TMK/UNITED FUNDS, INC.
ANNUAL
REPORT
-------------------------------------------
For the fiscal year ended December 31, 1995
<PAGE>
GROWTH PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Growth Portfolio for the fiscal year
ended December 31, 1995. The following discussion, graphs and tables provide
you with information regarding the Portfolio's performance during that period.
The Portfolio's performance in 1995 was positively affected by declining
interest rates and high corporate profits growth. Slowing economic growth
during much of 1995 caused inflation to slow further, also positively impacting
the Portfolio's performance. Balanced budget legislation sponsored by the
newly-Republican Congress also may have helped the stock market and the
performance of the Portfolio.
During the past fiscal year, the Portfolio increased its holdings of companies
in the financial and technology sectors. During the second half of the year,
emphasis on companies sensitive to the condition of the economy was reduced,
particularly technology.
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 charted on the following page. The S&P 500 Index reflects the performance
of securities that generally represent the stock market. The Portfolio's
performance was impacted favorably by our investment approach of remaining fully
invested throughout much of the year.
Our outlook for equities in 1996, while positive, anticipates more moderate
gains than those enjoyed in 1995. We expect a slower rate of domestic economic
growth, moderate inflation, slightly lower interest rates and stable corporate
profits. If developments unfold as we anticipate, the Portfolio should be well
structured.
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 8+ years**
38.57% 21.62% 16.05%
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
12/31/95 35,304 25,199
- ----- TMK/United Growth Portfolio**** -- $35,304
+++++ S&P 500 Index*** -- $25,199
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 12-31-95.
***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) are 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, 1995
Shares Value
COMMON STOCKS
Airlines - 0.47%
USAir Group, Inc.* ..................... 150,000 $ 1,987,500
Automotive - 1.70%
Federal-Mogul Corporation .............. 108,700 2,133,238
Ford Motor Company ..................... 175,000 5,075,000
Total ................................. 7,208,238
Banks and Savings and Loans - 13.88%
Ahmanson (H.F.) & Company .............. 175,000 4,637,500
Barnett Banks, Inc. .................... 100,000 5,900,000
BayBanks, Inc. ......................... 45,000 4,410,000
Boatmen's Bancshares, Inc. ............. 125,000 5,117,125
City National Corporation .............. 125,000 1,750,000
Crestar Financial Corporation .......... 100,000 5,912,500
First Security Corporation* ............ 45,000 1,721,250
Great Western Financial Corporation .... 200,000 5,100,000
Mercantile Bancorporation Inc. ......... 100,000 4,600,000
Morgan (J.P.) & Co. Incorporated ....... 75,000 6,018,750
Northern Trust Corporation ............. 100,000 5,568,700
Roosevelt Financial Group, Inc. ........ 225,000 4,331,250
Whitney Holding Corporation ............ 100,000 3,075,000
Total ................................. 58,142,075
Beverages - 0.36%
Hart Brewing, Inc.* .................... 100,000 1,500,000
Biotechnology and Medical Services - 1.12%
MediSense, Inc.* ....................... 28,200 897,098
Owen Healthcare, Inc.* ................. 72,000 1,944,000
Pyxis Corporation* ..................... 50,000 734,350
Zoll Medical Corporation* .............. 125,000 1,093,750
Total ................................. 4,669,198
Building - 1.15%
American Health Properties, Inc. ....... 50,000 1,075,000
National Health Investors, Inc. ........ 113,125 3,747,265
Total ................................. 4,822,265
Chemicals Major - 3.18%
du Pont (E.I.) de Nemours and Company .. 125,000 8,734,375
PPG Industries, Inc. ................... 100,000 4,575,000
Total ................................. 13,309,375
Chemicals Specialty and Miscellaneous Technology - 1.59%
Ecolab Inc. ............................ 100,000 3,000,000
Geon Company (The) ..................... 150,000 3,656,250
Total ................................. 6,656,250
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Computer Services and Software - 10.62%
General Motors Corporation, Class E .... 150,000 $ 7,800,000
HBO & Company .......................... 70,000 5,355,000
