net assets at beginning
of year................ 182,916,732 144,543,754 4,208,442 3,899,985 3,900,187 3,095,136
------------- ------------- ------------ ------------ ------------ ------------
Net assets at end of
year*.................. $ 195,346,558 $ 182,916,732 $ 6,854,180 $ 4,208,442 $ 6,869,857 $ 3,900,187
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
* including
(distributions in
excess of) or
undistributed net
investment income of... $ -- $ -- $ 3,076 $ 30,884 $ 2,830 $ 36,152
</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.
See accompanying notes to financial statements.
96
<PAGE>
<TABLE>
<CAPTION>
MATURING SMALL
GOVERNMENT VALUE COMPANY
BOND 2010 STOCK VALUE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- ----------------------------- ---------------------------
1998 1997 1998 1997 1998 1997(a)
------------ ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ 231,080 $ 166,131 $ 3,275,701 $ 1,762,513 $ 96,452 $ 14,790
Net realized gains
(losses) on
investments............ 2,583 16,729 (11,432,200) 16,644,728 (559,881) (53,657)
Net change in unrealized
appreciation or
depreciation of
investments............ 350,712 238,794 11,461,312 5,389,098 46,696 187,634
------------ ------------ ------------- ------------- ------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 584,375 421,654 3,304,813 23,796,339 (416,733) 148,767
------------ ------------ ------------- ------------- ------------ ------------
Distributions to
shareholders from:
Investment income --
net.................... (166,131) (118,592) -- (2,259,682) (111,242) --
-- -- -- -- -- --
Tax return of capital.... -- -- -- -- (548) --
Net realized gains....... (3,318) (24,752) (344,373) (17,911,742) -- --
Excess distribution of
net realized gains..... -- -- -- -- -- --
------------ ------------ ------------- ------------- ------------ ------------
Total distributions...... (169,449) (143,344) (344,373) (20,171,424) (111,790) --
------------ ------------ ------------- ------------- ------------ ------------
Capital share
transactions (note 6):
Proceeds from sales:..... 3,483,945 887,081 73,779,055 118,592,216 7,489,165 6,154,243
Shares issued as a result
of reinvested
distributions.......... 169,449 143,344 344,373 20,171,424 111,790 --
Payments for redemption
of shares.............. (1,596,250) (945,169) (71,131,363) (31,482,289) (3,603,869) (1,125,705)
------------ ------------ ------------- ------------- ------------ ------------
Increase in net assets
from capital share
transactions........... 2,057,144 85,256 2,992,065 107,281,351 3,997,086 5,028,538
------------ ------------ ------------- ------------- ------------ ------------
Total increase in net
assets................. 2,472,070 363,566 5,952,505 110,906,266 3,468,563 5,177,305
Net assets at beginning
of year................ 3,176,383 2,812,817 208,093,394 97,187,128 5,177,305 --
------------ ------------ ------------- ------------- ------------ ------------
Net assets at end of
year*.................. $ 5,648,453 $ 3,176,383 $ 214,045,899 $ 208,093,394 $ 8,645,868 $ 5,177,305
------------ ------------ ------------- ------------- ------------ ------------
------------ ------------ ------------- ------------- ------------ ------------
* including
(distributions in
excess of) or
undistributed net
investment income of... $ 231,080 $ 166,131 $ 3,275,701 $ -- $ -- $ 14,790
<CAPTION>
GLOBAL INDEX 400
BOND MID-CAP
PORTFOLIO PORTFOLIO
--------------------------- ---------------------------
1998 1997(b) 1998 1997(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ 1,303,782 $ 250,450 $ 51,264 $ 11,340
Net realized gains
(losses) on
investments............ 1,799,029 (71,587) 829,653 (27,501)
Net change in unrealized
appreciation or
depreciation of
investments............ 987,582 (161,823) 573,973 50,687
------------ ------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 4,090,393 17,040 1,454,890 34,526
------------ ------------ ------------ ------------
Distributions to
shareholders from:
Investment income --
net.................... (878,174) (250,450) (64,340) --
-- (119,550) -- --
Tax return of capital.... -- -- -- --
Net realized gains....... (1,678,937) (21,580) (184,870) (430)
Excess distribution of
net realized gains..... -- (5,023) -- --
------------ ------------ ------------ ------------
Total distributions...... (2,557,111) (396,603) (249,210) (430)
------------ ------------ ------------ ------------
Capital share
transactions (note 6):
Proceeds from sales:..... 5,272,273 26,248,677 7,061,818 5,678,904
Shares issued as a result
of reinvested
distributions.......... 2,557,111 396,603 249,210 430
Payments for redemption
of shares.............. (3,229,318) (1,246,997) (3,057,348) (661,540)
------------ ------------ ------------ ------------
Increase in net assets
from capital share
transactions........... 4,600,066 25,398,283 4,253,680 5,017,794
------------ ------------ ------------ ------------
Total increase in net
assets................. 6,133,348 25,018,720 5,459,360 5,051,890
Net assets at beginning
of year................ 25,018,720 -- 5,051,890 --
------------ ------------ ------------ ------------
Net assets at end of
year*.................. $ 31,152,068 $ 25,018,720 $ 10,511,250 $ 5,051,890
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
* including
(distributions in
excess of) or
undistributed net
investment income of... $ 212,891 $ (212,717) $ -- $ 11,340
</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.
