TMK/UNITED FUNDS, INC.
ANNUAL
REPORT
-------------------------------------------
For the fiscal year ended December 31, 1994
<PAGE>
This report is submitted for the general information of the shareholders of
TMK/United Funds, Inc. It is not authorized for distribution to prospective
investors in the Fund unless accompanied with or preceded by the TMK/United
Funds, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
DECEMBER 31, 1994
Dear Shareholder:
As President of your Fund, I would like to take this opportunity to share
my thoughts on a subject that I believe is very important to all of us; the need
for tax incentives that will help Americans take personal responsibility for
their futures.
Voters all across America sent two clear messages in the elections held in
November 1994. They want their taxes reduced and they want their concern for
financial security addressed without adding new bureaucracies or government
programs. One of the methods to do this is to expand the availability of tax
incentives for individuals to invest in Individual Retirement Accounts. This
could be done in several ways such as:
restoring the universal availability of fully tax-deductible Individual
Retirement Accounts,
allowing non-working spouses to make a full contribution of $2,000 to an
Individual Retirement Account instead of only $250 as currently allowed,
eliminating the taxation on the distribution of earnings from Individual
Retirement Accounts.
All of us recognize that future generations will need to supplement social
security benefits by private savings in order to provide an adequate level of
retirement income. Expanding the benefits of IRA's provides tax incentives to
encourage savings which allows all individuals the opportunity to provide
financial security for themselves and their families. Encouraging savings
through tax incentives has additional indirect benefits. Americans' personal
savings rate has fallen from 8% in the 1960's to just 2% of disposable income
today. Expanding the benefits of IRA's will help reverse this trend, will
increase the amount of U.S. capital available for investment and should make the
U.S. less dependent on capital from foreign sources.
Changes to our current IRA laws, such as the ones I mentioned above, are
being discussed in Congress. I urge you to write to your Members of Congress
and to the President to tell them that you support expanded IRA legislation that
provides incentives and opportunities for all Americans to improve their
financial well being.
Finally, I appreciate your continued confidence in our products and
services.
Respectfully,
Keith A. Tucker
President
<PAGE>
GROWTH PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Growth Portfolio for the fiscal year
ended December 31, 1994. The following discussion, graphs and tables provide
you with information regarding the Portfolio's performance during that period.
Stock market conditions and investment performance in 1994 were affected
significantly by the Federal Reserve Bank's policy to raise interest rates in an
effort to alleviate inflationary pressures in the economy. The markets were
also impacted by various other developments, including the election of a
Republican Congress in November and the crisis devaluation of Mexico's currency
in December.
During the past fiscal year, we took a cautious approach. We reduced our
holdings of companies in financial and cyclical industries, and we increased our
holdings of technology and growth stocks. We maintained a significant cash
position most of the year as well.
The strategies and techniques we applied resulted in better performance by the
Portfolio than the S&P 500 Index as charted on the following page. That index
reflects the performance of securities that generally represent the stock
market. The Portfolio's performance was impacted by our growh stock selections
and our maintenance of significant cash positions.
Our outlook for equities in 1995 is still cautious. We expect the market to
perform better when later in the year the pace of economic growth slows and the
Federal Reserve Bank discontinues its credit tightening efforts. If conditions
evolve as we anticipate, we intend to increase the Portfolio's equity holdings.
We plan to emphasize technology, telecommunications and consumer goods
companies.
Thank you very much for your continued support and confidence.
Respectfully,
Antonio Intagliata
Manager, Growth Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED GROWTH PORTFOLIO
AND THE S&P 500 INDEX
Average Annual Total Return*
1 year 5 years 7+ years**
2.39% 12.69% 13.33%
TMK/UNITED S&P
GROWTH 500
PORTFOLIO INDEX
---------- -----
07/13/87 Purchase 10,000
07/31/87 10,237 10,000
12/31/87 9,674 7,860
12/31/88 10,985 9,166
12/31/89 14,018 12,070
12/31/90 13,269 11,696
12/31/91 18,060 15,259
12/31/92 21,824 16,423
12/31/93 24,884 18,077
12/31/94 25,479 18,316
- ----- TMK/United Growth Portfolio**** -- $25,479
+++++ S&P 500 Index*** -- $18,316
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**7-13-87 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the S&P 500
Index (including income) is not available, investment in the index was
effected as of July 31, 1987.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Banks and Savings and Loans - 3.54%
Bank of Boston Corporation ............. 100,000 $ 2,587,500
City National Corporation .............. 100,000 1,062,500
First Chicago Corporation .............. 60,000 2,865,000
Grupo Financiero Bancomer, S.A. de
C.V., C (A)............................ 1,000,000 550,000
Midlantic Corporation .................. 75,000 1,992,150
Roosevelt Financial Group, Inc. ........ 50,000 746,850
Total ................................. 9,804,000
Biotechnology and Medical Services - 0.59%
Centocor, Inc.* ........................ 100,000 1,631,200
Building - 0.52%
United Dominion Realty Trust, Inc. ..... 100,000 1,437,500
Chemicals Major - 3.24%
Air Products & Chemicals, Inc. ......... 75,000 3,346,875
du Pont (E.I.) de Nemours and Company .. 100,000 5,625,000
Total ................................. 8,971,875
Computers and Office Equipment - 5.99%
Cerner Corporation* .................... 18,200 805,350
Compuware Corporation* ................. 100,000 3,587,500
General Motors Corporation, Class E .... 90,000 3,465,000
HBO & Company .......................... 50,000 1,718,750
Informix Corporation* .................. 100,000 3,206,200
International Business Machines
Corporation ........................... 40,000 2,940,000
Parametric Technology Corporation* ...... 25,000 859,375
Total ................................. 16,582,175
Domestic Oil - 0.28%
Seagull Energy Corporation* ............ 40,000 765,000
Drugs and Hospital Supply - 4.96%
Abbott Laboratories .................... 150,000 4,893,750
Baxter International Inc. .............. 100,000 2,825,000
Schering-Plough Corporation ............ 50,000 3,700,000
Warner-Lambert Company ................. 30,000 2,310,000
Total ................................. 13,728,750
Electrical Equipment - 5.30%
Emerson Electric Co. ................... 100,000 6,250,000
General Electric Company ............... 165,000 8,415,000
Total ................................. 14,665,000
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Electronics - 5.31%
cisco Systems, Inc.* ................... 85,000 $ 2,980,270
Hewlett-Packard Company ................ 50,000 4,993,750
Level One Communications, Incorporated* 50,000 762,500
Micron Technology, Inc. ................ 50,000 2,206,250
Texas Instruments Incorporated ......... 50,000 3,743,750
Total ................................. 14,686,520
Financial - 1.01%
American Express Company ............... 75,000 2,212,500
Grupo Financiero Banamex Accival, S.A.
de C.V., Class C (A) .................. 200,000 576,000
Total ................................. 2,788,500
Food and Related - 2.96%
CPC International Inc. ................. 60,000 3,195,000
Pet Incorporated ....................... 125,000 2,468,750
Sara Lee Corporation ................... 100,000 2,525,000
Total ................................. 8,188,750
Hospital Management - 6.20%
American Medical Holdings, Inc.* ...... 100,000 2,412,500
Columbia/HCA Healthcare Corporation .... 150,000 5,475,000
National Medical Enterprises, Inc.* .... 300,000 4,237,500
Sierra Health Services, Inc.* .......... 73,600 2,327,600
United HealthCare Corporation .......... 60,000 2,707,500
Total ................................. 17,160,100
Insurance - 6.40%
American General Corporation ........... 150,000 4,237,500
American Re Corporation* ............... 75,000 2,418,750
First Colony Corporation ............... 100,000 2,237,500
NWNL Companies, Inc. (The) ............. 50,000 1,450,000
National Re Corporation ................ 45,900 1,204,875
PartnerRe Holding, Ltd. ................ 100,000 2,075,000
Presidential Life Corporation .......... 100,000 518,700
TIG Holdings, Inc. ..................... 125,000 2,343,750
USLIFE Corporation ..................... 35,000 1,220,625
Total ................................. 17,706,700
Leisure Time - 3.42%
Comcast Corporation, Class A ........... 150,000 2,353,050
Tele-Communications, Inc., Class A* .... 125,000 2,726,500
Time Warner Incorporated ............... 125,000 4,390,625
Total ................................. 9,470,175
Machinery - 0.40%
Ingersoll-Rand Company ................. 35,000 1,102,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Metals and Mining - 1.12%
Phelps Dodge Corporation ............... 50,000 $ 3,093,750
Multi-Industry - 2.40%
ITT Corporation ........................ 75,000 6,646,875
Public Utilities - Electric - 3.49%
Peco Energy Company .................... 100,000 2,450,000
Unicom Corporation ..................... 300,000 7,200,000
Total ................................. 9,650,000
Railroads - 4.99%
Chicago and North Western Transportation
Company* .............................. 100,000 1,925,000
Kansas City Southern Industries, Inc. .. 76,000 2,346,500
Norfolk Southern Corporation ........... 75,000 4,546,875
Southern Pacific Rail Corporation* ..... 125,000 2,265,625
Union Pacific Corporation .............. 60,000 2,737,500
Total ................................. 13,821,500
Retailing - 0.85%
Charming Shoppes Inc. .................. 100,000 656,200
Family Dollar Stores, Inc. ............. 135,000 1,687,500
Total ................................. 2,343,700
Steel - 1.16%
National Steel Corporation, Class B* ... 100,000 1,450,000
USX Corporation - U.S. Steel Group ..... 50,000 1,775,000
Total ................................. 3,225,000
Telecommunications - 8.49%
AT&T Corporation ....................... 150,000 7,537,500
LDDS Communications, Inc.* ............. 40,000 780,000
MCI Communications Corporation ......... 200,000 3,687,400
Motorola, Inc. ......................... 50,000 2,893,750
Ortel Corporation* ..................... 117,000 3,071,250
Sprint Corporation ..................... 50,000 1,381,250
Telefonaktiebolaget LM Ericsson,
ADR, Class B .......................... 75,000 4,143,750
Total ................................. 23,494,900
TOTAL COMMON STOCKS - 72.62% $200,964,470
(Cost: $210,483,893)
PREFERRED STOCKS
Hospital Management - 0.76%
National Health Investors,
Convertible ........................... 90,000 2,103,750
Telecommunications - 0.81%
Nokia Corporation* ..................... 30,000 2,250,000
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
TOTAL PREFERRED STOCKS - 1.57% $ 4,353,750
(Cost: $4,451,929)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 2.86%
ANZ (Delaware) Inc.,
6.02%, 1-4-95 ......................... $ 7,000 6,996,488
U.S. Bancorp,
Master Note ........................... 918 918,000
Total ................................. 7,914,488
Chemicals Specialty and Miscellaneous
Technology - 3.65%
Minnesota Mining and Manufacturing
Company,
5.8%, 1-6-95 .......................... 10,105 10,096,860
Computers and Office Equipment - 1.80%
Honeywell Inc.,
6.05%, 1-19-95 ........................ 5,000 4,984,875
Consumer Electronics and Appliances - 1.74%
TDK (USA) Corp.,
6.03%, 1-20-95 ........................ 4,835 4,819,612
Drugs and Hospital Supply - 1.65%
Baxter International Inc.,
6.2%, 1-31-95 ......................... 4,600 4,576,233
Financial - 1.99%
Textron Financial Corp.,
6.25%, 1-12-95 ........................ 2,800 2,794,653
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 2,715 2,706,923
Total ................................. 5,501,576
Food and Related - 2.91%
ConAgra, Inc.,
6.0%, 1-11-95 ......................... 2,495 2,490,842
General Mills, Inc.,
Master Note ........................... 855 855,000
Heinz (H.J.) Company,
5.9%, 1-23-95 ......................... 4,200 4,184,857
Sara Lee Corporation,
Master Note............................ 531 531,392
Total ................................. 8,062,091
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Paper - 1.14%
Champion International Corporation,
6.15%, 1-9-95 ......................... $ 3,145 $ 3,140,702
Public Utilities - Electric - 5.29%
PS Colorado Credit Corp.,
6.18%, 1-13-95 ........................ 3,250 3,243,305
Pacificorp,
6.05%, 1-13-95 ........................ 2,000 1,995,967
Potomac Electric Power Co.,
6.03%, 1-13-95 ........................ 3,395 3,388,176
Western Resources Inc.,
6.18%, 1-6-95 ......................... 6,000 5,994,850
Total ................................. 14,622,298
Public Utilities - Gas - 1.39%
Bay State Gas Co.,
5.98%, 1-13-95 ........................ 3,850 3,842,326
Public Utilities - Pipeline - 1.42%
Enron Corp.,
6.0%, 1-31-95 ......................... 3,950 3,930,250
TOTAL SHORT-TERM SECURITIES - 25.84% $ 71,491,311
(Cost: $71,491,311)
TOTAL INVESTMENT SECURITIES - 100.03% $276,809,531
(Cost: $286,427,133)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.03%) (72,896)
NET ASSETS - 100.00% $276,736,635
See Notes to Schedules of Investments on page 65.
<PAGE>
INCOME PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Income Portfolio for the fiscal year
ended December 31, 1994. The following discussion, graphs and tables provide
you with information regarding the Portfolio's performance during that period.
During the past fiscal year the performance of the equity markets in the United
States was essentially flat. The primary reason for this was the significant
increase in interest rates caused by Federal Reserve Bank policy. This was done
in an effort to slow economic growth for the purpose of alleviating the
inflationary expectations that arose from a strong economy. The Federal Reserve
Bank increased interest rates six times during 1994, while the rate of inflation
remained low throughout the year.
We believed that the Federal Reserve Bank perceived greater inflationary
pressures than were actually present, particularly in view of several
indications that inflationary pressures actually subsided during 1994. In this
past year's environment of low inflation and rising interest rates, our strategy
was to maintain the structure of the Portfolio in essentially the same manner as
existed at the beginning of the year. Therefore, we continued to emphasize
companies that we perceived as having the most potential for positive long-term
change, such as automobile companies, corporations with efficient worldwide
distribution systems and domestic companies with international outlets for their
goods and services.
The strategies and techniques we applied resulted in the direction of the
Portfolio's performance remaining fairly consistent with that of the S&P 500
Index as charted on the following page. That index reflects the performance of
securities that generally represent the stock market. The Portfolio's
performance, like that of equities in general, was impacted by rising interest
rates more than any other factor during the past fiscal year.
In 1995 we anticipate that inflation will remain low and that the U.S. economy
will continue to grow at a modest but slowing rate. We expect to continue to
pursue the same strategies we have recently employed, which we believe will
produce solid returns in the long term. The search for companies that have
excellent prospects for superior earnings and revenue growth will continue to be
our mission.
Thank you very much for your continued support and confidence.