HPR Inc.* .............................. 41,400 1,242,000
Inference Corporation, Class A* ........ 154,500 2,896,875
Informix Corporation* .................. 300,000 9,018,600
Intuit Inc.* ........................... 75,000 5,859,375
META Group, Inc.* ...................... 50,000 1,531,250
PSINet Inc.* ........................... 75,000 1,720,275
Parametric Technology Corporation* ...... 75,000 4,978,125
Pixar* ................................. 50,000 1,440,600
Summit Medical Systems, Inc.* .......... 125,000 2,656,250
Total ................................. 44,498,350
Computer Systems - 2.15%
Cerner Corporation* .................... 230,000 4,715,000
DST Systems, Inc.* ..................... 150,000 4,275,000
Total ................................. 8,990,000
Drugs and Hospital Supply - 12.22%
Abbott Laboratories .................... 225,000 9,393,750
ALZA Corporation* ...................... 53,200 1,316,700
Baxter International Inc. .............. 130,000 5,443,750
Johnson & Johnson ...................... 65,000 5,565,625
Lilly (Eli) and Company ................ 150,000 8,437,500
Pfizer Inc. ............................ 90,000 5,670,000
Quest Medical, Inc.* ................... 100,000 1,037,500
SmithKline Beecham plc, ADR ............ 130,000 7,215,000
United States Surgical Corporation ..... 150,000 3,206,250
Warner-Lambert Company ................. 40,000 3,885,000
Total ................................. 51,171,075
Electrical Equipment - 2.81%
Emerson Electric Co. ................... 100,000 8,175,000
General Electric Company ............... 50,000 3,600,000
Total ................................. 11,775,000
Electronics - 0.35%
Digital Link Corporation* .............. 103,300 1,478,430
Financial - 2.87%
Donaldson, Lufkin & Jenrette, Inc. ..... 75,000 2,343,750
Lehman Brothers Holdings Inc. .......... 30,000 637,500
Paine Webber Group Inc. ................ 30,000 600,000
Regional Acceptance Corporation* ....... 225,000 2,137,500
Travelers Group, Inc. .................. 100,000 6,287,500
Total ................................. 12,006,250
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Food and Related - 2.74%
Archer-Daniels-Midland Company ......... 226,200 $ 4,071,600
Pioneer Hi-Bred International, Inc. .... 50,000 2,781,250
Ralcorp Holdings* ...................... 191,000 4,631,750
Total ................................. 11,484,600
Hospital Management - 4.19%
Beverly Enterprises, Inc.* ............. 500,000 5,312,500
LTC Properties, Inc. ................... 50,000 750,000
Sierra Health Services, Inc.* .......... 125,000 3,968,750
Sterling House Corporation* ............ 150,000 1,443,750
Tenet Healthcare Corporation* .......... 150,000 3,112,500
Total Renal Care Holdings, Inc.* ....... 100,000 2,950,000
Total ................................. 17,537,500
Insurance - 12.56%
Allstate Corporation (The) ............. 150,000 6,168,750
American International Group, Inc. ..... 100,000 9,250,000
Amerin Corporation* .................... 48,900 1,305,141
Berkley (W. R.) Corporation ............ 100,000 5,350,000
General Re Corporation ................. 40,000 6,200,000
Guarantee Life Companies Inc. (The)* ... 51,300 811,156
Home Beneficial Corporation, Class B ... 10,000 241,250
Independent Insurance Group, Inc. ...... 50,000 1,362,500
John Alden Financial Corporation ....... 75,000 1,565,625
Liberty Corporation (The) .............. 65,000 2,193,750
Lincoln National Corporation ........... 130,000 6,987,500
Meadowbrook Insurance Group, Inc.* ..... 42,100 1,410,350
Prudential Reinsurance Holdings, Inc. .. 200,000 4,675,000
Security-Connecticut Corporation ....... 100,000 2,712,500
Unitrin, Inc. .......................... 50,000 2,381,250
Total ................................ 52,614,772
International Oil - 0.61%
ENI S.p.A., ADR* ....................... 75,000 2,568,750
Leisure Time - 4.28%
Boston Chicken, Inc.* .................. 200,000 6,412,400
Bristol Hotel Company* ................. 60,000 1,462,500
Comcast Corporation, Class A ........... 250,000 4,546,750
Tele-Communications, Inc., Class A* .... 275,000 5,482,675
Total ................................. 17,904,325
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Machinery - 3.45%
Cooper Industries, Inc. ................ 125,000 $ 4,593,750
Ingersoll-Rand Company ................. 75,000 2,634,375
Keystone International, Inc. ........... 125,000 2,500,000
Parker Hannifin Corporation ............ 75,000 2,568,750