97
<PAGE>
ADVANTUS SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
MACRO-CAP MICRO-CAP REAL ESTATE
VALUE GROWTH SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------- ------------
1998 1997(c) 1998 1997(d) 1998(e)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations:
Investment income (loss)
-- net................. $ 46,797 $ 20,572 $ (21,765) $ (3,373) $ 176,203
Net realized gains
(losses) on
investments............ 558,046 (51,812) (819,037) 27,129 (395,155)
Net change in unrealized
appreciation or
depreciation of
investments............ 1,033,299 (78,091) 1,805,838 (458,165) (462,761)
------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 1,638,142 (109,331) 965,036 (434,409) (681,713)
------------ ------------ ------------ ------------ ------------
Distributions to
shareholders from:
Investment income --
net.................... (45,572) (20,200) -- -- (175,908)
Tax return of capital.... -- -- -- -- (28,239)
Net realized gains....... (437,926) (1,908) -- (139,529) --
------------ ------------ ------------ ------------ ------------
Total distributions...... (483,498) (22,108) -- (139,529) (204,147)
------------ ------------ ------------ ------------ ------------
Capital share
transactions (note 6):
Proceeds from sales:..... 7,280,348 5,357,270 4,104,094 5,479,740 6,173,915
Shares issued as a result
of reinvested
distributions.......... 483,498 22,108 -- 139,529 204,147
Payments for redemption
of shares.............. (2,753,948) (324,515) (1,625,610) (454,406) (169,741)
------------ ------------ ------------ ------------ ------------
Increase in net assets
from capital share
transactions........... 5,009,898 5,054,863 2,478,484 5,164,863 6,208,321
------------ ------------ ------------ ------------ ------------
Total increase in net
assets................. 6,164,542 4,923,424 3,443,520 4,590,925 5,322,461
Net assets at beginning
of year................ 4,923,424 -- 4,590,925 -- --
------------ ------------ ------------ ------------ ------------
Net assets at end of
year*.................. $ 11,087,966 $ 4,923,424 $ 8,034,445 $ 4,590,925 $ 5,322,461
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
* including undistributed
net investment income
of..................... $ 1,597 $ 372 $ -- $ -- $ --
</TABLE>
(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 December 31,
1998.
See accompanying notes to financial statements.
98
<PAGE>
ADVANTUS SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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 nineteen portfolios (Growth, Bond, Money
Market, Asset Allocation, Mortgage Securities, Index 500, Capital Appreciation,
International Stock, Small Company, 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 and Real Estate Securities). The investment objective of
each Portfolio is listed below. The Fund's prospectus provides a more detailed
description of each Portfolio's investment objective, policies and strategies.
<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 2002, 2006 & 2010 Portfolios................. Maximize investment return
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
MidCap 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 Minnesota Life Insurance Company's (Minnesota Life),
formerly known as The Minnesota Mutual Life Insurance Company, separate accounts
in connection with Minnesota Life 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 Life 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.
(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.
99
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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. Global Bond may also enter into these
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one country to another. 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.
100
<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 December 31, 1998, which, if not offset by subsequent capital
gains, will expire December 31, 2002 through 2007. 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................................................ $ 2,197,150
Small Company...................................................... 15,159,260
Value Stock........................................................ 11,551,098
Small Company Value................................................ 477,770
Micro-Cap Growth................................................... 914,937
Real Estate Securities............................................. 258,130
</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 ACCUMULATED ADDITIONAL PAID
INVESTMENT REALIZED IN
INCOME GAIN/LOSS CAPITAL
---------------- ---------------- ---------------
<S> <C> <C> <C>
Capital Appreciation........................................ $ 677,156 $ (677,156) $ --
International Stock......................................... 84,879 (78,769) (6,110)
Small Company............................................... 508,379 -- (508,379)
Small Company Value......................................... 548 8,863 (9,411)
Index 400................................................... 1,736 (1,736) --
Micro-Cap Growth............................................ 21,765 -- (21,765)
Maturing Government Bond 2006............................... (2,503) 2,503 --
Real Estate Securities...................................... 27,944 -- (27,944)
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income for Money Market
are declared and reinvested daily in additional shares of capital stock. For
Portfolios other than Money Market, distributions from net investment income and
realized gains, if any, will generally be declared and reinvested in additional
shares on an annual basis.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities which have been purchased by the Fund on
a forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities are subject to market
fluctuations. As of December 31, 1998, the Mortgage Securities Portfolio had
entered into outstanding, when-issued or forward commitments of $758,828,
respectively. The Portfolio has segregated assets, with the Portfolio's
custodian, to cover such when-issued and forward commitments.