Respectfully,
Russell E. Thompson
Manager, Income Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED INCOME PORTFOLIO
AND THE S&P 500 INDEX
Average Annual Total Return*
1 year 3+ years**
- -1.14% 10.67%
TMK\UNITED S&P
INCOME 500
PORTFOLIO INDEX
---------- -----
07/16/91 Purchase 10,000
07/31/91 10,054 10,000
12/31/91 10,767 10,910
12/31/92 12,251 11,742
12/31/93 14,371 12,924
12/31/94 14,207 13,095
- ----- TMK/United Income Portfolio**** -- $14,207
+++++ S&P 500 Index*** -- $13,095
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**7-16-91 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the S&P 500
Index (including income) is not available, investment in the index was
effected as of July 31, 1991.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Aerospace - 0.96%
Boeing Company (The) ................... 24,500 $ 1,145,375
Sundstrand Corporation ................. 21,000 955,500
Total ................................. 2,100,875
Airlines - 1.51%
AMR Corporation* ....................... 28,000 1,491,000
Southwest Airlines Co. ................. 108,000 1,809,000
Total ................................. 3,300,000
Automotive - 6.73%
Chrysler Corporation ................... 75,500 3,699,500
Daimler-Benz AG, ADS ................... 10,460 515,155
Dana Corporation ....................... 53,000 1,238,875
Eaton Corporation ...................... 35,000 1,732,500
Ford Motor Company ..................... 130,500 3,654,000
General Motors Corporation ............. 69,500 2,936,375
Magna Group, Inc., Class A ............. 24,500 940,188
Total ................................. 14,716,593
Banks and Savings and Loans - 2.50%
Citicorp ............................... 52,000 2,151,500
First Bank Systems, Inc. ............... 35,000 1,163,750
First Interstate Bancorp ............... 21,000 1,420,125
Midlantic Corporation .................. 28,000 743,736
Total ................................. 5,479,111
Beverages - 1.12%
PepsiCo, Inc. .......................... 67,500 2,446,875
Biotechnology and Medical Services - 1.81%
Medtronic, Inc. ........................ 28,000 1,557,500
Ventritex, Inc.* ....................... 89,000 2,397,393
Total ................................. 3,954,893
Building - 5.84%
Armstrong World Industries, Inc. ....... 62,500 2,406,250
Centex Corporation ..................... 82,000 1,865,500
Georgia-Pacific Corporation ............ 29,500 2,109,250
Louisiana-Pacific Corporation .......... 47,000 1,280,750
Pulte Corporation ...................... 89,200 2,051,600
Temple-Inland Inc. ..................... 24,500 1,105,563
Weyerhaeuser Company ................... 52,000 1,950,000
Total ................................. 12,768,913
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Chemicals Major - 6.60%
Air Products & Chemicals, Inc. ......... 70,000 $ 3,123,750
Albemarle Corporation .................. 72,800 1,010,100
du Pont (E.I.) de Nemours and Company .. 68,500 3,853,125
PPG Industries, Inc. ................... 87,000 3,229,875
Praxair, Inc. .......................... 69,500 1,424,750
Union Carbide Corporation .............. 61,000 1,791,875
Total ................................. 14,433,475
Chemicals Specialty and Miscellaneous Technology - 5.15%
Betz Laboratories, Inc. ................ 35,000 1,548,750
Geon Company (The) ..................... 100,600 2,753,925
Minnesota Mining and Manufacturing
Company ............................... 35,000 1,868,125
Polaroid Corporation ................... 97,500 3,168,750
Xerox Corporation ...................... 19,500 1,930,500
Total ................................. 11,270,050
Computers and Office Equipment - 3.55%
General Motors Corporation, Class E .... 69,500 2,675,750
International Business Machines
Corporation ........................... 35,000 2,572,500
Microsoft Corporation* ................. 21,000 1,286,250
Oracle Systems Corporation* ............ 28,000 1,239,000
Total ................................. 7,773,500
Consumer Electronics and Appliances - 1.62%
Harman International Industries,
Incorporated .......................... 23,000 851,000
Whirlpool Corporation .................. 53,500 2,688,375
Total ................................. 3,539,375
Electrical Equipment - 2.72%
Emerson Electric Co. ................... 28,000 1,750,000
General Electric Company ............... 82,500 4,207,500
Total ................................. 5,957,500
Electronics - 8.38%
AMP Incorporated ....................... 38,500 2,800,875
Analog Devices, Inc.* .................. 101,000 3,547,625
Applied Materials, Inc.* ............... 60,000 2,520,000
cisco Systems, Inc.* ................... 69,500 2,436,809
Intel Corporation ...................... 52,500 3,346,875
LSI Logic Corporation* ................. 67,200 2,713,200
Molex Inc., Class A .................... 31,250 976,563
Total ................................. 18,341,947
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Engineering and Construction - 0.93%
Fluor Corporation ...................... 28,000 $ 1,207,500
Foster Wheeler Corporation ............. 28,000 833,000
Total ................................. 2,040,500
Financial - 2.20%
Federal Home Loan Mortgage Corporation . 35,000 1,767,500
Federal National Mortgage Association .. 20,500 1,493,938
Household International, Inc. .......... 42,000 1,559,250
Total ................................. 4,820,688
Food and Related - 1.33%
CPC International Inc. ................. 35,000 1,863,750
Pet Incorporated ....................... 53,500 1,056,625
Total ................................. 2,920,375
Hospital Management - 0.93%
United Healthcare Corp. ................ 45,000 2,030,625
Household Products - 3.60%
Colgate-Palmolive Company .............. 42,000 2,661,750
Gillette Company (The) ................. 35,000 2,616,250
Procter & Gamble Company (The) ......... 42,000 2,604,000
Total.................................. 7,882,000
Leisure Time - 2.34%
Walt Disney Company (The) .............. 49,000 2,260,125
McDonald's Corporation ................. 97,500 2,851,875
Total ................................. 5,112,000
Machinery - 6.61%
Caterpillar Inc. ....................... 109,500 6,036,188
Clark Equipment Company ................ 35,000 1,898,750
Deere & Company ........................ 47,500 3,146,875
Ingersoll-Rand Company ................. 28,000 882,000
Parker Hannifin Corporation ............ 28,000 1,274,000
Trinova Corporation .................... 42,000 1,233,750
Total ................................. 14,471,563
Metals and Mining - 0.55%
Phelps Dodge Corporation ............... 19,500 1,206,563
Multi-Industry - 2.05%
ITT Corporation ........................ 50,500 4,475,563
Paper - 2.15%
International Paper Company ............ 40,500 3,052,688
Union Camp Corporation ................. 35,000 1,649,375
Total ................................. 4,702,063
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Railroads - 3.33%
CSX Corporation ........................ 24,500 $ 1,705,813
Conrail, Inc. .......................... 42,000 2,121,000
Norfolk Southern Corporation ........... 21,000 1,273,125
Southern Pacific Rail Corporation* ..... 32,000 580,000
Union Pacific Corporation .............. 35,000 1,596,875
Total ................................. 7,276,813
Retailing - 10.68%
Circuit City Stores, Inc. .............. 111,500 2,480,875
Dayton Hudson Corporation .............. 32,500 2,299,375
Dillard Department Stores, Inc.,
Class A ............................... 66,000 1,765,500
Gap, Inc. (The) ........................ 49,000 1,494,500
Home Depot, Inc. (The) ................. 53,500 2,461,000
Limited, Inc. (The) .................... 52,000 942,500
May Department Stores Company (The) .... 67,500 2,278,125
Nordstrom, Inc. ........................ 26,000 1,095,250
OfficeMax, Inc.* ....................... 46,500 1,232,250
Penney (J.C.) Company, Inc. ............ 47,000 2,097,375
Sears, Roebuck and Co. ................. 14,000 644,000
Tommy Hilfiger Corporation* ............ 54,400 2,454,800
Toys "R" Us Inc.* ...................... 21,000 640,500
Wal-Mart Stores, Inc. .................. 69,500 1,476,875
Total ................................. 23,362,925
Telecommunications - 9.02%
AT&T Corporation ....................... 35,000 1,758,750
BellSouth Corporation .................. 22,000 1,190,750
General Instrument Corporation* ........ 69,500 2,085,000
MCI Communications Corporation ......... 130,000 2,396,810
MFS Communications Company, Inc.* ...... 29,900 986,700
Motorola, Inc. ......................... 115,500 6,684,563
Telefonaktiebolaget LM Ericsson,
Class B, ADR ......................... 35,000 1,933,750
Vanguard Cellular Systems, Inc.,
Class A* .............................. 105,000 2,690,625
Total ................................. 19,726,948
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Tire and Rubber - 1.07%
Goodyear Tire & Rubber Company (The) ... 69,500 $ 2,336,938
TOTAL COMMON STOCKS - 95.28% $208,448,671
(Cost: $192,074,625)
TOTAL SHORT-TERM SECURITIES - 4.75% $ 10,395,856
(Cost: $10,395,856)
TOTAL INVESTMENT SECURITIES - 100.03% $218,844,527
(Cost: $202,470,481)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.03%) (70,925)
NET ASSETS - 100.00% $218,773,602
See Notes to Schedules of Investments on page 65.
<PAGE>
INTERNATIONAL PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the International Portfolio from the
date of its inception on April 29, 1994 to the end of its fiscal year on
December 31, 1994. The following discussion, graphs and tables provide you with
information regarding the Portfolio's performance during that period.
During 1994 international markets were very volatile, in large part due to sharp
rises in worldwide interest rates. Most European stock markets declined in
value as expressed in their own currencies, but they were largely unchanged when
valued in U.S. dollars. The most notable exceptions were the Scandinavian stock
markets, which performed strongly in 1994. Emerging stock markets weakened
throughout 1994, particularly in December when Mexico experienced a financial
crisis resulting from devaluation of its currency.
Since its inception the Portfolio has emphasized investments in Europe,
especially in Scandinavia. Our strategy has been to focus on economically
sensitive companies that are likely to benefit as European economies continue
to recover from recession. We perceived only minimal investment opportunities
in Japan in 1994 and, therefore, limited our holdings there. However, we
increased our holdings in some Asian markets, such as Hong Kong and Thailand,
after they had declined to the point where they offered attractive investment
opportunities.
The strategies and techniques we applied resulted in slightly better performance
by the Portfolio than the Morgan Stanley E.A.FE. Index (Europe, Australia, Far
East Index) as charted on the following page. That index reflects the
performance of securities that generally represent the international stock
market. The Portfolio's performance was impacted positively by its
proportionally greater exposure to Scandinavian securities than the E.A.FE.
Index.
Although interest rates globally have risen sharply over the past year in
anticipation of increased levels of inflation, worldwide inflation has remained
very subdued. If inflation remains under control we expect interest rates to
fall, resulting in stronger equity markets. We anticipate that emerging stock
markets, which fell sharply in recent months, will continue to remain volatile
but will appreciate over the longer term. We expect to continue the strategies
we have employed in the recent past by continuing to increase the Portfolio's
holdings in worldwide growth stocks, particularly in Europe and in those
emerging markets that now offer particularly good investment values.
Thank you very much for your continued support and confidence.
Respectfully,
Mark L. Yockey
Manager, International Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED INTERNATIONAL PORTFOLIO
AND THE MORGAN STANLEY E.A.FE. INDEX
Aggregate
Period Total Return*
5/3/94 - 12/31/94** 0.26%
Morgan
TMK/United Stanley
International E.A.FE.
Portfolio Index
--------- ---------
05/03/94 Purchase 10,000 10,000
06/30/94 9,764 10,083
09/30/94 10,320 10,093
12/31/94 10,026 9,990
- ----- TMK/United International Portfolio**** -- $10,026
+++++ Morgan Stanley E.A.FE. Index*** -- $9,990
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**5-3-94 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the Morgan
Stanley E.A.FE. Index (including income) is not available, investment in the
index was effected as of April 30, 1994.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Australia - 2.14%
Westpac Banking Corp. (A) .............. 165,500 $ 556,742
Finland - 8.88%
Enso-Gutzeit Oy (A) .................... 40,400 347,036
Kymmene Oy (A) ......................... 13,000 353,964
Metsa-Serla Oy, Series B (A) ........... 20,000 878,080
Nokia Corporation (A) .................. 2,950 435,874
Tampella Oy (A)* ....................... 100,000 295,500
Total ................................. 2,310,454
France - 5.52%
Credit Lyonnais SA (A)* ................ 4,700 389,245
Lapeyre S.A. (A) ....................... 6,625 333,913
Societe Industrielle de Transports
Automobiles S.A. (A) .................. 2,700 351,095
Television Francaise 1-TF1 S.A. (A) .... 4,000 362,900
Total ................................. 1,437,153
Germany - 7.37%
Dorries Scharmann AG (A)* .............. 1,000 122,620
Mannesman AG (A) ....................... 2,000 544,690
TRAUB AG (A)* .......................... 4,000 552,436
VEBA AG (A) ............................ 2,000 696,998
Total ................................. 1,916,744
Japan - 3.82%
Hitachi (A) ............................ 30,000 297,420
NEC (A) ................................ 16,000 182,848
NKK (A)* ............................... 120,000 331,920
Sharp (A) .............................. 10,000 180,450
Total ................................. 992,638
Mexico - 3.65%
Cemex, S.A., CPO Shares, Series A (A) .. 41,500 204,180
Desc-Sociedad de Fomento Industrial,
S.A. de C.V., Class B (A) ............. 43,000 215,000
Grupo Carso, S.A. de C.V.,
Series 1A (A)* ........................ 29,000 213,150
Grupo Financiero Bancomer, S.A. de
C.V., Class C (A) ..................... 286,000 157,300
Grupo Iusacell S.A. de C.V.,
Class D, ADR* ......................... 1,400 22,400
Grupo Iusacell S.A. de C.V.,
Class L, ADR* ......................... 1,400 26,075
Telefonos de Mexico S.A. de C.V., ADR .. 2,700 110,700
Total ................................. 948,805
Norway - 2.29%
Den Norske Luftfartselskap A/S,
Series B (A)* ......................... 18,900 594,972
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Sweden - 10.77%
ASTRA AB A (A) ......................... 14,000 $ 361,592
Avesta Sheffield AB (A)* ............... 20,000 197,740
Kinnevik AB (A) ........................ 21,500 711,478
Skandia Enskilda Banken, Class A (A)* .. 91,000 520,247
Trelleborg AB, Series B (A)* ........... 30,000 437,850
AB Volvo (A) ........................... 30,500 574,407
Total ................................. 2,803,314
United Kingdom - 6.79%
AMEC (A) ............................... 210,000 226,800
BTR PLC (A) ............................ 40,000 183,880
House of Fraser PLC (A) ................ 111,000 303,363
Next plc (A) ........................... 131,000 527,275
Pilkington PLC (A) ..................... 104,000 270,400
United Biscuits (Holdings) Public
Limited Co. (A) ....................... 50,000 256,100
Total ................................. 1,767,818
TOTAL COMMON STOCKS - 51.23% $ 13,328,640
(Cost: $13,979,307)
PREFERRED STOCK - 1.15%
Germany
Hornbach-Baumarkt-AG (A) ............... 300 $ 300,097
(Cost: $313,526)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.57%
U.S. Bancorp,
Master Note ........................... $ 930 930,000
Consumer Electronics and Appliances - 2.68%
TDK (USA) Corp.,
6.03%, 1-20-95 ........................ 700 697,772
Financial - 20.69%
BHP Finance (USA) Inc.,
6.02%, 1-31-95 ........................ 1,000 994,983
International Business Machines Credit
Corporation,
7.25%, 1-3-95 ......................... 600 599,758
Kerr-McGee Credit Corp.,
6.2%, 1-11-95 ......................... 600 598,967
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Financial (Continued)
Nestle Capital Corp.,
5.9%, 1-31-95 ......................... $ 700 $ 696,558
PHH Corp.,
6.02%, 1-27-95 ........................ 700 696,957
Textron Financial Corp.,
6.25%, 1-12-95 ........................ 700 698,663
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 600 598,215
USL Capital Corp.,
6.0%, 1-17-95 ......................... 500 498,667
Total ................................. 5,382,768
Food and Related - 9.80%
ConAgra, Inc.,
6.0%, 1-11-95 ......................... 700 698,833
General Mills, Inc.,
Master Note ........................... 950 950,000
Sara Lee Corporation,
Master Note............................ 900 900,402
Total ................................. 2,549,235
Paper - 3.07%
Champion International Corporation,
6.0%, 1-19-95 ......................... 800 797,600
Public Utilities - Electric - 4.22%
PS Colorado Credit Corp.,
6.18%, 1-13-95 ........................ 500 498,970
Potomac Electric Power Co.,
6.0%, 1-13-95 ......................... 600 598,794
Total ................................. 1,097,764
Public Utilities - Gas - 2.68%
Questar Corp.,
6.05%, 1-20-95 ........................ 700 697,765
TOTAL SHORT-TERM SECURITIES - 46.71% $12,152,904
(Cost: $12,152,904)
TOTAL INVESTMENT SECURITIES - 99.09% $25,781,641
(Cost: $26,445,737)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.91% 237,993
NET ASSETS - 100.00% $26,019,634
See Notes to Schedules of Investments on page 65.