TRINOVA Corporation .................... 75,000 2,146,875
Total ................................. 14,443,750
Metals and Mining - 1.14%
Aluminum Company of America ............ 90,000 4,758,750
Multi-Industry - 1.47%
Berkshire Hathaway Inc.* ............... 35 1,123,500
ITT Corporation* ....................... 40,000 2,120,000
ITT Hartford Group, Inc.* .............. 40,000 1,935,000
ITT Industries, Inc. ................... 40,000 960,000
Total ................................. 6,138,500
Public Utilities - Electric - 1.38%
Central and South West Corporation ..... 60,000 1,672,500
Detroit Edison Company (The) ........... 60,000 2,070,000
Texas Utilities Electric Company ....... 50,000 2,056,250
Total ................................. 5,798,750
Railroads - 3.05%
Conrail Inc. ........................... 100,000 7,000,000
Illinois Central Corporation ........... 150,000 5,756,250
Total ................................. 12,756,250
Retailing - 1.73%
Family Dollar Stores, Inc. ............. 190,000 2,612,500
Mercantile Stores Company, Inc. ........ 100,000 4,625,000
Total ................................. 7,237,500
Services, Consumer and Business - 0.73%
Block (H & R), Inc. .................... 75,000 3,037,500
Telecommunications - 3.74%
Ascend Communications, Inc.* ........... 55,000 4,465,285
MFS Communications Company, Inc.* ...... 100,000 5,350,000
Nokia Corporation, Series A, ADS ....... 150,000 5,831,250
Total ................................. 15,646,535
Textiles and Apparel - 0.16%
Warnaco Group, Inc. (The), Class A ..... 27,600 690,000
TOTAL COMMON STOCKS - 95.70% $400,831,488
(Cost: $367,893,754)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE GROWTH PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITY - 0.33%
Financial
American Travellers Corporation, Convertible,
6.5%, 10-1-2005 ....................... $ 1,000 $ 1,370,000
(Cost: $1,000,000)
SHORT-TERM SECURITIES
Drugs and Hospital Supply - 0.64%
Abbott Laboratories,
5.63%, 1-16-96 ........................ 2,670 2,663,736
Financial - 1.20%
Dresdner U.S. Finance Inc.,
5.61%, 1-19-96 ........................ 5,035 5,020,877
Food and Related - 2.62%
General Mills, Inc.,
Master Note ........................... 5,360 5,360,000
Sara Lee Corporation,
Master Note............................ 5,597 5,597,000
Total ................................. 10,957,000
Telecommunications - 0.71%
BellSouth Telecommunications Inc.,
5.8%, 1-5-96 .......................... 3,000 2,998,067
TOTAL SHORT-TERM SECURITIES - 5.17% $ 21,639,680
(Cost: $21,639,680)
TOTAL INVESTMENT SECURITIES - 101.20% $423,841,168
(Cost: $390,533,434)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (1.20%) (5,015,484)
NET ASSETS - 100.00% $418,825,684
See Notes to Schedules of Investments on page 71.
<PAGE>
INCOME PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Income Portfolio for the fiscal year
ended December 31, 1995. The following discussion, graphs and tables provide
you with information regarding the Portfolio's performance during that period.
Early in 1995, the Federal Reserve Bank further raised interest rates. These
higher interest rates eventually resulted in slowing economic growth. However,
strong corporate profits growth during 1995, combined with lower interest rates
in the second half, resulted in positive performance for the stock market for
the year.
In the early months of 1995, the Portfolio was heavily invested in cyclical
issues, such as retail, home improvement and housing stocks. As the year
progressed, we began to place more emphasis on the stocks of companies in the
technology industry, which showed greater promise for growth in the slowing
economy.
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 was positively impacted by its investments in the technology sector
during the first three quarters of 1995. The technology sell-off during the
fourth quarter of 1995 diminished somewhat the Portfolio's overall performance
for the year.
In 1996, we anticipate that the economy will continue its slow rate of growth.
We further expect the Federal Reserve Bank to lower interest rates in an effort
to spur the economy and avoid a recession. As a result, we intend to maintain a
fully-invested position to take advantage of the anticipated lowering of
interest rates. We will continue to emphasize technology and cyclical stocks
and aggressively search for strong investment opportunities for the Portfolio in
companies with excellent prospects for superior earnings and revenue growth.