101
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) INVESTMENT SECURITY TRANSACTIONS
For the year ended December 31, 1998, the cost of purchases and proceeds
from sales of investment securities aggregated $435,761,574 and $364,629,432,
respectively, for Money Market. For the other Portfolios, the cost of purchases
and proceeds from sales of investment securities, other than temporary
investments in short-term securities, for the period ended December 31, 1998
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Growth............................................. $284,550,019 $ 251,507,404
Bond............................................... 423,108,042 385,736,263
Asset Allocation................................... 739,104,776 698,021,623
Mortgage Securities................................ 151,160,566 125,124,496
Index 500.......................................... 190,163,992 141,581,465
Capital Appreciation............................... 265,691,368 269,303,635
International Stock................................ 66,555,633 61,645,236
Small Company...................................... 142,215,254 130,276,557
Maturing Government Bond 2002...................... 4,248,034 1,829,748
Maturing Government Bond 2006...................... 3,594,625 1,112,608
Maturing Government Bond 2010...................... 3,288,924 1,189,915
Value Stock........................................ 191,608,384 177,577,597
Small Company Value................................ 8,144,228 4,178,560
Global Bond........................................ 76,587,097 69,237,186
Index 400 Mid-Cap.................................. 9,461,062 5,650,298
Macro-Cap Value.................................... 15,029,752 10,691,848
Micro-Cap Growth................................... 5,008,325 3,333,497
Real Estate Securities............................. 8,454,040 2,470,345
</TABLE>
(4) FORWARD FOREIGN CURRENCY CONTRACTS
On December 31, 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
- --------- ----------------------- ----------------------- --------------- ---------------
<C> <C> <S> <C> <C> <C> <C>
2/10/99 7,200,000 US$ 6,132,357 XEU $ -- $ 8,307
1/26/99 1,461,168 US$ 2,428,461 DEM -- 2,159
1/22/99 620,000 US$ 1,028,580 DEM -- 2,264
1/27/99 524,000 GBP 1,443,293 DEM -- 1,324
1/26/99 1,180,000 GBP 3,246,888 DEM -- 5,325
2/10/99 6,132,357 XEU 12,032,910 DEM 23,758 --
2/22/99 3,500,000 ZAR 585,141 US$ -- 9,104
------ ------
$ 23,758 $ 28,483
------ ------
------ ------
</TABLE>
<TABLE>
<S> <C>
DEM German Mark
GBP British Sterling Pound
US$ United States Dollar
XEU European Currency Unit
ZAR South African Rand
</TABLE>
(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 Life. On June 1, 1998,
Advantus Capital merged with MIMLIC Management retaining the
102
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
Advantus Capital name and became a wholly-owned subsidiary of Minnesota Life.
Under the advisory agreement, Advantus Capital manages the Funds 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 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>
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 Life directly incurs and pays these operating expenses
relating to the Fund and the Fund in turn reimburses Minnesota Life. Minnesota
Life has voluntarily agreed to absorb all fees
103
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(5) EXPENSES AND RELATED PARTY TRANSACTIONS--(CONTINUED)
and expenses for each portfolio that exceed various percentages of average daily
net assets. During the year ended December 31, 1998, Minnesota Life voluntarily
agreed to absorb $37,949, $37,165, $39,052, $58,848, $52,946, $114,468, $46,960
and $31,736 in expenses that were otherwise payable by 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 Life for
accounting, legal and other administrative services which Minnesota Life
provides. The administrative services fee for each Portfolio is $2,500 per
month. Effective February 1, 1999, the administrative services fee for each
Portfolio, except International Stock, Global Bond and Macro-Cap Value, will be
$3,900 per month. For International Stock, Global Bond and Macro-Cap Value, the
administrative services fee will be $2,800 per month for each Portfolio.
The Fund has an agreement with SEI Investments Mutual Fund Services (SEI)
whereby SEI provides daily fund accounting services for International Stock,
Global Bond and Macro-Cap Value Portfolios. Under this agreement, the annual fee
for each Portfolio is equal to the greater of $45,000 or .08% of the first $150
million in net assets and .05% of net assets in excess of $150 million.
(6) CAPITAL SHARE TRANSACTIONS
Transactions in shares of Portfolios for the year ended December 31, 1998
(period from April 24, 1998 to December 31, 1998 for Real Estate Securities) and
the 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........................................................ 41,346,130 29,784,127 49,909,742 33,365,340
Issued for reinvested distributions......................... 25,337,264 32,682,993 8,381,732 5,823,498
Redeemed.................................................... (33,461,190) (30,648,643) (27,061,069) (31,803,822)
------------ ------------ ------------ ------------
33,222,204 31,818,477 31,230,405 7,385,016
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET ASSET ALLOCATION
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 166,508,271 225,862,019 54,674,972 44,618,940
Issued for reinvested distributions......................... 3,531,071 3,620,869 25,210,015 20,976,850
Redeemed.................................................... (97,445,660) (227,360,218) (49,971,834) (37,920,814)
------------ ------------ ------------ ------------
72,593,682 2,122,670 29,913,153 27,674,976
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE SECURITIES INDEX 500
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 35,510,767 29,866,001 50,147,731 51,876,275
Issued for reinvested distributions......................... 5,053,091 4,427,420 1,818,869 2,584,456
Redeemed.................................................... (20,373,512) (16,400,913) (37,336,685) (16,640,621)
------------ ------------ ------------ ------------
20,190,346 17,892,508 14,629,915 37,820,110
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
CAPITAL APPRECIATION INTERNATIONAL STOCK
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 24,386,231 22,411,218 44,370,773 51,182,808
Issued for reinvested distributions......................... 5,619,457 9,939,280 8,756,986 6,814,559
Redeemed.................................................... (22,253,582) (15,804,911) (41,788,154) (23,353,360)
------------ ------------ ------------ ------------
7,752,106 16,545,587 11,339,605 34,644,007
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
104
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(6) CAPITAL SHARE TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
MATURING GOVERNMENT
SMALL COMPANY BOND 2002
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 37,038,532 41,068,398 2,485,026 660,746
Issued for reinvested distributions......................... -- 1,733 359,011 221,259