<PAGE>
SMALL CAP PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Small Cap Portfolio from the date of
its inception on April 29, 1994 to the end of its fiscal year on December 31,
1994. The following discussion, graphs and tables provide you with information
regarding the Portfolio's performance during that period.
Stock market conditions during the past year were affected positively by rising
corporate earnings and negatively by rising interest rates brought on by the
credit tightening actions of the Federal Reserve Bank. The market perceived
Congressional inaction on major health care reform and the election of a new
party to power in Congress as positive.
Upon commencing operations this past year, the Portfolio emphasized stocks of
technology-related companies that were achieving exceptional earnings. These
companies included several that were making their initial public offering of
stock. As money flowed into the Portfolio after its inception, it expanded and
diversified its holdings.
The strategies and techniques we applied resulted in better performance by the
Portfolio than the NASDAQ Industrials Index as charted on the following page.
That index reflects the performance of securities that generally represent the
small companies sector of the stock market. The Portfolio's performance
exceeded that of the index because we selected stocks in the industries that
produced the better returns in 1994 and because the relatively small size of the
Portfolio allowed each investment decision to produce a significant impact on
the Portfolio's performance results..
In 1995 we expect the Federal Reserve Bank to increase interest rates further to
alleviate inflationary pressures in the economy. We anticipate that inflation
will remain low and that the rate of growth in the economy will slow. We
believe the long-term outlook for small cap securities is extremely positive, so
we expect to continue to pursue the same strategies we have employed in the
recent past in seeking to achieve the Portfolio's objectives. In the shorter
run as markets continue to contend with uncertainties in the economy, the
ability to select stocks that are most likely to appreciate will be the
principal determinant of performance. Stock selection will focus on companies
that are likely to do well regardless of the macro-economic backdrop.
Thank you very much for your continued support and confidence.
Respectfully,
Mark G. Seferovich
Manager, Small Cap Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED SMALL CAP PORTFOLIO
AND THE NASDAQ INDUSTRIALS INDEX
Aggregate
Period Total Return*
5/3-94-12/31/94** 20.92%
TMK/United NASDAQ
SMALL CAP Industrials
Portfolio Index
---------- -----------
05/03/94 Purchase 10,000 10,000
06/30/94 10,033 9,344
09/30/94 11,115 10,171
12/31/94 12,091 9,862
- ----- TMK/United Small Cap Portfolio**** -- $12,091
+++++ NASDAQ Industrials Index*** -- $9,882
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**5-3-94 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the NASDAQ
Industrials Index is not available, investment in the index was effected as
of April 30, 1994.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Biotechnology and Medical Services - 5.05%
EP Technologies, Inc.* ................. 50,000 $ 453,100
Protocol Systems, Inc.* ................ 16,000 144,000
Pyxis Corp.* ........................... 5,000 95,310
St. Jude Medical, Inc. ................. 1,000 39,500
Ventritex, Inc.* ....................... 3,000 80,811
Total ................................. 812,721
Computers and Office Equipment - 15.65%
Affiliated Computer Services, Inc.,
Class A* .............................. 10,000 217,500
America Online, Inc.*. ................. 2,000 112,000
Broderbund Software, Inc.* ............. 2,000 94,000
Cerner Corporation* .................... 1,000 44,250
Learning Company (The)* ................ 3,000 74,250
Macromedia, Inc.* ...................... 7,500 193,125
MapInfo Corporation* ................... 5,000 126,875
Minnesota Educational Computing
Corporation* .......................... 10,000 160,000
Parametric Technology Corporation* ..... 12,000 412,500
Shiva Corporation* ..................... 10,000 398,750
Synopsys, Inc.* ........................ 5,000 217,500
Wall Data Incorporated* ................ 10,000 398,750
Wonderware Corporation* ................ 2,000 67,000
Total ................................. 2,516,500
Drugs and Hospital Supply - 4.22%
LUNAR CORPORATION* ..................... 25,000 459,375
OmniCare, Inc. ......................... 5,000 219,375
Total ................................. 678,750
Electronics - 0.52%
Micro Linear Corporation* .............. 10,000 83,750
Hospital Management - 1.28%
Inphynet Medical Management Inc.* ...... 8,000 98,000
Quorum Health Group, Inc.* ............. 1,000 19,125
Sierra Health Services, Inc.* .......... 2,800 88,550
Total ................................. 205,675
Leisure Time - 2.18%
Cannondale Corporation* ................ 25,000 262,500
Longhorn Steaks, Inc.* ................. 10,000 87,500
Total ................................. 350,000
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Retailing - 5.95%
BABY SUPERSTORE, INC.* ................. 7,500 $ 344,063
Central Tractor Farm & Country, Inc.* .. 10,000 147,500
Hollywood Entertainment Corporation* ... 6,000 180,000
Just for Feet, Inc.* ................... 9,000 155,250
Movie Gallery, Inc.* ................... 5,000 129,375
Total ................................. 956,188
Services, Consumer and Business - 0.19%
Stewart Enterprises, Inc., Class A ..... 1,300 31,525
Telecommunications - 5.05%
Mobile Telecommunication Technologies
Corp.* ................................ 3,000 58,686
Ortel Corporation* ..................... 16,400 430,500
TESSCO Technologies Incorporated ....... 20,000 322,500
Total ................................. 811,686
Textiles and Apparel - 1.98%
Department 56, Inc.* ................... 8,000 318,000
Trucking - 0.89%
Knight Transportation, Inc.* ........... 10,000 143,750
TOTAL COMMON STOCKS - 42.96% $ 6,908,545
(Cost: $5,600,266)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 2.84%
U.S. Bancorp,
Master Note ........................... $ 457 457,000
Chemicals Specialty and Miscellaneous
Technology - 1.86%
Minnesota Mining and Manufacturing
Company,
5.8%, 1-6-95 .......................... 300 299,758
Consumer Electronics and Appliances - 3.10%
TDK (USA) Corp.,
6.03%, 1-20-95 ........................ 500 498,409
Drugs and Hospital Supply - 3.56%
Baxter International Inc.,
6.2%, 1-31-95 ......................... 575 572,029
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Financial - 23.54%
BHP Finance (USA) Inc.,
6.02%, 1-31-95 ........................ $ 400 $ 397,993
Block Financial Corp.,
5.97%, 1-23-95 ........................ 450 448,358
Kerr-McGee Credit Corp.,
6.2%, 1-11-95 ......................... 350 349,397
Merrill Lynch & Co., Inc.,
6.1%, 2-1-95 .......................... 500 497,374
Nestle Capital Corp.,
5.9%, 1-31-95 ......................... 600 597,050
PHH Corp.,
6.02%, 1-27-95 ........................ 500 497,826
Textron Financial Corp.,
6.25%, 1-12-95 ........................ 500 499,045
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 500 498,513
Total ................................. 3,785,556
Food and Related - 6.94%
ConAgra, Inc.,
6.0%, 1-11-95 ......................... 300 299,500
General Mills, Inc.,
Master Note ........................... 492 492,000
Sara Lee Corporation,
Master Note............................ 324 323,678
Total ................................. 1,115,178
Paper - 3.10%
Champion International Corporation,
6.0%, 1-19-95 ......................... 500 498,500
Public Utilities - Electric - 6.21%
PS Colorado Credit Corp.,
6.18%, 1-13-95 ........................ 500 498,970
Potomac Electric Power Co.,
6.03%, 1-13-95 ........................ 500 498,995
Total ................................. 997,965
Public Utilities - Gas - 2.48%
Questar Corp.,
6.05%, 1-20-95 ........................ 400 398,723
Public Utilities - Pipelines - 3.09%
Enron Corp.,
6.0%, 1-31-95 ......................... 500 497,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1994
Value
TOTAL SHORT-TERM SECURITIES - 56.72% $ 9,120,618
(Cost: $9,120,618)
TOTAL INVESTMENT SECURITIES - 99.68% $16,029,163
(Cost: $14,720,884)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.32% 50,999
NET ASSETS - 100.00% $16,080,162
See Notes to Schedules of Investments on page 65.
<PAGE>
BALANCED PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Balanced Portfolio from the date of
its inception on April 29, 1994 to the end of its fiscal year on December 31,
1994. The following discussion, graphs and tables provide you with information
regarding the Portfolio's performance during that period.
During the past year the economy was characterized by rising interest rates,
which negatively impacted the performance of stocks and bonds. The securities
markets were also affected by political developments, including Congressional
inaction on major health care reform and the election of a new party to power in
Congress, both of which were perceived by the stock markets as positive.
As money has flowed into the Portfolio since its inception, we have added to its
core group of securities by purchasing a broad array of holdings. The volatile
nature of the markets in 1994 gave us the opportunity to acquire positions in
securities that we believe possess the potential for long-term appreciation
despite near-term uncertainties. We also maintained a significant cash
position.
The strategies and techniques we applied resulted in performance by the
Portfolio that fell below the performance of the indexes charted on the
following page. Those indexes reflect the performance of securities that
generally represent the stock market (the S&P 500 Index) and the bond market
(the Lehman Brothers Government/Corporate Bond Index or LBGCBI). The S&P 500
and the LBGCBI are presented because the Portfolio invests in both stocks and
bonds. The Portfolio's performance was positively impacted by its start-up
activities, as well as its maintenance of significant cash holdings during the
year.
In 1995 we expect inflation to remain subdued, but stocks are likely to remain
vulnerable to expectations of additional interest rate increases. In addition,
we anticipate that the recent financial difficulties in Mexico and other Latin
American countries will affect companies that are exposed to developments in
those areas. We intend to pursue our same strategy of searching for securities
that present the best prospects for positive long-term returns in keeping with
the Portfolio's investment objectives.
Thank you very much for your continued support and confidence.
Respectfully,
Cynthia P. Prince-Fox
Manager, Balanced Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED BALANCED PORTFOLIO,
THE STANDARD & POOR'S 500 INDEX, AND THE
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Aggregate
Period Total Return*
5/3/94-12/31/94** -0.37%
Lehman
Brothers
Standard Government/
TMK/United & Poor's Corporate
Balanced 500 Bond
Portfolio Index Index
---------- -------- -----------
05/03/94 Purchase 10,000 10,000 10,000
06/30/94 10,021 9,915 9,959
09/30/94 10,254 10,400 10,009
12/31/94 9,963 10,398 10,046
- ----- S&P 500 Index*** -- $10,398
+++++ Lehman Bros Gov't/Corp Bond Index*** -- $10,046
===== TMK/United Balanced Portfolio**** -- $9,963
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**5-3-94 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the S&P 500
Index and the Lehman Brothers Government/Corproate Bond Index (including
income) are not available, investment in the indexes was effected as of
April 30, 1994.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Aerospace - 1.83%
TRW Inc. ............................... 2,400 $ 158,400
Automotive - 3.45%
Eaton Corporation ...................... 1,800 89,100
General Motors Corporation ............. 2,700 114,075
AB Volvo, ADR, Series B ................ 5,100 96,263
Total ................................. 299,438
Banks and Savings and Loans - 0.59%
Norwest Corporation .................... 2,200 51,425
Biotechnology and Medical Services - 1.00%
St. Jude Medical, Inc. ................. 2,200 86,900
Building - 2.95%
Simon Property Group, Inc. ............. 3,900 94,575
Temple-Inland Inc. ..................... 800 36,100
York International Corporation ......... 3,400 125,375
Total ................................. 256,050
Chemicals Major - 2.72%
Air Products and Chemicals, Inc. ....... 1,900 84,788
du Pont (E.I.) de Nemours and Company .. 1,200 67,500
Praxair, Inc. .......................... 1,200 24,600
Union Carbide Corporation .............. 2,000 58,750
Total ................................. 235,638
Chemicals Specialty and Miscellaneous
Technology - 1.28%
Betz Laboratories, Inc. ................ 2,500 110,625
Domestic Oil - 2.24%
Amoco Corporation ....................... 1,600 94,600
Apache Corporation ..................... 4,000 100,000
Total ................................. 194,600
Electronics - 0.67%
AMP Incorporated ....................... 800 58,200
Engineering and Construction - 0.86%
Foster Wheeler Corporation ............. 2,500 74,375
Financial - 1.34%
Federal National Mortgage Association .. 1,600 116,600
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Food and Related - 4.13%
CPC International Inc. ................. 1,200 $ 63,900
Deans Foods Company .................... 3,600 104,400
Hormel Foods Corporation ............... 4,200 103,950
Sara Lee Corporation ................... 3,400 85,850
Total ................................. 358,100
Hospital Management - 4.06%
LTC Properties Inc. .................... 9,000 119,250
National Medical Enterprises, Inc.* .... 8,600 121,475
Sierra Health Services, Inc.* .......... 1,800 56,925
United HealthCare Corporation .......... 1,200 54,150
Total ................................. 351,800
Insurance - 2.95%
SAFECO Corporation ..................... 1,500 78,188
St. Paul Companies, Inc. (The) ......... 2,200 98,450
UNUM Corporation ....................... 2,100 79,275
Total ................................. 255,913
Machinery - 4.00%
Caterpillar Inc. ....................... 1,200 66,150
Cleveland-Cliffs Inc. .................. 500 18,500
Deere & Company ........................ 2,000 132,500
Timken Company (The) ................... 1,000 35,250
Trinova Corporation .................... 3,200 94,000
Total ................................. 346,400
Multi-Industry - 1.12%
ITT Corporation ........................ 1,100 97,488
Paper - 2.11%
Union Camp Corporation ................. 1,800 84,825
Westvaco Corporation ................... 2,500 98,125
Total ................................. 182,950
Publishing and Advertising - 1.00%
McGraw-Hill, Inc. ...................... 1,300 86,938
Railroads - 3.52%
Burlington Northern Inc. ............... 400 19,250
CSX Corp. .............................. 1,900 132,288
ConRail, Inc. .......................... 1,600 80,800
Norfolk Southern Corporation ........... 1,200 72,750
Total ................................. 305,088
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Retailing - 5.33%
Kohl's Corporation* ..................... 2,000 $ 79,500
Limited, Inc. (The) .................... 4,000 72,500
May Department Stores Company (The) .... 1,900 64,125
Mercantile Stores Company, Inc. ........ 1,000 39,500
Penney (J.C.) Company, Inc. ............ 2,000 89,250
Tommy Hilfiger Corporation* ............ 2,600 117,325
Total ................................. 462,200
Steel - 0.94%
Bethlehem Steel Corporation* ........... 4,500 81,000
Telecommunications - 3.02%
BellSouth Corporation .................. 1,200 64,950
MCI Communications Corporation ......... 6,000 110,622
Telefonos de Mexico S.A. de C.V., ADR .. 2,100 86,100
Total ................................. 261,672
Textiles and Apparel - 0.93%
Cygne Designs, Inc.* ................... 6,000 81,000
TOTAL COMMON STOCKS - 52.04% $ 4,512,800
(Cost: $4,737,268)
PREFERRED STOCKS
Airlines - 0.30%
Delta Air Lines, Inc., Depository Shares,
Convertible, Series C ................. 600 26,250
Computers and Office Equipment - 0.73%
General Motors Corporation, Class E,
Depository Shares, Convertible ........ 1,100 63,113
Telecommunications - 0.35%
Nokia Corporation, ADS* ................ 400 30,000
TOTAL PREFERRED STOCKS - 1.38% $ 119,363
(Cost: $106,718)
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES - 6.18%
United States Treasury:
6.875%, 8-31-99 ....................... $250 $ 240,625
6.375%, 8-15-2002 ..................... 100 91,562
6.25%, 8-15-2023 ...................... 250 203,243
Total ................................. $ 535,430
(Cost: $559,041)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 4.31%
U.S. Bancorp,
Master Note ........................... 374 374,000
Consumer Electronics and Appliances - 3.45%
TDK (USA) Corp.,
6.03%, 1-20-95 ........................ 300 299,045
Financial - 10.69%
BHP Finance (USA) Inc.,
6.02%, 1-31-95 ........................ 250 248,746
Kerr-McGee Credit Corp.,
6.2%, 1-11-95 ......................... 230 229,604
PHH Corp.,
6.02%, 1-27-95 ........................ 250 248,913
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 200 199,405
Total ................................. 926,668
Food and Related - 10.68%
ConAgra, Inc.,
6.0%, 1-11-95 ......................... 300 299,500
General Mills, Inc.,
Master Note ........................... 375 375,000
Sara Lee Corporation,
Master Note............................ 252 251,592
Total ................................. 926,092
Paper - 3.45%
Champion International Corporation,
6.0%, 1-19-95 ......................... 300 299,100
Public Utilities - Electric - 6.90%
PS Colorado Credit Corp.,
6.18%, 1-13-95 ........................ 300 299,382
Potomac Electric Power Co.,
6.03%, 1-13-95 ........................ 300 299,397
Total ................................. 598,779
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1994
Value
TOTAL SHORT-TERM SECURITIES - 39.48% $3,423,684
(Cost: $3,423,684)
TOTAL INVESTMENT SECURITIES - 99.08% $8,591,277
(Cost: $8,826,711)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.92% 79,791
NET ASSETS - 100.00% $8,671,068
See Notes to Schedules of Investments on page 65.