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 4+ years**
31.56% 15.05%
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
12/31/95 18,692 18,016
- ----- TMK/United Income Portfolio**** -- $18,692
+++++ S&P 500 Index*** -- $18,016
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 12-31-95.
***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) are 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, 1995
Shares Value
COMMON STOCKS
Aerospace - 1.56%
Boeing Company (The) ................... 47,100 $ 3,691,462
Sundstrand Corporation ................. 21,000 1,477,875
Total ................................. 5,169,337
Airlines - 2.84%
AMR Corporation* ....................... 29,700 2,205,225
Southwest Airlines Co. ................. 183,600 4,268,700
USAir Group, Inc.* ..................... 220,000 2,915,000
Total ................................. 9,388,925
Automotive - 5.22%
Chrysler Corporation ................... 81,600 4,518,600
Dana Corporation ....................... 56,400 1,649,700
Eaton Corporation ...................... 37,100 1,989,487
Ford Motor Company ..................... 140,900 4,086,100
General Motors Corporation ............. 74,200 3,923,325
Magna International Inc., Class A ...... 26,000 1,124,500
Total ................................. 17,291,712
Banks and Savings and Loans - 1.69%
Citicorp ............................... 55,600 3,739,100
First Bank System Inc. ................. 37,100 1,841,087
Total ................................. 5,580,187
Beverages - 1.62%
Pepsi-Cola Puerto Rico Bottling
Company, Class B ...................... 105,600 1,214,400
PepsiCo, Inc. .......................... 74,200 4,145,925
Total ................................. 5,360,325
Biotechnology and Medical Services - 1.00%
Medtronic, Inc. ........................ 59,300 3,313,388
Building - 5.90%
Armstrong World Industries, Inc. ....... 66,800 4,141,600
Centex Corporation ..................... 134,400 4,670,400
Georgia-Pacific Corporation ............ 31,500 2,161,687
Pulte Corporation ...................... 148,900 5,006,762
Temple-Inland Inc. ..................... 26,000 1,147,250
Weyerhaeuser Company ................... 55,600 2,404,700
Total ................................. 19,532,399
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Chemicals Major - 7.08%
Air Products and Chemicals, Inc. ....... 85,300 $ 4,499,575
Albemarle Corporation .................. 72,800 1,410,500
Dow Chemical Company (The) ............. 45,400 3,195,025
du Pont (E.I.) de Nemours and Company .. 74,200 5,184,725
PPG Industries, Inc. ................... 92,700 4,241,025
Praxair, Inc. .......................... 74,200 2,494,975
Union Carbide Corporation .............. 64,900 2,433,750
Total ................................. 23,459,575
Chemicals Specialty and Miscellaneous Technology - 3.20%
Crompton & Knowles Corporation ......... 98,500 1,305,125
Geon Company (The) ..................... 100,600 2,452,125
Polaroid Corporation ................... 56,500 2,676,688
WMX Technologies, Inc. ................. 44,500 1,329,438
Xerox Corporation ...................... 20,800 2,849,600
Total ................................. 10,612,976
Computer Services and Software - 3.41%
Computer Associates International, Inc. 27,750 1,578,281
General Motors Corporation, Class E .... 80,200 4,170,400
Microsoft Corporation* ................. 22,300 1,958,208
Oracle Systems Corporation* ............ 84,700 3,589,162
Total ................................. 11,296,051
Consumer Electronics and Appliances - 1.20%
Harman International Industries,
Incorporated .......................... 24,150 969,019
Whirlpool Corporation .................. 56,700 3,019,275
Total ................................. 3,988,294
Drugs and Hospital Supply - 2.05%
Abbott Laboratories .................... 40,200 1,678,350
Baxter International Inc. .............. 38,900 1,628,937
Merck & Co., Inc. ...................... 29,700 1,952,775
Pfizer Inc. ............................ 24,100 1,518,300
Total ................................. 6,778,362
Electrical Equipment - 2.67%
Emerson Electric Co. ................... 29,700 2,427,975
General Electric Company ............... 89,000 6,408,000
Total ................................. 8,835,975
Electronics - 12.37%
AMP Incorporated ....................... 81,600 3,131,400
Analog Devices, Inc.* .................. 193,200 6,834,450
Applied Materials, Inc.* ............... 128,300 5,043,730