Redeemed.................................................... (30,987,936) (24,691,193) (564,982) (680,560)
------------ ------------ ------------ ------------
6,050,596 16,378,938 2,279,055 201,445
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MATURING GOVERNMENT MATURING GOVERNMENT
BOND 2006 BOND 2010
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 2,927,288 667,008 2,600,917 755,090
Issued for reinvested distributions......................... 279,975 197,541 135,253 133,829
Redeemed.................................................... (1,092,077) (327,654) (1,187,008) (832,150)
------------ ------------ ------------ ------------
2,115,186 536,895 1,549,162 56,769
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
VALUE STOCK SMALL COMPANY VALUE
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 43,695,075 64,605,973 7,480,763 6,127,395
Issued for reinvested distributions......................... 186,228 11,674,522 119,062 --
Redeemed.................................................... (42,411,503) (17,200,384) (3,500,677) (1,109,258)
------------ ------------ ------------ ------------
1,469,800 59,080,111 4,099,148 5,018,137
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
GLOBAL BOND INDEX 400 MID-CAP
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 4,989,627 26,237,804 6,762,825 5,613,515
Issued for reinvested distributions......................... 2,452,206 402,914 227,697 429
Redeemed.................................................... (3,151,023) (1,223,921) (2,859,726) (599,930)
------------ ------------ ------------ ------------
4,290,810 25,416,797 4,130,796 5,014,014
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MACRO-CAP VALUE MICRO-CAP GROWTH
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sold........................................................ 6,894,356 5,370,493 4,500,340 5,489,670
Issued for reinvested distributions......................... 426,710 22,690 -- 156,935
Redeemed.................................................... (2,644,430) (340,052) (1,708,214) (473,013)
------------ ------------ ------------ ------------
4,676,636 5,053,131 2,792,126 5,173,592
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE
SECURITIES
------------
1998
------------
<S> <C> <C> <C> <C>
Sold........................................................ 6,324,307
Issued for reinvested distributions......................... 250,807
Redeemed.................................................... (176,722)
------------
6,398,392
------------
------------
</TABLE>
(7) ILLIQUID SECURITIES
Each Portfolio of the Fund currently limits investments in illiquid
securities to 15% of net assets at the time of purchase, except for Money Market
which limits the investment in illiquid securities to 10% of net assets. At
December 31, 1998, investments in
105
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(7) ILLIQUID SECURITIES--(CONTINUED)
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 were $14,078,637, $18,909,149, $17,381,460,
$8,328,740 and $1,011,870, respectively, which represent 7.9%, 3.0%, 14.0%, 2.7%
and 3.2% 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 (UNAUDITED)
In 1995, Minnesota Life began addressing computer systems requirements and
applications to be Year 2000 ready. Based on a current study, Minnesota Life
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.
106
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $2.40 $2.34 $2.21 $1.87 $1.91
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .01 .02 .02 .02 .02
Net gains on securities (both
realized and unrealized).......... .74 .62 .32 .41 --
-------- -------- -------- -------- --------
Total from investment
operations................... .75 .64 .34 .43 .02
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.02) (.02) (.02) (.02) (.02)
Distributions from net realized
gains............................. (.39) (.56) (.19) (.07) (.04)
-------- -------- -------- -------- --------
Total distributions............. (.41) (.58) (.21) (.09) (.06)
-------- -------- -------- -------- --------
Net asset value, end of year............ $2.74 $2.40 $2.34 $2.21 $1.87
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 34.70% 33.41% 17.15% 24.28% .81%
Net assets, end of year (in
thousands)............................ $468,382 $330,816 $248,465 $201,678 $157,369
Ratio of expenses to average daily net
assets................................ .53% .55% .59% .55% .56%
Ratio of net investment income to
average daily net assets.............. .40% 1.16% 1.04% 1.04% 1.22%
Portfolio turnover rate (excluding
short-term securities)................ 66.4% 120.1% 154.7% 91.9% 42.0%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
107
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.33 $1.28 $1.33 $1.16 $1.30
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .06 .08 .06 .07 .04
Net gains (losses) on securities
(both realized and unrealized).... .01 .04 (.03) .15 (.10)
-------- -------- -------- -------- --------
Total from investment
operations................... .07 .12 .03 .22 (.06)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.07) (.07) (.07) (.05) (.05)
Distributions from net realized
gains............................. (.02) -- (.01) -- (.03)
-------- -------- -------- -------- --------
Total distributions............. (.09) (.07) (.08) (.05) (.08)
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.31 $1.33 $1.28 $1.33 $1.16
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 6.08% 9.42% 2.96% 19.75% (4.55)%
Net assets, end of year (in
thousands)............................ $178,793 $139,824 $125,886 $101,045 $ 74,679
Ratio of expenses to average daily net
assets................................ .55% .57% .56% .58% .61%
Ratio of net investment income to
average daily net assets.............. 5.84% 6.39% 6.36% 6.57% 6.12%
Portfolio turnover rate (excluding
short-term securities)................ 252.1% 200.0% 154.0% 205.4% 166.2%
</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.
108
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(c) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .05 .05 .05 .05 .04
-------- -------- -------- -------- --------
Total from investment
operations................... .05 .05 .05 .05 .04
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.05) (.05) (.05) (.05) (.04)
-------- -------- -------- -------- --------
Total distributions............. (.05) (.05) (.05) (.05) (.04)
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 4.97% 5.11% 4.92% 5.43% 3.71%
Net assets, end of year (in
thousands)............................ $126,177 $ 53,583 $ 51,461 $ 30,166 $ 23,107
Ratio of expenses to average daily net
assets (b)............................ .58% .59% .60% .64% .65%
Ratio of net investment income to
average daily net assets (b).......... 4.84% 5.13% 4.81% 5.29% 3.71%
</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 Life voluntarily absorbed $13,734 in expenses for the year ended
December 31, 1994. Had the Portfolio paid all fees and expenses the ratio
of expenses to average daily net assets would have been .72% and the ratio
of net investment income to average daily net assets would have been 3.64%.