<PAGE>
MONEY MARKET PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report covers the operation of the Money Market Portfolio for the fiscal
year ended December 31, 1994. The following discussion and tables provide you
with information regarding the Portfolio's performance during that period.
After several years of declining interest rates, the Federal Reserve Bank began
raising interest rates in February of 1994. This move to a restrictive monetary
policy was aimed at controlling growth in the economy for the purpose of
alleviating perceived inflationary pressures. Interest rates on very short-term
instruments, such as those held by the Portfolio, rose as the Federal Reserve
Bank implemented interest rate increases a total of six times during 1994.
At the beginning of the fiscal year, the Portfolio held approximately 30% of its
assets in floating-rate instruments, which adjust quickly to changes in yield as
short-term interest rates rise. During the year, the Portfolio acquired
additional floating-rate instruments. The Portfolio also invested in securities
with very short maturities to take fullest advantage of the increasingly higher
yields that became available throughout the year.
We believe the Federal Reserve Bank is likely to increase interest rates further
in the first half of 1995 to continue efforts to control economic growth and
temper rising inflation expectations. We plan to continue to emphasize
floating-rate securities and intend to maintain a relatively short average-
weighted maturity among the Portfolio's holdings so as to be able to take
advantage of the higher short-term interest rates we expect in the future.
Thank you very much for your continued support and confidence.
Respectfully,
Richard K. Poettgen
Manager, Money Market Portfolio
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit
Domestic - 1.62%
PNC Bank, N.A.,
5.7%, 4-20-95 ......................... $ 500 $ 499,401
Eurodollar - 1.62%
NationsBank Corp. Europe,
5.4%, 5-19-95 ......................... 500 499,999
Total Certificates of Deposit - 3.24% 999,400
Notes - 3.25%
Abbey National Treasury Services plc,
7.4%, 12-15-95 ........................ 500 500,000
Comerica Bank,
5.83%, 1-3-95 ......................... 500 500,000
Total ................................. 1,000,000
TOTAL BANK OBLIGATIONS - 6.49% $ 1,999,400
(Cost: $1,999,400)
CORPORATE OBLIGATIONS
Commercial Paper
Building - 2.59%
Weyerhaeuser Company,
5.9%, 1-23-95 ......................... 800 797,116
Financial - 19.49%
AT&T Capital Corp.,
5.88%, 1-3-95 ......................... 800 799,739
B.A.T. Capital Corp.,
5.9%, 1-25-95 ......................... 500 498,033
BHP Finance (USA) Inc.,
6.02%, 1-31-95 ........................ 700 696,488
Block Financial Corp.,
5.97%, 1-23-95 ........................ 600 597,811
General Electric Capital Corp.,
6.0%, 2-17-95 ......................... 800 793,733
Merrill Lynch & Co., Inc.,
5.72%, 1-17-95 ........................ 600 598,475
Nestle Capital Corp.,
5.9%, 1-31-95 ......................... 630 626,902
PHH Corp.,
6.02%, 1-27-95 ........................ 800 796,522
Philip Morris Capital Corp.,
5.9%, 1-25-95 ......................... 600 597,640
Total ................................. 6,005,343
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Food and Related - 12.17%
General Mills, Inc.,
Master Note ........................... $1,060 $ 1,060,000
Heinz (H.J.) Company,
5.9%, 1-23-95 ......................... 800 797,115
Quaker Oats Co.,
5.95%, 1-17-95 ........................ 800 797,884
Sara Lee Corporation,
Master Note ........................... 1,094 1,093,781
Total ................................. 3,748,780
Paper - 2.59%
Kimberly-Clark Corp.,
5.9%, 1-23-95 ......................... 800 797,115
Public Utilities - Electric - 9.39%
Pacific Gas and Electric Co.,
6.0%, 1-13-95 ......................... 800 798,400
Pacificorp,
5.72%, 1-11-95 ........................ 500 499,206
Potomac Electric Power Co.,
6.03%, 1-13-95 ........................ 800 798,392
Southern California Edison Company,
6.05%, 1-20-95 ........................ 800 797,446
Total ................................. 2,893,444
Public Utilities - Gas - 4.85%
Bay State Gas Co.,
5.9%, 1-25-95 ......................... 800 796,853
Questar Corp.,
5.75%, 1-13-95 ........................ 700 698,658
Total ................................. 1,495,511
Publishing and Advertising - 2.59%
Times Mirror Company (The),
6.05%, 1-11-95 ........................ 800 798,656
Telecommunications - 1.61%
Southwestern Bell Capital Corp.,
6.04%, 2-2-95 ......................... 500 497,316
Total Commercial Paper - 55.28% 17,033,281
Commercial Paper (backed by irrevocable
bank letter of credit)
Financial - 1.62%
Spiegel Funding Corp. (Dresdner
Bank A.G.),
5.75%, 1-17-95 ........................ 500 498,722
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (backed by irrevocable
bank letter of credit) (Continued)
Public Utilities - Electric - 2.59%
AES Barbers Point Inc. (Bank of
America N.T. & S.A.),
6.03%, 1-19-95 ........................ $ 800 $ 797,588
Total Commercial Paper (backed by
irrevocable bank letter of credit) - 4.21% 1,296,310
Notes
Beverages - 1.62%
PepsiCo, Inc.,
5.845%, 1-3-95 ........................ 500 500,000
Financial - 1.62%
AVCO Financial Services Inc.,
5.87%, 1-3-95 ......................... 500 500,000
Public Utilities - Electric - 1.62%
Georgia Power Co.,
5.125%, 9-1-95 ........................ 500 497,889
Total Notes - 4.86% 1,497,889
TOTAL CORPORATE OBLIGATIONS - 64.35% $19,827,480
(Cost: $19,827,480)
MUNICIPAL OBLIGATIONS
California - 2.60%
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
5.78%, 2-1-95 ......................... 800 800,000
Georgia - 2.60%
Development Authority of Richmond
County (Georgia), Taxable Industrial
Revenue Bonds (NutraSweet Project),
Series 1990 (Union Bank of Switzerland),
5.71, 6-2-95 .......................... 800 800,000
Michigan - 2.27%
Michigan Underground Storage Tank Financial
Assurance Authority, State of Michigan,
Series 1 (Canadian Imperial Bank of Commerce),
6.4%, 1-11-95 ......................... 700 698,756
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
New Hampshire - 1.62%
The Industrial Development Authority
of the State of New Hampshire,
Pollution Control Revenue Bonds
(Public Service Company of New
Hampshire Project-1991 Taxable
Series D and E) (Barclays Bank),
6.45%, 2-14-95 ........................ $ 500 $ 500,000
Texas - 1.61%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
6.118%, 1-20-95 ....................... 500 498,385
TOTAL MUNICIPAL OBLIGATIONS - 10.70% $ 3,297,141
(Cost: $3,297,141)
UNITED STATES GOVERNMENT
OBLIGATIONS
Federal Home Loan Banks,
5.9%, 1-9-95 .......................... 1,000 1,000,000
Federal Home Loan Mortgage Corporation,
5.95%, 3-7-95 ......................... 1,000 1,000,000
Federal National Mortgage Association,
5.9%, 3-20-95 ......................... 500 500,000
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS - 8.11% $ 2,500,000
(Cost: $2,500,000)
TOTAL INVESTMENT SECURITIES - 89.65% $27,624,021
(Cost: $27,624,021)
CASH AND OTHER ASSETS,
NET OF LIABILITIES - 10.35% 3,188,242
NET ASSETS - 100.00% $30,812,263
See Notes to Schedules of Investments on page 65.
<PAGE>
LIMITED-TERM BOND PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Limited-Term Bond Portfolio from the
date of its inception on April 29, 1994 to the end of its fiscal year on
December 31, 1994. The following discussion, graphs and tables provide you with
information regarding the Portfolio's performance during that period.
During the past year the Federal Reserve Bank raised interest rates several
times as it attempted to preempt inflationary pressures and achieve a slow,
sustainable level of economic growth. The Federal Reserve Bank's actions caused
interest rates on intermediate-maturity instruments to experience a sharp rise.
Two-year treasury notes rose by nearly 3.5 percentage points and three-year
treasury notes increased by almost 3.25 percentage points over the course of the
year. The Federal Funds rate increased 2.5 percentage points during the same
period.
To protect against the erosion in bond principal values caused by rising
interest rates, we reduced the average maturity of the Portfolio's bond holdings
and increased the level of cash. We reduced the Portfolio's average maturity to
about the mid-point of the two-to-five-year maturity range established for the
Portfolio, which allowed for some asset value protection while enabling
maintenance of a reasonable level of income.
The strategies and techniques we applied resulted in the direction of the
Portfolio's performance remaining fairly consistent with that of the Lehman
Brothers Mutual Fund Short Investment Grade Debt Index as charted on the
following page. That index reflects the performance of securities that
generally represent the short-maturity sector of the bond market.
In 1995 we anticipate that the Federal Reserve Bank will continue a restrictive
monetary policy in an effort to control the rate of economic growth and
alleviate potential inflationary pressures. As a result, we expect that bond
yields will remain at historically high levels relative to continuing low rates
of inflation. We intend to extend the average maturity of the Portfolio's
holdings by using our cash reserves to purchase bonds with relatively longer
maturities. When making new purchases, we plan to focus on higher-rated
securities that typically do relatively well in a period of slowing economic
activity, which we anticipate.
Thank you very much for your continued support and confidence.
Respectfully,
W. Patrick Sterner
Manager, Limited-Term Bond Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED LIMITED-TERM BOND PORTFOLIO
AND THE LEHMAN BROTHERS MUTUAL FUND SHORT INVESTMENT GRADE DEBT INDEX
Aggregate
Period Total Return*
5/3/94-12/31/94** 0.26%
Lehman
Brothers
Mutual Fund
TMK/United Short
Limited-Term Investment
Bond Grade Debt
Portfolio Index
--------- ---------
05/03/94 Purchase 10,000 10,000
06/30/94 9,979 10,045
09/30/94 10,041 10,165
12/31/94 10,026 10,142
- ----- Lehman Bros MF Short Inv Grade Debt Index*** -- $10,142
+++++ TMK/United Limited-Term Bond Portfolio**** -- $10,026
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**5-3-94 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the Lehman
Brothers Mutual Fund Short Investment Grade Debt Index (including income) is
not available, investment in the index was effected as of April 30, 1994.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE LIMITED-TERM BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Airlines - 3.10%
Federal Express Corporation,
9.75%, 5-15-96 ........................ $ 50 $ 51,010
Automotive - 2.98%
General Motors Corporation,
7.625%, 2-15-97 ....................... 50 49,011
Banks and Savings and Loans - 12.38%
BankAmerica Corporation,
9.7%, 8-1-2000 ........................ 50 52,361
Boatmen's Bancshares, Inc.,
9.25%, 11-1-2001 ...................... 50 51,396
NCNB Corporation,
10.5%, 3-15-99 ........................ 50 51,375
Norwest Financial, Inc.,
7.75%, 8-15-2001 ...................... 50 48,476
Total ................................. 203,608
Chemicals Major - 8.33%
Dow Chemical Company, Inc. (The),
4.625%, 10-15-95 ...................... 60 58,650
ICI Welmington, Inc.,
9.5%, 11-15-2000 ...................... 75 78,438
Total ................................. 137,088
Chemicals Specialty and Miscellaneous
Technology - 5.98%
Waste Management, Inc.,
6.25%, 12-15-96 ....................... 50 49,247
Xerox Credit Corporation,
6.25%, 1-15-96 ........................ 50 49,138
Total ................................. 98,385
Domestic Oil - 3.13%
BP America Inc.,
9.5%, 1-1-98 .......................... 50 51,490
Drugs and Hospital Supply - 3.09%
Baxter International Inc.,
9.25%, 9-15-96 ........................ 50 50,802
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE LIMITED-TERM BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial - 11.76%
Associates Corporation of North America,
8.8%, 8-1-98 .......................... $ 50 $ 50,452
Avco Financial Services, Inc.,
5.5%, 4-1-2000 ........................ 50 44,137
Ford Motor Credit Company,
8.0%, 1-15-99 ......................... 50 49,390
Household Finance Corporation,
7.75%, 6-15-97 ........................ 50 49,447
Total ................................. 193,426
Insurance - 6.06%
ITT Hartford,
7.25%, 12-1-96 ........................ 50 49,099
Transamerica Finance Corporation,
8.75%, 10-1-99 ........................ 50 50,583
Total ................................. 99,682
International Oil - 6.09%
Chevron Corporation,
8.11%, 12-1-2004 ...................... 50 48,734
Texaco Capital Inc.,
9.0%, 12-15-99 ........................ 50 51,433
Total ................................. 100,167
Multi-Industry - 3.12%
ITT Financial Corporation,
8.875%, 6-15-2003 ..................... 50 51,336
Public Utilities - Pipelines - 6.14%
Consolidated Natural Gas Company,
8.75%, 6-1-99 ......................... 50 50,642
Tenneco Credit Corporation,
9.0%, 7-15-95 ......................... 50 50,345
Total ................................. 100,987
Retailing - 6.28%
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 50 52,140
Sears, Roebuck and Co.,
9.25%, 4-15-98 ........................ 50 51,273
Total ................................. 103,413
TOTAL CORPORATE DEBT SECURITIES - 78.44% $1,290,405
(Cost: $1,324,967)
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE LIMITED-TERM BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
5.125%, 11-30-98 ...................... $100 $ 90,969
6.375%, 8-15-2002...................... 100 91,562
6.25%, 2-15-2003 ...................... 100 90,437
TOTAL UNITED STATES GOVERNMENT SECURITIES - 16.59% $ 272,968
(Cost: $286,093)
TOTAL SHORT-TERM SECURITIES - 2.86% $ 47,000
(Cost: $47,000)
TOTAL INVESTMENT SECURITIES - 97.89% $1,610,373
(Cost: $1,658,060)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.11% 34,773
NET ASSETS - 100.00% $1,645,146
See Notes to Schedules of Investments on page 65.