cisco Systems, Inc.* ................... 74,200 5,541,775
Intel Corporation ...................... 113,500 6,448,162
LSI Logic Corporation* ................. 134,400 4,401,600
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Electronics (Continued)
Linear Technology Corporation .......... 42,600 $ 1,677,375
Micron Technology, Inc. ................ 63,800 2,528,075
Molex Incorporated, Class A ............ 78,187 2,404,250
Teradyne, Inc.* ........................ 59,900 1,497,500
Texas Instruments Incorporated ......... 28,100 1,454,175
Total ................................. 40,962,492
Engineering and Construction - 0.97%
Fluor Corporation ...................... 29,700 1,960,200
Foster Wheeler Corporation ............. 29,700 1,262,250
Total ................................. 3,222,450
Financial - 1.76%
Federal Home Loan Mortgage Corporation . 37,100 3,097,850
Federal National Mortgage Association .. 21,900 2,718,337
Total ................................. 5,816,187
Food and Related - 0.77%
CPC International Inc. ................. 37,100 2,545,987
Hospital Management - 1.84%
Columbia/HCA Healthcare Corporation .... 27,800 1,410,850
Tenet Healthcare Corporation* .......... 74,200 1,539,650
United HealthCare Corporation .......... 48,200 3,157,100
Total ................................. 6,107,600
Household Products - 3.23%
Colgate-Palmolive Company .............. 44,500 3,126,125
Gillette Company (The) ................. 74,200 3,867,675
Procter & Gamble Company (The) ......... 44,500 3,693,500
Total.................................. 10,687,300
Leisure Time - 2.34%
Walt Disney Company (The) .............. 51,900 3,062,100
McDonald's Corporation ................. 103,900 4,688,488
Total ................................. 7,750,588
Machinery - 6.23%
Case Corporation ....................... 97,500 4,460,625
Caterpillar Inc. ....................... 118,700 6,973,625
Deere & Company ........................ 152,400 5,372,100
Ingersoll-Rand Company ................. 29,700 1,043,212
Parker Hannifin Corporation ............ 44,500 1,524,125
TRINOVA Corporation .................... 44,500 1,273,812
Total ................................. 20,647,499
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Multi-Industry - 2.11%
ITT Corporation* ....................... 55,700 $ 2,952,100
ITT Hartford Group, Inc.* .............. 55,700 2,694,487
ITT Industries, Inc. ................... 55,700 1,336,800
Total ................................. 6,983,387
Paper - 1.92%
Bowater Incorporated ................... 34,100 1,210,550
International Paper Company ............ 89,000 3,370,875
Union Camp Corporation ................. 37,100 1,766,888
Total ................................. 6,348,313
Railroads - 2.93%
CSX Corporation ........................ 52,000 2,372,500
Conrail Inc. ........................... 44,500 3,115,000
Norfolk Southern Corporation ........... 22,200 1,762,125
Union Pacific Corporation .............. 37,100 2,448,600
Total ................................. 9,698,225
Retailing - 8.12%
Circuit City Stores, Inc. .............. 118,700 3,279,088
Dayton Hudson Corporation .............. 34,500 2,587,500
Gap, Inc. (The) ........................ 51,900 2,179,800
General Nutrition Companies, Inc.* ..... 70,000 1,627,500
Home Depot, Inc. (The) ................. 56,700 2,714,513
May Department Stores Company (The) .... 74,200 3,134,950
Nordstrom, Inc. ........................ 27,800 1,122,425
OfficeMax, Inc.* ....................... 69,750 1,560,656
Penney (J.C.) Company, Inc. ............ 50,100 2,386,013
Tommy Hilfiger Corporation* ............ 109,400 4,635,825
Wal-Mart Stores, Inc. .................. 74,200 1,660,225
Total ................................. 26,888,495
Services, Consumer and Business - 0.47%
Block (H & R), Inc. .................... 38,700 1,567,350
Steel - 0.38%
Nucor Corporation ...................... 22,300 1,273,888
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Telecommunications - 6.59%
AT&T Corporation ....................... 37,100 $ 2,402,225
General Instrument Corporation* ........ 57,900 1,353,413
General Motors Corporation, Class H .... 13,100 643,538
MCI Communications Corporation ......... 139,100 3,642,612
MFS Communications Company, Inc.* ...... 29,900 1,599,650
Motorola, Inc. ......................... 126,100 7,187,700
Telefonaktiebolaget LM Ericsson,
Class B, ADR ......................... 148,400 2,893,800
Vanguard Cellular Systems, Inc.,
Class A* .............................. 105,000 2,113,125