(c) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
109
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $2.03 $1.87 $1.83 $1.52 $1.59
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .05 .05 .05 .06 .04
Net gains (losses) on securities
(both realized and unrealized).... .40 .27 .16 .31 (.07)
-------- -------- -------- -------- --------
Total from investment
operations................... .45 .32 .21 .37 (.03)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.06) (.05) (.06) (.05) (.03)
Distributions from net realized
gains............................. (.14) (.11) (.11) (.01) (.01)
-------- -------- -------- -------- --------
Total distributions............. (.20) (.16) (.17) (.06) (.04)
-------- -------- -------- -------- --------
Net asset value, end of year............ $2.28 $2.03 $1.87 $1.83 $1.52
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 23.65% 18.99% 12.50% 25.01% (1.40)%
Net assets, end of year (in
thousands)............................ $637,997 $507,220 $414,709 $349,010 $272,629
Ratio of expenses to average daily net
assets................................ .53% .55% .54% .55% .56%
Ratio of net investment income to
average daily net assets.............. 2.51% 3.10% 3.09% 3.75% 3.31%
Portfolio turnover rate (excluding
short-term securities)................ 129.6% 140.2% 120.1% 157.0% 123.6%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
110
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MORTGAGE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.21 $1.19 $1.21 $1.10 $1.22
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .08 .07 .08 .08 .07
Net gains (losses) on securities
(both realized and unrealized).... -- .03 (.02) .11 (.11)
-------- -------- -------- -------- --------
Total from investment
operations................... .08 .10 .06 .19 (.04)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.07) (.08) (.08) (.08) (.05)
Distributions from net realized
gains............................. -- -- -- -- (.03)
-------- -------- -------- -------- --------
Total distributions............. (.07) (.08) (.08) (.08) (.08)
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.22 $1.21 $1.19 $1.21 $1.10
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 6.57% 9.14% 5.26% 18.01% (3.37)%
Net assets, end of year (in
thousands)............................ $124,358 $ 99,233 $ 75,992 $ 69,746 $ 59,666
Ratio of expenses to average daily net
assets................................ .57% .59% .58% .58% .60%
Ratio of net investment income to
average daily net assets.............. 6.76% 7.08% 6.94% 7.09% 6.55%
Portfolio turnover rate (excluding
short-term securities)................ 116.7% 106.4% 70.0% 133.7% 197.3%
</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.
111
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 500 PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $3.10 $2.41 $2.02 $1.52 $1.53
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .04 .03 .03 .03 .03
Net gains (losses) on securities
(both realized and unrealized).... .82 .73 .40 .51 (.01)
-------- -------- -------- -------- --------
Total from investment
operations................... .86 .76 .43 .54 .02
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.03) (.03) (.03) (.03) (.02)
Distributions from net realized
gains............................. (.02) (.04) (.01) (.01) (.01)
-------- -------- -------- -------- --------
Total distributions............. (.05) (.07) (.04) (.04) (.03)
-------- -------- -------- -------- --------
Net asset value, end of year............ $3.91 $3.10 $2.41 $2.02 $1.52
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 27.99% 32.36% 21.64% 36.83% 1.18%
Net assets, end of year (in
thousands)............................ $536,859 $380,751 $204,395 $123,999 $ 73,432
Ratio of expenses to average daily net
assets................................ .44% .45% .45% .47% .50%
Ratio of net investment income to
average daily net assets.............. 1.08% 1.33% 1.77% 2.08% 2.34%
Portfolio turnover rate (excluding
short-term securities)................ 30.2% 8.3% 15.2% 4.8% 5.9%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
CAPITAL APPRECIATION PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $2.85 $2.47 $2.16 $1.81 $1.80
-------- -------- -------- -------- --------
Income from investment operations:
Net gains on securities (both
realized and unrealized).......... .86 .62 .37 .40 .04
-------- -------- -------- -------- --------
Total from investment
operations................... .86 .62 .37 .40 .04
-------- -------- -------- -------- --------
Less distributions:
Distributions from net realized
gains............................. (.17) (.24) (.06) (.05) (.03)
-------- -------- -------- -------- --------
Total distributions............. (.17) (.24) (.06) (.05) (.03)
-------- -------- -------- -------- --------
Net asset value, end of year............ $3.54 $2.85 $2.47 $2.16 $1.81
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 30.83% 28.26% 17.61% 22.78% 2.25%
Net assets, end of year (in
thousands)............................ $392,800 $294,665 $214,468 $163,520 $115,607
Ratio of expenses to average daily net
assets................................ .78% .80% .85% .80% .83%
Ratio of net investment (loss) to
average daily net assets.............. (.21)% (.12)% (.09)% (.15)% (.09)%
Portfolio turnover rate (excluding
short-term securities)................ 82.7% 74.0% 62.9% 51.1% 68.4%
</TABLE>
- ------------------------
(a) Total return figures are based on a share outstanding throughout the period
and assumes reinvestment of distributions at net asset value. Total return
figures do not reflect charges pursuant to the terms of the variable life
insurance policies and variable annuity contracts funded by separate
accounts that invest in the Fund's shares.
(b) Effective May 1, 1997, the Portfolio entered into a new investment advisory
agreement with Advantus Capital Management, Inc. Prior to May 1, 1997 the
Portfolio had an investment advisory agreement with MIMLIC Asset Management
Company.