<PAGE>
BOND PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Bond Portfolio for the fiscal year
ended December 31, 1994. The following discussion, graphs and tables provide
you with information regarding the Portfolio's performance during that period.
During the past fiscal year, the Federal Reserve Bank raised interest rates six
times. This action pushed interest rates on short-term bonds from a low of
under 3% in January 1994 to a high of over 6.5% in December 1994. Interest
rates on long-term bonds rose similarly, from a January low of around 6% to a
peak of over 8% in November of 1994.
In response to rising interest rates, we reduced the average maturity of the
Portfolio's holdings as a means of lessening declines in the Portfolio's per-
share value. In addition, the Portfolio increased its exposure to non-
investment grade securities slightly, which increased the average stated yield
of the Portfolio's holdings. This strategy of emphasizing securities with
shorter maturities and higher stated yields helped the Portfolio preserve
capital in an environment of declining bond values.
The strategies and techniques we applied resulted in the direction of the
Portfolio's performance remaining fairly consistent with that of the Lehman
Brothers Government/Corporate Bond Index as charted on the following page. That
index reflects the performance of securities that generally represent the
corporate bond market. The Portfolio's performance was down slightly more than
the index because the longer average maturity of the Portfolio during the
earlier portion of the year adversely affected the Portfolio's results relative
to the index.
In 1995 we anticipate the possibility of an additional increase in short-term
interest rates by the Federal Reserve Bank and a concurrent slowing of economic
growth. These factors should reduce inflation fears and, in combination, will
be encouraging to the bond markets. Therefore, we intend to shed some of the
Portfolio's non-investment-grade holdings and to extend the Portfolio's average
maturity as circumstances warrant in the year ahead.
Thank you very much for your continued support and confidence.
Respectfully,
James C. Cusser
Manager, Bond Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED BOND PORTFOLIO
AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Average Annual Total Return*
1 year 5 years 7+ years**
- -5.90% 7.20% 7.88%
Lehman
Brothers
Government/
TMK/United Corporate
Bond Bond
Portfolio Index
---------- -----------
07/13/87 Purchase 10,000
07/31/87 10,070 10,000
12/31/87 10,331 10,298
12/31/88 11,131 11,079
12/31/89 12,449 12,656
12/31/90 13,325 13,706
12/31/91 15,482 15,916
12/31/92 16,670 17,121
12/31/93 18,730 19,014
12/31/94 17,624 18,347
- ----- Lehman Bros Gov't/Corp Bond Index*** -- $18,347
+++++ TMK/United Bond Portfolio**** -- $17,624
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**7-13-87 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the Lehman
Brothers Government Bond Index (including income) is not available,
investment in the index was effected as of July 31, 1987.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Aerospace - 1.39%
McDonnell Douglas Corporation,
9.25%, 4-1-2002 ....................... $1,000 $ 1,026,960
Airlines - 1.26%
Federal Express Corporation,
7.89%, 9-23-2008 ...................... 1,000 935,770
Automotive - 5.70%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 2,600 2,661,958
Toyota Motor Credit Corporation, Medium Term,
Three Year Basket Inverse Floating Rate,
3.02%, 8-5-96 (B) ..................... 1,750 1,557,500
Total ................................. 4,219,458
Banks and Savings and Loans - 13.77%
BankAmerica Corporation,
8.125%, 8-15-2004 ..................... 1,000 950,710
BarclaysAmericanCorporation,
9.125%, 12-1-97 ....................... 225 229,478
Bayerische Landesbank Girozentale, NY
Branch, CD, Currency Protected Deutschemark
Swap Rate Inverse Floating Rate,
3.06%, 3-28-97 (C) .................... 1,000 890,000
Central Fidelity Banks,
8.15%, 11-15-2002 ..................... 500 483,140
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 500 420,000
Citicorp,
7.75%, 6-15-2006 ...................... 1,000 929,430
First Union Corporation,
8.0%, 11-15-2002 ...................... 1,000 958,460
Great Western Financial Corporation,
8.6%, 2-1-2002 ........................ 1,500 1,489,380
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 1,000 1,073,220
Riggs National Corporation,
8.5%, 2-1-2006 ........................ 1,000 925,000
Skandia Enskilda Banken, NY Branch
Certificate of Deposit Dollarized
Australian Dollar Reset,
6.125%, 4-5-99 (D) .................... 1,000 840,000
Wells Fargo & Company,
8.75%, 5-1-2002 ....................... 1,000 1,005,950
Total ................................. 10,194,768
Building - 7.93%
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ...................... 1,000 932,840
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Building (Continued)
Cemex, S.A.,
8.875%, 6-10-98 ....................... $1,000 $ 870,000
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 500 441,250
Noranda Forest Inc.,
7.5%, 7-15-2003 ....................... 1,000 921,820
Noranda Inc.,
8.625%, 7-15-2002 ..................... 950 942,524
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 1,000 999,330
Del Webb Corporation,
10.875%, 3-31-2000 .................... 800 760,000
Total ................................. 5,867,764
Chemicals Major - 1.37%
Dow Capital BV,
9.0%, 5-15-2010 ....................... 1,000 1,014,920
Domestic Oil - 4.96%
Apache Corporation,
9.25%, 6-1-2002 ....................... 500 509,670
LASMO (USA) INC.,
7.125%, 6-1-2003 ...................... 1,000 889,720
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 1,500 1,297,500
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 1,000 971,680
Total ................................. 3,668,570
Electrical Equipment - 3.29%
General Electric Capital Corporation:
8.3%, 9-20-2009 ....................... 1,500 1,528,515
8.65%, 5-1-2018 ....................... 895 902,769
Total ................................. 2,431,284
Financial - 10.48%
Banc One Credit Card Master Trust,
7.55%, 12-15-99 ....................... 1,000 985,930
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 1,000 1,161,360
Countrywide Mortgage Backed Securities,
Inc.,
6.5%, 4-25-2024 ....................... 2,000 1,839,720
DLJ Mortgage Acceptance Corp., 1994-3 A13,
6.5%, 4-25-2024 ....................... 980 849,216
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 1,000 1,038,310
Greyhound Financial Corporation,
8.79%, 11-15-2001 ..................... 1,000 1,002,150
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial (Continued)
JCP Master Credit Card Trust,
9.625%, 6-15-2000 ..................... $ 500 $ 524,685
National Credit Card Trust 1989-4,
9.45%, 12-31-97 ....................... 350 355,796
Total ................................. 7,757,167
Hospital Management - 1.36%
HealthTrust Inc.:
10.75%, 5-1-2002 ...................... 500 531,250
8.75%, 3-15-2005 ...................... 500 477,500
Total ................................. 1,008,750
Household Products - 2.68%
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 2,000 1,983,760
International Oil - 0.49%
YPF Sociedad Anoima,
8.0%, 2-15-2004 ....................... 500 360,000
Leisure Time - 4.91%
Marriott International, Inc.,
6.75%, 12-15-2003 ..................... 1,000 881,960
Tele-Communications, Inc.,
9.8%, 2-1-2012 ........................ 1,000 1,000,210
Time Warner Incorporated,
7.95%, 2-1-2000 ....................... 1,000 937,460
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 1,000 813,080
Total ................................. 3,632,710
Machinery - 0.72%
Caterpillar, Inc.,
9.375%, 8-15-2011 ..................... 500 534,840
Multi-Industry - 1.22%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 1,000 905,000
Public Utilities - Electric - 1.28%
Kansas Gas & Electric Company,
7.6%, 12-15-2003 ...................... 1,000 943,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Public Utilities - Pipelines - 2.76%
Arkla, Inc.,
8.875%, 7-15-99 ....................... $1,000 $ 975,000
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 500 531,595
Tenneco Inc.,
10.375%, 11-15-2000 ................... 500 536,825
Total ................................. 2,043,420
Publishing and Advertising - 1.86%
News America Holdings Incorporated:
9.125%, 10-15-99 ...................... 500 503,975
8.25%, 8-10-2018 ...................... 1,000 875,610
Total ................................. 1,379,585
Railroad Equipment - 0.01%
Union Tank Car Co.,
9.5%, 12-15-95 ........................ 9 9,131
Railroads - 1.42%
Louisville & Nashville Railroad
Equipment Trust Certificates, Series 10,
12.3%, 2-1-95 ......................... 8 8,008
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... 1,000 1,045,170
Total ................................. 1,053,178
Steel - 1.33%
USX Corporation,
8.21%, 1-21-2000 ...................... 1,000 980,750
Telecommunications - 4.74%
New England Telephone & Telegraph Company,
7.875%, 11-15-2029 .................... 2,000 2,081,560
Southwestern Bell Telephone Company,
7.0%, 8-26-2002 ....................... 1,000 930,980
US WEST Financial Services, Inc.,
8.4%, 9-15-99 ......................... 500 498,625
Total ................................. 3,511,165
TOTAL CORPORATE DEBT SECURITIES - 74.93% $55,462,450
(Cost: $59,389,451)
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITIES
Argentina - 0.48%
Republic of Argentina,
8.375%, 12-20-2003 .................... $ 500 $ 356,250
Canada - 4.24%
Hydro Quebec,
8.05%, 7-7-2024 ....................... 1,000 961,420
Province of Manitoba,
9.125%, 1-15-2018 ..................... 2,000 2,179,440
Total ................................. 3,140,860
Supranationals - 1.41%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 1,000 1,039,730
TOTAL OTHER GOVERNMENT SECURITIES - 6.13% $ 4,536,840
(Cost: $4,789,818)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
7.5%, 11-15-2017 ...................... 1,538 1,439,953
7.5%, 4-15-2019 ....................... 1,190 1,019,068
7.0%, 1-15-2021 ....................... 500 440,000
Federal National Mortgage Association,
7.5%, 9-1-2009 ........................ 1,000 956,926
United States Treasury:
6.5%, 5-15-97 ......................... 1,000 972,340
5.75%, 10-31-97 ....................... 2,500 2,369,925
11.25%, 2-15-2015 ..................... 1,000 1,321,250
8.875%, 8-15-2017 ..................... 2,000 2,178,740
7.5%, 11-15-2024 ...................... 1,000 956,560
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 15.75% $11,654,762
(Cost: $12,071,117)
TOTAL SHORT-TERM SECURITIES - 1.24% $ 922,000
(Cost: $922,000)
TOTAL INVESTMENT SECURITIES - 98.05% $72,576,052
(Cost: $77,172,386)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.95% 1,440,798
NET ASSETS - 100.00% $74,016,850
See Notes to Schedules of Investments on page 65.
<PAGE>
HIGH INCOME PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the High Income Portfolio for the fiscal
year ended December 31, 1994. The following discussion, graphs and tables
provide you with information regarding the Portfolio's performance during that
period.
During the past fiscal year the Federal Reserve Bank raised interest rates
several times. This led to weak performance in the high-yield bond market
throughout the year, although its results were somewhat less disappointing than
the performance of the high-grade bond market in 1994.
In view of the prevailing situation, the Portfolio maintained 8% to 10% of its
assets in cash and invested primarily in high-yield bonds of relatively higher
quality. When there is a slowing in the rate of economic growth, which the
Federal Reserve Bank's actions have been designed to induce, the demand for
bonds of relatively higher quality usually increases, typically causing them to
perform better than lower-rated bonds. Our strategy, therefore, has been to
position the Portfolio to take advantage of the appreciation potential of the
more highly-rated high-yield securities.
The strategies and techniques we applied resulted in the direction of the
Portfolio's performance remaining fairly consistent with that of the First
Boston High Yield Index as charted on the following page. That index reflects
the performance of securities that generally represent the high-yield bond
market. The performance of the index in 1994 was somewhat better than the
Portfolio's performance because the index was weighted more heavily in
industries such as health care that experienced a rally in the fourth quarter of
the year.
In 1995 we expect the Federal Reserve Bank to increase interest rates further.
We anticipate that the rate of economic growth will slow by the second half of
the year. The high-yield bond market could remain nervous this coming year over
Fed-induced economic weakness. Therefore, we remain cautious and will continue
to take steps to limit the Portfolio's risk while still emphasizing high income.
Our strategy is to search for relatively higher-quality bonds that are trading
at discounts, thereby producing high yields relative to their credit risk, as
well as newly issued bonds offering the attractive yields that have become
available as interest rates have risen.
Thank you very much for your continued support and confidence.
Respectfully,
Louise D. Rieke
Manager, High Income Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED HIGH INCOME PORTFOLIO
AND THE FIRST BOSTON HIGH YIELD INDEX
Average Annual Total Return*
1 year 5 years 7+ years**
- -2.55% 10.58% 8.29%
First
Boston
TMK/United High
High Income Yield
Portfolio Index
----------- ------
07/13/87 Purchase 10,000
07/31/87 10,041 10,000
12/31/87 9,954 10,087
12/31/88 11,461 11,465
12/31/89 10,980 11,509
12/31/90 10,164 10,775
12/31/91 13,639 15,489
12/31/92 15,779 18,070
12/31/93 18,605 21,488
12/31/94 18,130 21,280
- ----- First Boston HIgh Yield Index*** -- $21,280
+++++ TMK/United High Income Portfolio**** -- $18,130
Past performance is not predictive of future performance. Indexes are
unmanaged. Performance data quoted does not take into account any expenses
or charges associated with owning a variable life or annuity policy invested
in the TMK/United Funds, Inc.
*Performance data quoted represents past performance. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**7-13-87 (the initial offering date) through 12-31-94.