Total ................................. 21,836,063
Tire and Rubber - 1.02%
Goodyear Tire & Rubber Company (The) ... 74,200 3,366,825
TOTAL COMMON STOCKS - 92.49% $306,310,155
(Cost: $225,958,227)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.45%
U.S. Bancorp,
Master Note ........................... $1,505 1,505,000
Financial - 3.17%
Merrill Lynch & Co., Inc.,
5.75%, 1-26-96 ........................ 5,225 5,204,136
Nestle Capital Corp.,
5.75%, 1-12-96 ........................ 5,290 5,280,706
Total ................................. 10,484,842
Food and Related - 1.85%
General Mills, Inc.,
Master Note ........................... 2,257 2,257,000
Sara Lee Corporation,
Master Note............................ 3,875 3,875,000
Total ................................. 6,132,000
Public Utilities - Electric - 0.94%
Potomac Electric Power Co.,
5.72%, 1-4-96 ......................... 3,115 3,113,515
Telecommunications - 0.75%
GTE Corporation,
5.95%, 2-2-96 ......................... 2,500 2,486,778
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INCOME PORTFOLIO
DECEMBER 31, 1995
Value
TOTAL SHORT-TERM SECURITIES - 7.16% $ 23,722,135
(Cost: $23,722,135)
TOTAL INVESTMENT SECURITIES - 99.65% $330,032,290
(Cost: $249,680,362)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.35% 1,161,742
NET ASSETS - 100.00% $331,194,032
See Notes to Schedules of Investments on page 71.
<PAGE>
INTERNATIONAL PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the International Portfolio during the
fiscal year ended December 31, 1995. The following discussion, graphs and
tables provide you with information regarding the Portfolio's performance during
that period.
International markets generally experienced growth during the beginning of 1995,
but lost ground as the year progressed due to weaker than anticipated economic
activity in most countries. The governments of many nations lowered interest
rates during 1995 in an effort to stabilize their economies, but the efforts
were generally undertaken too late to preempt disappointing corporate profit
performance. Political developments in both mature and developing nations,
particularly Mexico and France, negatively impacted international markets in
1995.
During the past year, the Portfolio concentrated on investments in Europe,
emphasizing Scandinavian opportunities. Early in 1995, the Portfolio emphasized
investments in Mexico, but divested a large portion of its holdings in Mexico as
the year progressed. During the course of 1995, the Portfolio shifted its
emphasis from economically sensitive issues such as communications equipment and
paper and forest products toward interest sensitive issues and issues less
sensitive to economic weakness.
The strategies and techniques we applied resulted in the Portfolio
underperforming the Morgan Stanley E.A.FE. Index (Europe, Australia, Far East
Index) charted on the following page. That index reflects the performance of
securities that generally represent the international stock market. The
Portfolio's performance was negatively impacted by its proportionately greater
exposure to Mexican securities than the E.A.FE. Index early in the year and its
proportionately lesser exposure to Japanese securities during the second half of
1995.
Current economic conditions in most foreign countries remain weak despite
actions taken by many foreign governments to stimulate economic growth. We
anticipate that more time and easing of governmental policies will be required
before substantial economic growth is experienced. Accordingly, we expect that
the Portfolio will remain overweighted in those areas likely to be helped by
foreign governmental policies designed to stimulate economic growth, including
investments likely to benefit from lower interest rates. 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 and in those emerging markets
that offer particularly good investment values.
Thank you very much for your continued support and confidence.
Respectfully,
Henry J. Herrmann
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
Average Annual Total Return*
1 year 1+ years**
7.28% 4.48%
Morgan
TMK/United Stanley
International E.A.FE.
Portfolio Index
--------- ---------
05/03/94 Purchase $10,000 $10,000
12/31/94 10,026 9,990
12/31/95 10,756 11,110
+++++ Morgan Stanley E.A.FE. Index*** -- $11,110
- ----- TMK/United International Portfolio**** -- $10,756
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 12-31-95.