113
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.71 $1.60 $1.41 $1.24 $1.31
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income............... .04 .03 .03 .03 .01
Net gains (losses) on securities
(both realized and unrealized).... .08 .15 .24 .14 (.01)
-------- -------- -------- -------- --------
Total from investment
operations................... .12 .18 .27 .17 --
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ (.05) (.05) (.04) -- (.03)
Distributions from net realized
gains............................. (.05) (.02) (.04) -- (.04)
-------- -------- -------- -------- --------
Total distributions............. (.10) (.07) (.08) -- (.07)
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.73 $1.71 $1.60 $1.41 $1.24
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 6.61% 11.94% 19.79% 14.23% (.32)%
Net assets, end of year (in
thousands)............................ $310,873 $287,170 $213,608 $140,770 $107,490
Ratio of expenses to average daily net
assets................................ .94% .97% 1.06% 1.04% 1.24%
Ratio of net investment income to
average daily net assets.............. 2.55% 2.29% 2.53% 2.69% 1.68%
Portfolio turnover rate (excluding
short-term securities)................ 22.4% 12.5% 11.5% 20.3% 12.9%
</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 persuant 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 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.
114
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997(c) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $1.65 $1.54 $1.60 $1.23 $1.16
-------- -------- -------- -------- --------
Income from investment operations:
Net gains on securities (both
realized and unrealized).......... .03 .11 .10 .39 .07
-------- -------- -------- -------- --------
Total from investment
operations................... .03 .11 .10 .39 .07
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................ -- -- (.16) (.02) --
-------- -------- -------- -------- --------
Total distributions............. -- -- (.16) (.02) --
-------- -------- -------- -------- --------
Net asset value, end of year............ $1.68 $1.65 $1.54 $1.60 $1.23
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return (a)........................ 1.27% 7.75% 6.45% 32.06% 6.16%
Net assets, end of year (in
thousands)............................ $195,347 $182,917 $144,544 $ 98,895 $ 51,105
Ratio of expenses to average daily net
assets (b)............................ .79% .82% .81% .84% .90%
Ratio of net investment income to
average daily net assets (b).......... (.28)% (.05)% .24% .15% .24%
Portfolio turnover rate (excluding
short-term securities)................ 75.5% 63.8% 74.4% 61.3% 28.1%
</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 Life voluntarily absorbed $9,532 in expenses for the year ended
December 31, 1994. Had the Portfolio paid all fees and expenses, the ratio
of expenses to average daily net assets would have been .92% and the ratio
of net investment income to average daily net assets would have been .21%.
(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.
115
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2002 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
----------------------------------------------- DECEMBER 31,
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............... .05 .06 .06 .07 .04
Net gains (losses) on securities
(both realized and unrealized).... .06 .02 (.04) .16 (.04)
-------- -------- -------- -------- -----
Total from investment
operations................... .11 .08 .02 .23 --
-------- -------- -------- -------- -----
Less distributions:
Dividends from net investment
income............................ (.06) (.05) (.06) (.07) (.05)
Distributions from net realized
gains............................. (.01) (.01) -- -- --
-------- -------- -------- -------- -----
Total distributions............. (.07) (.06) (.06) (.07) (.05)
-------- -------- -------- -------- -----
Net asset value, end of period.......... $1.11 $1.07 $1.05 $1.09 $.93
-------- -------- -------- -------- -----
-------- -------- -------- -------- -----
Total return (b)........................ 9.61% 8.50% 1.73% 25.02% .28%
Net assets, end of period (in
thousands)............................ $ 6,854 $ 4,208 $ 3,900 $ 3,049 $ 2,575
Ratio of expenses to average daily net
assets (c)............................ .34% .20% .20% .20% .20%(d)
Ratio of net investment income to
average daily net assets (c).......... 5.74% 5.99% 6.52% 6.52% 7.18%(d)
Portfolio turnover rate (excluding
short-term securities)................ 35.2% 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 Life voluntarily absorbed $37,949, $36,833, $31,158, $24,709 and
$23,298 in expenses for the years ended December 31, 1998, 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 1.07%, 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 5.01%, 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.
116
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2006 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
----------------------------------------------- DECEMBER 31,
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............... .05 .07 .06 .07 .05
Net gains (losses) on securities
(both realized and unrealized).... .11 .07 (.07) .25 (.05)
-------- -------- -------- -------- -----
Total from investment
operations................... .16 .14 (.01) .32 --
-------- -------- -------- -------- -----
Less distributions:
Dividends from net investment
income............................ (.06) (.06) (.06) (.07) .05
Distributions from net realized
gains............................. (.01) (.01) (.01) -- --
-------- -------- -------- -------- -----
Total distributions............. (.07) (.07) (.07) (.07) (.05)
-------- -------- -------- -------- -----
Net asset value, end of period.......... $1.25 $1.16 $1.09 $1.17 $.92
-------- -------- -------- -------- -----
-------- -------- -------- -------- -----
Total return (b)........................ 14.37% 12.62% (1.21)% 34.72% .13%
Net assets, end of period (in
thousands)............................ $ 6,870 $ 3,900 $ 3,095 $ 2,570 $ 1,860
Ratio of expenses to average daily net
assets (c)............................ .40% .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 5.57% 6.23% 6.43% 6.56% 7.45%(d)
Portfolio turnover rate (excluding
short-term securities)................ 21.6% 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 Life voluntarily absorbed $37,165, $37,425, $31,536, $25,199 and
$24,803 in expenses for the years ended December 31, 1998, 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 1.12%, 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 4.85%, 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.