***Because the Fund commenced operations on a date other than at the end of a
month, and partial month calculations of the performance of the First Boston
High Yield Index (including income) is not available, investment in the
index was effected as of July 31, 1987.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Shares Value
COMMON STOCKS AND WARRANTS
Leisure Time - 0.98%
Infinity Broadcasting Corporation,
Class A* .............................. 22,500 $ 711,563
Miscellaneous - 0.91%
Dial Page Inc., Warrants ............... 1,000 1,250
LTC Properties, Inc. ................... 50,000 662,500
Total ................................. 663,750
TOTAL COMMON STOCKS AND WARRANTS - 1.89% $1,375,313
(Cost: $967,468)
PREFERRED STOCKS - 0.69%
Banks and Savings and Loans
California Federal Bank, F.S.B. ........ 5,000 $ 501,250
(Cost: $500,000)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Automotive - 2.53%
Aftermarket Technology Corp.,
12.0%, 8-1-2004 (E).................... $ 500 516,250
Lear Seating Corporation,
8.25%, 2-1-2002 ....................... 1,500 1,320,000
Total ................................. 1,836,250
Beverages - 1.69%
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (F).................... 500 345,000
ROYAL CROWN CORPORATION,
9.75%, 8-1-2000 ....................... 1,000 880,000
Total ................................. 1,225,000
Biotechnology and Medical Services - 2.08%
Abbey Healthcare Group, Incorporated,
9.5%, 11-1-2022 ....................... 500 450,000
Quorum Health Group, Inc.,
11.875%, 12-15-2002 ................... 1,000 1,060,000
Total ................................. 1,510,000
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Building - 7.66%
American Standard Inc.:
9.875%, 6-1-2001 ...................... $1,000 $ 970,000
9.25%, 12-1-2016 ...................... 500 457,500
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ........................ 750 615,000
Eagle Industries, Inc.,
0.0%, 7-15-2003 (F) ................... 1,500 975,000
Hillsborough Company,
17.0%, 1-1-96 (G) ..................... 500 305,000
NVR L.P.,
11.0%, 4-15-2003 ...................... 1,000 840,000
Nortek, Inc.,
9.875%, 3-1-2004 ...................... 500 445,000
Triangle Pacific Corp.,
10.5%, 8-1-2003 ....................... 1,000 957,500
Total ................................. 5,565,000
Chemicals Specialty and Miscellaneous Technology - 5.34%
Buckeye Cellulose Corporation,
10.25%, 5-15-2001 ..................... 1,250 1,168,750
Carlisle Plastics Inc.,
10.25%, 6-15-97 ....................... 500 492,500
Envirotest Systems Corp.,
9.125%, 3-15-2001 ..................... 1,000 840,000
LaRoche Industries Inc.,
13.0%, 8-15-2004 ...................... 1,000 920,000
OSi Specialties, Inc.,
9.25%, 10-1-2003 ...................... 500 457,500
Total ................................. 3,878,750
Computers and Office Equipment - 0.60%
Mail-Well Corporation,
10.5%, 2-15-2004 ...................... 500 435,000
Consumer Electronics and Appliances - 1.07%
Sealy Corporation,
9.5%, 5-1-2003 ........................ 825 779,625
Domestic Oil - 1.57%
Clark R&M Holdings, Inc.,
0.0%, 2-15-2000 ....................... 2,000 1,140,000
Drugs and Hospital Supply - 2.79%
Amerisource Distribution Corporation,
11.25%, 7-15-2005 ..................... 1,112 1,059,788
General Medical Corporation,
12.125%, 8-15-2005 .................... 1,000 969,202
Total ................................. 2,028,990
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Electronics - 1.29%
Essex Group, Inc.,
10.0%, 5-1-2003 ....................... $1,000 $ 940,000
Food and Related - 2.21%
General Nutrition, Incorporated,
11.375%, 3-1-2000 ..................... 393 433,774
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ..................... 300 282,750
Specialty Foods Corporation,
10.25%, 8-15-2001 ..................... 1,000 890,000
Total ................................. 1,606,524
Hospital Management - 3.30%
LTC Properties, Inc.,
8.5%, 1-1-2000 ........................ 1,000 1,005,000
Pathmark Stores, Inc.,
9.625%, 5-1-2003 ...................... 1,000 890,000
Surgical Health Corporation,
11.5%, 7-15-2004 ...................... 500 500,000
Total ................................. 2,395,000
Household Products - 1.66%
Exide Corporation:
10.75%, 12-15-2002 .................... 750 750,000
0.0%, 12-15-2004 (F) .................. 500 352,500
MacAndrews & Forbes Group Incorporated,
13.0%, 3-1-99 ......................... 100 100,250
Total ................................. 1,202,750
Leisure Time - 16.50%
Argosy Gaming Company,
12.0%, 6-1-2001 ....................... 908 860,330
Cablevision Industries Corporation,
10.75%, 1-30-2002 ..................... 500 497,500
California Hotel Finance Corporation,
11.0%, 12-1-2002 ...................... 1,000 920,000
Comcast Corporation,
0.0%, 3-5-2000 ........................ 1,000 670,000
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................... 500 503,750
8.875%, 9-15-2005 ..................... 500 452,500
11.0%, 6-1-2007 ....................... 500 507,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Leisure Time (Continued)
Family Restaurants, Inc.,
9.75%, 2-1-2002 ....................... $ 500 $ 392,500
FLAGSTAR COMPANIES, INC.:
10.75%, 9-15-2001 ..................... 1,000 937,500
11.25%, 11-1-2004 ..................... 1,000 825,000
GNS Finance Corp.,
9.25%, 3-15-2003 ...................... 1,500 1,440,000
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 1,000 1,010,000
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................... 1,000 930,000
Showboat, Inc.,
9.25%, 5-1-2008 ....................... 1,000 835,000
Sinclair Broadcast Group Inc.,
10.0%, 12-15-2003 ..................... 375 348,750
Viacom International, Inc.,
8.0%, 7-7-2006 ........................ 1,000 857,500
Total ................................. 11,987,830
Multi-Industry - 3.74%
Federal Industries Ltd.,
10.25%, 6-15-2000 ..................... 500 468,750
Jordan Industries, Inc.,
10.375%, 8-1-2003 ..................... 1,000 890,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 1,500 1,357,500
Total ................................. 2,716,250
Oil Services - 1.40%
Wainoco Oil Corporation,
12.0%, 8-1-2002 ....................... 1,000 1,020,000
Packaging and Containers - 7.02%
Anchor Glass Container Corporation,
9.875%, 12-15-2008 .................... 500 430,000
Container Corporation of America,
11.25%, 5-1-2004 ...................... 1,500 1,537,500
Gaylord Container Corporation,
11.5%, 5-15-2001 ...................... 1,000 1,030,000
Owens-Illinois, Inc.,
10.25%, 4-1-99 ........................ 1,000 990,000
Silgan Corporation,
0.0%, 12-15-2002 (F)................... 500 420,000
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ....................... 750 690,000
Total ................................. 5,097,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Paper - 3.73%
Fort Howard Corporation:
11.0%, 1-2-2002 ....................... $ 475 $ 474,484
14.125%, 11-1-2004 .................... 500 503,750
Stone Container Corporation,
10.75%, 10-1-2002 ..................... 1,000 995,000
Williamhouse-Regency of Delaware, Inc.,
11.5%, 6-15-2005 ..................... 800 736,000
Total ................................. 2,709,234
Publishing and Advertising - 3.94%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................... 1,000 1,025,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 ...................... 1,000 935,000
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ..................... 1,000 900,000
Total ................................. 2,860,000
Retailing - 9.97%
Barnes & Noble, Inc.,
11.875%, 1-15-2003 ................... 500 535,000
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 ...................... 500 395,000
Bradlees, Inc.,
9.25%, 3-1-2003 ...................... 1,000 825,000
Color Tile, Inc.,
10.75%, 12-15-2001 .................... 1,000 880,000
Kroger Co. (The),
9.75%, 2-15-2004 ...................... 1,000 1,011,250
Musicland Stores, Inc.,
9.0%, 6-15-2003 ....................... 1,500 1,245,000
Penn Traffic Company,
10.375%, 10-1-2004 .................... 1,500 1,447,500
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................... 1,000 905,000
Total ................................. 7,243,750
Services, Consumer and Business - 0.98%
Bell & Howell Company,
10.75%, 10-1-2002 ..................... 750 712,500
See Notes to Schedules of Investments on page 65.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Steel - 2.10%
AK Steel,
10.75%, 4-1-2004 ...................... $1,000 $ 990,000
Inland Steel,
12.75%, 12-15-2002 .................... 500 538,125
Total ................................. 1,528,125
Telecommunications - 3.60%
Dial Call Communications, Inc.,
0.0%, 4-15-2004 (F) ................... 1,000 345,000
MFS Communications Company, Inc.,
0.0%, 1-15-2004 (F) ................... 500 295,000
PanAmSat, L.P.:
9.75%, 8-1-2000 ....................... 1,000 942,500
0.0%, 8-1-2003 (F) .................... 1,000 625,000
USA Mobile Communications, Inc.,
9.5%, 2-1-2004 ........................ 500 405,000
Total ................................. 2,612,500
Textiles and Apparel - 1.27%
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 ...................... 1,000 925,000
TOTAL CORPORATE DEBT SECURITIES - 88.04% $63,955,578
(Cost: $68,357,699)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.96%
U.S. Bancorp,
Master Note ........................... 1,423 1,423,000
Food and Related - 4.95%
General Mills, Inc.,
Master Note ........................... 2,267 2,267,000
Sara Lee Corporation,
Master Note ........................... 1,326 1,326,000
Total ................................. 3,593,000
TOTAL SHORT-TERM SECURITIES - 6.91% $ 5,016,000
(Cost: $5,016,000)
TOTAL INVESTMENT SECURITIES - 97.53% $70,848,141
(Cost: $74,841,167)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.47% 1,795,534
NET ASSETS - 100.00% $72,643,675
See Notes to Schedules of Investments on page 65.
<PAGE>
Notes to Schedules of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside of the United States.
(B) Coupon resets semiannually based on the arithmetic mean of two year swap
rates in four nations: Italy, France, Spain, and the United Kingdom,
determined by the following formula (minimum coupon of 0%):
19.65% - 2X(Average two year swap rate in the aforementioned nations).
(C) Coupon resets semiannually based on 14.13% - 1.5 (5 year Deutschemark swap
rate). Coupon guaranteed at 3%.
(D) Coupon resets on 4/5/95 based on the greater of 4% and 4% + 5 X (6.65% - 3
year Australian Dollar swap rate). After 4/5/95 the coupon becomes fixed.
Minimum coupon - 4%, maximum coupon - 7.5%.
(E) As of December 31, 1994, the following restricted security was owned in the
High Income Portfolio:
Principal
Acquisition Amount Acquisition Market
Security Date (in 000's) Cost Value
---------------- --------------------------------------------
Aftermarket Technology
Corp.,
12.0%, 8-1-2004 7/21/94 $500 $500,000 $516,250
======== ========
The total market value of restricted securities represents approximately
0.71% of the total net assets in the High Income Portfolio at December 31,
1994.
(F) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(G) Non-income producing as the issuer has either missed its most recent
interest payment or declared bankruptcy:
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
Growth IncomeInternational
Portfolio Portfolio Portfolio
Assets ----------- ---------- -----------
Investment securities--at
value (Notes 1 and 3) $276,809,531$218,844,527 $25,781,641
Cash .............. 6,687 4,431 1,384
Receivables:
Dividends and interest 567,231 332,243 42,859
Fund shares sold .. 113,778 177,059 210,565
Investment securities
sold ............ --- 203,448 ---
Prepaid insurance
premium ........... 3,991 2,819 182
------------------------ -----------
Total assets .... 277,501,218 219,564,527 26,036,631
Liabilities ------------------------ -----------
Payable for investment
securities purchased 548,125 610,437 ---
Payable for Fund shares
redeemed .......... 199,058 169,428 5,151
Accrued accounting
services fee ...... 4,167 4,167 833
Other .............. 13,233 6,893 11,013
------------------------ -----------
Total liabilities 764,583 790,925 16,997
------------------------ -----------
Total net assets $276,736,635$218,773,602 $26,019,634
Net Assets ======================== ===========
$0.01 par value capital stock
Capital stock ..... $ 469,159$ 323,206 $ 52,116
Additional paid-in
capital ......... 285,885,078 202,539,201 26,652,623
Accumulated undistributed
gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized loss on
investment transactions
and foreign currency
transactions ..... --- (462,851) (21,009)
Net unrealized appreciation
(depreciation) of investments
at end of period . (9,617,602) 16,374,046 (664,096)
------------------------ -----------
Net assets applicable to
outstanding units
of capital ..... $276,736,635$218,773,602 $26,019,634
======================== ===========
Net asset value, redemption
and offering price per share $5.8986 $6.7689 $4.9926
======= ======= =======
Capital shares outstanding 46,915,868 32,320,625 5,211,592
Capital shares authorized 100,000,000 100,000,000 100,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
Small Cap BalancedMoney Market
Portfolio Portfolio Portfolio
Assets ---------- ---------- -----------
Investment securities--at
value (Notes 1 and 3) $16,029,163 $8,591,277 $27,624,021
Cash .............. 7,362 6,057 18,970
Receivables:
Dividends and interest 6,098 29,433 64,604
Fund shares sold .. 110,867 69,600 3,480,604
Investment securities
sold ............ --- --- ---
Prepaid insurance
premium ........... 182 182 1,506
----------- ---------- -----------
Total assets .... 16,153,672 8,696,549 31,189,705
Liabilities ----------- ---------- -----------
Payable for investment
securities purchased 66,102 --- ---
Payable for Fund shares
redeemed .......... 4,142 23,625 373,894
Accrued accounting
services fee ...... 833 --- 1,667
Other .............. 2,433 1,856 1,881
----------- ---------- -----------
Total liabilities 73,510 25,481 377,442
----------- ---------- -----------
Total net assets $16,080,162 $8,671,068 $30,812,263
Net Assets =========== ========== ===========
$0.01 par value capital stock
Capital stock ..... $ 26,837 $ 17,567 $ 308,123
Additional paid-in
capital ......... 14,745,046 8,892,153 30,504,140
Accumulated undistributed
gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized loss on
investment transactions
and foreign currency
transactions ..... --- (3,218) ---
Net unrealized appreciation
(depreciation) of investments
at end of period . 1,308,279 (235,434) ---
----------- ---------- -----------
Net assets applicable to
outstanding units
of capital ..... $16,080,162 $8,671,068 $30,812,263
=========== ========== ===========
Net asset value, redemption
and offering price per share $5.9918 $4.9359 $1.0000
======= ======= =======
Capital shares outstanding 2,683,680 1,756,720 30,812,263
Capital shares authorized 100,000,000 100,000,000 200,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
Limited-Term Bond High Income
Bond Portfolio Portfolio Portfolio
Assets ------------------------- -----------
Investment securities--at
value (Notes 1 and 3) $1,610,373 $72,576,052 $70,848,141
Cash .............. 4,791 7,680 5,708
Receivables:
Dividends and interest 32,608 1,432,762 1,553,672
Fund shares sold .. --- 21,190 69,923
Investment securities
sold ............ --- --- 261,345
Prepaid insurance
premium ........... 182 2,062 2,200
---------- ----------- -----------
Total assets .... 1,647,954 74,039,746 72,740,989
Liabilities ---------- ----------- -----------
Payable for investment
securities purchased --- --- ---
Payable for Fund shares
redeemed .......... 2,439 17,625 92,213
Accrued accounting
services fee ...... --- 2,500 2,500
Other .............. 369 2,771 2,601
---------- ----------- -----------
Total liabilities 2,808 22,896 97,314
---------- ----------- -----------
Total net assets $1,645,146 $74,016,850 $72,643,675
Net Assets ========== =========== ===========
$0.01 par value capital stock
Capital stock ..... $ 3,384 $ 156,178 $ 176,670
Additional paid-in
capital ......... 1,689,449 81,936,702 78,205,135
Accumulated undistributed
gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized loss on
investment transactions
and foreign currency
transactions ..... --- (3,479,696) (1,745,104)
Net unrealized appreciation
(depreciation) of investments
at end of period . (47,687) (4,596,334) (3,993,026)
---------- ----------- -----------
Net assets applicable to
outstanding units
of capital ..... $1,645,146 $74,016,850 $72,643,675
========== =========== ===========
Net asset value, redemption
and offering price per share $4.8611 $4.7393 $4.1118
======= ======= =======
Capital shares outstanding 338,428 15,617,757 17,667,001
Capital shares authorized 100,000,000 100,000,000 100,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1994
Growth IncomeInternational
Portfolio Portfolio Portfolio
---------- ---------- ----------
Investment Income
Income:
Interest .......... $ 1,893,626 $ 382,961 $158,020
Dividends ......... 5,347,449 3,354,791 47,329
----------- ---------- --------
Total income .... 7,241,075 3,737,752 205,349
----------- ---------- --------
Expenses (Note 2):
Investment management
fee ............. 1,813,171 1,374,533 63,291
Accounting services
fee ............. 50,000 44,167 3,333
Custodian fees .... 38,479 21,378 30,318
Audit fees ........ 7,101 5,540 ---
Legal fees ........ 5,105 8,638 1,502
Other ............. 40,985 35,239 288
----------- ---------- --------
Total expenses .. 1,954,841 1,489,495 98,732
----------- ---------- --------
Net investment income 5,286,234 2,248,257 106,617
----------- ---------- --------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on investments .... 14,371,377 684,147 (21,009)
Unrealized appreciation
(depreciation)in value
of investments during
the period ........ (13,761,465) (6,030,073) (664,096)
----------- ---------- --------
Net gain (loss) on
investments..... 609,912 (5,345,926) (685,105)
----------- ---------- --------
Net increase (decrease)
in net assets
resulting from
operations ... $ 5,896,146 $(3,097,669) $(578,488)
=========== ========== ========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1994
Small Cap BalancedMoney Market
Portfolio Portfolio Portfolio
---------- ---------- ----------
Investment Income
Income:
Interest .......... $ 144,765 $ 64,909 $999,857
Dividends ......... 292 38,828 ---
---------- -------- --------
Total income .... 145,057 103,737 999,857
---------- -------- --------
Expenses (Note 2):
Investment management
fee ............. 36,355 15,489 116,644
Accounting services
fee ............. 1,667 --- 10,833
Custodian fees .... 5,953 7,174 11,635
Audit fees ........ --- --- 4,635
Legal fees ........ 1,452 1,421 696
Other ............. 283 43 3,980
---------- -------- --------
Total expenses .. 45,710 24,127 148,423
---------- -------- --------
Net investment income 99,347 79,610 851,434
---------- -------- --------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on investments .... 44,381 (3,218) ---
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ 1,308,279 (235,434) ---
---------- -------- --------
Net gain (loss) on
investments..... 1,352,660 (238,652) ---
---------- -------- --------
Net increase (decrease)
in net assets
resulting from
operations ... $1,452,007 $(159,042) $851,434
========== ======== ========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1994
Limited-Term Bond High Income
Bond Portfolio Portfolio Portfolio
--------------- ---------- ----------
Investment Income
Income:
Interest .......... $57,386 $ 5,773,265 $7,220,542
Dividends ......... --- --- 92,656
------- ----------- ----------
Total income .... 57,386 5,773,265 7,313,198
------- ----------- ----------
Expenses (Note 2):
Investment management
fee ............. 4,712 424,370 494,237
Accounting services
fee ............. --- 30,000 30,000
Custodian fees .... 1,531 10,046 7,962
Audit fees ........ --- 4,977 4,766
Legal fees ........ 1,404 1,595 1,511
Other ............. 207 15,304 13,039
------- ----------- ----------
Total expenses .. 7,854 486,292 551,515
------- ----------- ----------
Net investment income 49,532 5,286,973 6,761,683
------- ----------- ----------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on investments .... 455 (3,479,696) (1,428,391)
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ (47,687) (6,740,515) (7,299,167)
------- ----------- ----------
Net gain (loss) on
investments..... (47,232)(10,220,211) (8,727,558)
------- ----------- ----------
Net increase (decrease)
in net assets
resulting from
operations ... $ 2,300$( 4,933,238)$(1,965,875)
======= =========== ==========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1994
Growth IncomeInternational
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 5,286,234$ 2,248,257 $ 106,617
Realized net gain (loss)
on investments .. 14,371,377 684,147 (21,009)
Unrealized appreciation
(depreciation) .. (13,761,465) (6,030,073) (664,096)
------------------------ -----------
Net increase (decrease)
in net assets resulting
from operations. 5,896,146 (3,097,669) (578,488)
------------------------ -----------
Dividends to shareholders from:*
Net investment income (5,286,234) (2,248,257) (106,617)
Realized gains on securities
transactions .... (14,154,374) --- ---
------------------------ -----------
(19,440,608) (2,248,257) (106,617)
------------------------ -----------
Capital share
transactions** .... 69,690,925 69,027,272 26,704,739
------------------------ -----------
Total increase
(decrease)...... 56,146,463 63,681,346 26,019,634
Net Assets
Beginning of period 220,590,172 155,092,256 ---
------------------------ -----------
End of period ...... $276,736,635$218,773,602 $26,019,634
======================== ===========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 73-81.