117
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MATURING GOVERNMENT BOND 2010 PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
----------------------------------------------- DECEMBER 31,
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............... .06 .07 .05 .07 .05
Net gains (losses) on securities
(both realized and unrealized).... .12 .11 (.09) .30 (.05)
-------- -------- -------- -------- -----
Total from investment
operations................... .18 .18 (.04) .37 --
-------- -------- -------- -------- -----
Less distributions:
Dividends from net investment
income............................ (.06) (.05) -- (.07) (.05)
Distributions from net realized
gains............................. -- (.01) -- -- --
-------- -------- -------- -------- -----
Total distributions............. (.06) (.06) -- (.07) (.05)
-------- -------- -------- -------- -----
Net asset value, end of period.......... $1.41 $1.29 $1.17 $1.21 $.91
-------- -------- -------- -------- -----
-------- -------- -------- -------- -----
Total return (b)........................ 14.28% 17.87% (3.42)% 41.22% (.30)%
Net assets, end of period (in
thousands)............................ $ 5,648 $ 3,176 $ 2,813 $ 1,384 $ 1,071
Ratio of expenses to average daily net
assets (c)............................ .40% .40% .40% .40% .40%(d)
Ratio of net investment income to
average daily net assets (c).......... 5.48% 6.18% 6.40% 6.58% 7.79%(d)
Portfolio turnover rate (excluding
short-term securities)................ 28.2% 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 Life voluntarily absorbed $39,052, $38,967, $33,042, $26,308 and
$25,888 in expenses for the years ended December 31, 1998, 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 1.33%, 1.85%, 2.18%, 2.68%, and
4.01%, respectively, and the ratio of net investment income to average
daily net assets would have been 4.55%, 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.
118
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
VALUE STOCK PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 2,
YEAR ENDED DECEMBER 31, 1994 TO
----------------------------------------------- DECEMBER 31,
1998 1997(e) 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............... .03 .01 .01 .01 --
Net gains on securities (both
realized and unrealized).......... -- .32 .39 .33 .04
-------- -------- -------- -------- -----
Total from investment
operations................... .03 .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.......... $1.76 $1.73 $1.59 $1.31 $1.04
-------- -------- -------- -------- -----
-------- -------- -------- -------- -----
Total return (b)........................ 1.75% 21.19% 30.95% 32.96% 4.57%
Net assets, end of period (in
thousands)............................ $214,046 $208,093 $ 97,187 $ 31,825 $ 8,771
Ratio of expenses to average daily net
assets (c)............................ .79% .80% .83% .89% .90%(d)
Ratio of net investment income to
average daily net assets (c).......... 1.54% 1.13% 1.28% 1.25% 2.07%(d)
Portfolio turnover rate (excluding
short-term securities)................ 88.9% 115.4% 88.6% 164.2% 49.5%
</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 has not been annualized.
(c) Minnesota Life 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) 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.
119
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
SMALL COMPANY VALUE PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31,
1998 1997(a)
------------- -------------
<S> <C> <C>
Net asset value, beginning of period.... $1.03 $1.01
----- -----
Income from investment operations:
Net investment income............... .01 --
Net gains (losses) on securities
(both realized and unrealized).... (.08) .02
----- -----
Total from investment
operations................... (.07) .02
----- -----
Less distributions:
Dividends from net investment
income............................ (.01) --
----- -----
Total distributions............. (.01) --
----- -----
Net asset value, end of period.......... $.95 $1.03
----- -----
----- -----
Total return (b)........................ (6.75)% 2.30%
Net assets, end of period (in
thousands)............................ $ 8,646 $ 5,177
Ratio of expenses to average daily net
assets (c)............................ .90% .90%(d)
Ratio of net investment income to
average daily net assets (c).......... 1.52% 1.13%(d)
Portfolio turnover rate (excluding
short-term securities)................ 70.2% 13.0%
</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 assets 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 $58,848 and $11,517 in expenses for
the year ended December 31, 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 1.83% and 1.78%,
respectively, and the ratio of net investment income to average daily net
assets would have been .59% and .25%, respectively.
(d) Adjusted to an annual basis.
120
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
GLOBAL BOND PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
YEAR ENDED 1997 TO
DECEMBER 31, 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)........ .05 (.02)
Net gains on securities (both
realized and unrealized).......... .11 .02
------ ------
Total from investment
operations................... .16 --
------ ------
Less distributions:
Dividends from net investment
income............................ (.03) (.01)
Distributions from net realized
gains............................. (.06) --
Excess distributions of net
investment income................. -- (.01)
------ ------
Total distributions............. (.09) (.02)
------ ------
Net asset value, end of period.......... $1.05 $.98
------ ------
------ ------
Total return (b)........................ 16.18% .10%
Net assets, end of period (in
thousands)............................ $31,152 $25,019
Ratio of expenses to average daily net
assets................................ 1.13% 1.60%(c)
Ratio of net investment income to
average daily......................... 4.86% 3.66%(c)
Portfolio turnover rate (excluding
short-term securities)................ 285.3% 120.5%
</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 assets 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.
121
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
INDEX 400 MID-CAP PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31,
1998 1997(a)
------------- -------------
<S> <C> <C>
Net asset value, beginning of period.... $1.01 $1.00
----- -----
Income from investment operations:
Net investment income............... .01 --
Net gains on securities (both
realized and unrealized).......... .16 .01
----- -----
Total from investment
operations................... .17 .01
----- -----
Less distributions:
Dividends from net investment
income............................ (.01) --
Distributions from net realized
gains............................. (.02) --
----- -----
Total distributions............. (.03) --
----- -----
Net asset value, end of period.......... $1.15 $1.01
----- -----
----- -----
Total return (b)........................ 16.68% .06%
Net assets, end of period (in
thousands)............................ $10,511 $5,052
Ratio of expenses to average daily net
assets (c)............................ .55% .55%(d)
Ratio of net investment income to
average daily net assets (c).......... .78% .89%(d)
Portfolio turnover rate (excluding
short-term securities)................ 85.4% 4.9%
</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 to 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 Life voluntarily absorbed $52,946 and $14,670 in expenses for the
year ended December 31, 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 1.36% and 1.70%,
respectively, and the ratio of net investment (loss) to average daily net
assets would have been (.03)% and (.26)%, respectively.