**Shares issued from sale
of shares .......... 11,752,596 11,914,285 5,355,035
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 3,295,800 332,145 21,355
Shares redeemed ...... (3,733,563) (2,344,370) (164,798)
---------- ---------- ---------
Increase in outstanding
capital shares ...... 11,314,833 9,902,060 5,211,592
========== ========== =========
Value issued from sale
of shares .......... $73,683,884 $83,060,254 $27,436,654
Value issued from reinvest-
ment of dividends and/or
distributions ...... 19,440,608 2,248,256 106,617
Value redeemed ....... (23,433,567)(16,281,238) (838,532)
----------- ----------- -----------
Increase in
outstanding capital $69,690,925 $69,027,272 $26,704,739
=========== =========== ===========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1994
Small Cap BalancedMoney Market
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 99,347 $ 79,610 $ 851,434
Realized net gain (loss)
on investments .. 44,381 (3,218) ---
Unrealized appreciation
(depreciation) .. 1,308,279 (235,434) ---
----------- ---------- -----------
Net increase (decrease)
in net assets resulting
from operations. 1,452,007 (159,042) 851,434
----------- ---------- -----------
Dividends to shareholders from:*
Net investment income (99,347) (79,610) (851,434)
Realized gains on securities
transactions .... (44,381) --- ---
----------- ---------- -----------
(143,728) (79,610) (851,434)
----------- ---------- -----------
Capital share
transactions** .... 14,771,883 8,909,720 4,812,395
----------- ---------- -----------
Total increase
(decrease) .... 16,080,162 8,671,068 4,812,395
Net Assets
Beginning of period --- --- 25,999,868
----------- ---------- -----------
End of period ...... $16,080,162 $8,671,068 $30,812,263
=========== ========== ===========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 73-81.
**Shares issued from sale
of shares .......... 2,722,519 1,795,318 183,043,231
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 23,987 16,128 851,433
Shares redeemed ...... (62,826) (54,726)(179,082,269)
--------- --------- -----------
Increase in outstanding
capital shares..... 2,683,680 1,756,720 4,812,395
========= ========= ==========
Value issued from sale
of shares .......... $14,980,266 $9,104,454$183,043,231
Value issued from reinvest-
ment of dividends and/or
distributions ...... 143,729 79,610 851,433
Value redeemed ....... (352,112) (274,344)(179,082,269)
----------- ----------------------
Increase in
outstanding capital $14,771,883 $8,909,720$ 4,812,395
=========== =====================+
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1994
Limited-Term Bond High Income
Bond Portfolio Portfolio Portfolio
-------------- ----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 49,532 $ 5,286,973 $ 6,761,683
Realized net gain (loss)
on investments .. 455 (3,479,696) (1,428,391)
Unrealized appreciation
(depreciation) .. (47,687) (6,740,515) (7,299,167)
---------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations. 2,300 (4,933,238) (1,965,875)
---------- ----------- -----------
Dividends to shareholders
from:*
Net investment income (49,532) (5,286,973) (6,761,683)
Realized gains on securities
transactions .... (455) --- ---
---------- ----------- -----------
(49,987) (5,286,973) (6,761,683)
---------- ----------- -----------
Capital share
transactions**..... 1,692,833 2,510,419 10,105,884
---------- ----------- -----------
Total increase
(decrease) ..... 1,645,146 (7,709,792) 1,378,326
Net Assets
Beginning of period --- 81,726,642 71,265,349
---------- ----------- -----------
End of period ...... $1,645,146 $74,016,850 $72,643,675
========== =========== ===========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 73-81.
**Shares issued from sale
of shares .......... 331,301 3,002,124 3,768,168
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 10,283 1,081,257 1,593,245
Shares redeemed ...... (3,156) (3,587,525) (3,062,321)
------- --------- ---------
Increase in outstanding
capital shares ..... 338,428 495,856 2,299,092
======= ========= =========
Value issued from sale
of shares .......... $1,658,566 $15,437,912 $16,942,683
Value issued from reinvest-
ment of dividends and/or
distributions ...... 49,987 5,286,973 6,761,683
Value redeemed ....... (15,720)(18,214,466)(13,598,482)
---------- ----------- -----------
Increase in
outstanding capital $1,692,833 $ 2,510,419 $10,105,884
========== =========== ===========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1993
Growth Income
Portfolio Portfolio
----------- -----------
Increase in Net Assets
Operations:
Net investment income $ 1,680,381$ 1,435,262
Realized net gain (loss)
on investments .. 23,645,698 (1,146,998)
Unrealized appreciation
(depreciation) .. (3,724,710) 16,703,139
------------------------
Net increase in net
assets resulting
from operations. 21,601,369 16,991,403
------------------------
Dividends to shareholders:*
From net investment
income ........... (1,680,381) (1,435,262)
From realized net gain on
investment transactions(23,645,698) ---
In excess of realized net
gain from investment
transactions .... (217,003) ---
------------------------
(25,543,082) (1,435,262)
------------------------
Capital share
transactions**..... 102,168,632 74,508,737
------------------------
Total increase .. 98,226,919 90,064,878
Net Assets
Beginning of period 122,363,253 65,027,378
------------------------
End of period ...... $220,590,172$155,092,256
========================
Undistributed net
investment income $--- $---
==== ====
*See "Financial Highlights" on pages 73-81.
**Shares issued from sale
of shares .......... 13,254,238 12,309,850
Shares issued from reinvest-
ment of dividends and/or
distributions ....... 4,122,379 207,468
Shares redeemed ...... (1,670,417) (1,022,164)
---------- ----------
Increase in outstanding
capital shares ...... 15,706,200 11,495,154
========== ==========
Value issued from sale
of shares .......... $ 87,620,284 $79,652,858
Value issued from reinvest-
ment of dividends and/or
distributions ....... 25,543,082 1,435,262
Value redeemed ....... (10,994,734) (6,579,383)
------------ -----------
Increase in outstanding
capital ............ $102,168,632 $74,508,737
============ ===========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1993
Money Market Bond High Income
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase in Net Assets
Operations:
Net investment income $ 624,768 $ 3,976,047 $ 4,820,553
Realized net gain (loss)
on investments .. --- 2,377,676 776,421
Unrealized appreciation
(depreciation) .. --- 584,399 3,303,758
----------- ----------- -----------
Net increase in net
assets resulting
from operations. 624,768 6,938,122 8,900,732
----------- ----------- -----------
Dividends to shareholders:*
From net investment income (624,768) (3,976,047) (4,820,553)
From realized net gain on
investment transactions --- (2,377,676) ---
In excess of realized net
gain from investment
transactions .... --- --- ---
----------- ----------- -----------
(624,768) (6,353,723) (4,820,553)
----------- ----------- -----------
Capital share transactions**2,004,876 31,714,436 25,728,675
----------- ----------- -----------
Total increase .. 2,004,876 32,298,835 29,808,854
Net Assets
Beginning of period 23,994,992 49,427,807 41,456,495
----------- ----------- -----------
End of period ...... $25,999,868 $81,726,642 $71,265,349
=========== =========== ===========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 73-81.
**Shares issued from sale
of shares .......... 188,336,077 5,709,768 6,007,488
Shares issued from reinvest-
ment of dividends and/or
distributions ....... 624,768 1,156,980 1,068,165
Shares redeemed ...... (186,955,969) (1,137,054) (1,374,357)
----------- --------- ---------
Increase in outstanding
capital shares ...... 2,004,876 5,729,694 5,701,296
=========== ========= =========
Value issued from sale
of shares .......... $188,336,077 $31,672,885 $27,116,169
Value issued from reinvest-
ment of dividends and/or
distributions ....... 624,768 6,353,723 4,820,553
Value redeemed ....... (186,955,969) (6,312,172) (6,208,047)
------------ ----------- -----------
Increase in outstanding
capital ............ $ 2,004,876 $31,714,436 $25,728,675
============ =========== ===========
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE GROWTH PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
----------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------- ------- ------
Net asset value,
beginning of
period ........... $6.1962 $6.1505 $5.5973 $4.9479 $5.4025
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.1211 0.0537 0.1013 0.1229 0.1661
Net realized and
unrealized gain
(loss) on
investments ..... 0.0268 0.8087 1.0653 1.6636 (0.4546)
------- ------- ------- ------- -------
Total from investment
operations ....... 0.1479 0.8624 1.1666 1.7865 (0.2885)
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.1211)(0.0537) (0.1013)(0.1229) (0.1661)
Distribution from
capital gains ... (0.3244)(0.7569) (0.5121)(1.0142) (0.0000)
Distribution in
excess of capital
gains ........... 0.0000 (0.0061) (0.0000)(0.0000) (0.0000)
------- ------- ------- ------- -------
Total distributions. (0.4455)(0.8167) (0.6134)(1.1371) (0.1661)
------- ------- ------- ------- -------
Net asset value,
end of period .... $5.8986 $6.1962 $6.1505 $5.5973 $4.9479
======= ======= ======= ======= =======
Total return ....... 2.39% 14.02% 20.84% 36.10% -5.34%
Net assets, end of
period (000
omitted) ......... $276,737$220,590 $122,363 $69,044 $37,440
Ratio of expenses
to average net
assets ............ 0.77% 0.78% 0.80% 0.86% 0.86%
Ratio of net investment
income to average
net assets ....... 2.07% 1.01% 2.00% 2.43% 3.58%
Portfolio turnover
rate ............. 277.36% 297.81% 225.87% 316.72% 331.15%
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE INCOME PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended
December 31,
-------------------------------
1994 1993 1992 1991*
------- ------- ------- -------
Net asset value,
beginning of
period ........... $6.9180 $5.9530 $5.3158 $5.0000
------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.0702 0.0651 0.0803 0.0633
Net realized and
unrealized gain (loss)
on investments .. (0.1490) 0.9650 0.6496 0.3158
------- ------- ------- -------
Total from investment
operations ....... (0.0788) 1.0301 0.7299 0.3791
------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.0703)(0.0651) (0.0803)(0.0633)
Distribution from
capital gains.... (0.0000)(0.0000) (0.0124)(0.0000)
------- ------- ------- -------
Total distributions. (0.0703)(0.0651) (0.0927)(0.0633)
------- ------- ------- -------
Net asset value,
end of period .... $6.7689 $6.9180 $5.9530 $5.3158
======= ======= ======= =======
Total return........ -1.14% 17.30% 13.78% 17.43%
Net assets, end of
period (000
omitted) ......... $218,774$155,092 $65,027 $15,640
Ratio of expenses
to average net
assets ............ 0.77% 0.79% 0.85% 0.89%
Ratio of net investment
income to average
net assets ....... 1.16% 1.36% 1.78% 2.47%
Portfolio turnover
rate ............. 23.32% 18.38% 15.74% 4.41%
*The Income Portfolio's inception date is May 16, 1991; however, since this
Portfolio did not have any investment activity or incur expenses prior to the
date of initial offering, the per share information is for a capital share
outstanding for the period from July 16, 1991 (initial offering) through
December 31, 1991. Ratios and the portfolio turnover rate have been
annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE INTERNATIONAL PORTFOLIO
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period
ended
12/31/94*
----------
Net asset value,
beginning of
period ........... $5.0000
-------
Income from investment
operations:
Net investment
income .......... 0.0207
Net realized and
unrealized loss
on investments .. (0.0074)
-------
Total from investment
operations ....... 0.0133
Less dividends from net
investment
income .......... (0.0207)
-------
Net asset value,
end of period .... $4.9926
=======
Total return........ 0.26%
Net assets, end of
period (000
omitted) ......... $26,020
Ratio of expenses
to average net
assets ............ 1.26%
Ratio of net investment
income to average
net assets ....... 1.37%
Portfolio turnover
rate ............. 23.23%
*The International Portfolio's inception date is April 28, 1994; however, since
this Portfolio did not have any investment activity or incur expenses prior
to the date of initial offering, the per share information is for a capital
share outstanding for the period from May 3, 1994 (initial offering) through
December 31, 1994. Ratios and the portfolio turnover rate have been
annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE SMALL CAP PORTFOLIO
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period
ended
12/31/94*
----------
Net asset value,
beginning of
period ........... $5.0000
-------
Income from investment
operations:
Net investment
income .......... 0.0376
Net realized and
unrealized gain
on investments .. 1.0086
-------
Total from investment
operations ....... 1.0462
-------
Less distributions:
Dividends from net
investment income (0.0376)
Distributions from
capital gains.... (0.0168)
-------
Total distributions (0.0544)
-------
Net asset value,
end of period .... $5.9918
=======
Total return........ 20.92%
Net assets, end of
period (000
omitted) ......... $16,080
Ratio of expenses
to average net
assets ............ 1.08%
Ratio of net investment
income to average
net assets ....... 2.35%
Portfolio turnover
rate ............. 21.61%
*The Small Cap Portfolio's inception date is April 28, 1994; however, since
this Portfolio did not have any investment activity or incur expenses prior
to the date of initial offering, the per share information is for a capital
share outstanding for the period from May 3, 1994 (initial offering) through
December 31, 1994. Ratios and the portfolio turnover rate have been
annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE BALANCED PORTFOLIO
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period
ended
12/31/94*
----------
Net asset value,
beginning of
period ........... $5.0000
-------
Income from investment
operations:
Net investment
income .......... 0.0460
Net realized and
unrealized loss
on investments .. (0.0641)
-------
Total from investment
operations ....... (0.0181)
Less dividends from net
investment
income .......... (0.0460)
-------
Net asset value,
end of period .... $4.9359
=======
Total return........ -0.37%
Net assets, end of
period (000
omitted) ......... $8,671
Ratio of expenses
to average net
assets ............ 0.95%
Ratio of net investment
income to average
net assets ....... 3.14%
Portfolio turnover
rate ............. 19.74%
*The Balanced Portfolio's inception date is April 28, 1994; however, since
this Portfolio did not have any investment activity or incur expenses prior
to the date of initial offering, the per share information is for a capital
share outstanding for the period from May 3, 1994 (initial offering) through
December 31, 1994. Ratios and the portfolio turnover rate have been
annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE MONEY MARKET PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
-----------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
Net investment
income .......... 0.0368 0.0260 0.0324 0.0536 0.0753
Less dividends
declared ......... (0.0368)(0.0260) (0.0324)(0.0536) (0.0753)
------- ------- ------- ------- -------
Net asset value,
end of period .... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total return ....... 3.72% 2.63% 3.29% 5.49% 7.82%
Net assets, end of
period (000