(d) Adjusted to an annual basis.
122
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MACRO-CAP VALUE PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 15,
YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31,
1998 1997(a)
------------- -------------
<S> <C> <C>
Net asset value, beginning of period.... $.97 $1.00
------ -----
Income from investment operations:
Net investment income............... .01 --
Net gains (losses) on securities
(both realized and unrealized).... .21 (.02)
------ -----
Total from investment
operations................... .22 (.02)
------ -----
Less distributions:
Dividends from net investment
income............................ -- (.01)
Distributions from net realized
gains............................. (.05) --
------ -----
Total distributions............. (.05) (.01)
------ -----
Net asset value, end of period.......... $1.14 $.97
------ -----
------ -----
Total return (b)........................ 22.33% (2.13)%
Net assets, end of period (in
thousands)............................ $11,088 $ 4,923
Ratio of expenses to average daily net
assets (c)............................ .85% .85%(d)
Ratio of net investment income to
average daily net assets(c)........... .69% 2.04%(d)
Portfolio turnover rate (excluding
short-term securities)................ 164.0% 36.7%
</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 one year, total
return presented has not been annualized.
(c) Minnesota Life voluntarily absorbed $114,468 and $22,940 in expenses for
the year ending December 31, 1998 and the period ending December 31, 1997.
Had the Portfolio paid all fees and expenses, the ratio of expenses to
average daily net assets would have been 2.53% and 3.13%, respectively, and
the ratio of net investment (loss) to average daily net assets would have
been (.99)% and (.24)%, respectively.
(d) Adjusted to an annual basis.
123
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
MICRO-CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31,
1998 1997(a)
------------- -------------
<S> <C> <C>
Net asset value, beginning of period.... $.89 $1.06
----- -----
Income from investment operations:
Net gains (losses) on securities
(both realized and unrealized).... .12 (.14)
----- -----
Total from investment
operations................... .12 (.14)
----- -----
Less distributions:
Distributions from net realized
gains............................. -- (.03)
----- -----
Total distributions............. -- (.03)
----- -----
Net asset value, end of period.......... $1.01 $.89
----- -----
----- -----
Total return (b)........................ 13.44% (13.20)%
Net assets, end of period (in
thousands)............................ $ 8,034 $ 4,591
Ratio of expenses to average daily net
assets (c)............................ 1.25% 1.25%(d)
Ratio of net investment (loss) to
average daily net assets (c).......... (.40)% (.24)%(d)
Portfolio turnover rate (excluding
short-term securities)................ 67.4% 28.9%
</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 Life voluntarily absorbed $46,960 and $11,102 in expenses for the
year ended December 31, 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 2.10% and 2.03%,
respectively, and the ratio of net investment (loss) to average daily net
assets would have been (1.25)% and (1.02)%, respectively.
(d) Adjusted to an annual basis.
124
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(9) FINANCIAL HIGHLIGHTS--(CONTINUED)
REAL ESTATE SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
PERIOD FROM
MAY 1,
1998 TO
DECEMBER 31,
1998(a)
-------------
<S> <C>
Net asset value, beginning of period.... $1.02
-----
Income from investment operations:
Net investment income............... .03
Net losses on securities (both
realized and unrealized).......... (.19)
-----
Total from investment
operations................... (.16)
-----
Less distributions:
Dividends from net investment
income............................ (.03)
-----
Total distributions............. (.03)
-----
Net asset value, end of period.......... $.83
-----
-----
Total return (b)........................ (14.90)%
Net assets, end of period (in
thousands)............................ $ 5,322
Ratio of expenses to average daily net
assets (c)(d)......................... .90%
Ratio of net investment income to
average daily net assets (c)(d)....... 5.54%
Portfolio turnover rate (excluding
short-term securities)................ 54.0%
</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 Life voluntarily absorbed $31,736 in expenses for the period
ended December 31, 1998. Had the Portfolio paid all feees and expenses, the
ratio of expenses to average daily net assets would have been 1.90% and the
ratio of net investment income to average daily net assets would have been
4.54%.
(d) Adjusted to an annual basis.
125
<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 Life.
THIS REPORT MAY BE USED AS SALES LITERATURE IN CONNECTION WITH THE OFFER OR
SALE OF VARIABLE ANNUITY OR LIFE INSURANCE CONTRACTS FUNDED BY ADVANTUS
SERIES FUND, INC. ("FUND") IF PRECEDED OR ACCOMPANIED BY (a) THE CURRENT
PROSPECTUS FOR THE FUND AND SUCH CONTRACTS AND (b) THE CURRENT VARIABLE
ANNUITY PERFORMANCE REPORT, ADJUSTABLE INCOME ANNUITY PERFORMANCE
REPORT, GROUP VARIABLE ANNUITY PERFORMANCE REPORT, VARIABLE FUND D
PERFORMANCE REPORT, VARIABLE GROUP UNIVERSAL LIFE PORTFOLIO
PERFORMANCE AND HISTORICAL POLICY VALUES REPORT AND VARIABLE
ADJUSTABLE LIFE PORTFOLIO PERFORMANCE AND HISTORICAL
POLICY VALUES REPORT, RESPECTIVELY.
[LOGO]
ASCEND FINANCIAL SERVICES, INC.,
SECURITIES DEALER, MEMBER NASD/SIPC
400 ROBERT STREET NORTH
ST. PAUL, MN 55101-2098
1-888-AFS-1838
(1-888-237-1838)
<PAGE>
MINNESOTA 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
F. 38897 Rev. 2-1999