omitted) ......... $30,812 $26,000 $23,995 $19,797 $16,870
Ratio of expenses
to average net
assets ............ 0.65% 0.65% 0.65% 0.76% 0.79%
Ratio of net investment
income to average
net assets ....... 3.72% 2.61% 3.17% 5.33% 7.52%
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE LIMITED-TERM BOND PORTFOLIO
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period
ended
12/31/94*
----------
Net asset value,
beginning of
period ........... $5.0000
-------
Income from investment
operations:
Net investment
income .......... 0.1507
Net realized and
unrealized loss
on investments .. (0.1375)
-------
Total from investment
operations ....... 0.0132
-------
Less distributions:
Dividends from net
investment
income .......... (0.1507)
Distribution from
capital gains ... (0.0014)
-------
Total distributions (0.1521)
-------
Net asset value,
end of period .... $4.8611
=======
Total return........ 0.26%
Net assets, end of
period (000
omitted) ......... $1,645
Ratio of expenses
to average net
assets ............ 0.93%
Ratio of net investment
income to average
net assets ....... 5.89%
Portfolio turnover
rate ............. 93.83%
*The Limited-Term Bond Portfolio's inception date is April 28, 1994; however,
since this Portfolio did not have any investment activity or incur expenses
prior to the date of initial offering, the per share information is for a
capital share outstanding for the period from May 3, 1994 (initial offering)
through December 31, 1994. Ratios and the portfolio turnover rate have been
annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE BOND PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
-----------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $5.4045 $5.2626 $5.2661 $4.9534 $5.0249
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.3507 0.3334 0.3643 0.3867 0.4025
Net realized and
unrealized gain
(loss) on
investments ..... (0.6652) 0.3046 0.0216 0.3771 (0.0715)
------- ------- ------- ------- -------
Total from investment
operations ....... (0.3145) 0.6380 0.3859 0.7638 0.3310
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.3507)(0.3334) (0.3643)(0.3867) (0.4025)
Distribution from
capital gains ... 0.0000 (0.1627) (0.0251)(0.0644) (0.0000)
------- ------- ------- ------- -------
Total distributions. (0.3507)(0.4961) (0.3894)(0.4511) (0.4025)
------- ------- ------- ------- -------
Net asset value,
end of period .... $4.7393 $5.4045 $5.2626 $5.2661 $4.9534
======= ======= ======= ======= =======
Total return ....... -5.90% 12.37% 7.67% 16.19% 7.03%
Net assets, end of
period (000
omitted) ......... $74,017 $81,727 $49,428 $29,112 $16,464
Ratio of expenses
to average net
assets ............ 0.62% 0.62% 0.64% 0.72% 0.78%
Ratio of net investment
income to average
net assets ....... 6.73% 6.01% 6.91% 7.65% 8.05%
Portfolio turnover
rate ............. 135.82% 68.75% 44.32% 52.50% 51.50%
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE HIGH INCOME PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
-----------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $4.6373 $4.2886 $4.0770 $3.4067 $4.1288
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.4106 0.3899 0.4050 0.4368 0.4346
Net realized and
unrealized gain
(loss) on
investments ..... (0.5255) 0.3487 0.2116 0.6703 (0.7221)
------- ------- ------- ------- -------
Total from investment
operations ....... (0.1149) 0.7386 0.6166 1.1071 (0.2875)
------- ------- ------- ------- -------
Less dividends from
net investment
income ........... (0.4106)(0.3899) (0.4050)(0.4368) (0.4346)
------- ------- ------- ------- -------
Net asset value,
end of period .... $4.1118 $4.6373 $4.2886 $4.0770 $3.4067
======= ======= ======= ======= =======
Total return ....... -2.55% 17.90% 15.70% 34.19% -7.44%
Net assets, end of
period (000
omitted) ......... $72,644 $71,265 $41,456 $24,394 $13,868
Ratio of expenses
to average net
assets ............ 0.74% 0.75% 0.77% 0.87% 0.90%
Ratio of net investment
income to average
net assets ....... 9.03% 8.66% 9.48% 11.32% 11.55%
Portfolio turnover
rate ............. 37.86% 54.22% 60.79% 34.00% 12.21%
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 -- Significant Accounting Policies
TMK/United Funds, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
Capital stock is currently divided into the nine classes that are designated the
Growth Portfolio, the Income Portfolio, the International Portfolio, the Small
Cap Portfolio, the Balanced Portfolio, the Money Market Portfolio, the Limited-
Term Bond Portfolio, the Bond Portfolio and the High Income Portfolio. The
assets belonging to each Portfolio are held separately by the Custodian. The
capital shares of each Portfolio represent a pro rata beneficial interest in the
principal, net income, and realized and unrealized capital gains or losses of
its respective investments and other assets. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a major dealer in bonds. Convertible bonds are
valued using this pricing system only on days when there is no sale
reported. Stocks which are traded over-the-counter are priced using NASDAQ
(National Association of Securities Dealers Automated Quotations) which
provides information on bid and asked or closing prices quoted by major
dealers in such stocks. Securities for which quotations are not readily
available are valued as determined in good faith in accordance with
procedures established by and under the general supervision of the Fund's
Board of Directors. Short-term debt securities are valued at amortized
cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes over
the remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date except that certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income is recorded on the accrual basis. See Note 3 -- Investment
Securities Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translations arise from changes in currency exchange rates. The
Fund combines fluctuations from currency exchange rates and fluctuations in
market value when computing net realized and unrealized gain or loss from
investments.
D. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by each Portfolio on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
NOTE 2 -- Investment Management And Payments To Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the following annual rates: Growth Portfolio
- - .20% of net assets; Income Portfolio - .20% of net assets; International
Portfolio - .30% of net assets; Small Cap Portfolio - .35% of net assets;
Balanced Portfolio - .10% of net assets; Money Market Portfolio - none; Limited-
Term Bond Portfolio - .05% of net assets; Bond Portfolio - .03% of net assets;
High Income Portfolio - .15% of net assets and (ii) a base fee computed each day
on the combined net asset values of all of the Portfolios (approximately $725.4
million of combined net assets at December 31, 1994) and allocated among the
Portfolios based on their relative net asset size at the annual rates of .51% of
the first $750 million dollars of combined net assets, .49% on that amount
between $750 million and $1.5 billion, .47% between $1.5 billion and $2.25
billion, and .45% of that amount over $2.25 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. (W&R), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of each Portfolio. For these
services, each Portfolio pays WARSCO a monthly fee of one-twelfth of the annual
fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Portfolio
-------------------------- -----------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Fund paid Directors' fees of $21,273.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Investment securities transactions for the year ended December 31, 1994,
are summarized as follows:
Growth Income International
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $610,720,993 $110,216,798 $15,533,923
Purchases of U.S. Government
securities --- --- ---
Purchases of short-term
securities 587,088,754 122,085,281 123,647,756
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 599,584,276 43,252,090 1,220,081
Proceeds from maturities
and sales of U.S.
Government securities --- --- ---
Proceeds from maturities
and sales of short-term
securities 541,578,604 119,015,514 111,641,229
Small Cap BalancedMoney Market
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $5,949,448 $5,205,411 $---
Purchases of U.S. Government
securities --- 558,734 ---
Purchases of short-term
securities 97,663,698 42,037,927 301,240,425
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 393,563 358,207 ---
Proceeds from maturities
and sales of U.S.
Government securities --- --- ---
Proceeds from maturities
and sales of short-term
securities 88,681,760 38,660,425 303,613,144
Limited- High
Term Bond Bond Income
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $1,272,587$68,447,930 $32,290,564
Purchases of U.S. Government
securities 972,063 39,942,617 ---
Purchases of short-term
securities 3,157,000 62,965,209 51,306,202
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 52,702 61,694,962 26,035,941
Proceeds from maturities
and sales of U.S.
Government securities 688,031 40,410,384 ---
Proceeds from maturities
and sales of short-term
securities 3,111,930 66,437,462 48,207,575
For Federal income tax purposes, cost of investments owned at December 31,
1994 and the related unrealized appreciation (depreciation) were as follows:
Aggregate
CostAppreciationDepreciation Appreciation
-----------------------------------------------
Growth Portfolio $286,427,133 $5,310,898$(14,928,500) $(9,617,602)
Income Portfolio 202,473,404 22,487,056(6,115,933)16,371,123
International Portfolio 26,445,737 529,294(1,193,390)(664,096)
Small Cap Portfolio 14,720,884 1,448,308 (140,029)1,308,279
Balanced Portfolio 8,826,711 98,975 (334,409)(235,434)
Money Market Portfolio 27,624,021 0 0 0
Limited-Term Bond Portfolio 1,658,060 0 (47,687) (47,687)
Bond Portfolio 77,172,386 68,638(4,664,972)(4,596,334)
High Income Portfolio 74,841,167 852,083(4,845,109)(3,993,026)
NOTE 4 -- Federal Income Tax Matters
The Fund's income and expenses attributed to each Portfolio and the gains
and losses on security transactions of each Portfolio have been attributed to
that Portfolio for Federal income tax purposes as well as accounting purposes.
For Federal income tax purposes, Growth, Small Cap and Limited-Term Bond
Portfolios realized capital gain net income of $14,154,374, $44,381 and $455,
respectively, during the year ended December 31, 1994. The capital gain net
income was paid to shareholders during the year ended December 31, 1994. For
Federal income tax purposes the Income Portfolio realized capital gain net
income of $685,306 during the year ended December 31, 1994. These capital gains
were entirely offset by utilization of capital loss carryforwards. Remaining
prior year capital loss carryforwards of Income Portfolio aggregated $459,928 at
December 31, 1994, and are available to offset future realized capital gain net
income through December 31, 2001. For Federal income tax purposes, Bond, High
Income, Balanced and International Portfolios realized capital losses of
$3,479,696, $1,428,392, $3,218 and $21,009, respectively, during the year ended
December 31, 1994. These amounts are available to offset future realized
capital gain net income through December 31, 2002. In addition, the High Income
Portfolio has $316,713 in capital loss carryforwards from prior years, which are
available to offset future realized capital gain net income through December 31,
1999.
Note 5 -- Organization
The inception date of the International Portfolio, the Small Cap Portfolio,
the Balanced Portfolio, and the Limited-Term Bond Portfolio is April 28, 1994;
however, these Portfolios did not have any investment activity or incur expenses
prior to the date of initial offering, May 3, 1994. The statement of operations
and the statement of changes in net assets for the remaining Portfolios are for
the fiscal year ended December 31, 1994.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
TMK/United Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the nine portfolios
comprising TMK/United Funds, Inc., issuer of the respective nine classes of
capital shares (Growth Portfolio, Income Portfolio, International Portfolio,
Small Cap Portfolio, Balanced Portfolio, Money Market Portfolio, Limited-Term
Bond Portfolio, Bond Portfolio and High Income Portfolio) at December 31, 1994,
the results of their operations, and the changes in their net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
January 31, 1995
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel, III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
Leslie S. Wright, Birmingham, Alabama
OFFICERS
Keith A. Tucker, President
James C. Cusser, Vice President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Antonio Intagliata, Vice President
Sharon K. Pappas, Vice President and Secretary
Richard K. Poettgen, Vice President
Cynthia P. Prince-Fox, Vice President
Louise D. Rieke, Vice President
Mark G. Seferovich, Vice President
W. Patrick Sterner, Vice President
Carl E. Sturgeon, Vice President
Russell E. Thompson, Vice President
Mark L. Yockey, Vice President
<PAGE>
Advantage I. A flexible premium variable life insurance policy.
Advantage II. A deferred variable annuity policy.
Both offer you the investment flexibility of positioning your investment in one
or more of the following professionally managed portfolios:
GROWTH Portfolio
Objective: Capital growth with income as a secondary goal.
Invested In: Mainly common stocks of large, well-known companies representing
major sectors of the economy.
INCOME Portfolio
Objective: Maintain current income, subject to market conditions.
Invested In: Primarily common stocks or securities convertible into common
stocks.
INTERNATIONAL Portfolio
Objective: Long-term appreciation of capital with a secondary goal of current
income
Invested in: Securities issued by companies or governments of any nation.
SMALL CAP Portfolio
Objective: Capital growth
Invested in: Common stocks of relatively new or unseasoned companies, or
smaller companies positioned in new and emerging industries.
BALANCED Portfolio
Objective: Current income with a secondary goal of long-term appreciation of
capital.
Invested in: A variety of securities including debt securities, common stocks
and preferred stocks.
MONEY MARKET Portfolio
Objective: Maximum income consistent with stability of principal.
Invested In: Short-term securities including bank CD's, government securities,
investment grade commercial paper and other corporate debt
securities.
LlMITED-TERM BOND Portfolio
Objective: High level of current income consistent with the preservation of
capital.
Invested in: Debt securities of investment grade, including debt securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; the portfolio will maintain a dollar weighted
average maturity of two to five years.
BOND Portfolio
Objective: Income with an emphasis on preservation of capital.
Invested In: High-quality bonds issued by companies in a variety of industries;
government securities.
HIGH INCOME Portfolio
Objective: High level of income with a secondary objective of capital
appreciation when consistent with its primary objective.
Invested In: Corporate bonds offering higher rates of return than investment-
grade bonds.
FOR MORE INFORMATION:
Contact your representative, or your local office as listed on your Account
Statement, or contact:
United Investors Life
Variable Products Division
P.O. Box 156
Birmingham, AL 35201-0156
(205)325-4300
NUR1016A(12-94)
printed on recycled paper