***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) are 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, 1995
Shares Value
COMMON STOCKS
Australia - 1.77%
Westpac Banking Corp. (A) .............. 200,000 $ 886,013
Finland - 4.13%
Enso-Gutzeit Oy (A) .................... 40,400 269,327
Kymmene Oy (A) ......................... 13,000 343,670
Metsa-Serla Oy, Series B (A) ........... 20,000 616,078
Nokia Corporation, Series K (A) ........ 15,000 593,090
Tampella OY (A)* ....................... 200,000 252,868
Total ................................. 2,075,033
France - 2.95%
Lapeyre S.A. (A) ....................... 6,625 329,831
Societe Industrielle de Transports
Automobiles S.A. (A) .................. 3,500 613,446
Television Francaise 1-TF1 S.A. (A) .... 5,000 535,605
Total ................................. 1,478,882
Germany - 13.09%
adidas AG (A)* ......................... 10,000 526,499
DURR Beteiligungs AG (A) ............... 4,500 1,349,372
Fag Kugelfischer AG (A) ................ 6,000 774,058
GILDEMEISTER Aktiengesellschaft (A)* ... 13,750 1,246,513
Herlitz International Trading AG (A) ... 1,500 538,703
Mannesman AG (A) ....................... 4,300 1,369,463
TRAUB AG (A)* .......................... 8,500 767,608
Total ................................. 6,572,216
Hong Kong - 4.67%
First Pacific Company Limited (A) ...... 750,000 834,142
Guangdong Corporation Limited (A) ...... 1,000,000 601,358
HSBC Holdings Plc (A) .................. 60,000 907,856
Total ................................. 2,343,356
Indonesia - 2.78%
PT Matahari Putra Prima, F (A) ......... 573,750 1,009,991
PT United Tractors, F (A) .............. 205,000 385,524
Total ................................. 1,395,515
Japan - 2.10%
Aloka Co. Ltd. (A) ..................... 13,000 177,530
Hitachi (A) ............................ 50,000 503,632
Kyocera Corporation (A) ................ 5,000 371,428
Total ................................. 1,052,590
Korea - 2.27%
Samsung Electronics Co., Ltd., GDR (B)* 19,000 1,140,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Malaysia 0.19%
Asiatic Development Berhad (A) ......... 100,000 $ 92,924
Mexico - 8.09%
Cemex, S.A., CPO Shares, Series A (A) .. 150,000 491,899
Desc-Sociedad de Fomento Industrial,
S.A. de C.V., Class B (A)* ............ 200,000 733,636
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS ..................... 50,000 512,500
Grupo Carso, S.A. de C.V.,
Series 1A (A)* ........................ 150,000 810,758
Grupo Financiero Bancomer, S.A. de
C.V., B, CPO Shares (A)* .............. 2,000,000 557,356
Telefonos de Mexico, S.A. de C.V., ADR . 30,000 956,250
Total ................................. 4,062,399
Netherlands - 1.07%
Philips Electronics N.V. NY Shares ..... 15,000 538,125
Norway - 2.11%
Kvaerner a.s. (A) ...................... 30,000 1,061,092
Phillipines - 1.68%
Universal Robina Corporation (A) ....... 1,700,000 842,547
Sweden - 11.58%
Astra AB, Class A (A) .................. 35,000 1,396,522
Bergman & Beving, Series B (A) ......... 30,000 844,689
Kinnevik AB, Series B (A) .............. 21,500 671,723
Skandia Enskilda Banken, Class A (A) ... 150,000 1,242,189
Trelleborg AB, Series B (A) ............ 40,000 430,626
AB Volvo (A) ........................... 60,000 1,228,638
Total ................................. 5,814,387
Switzerland - 2.02%
Swiss Bank Corporation (A) ............. 2,500 1,013,865
United Kingdom - 7.18%
BTR PLC (A) ............................ 200,000 1,019,096
Next plc (A) ........................... 150,000 1,062,594
Pilkington PLC (A) ..................... 104,000 326,359
United Biscuits (Holdings) Public
Limited Co. (A) ....................... 75,000 297,689
Vodafone Group Plc (A) ................. 250,000 897,146
Total ................................. 3,602,884
TOTAL COMMON STOCKS - 67.68% $ 33,971,828
(Cost: $32,872,941)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1995
Shares Value
PREFERRED STOCKS - 3.23%
Germany
Hornbach-Baumarkt-AG (A) ............... 7,000 $ 610,181
Marschollek, Lautenschlager und
Partner AG (A) ........................ 1,000 683,403
STO AG (A) ............................. 666 325,105
Total ................................. $ 1,618,689
(Cost: $1,712,070)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.64%
U.S. Bancorp,
Master Note ........................... $1,826 1,826,000
Financial - 6.67%
BHP Finance (USA) Inc.,
5.78%, 1-12-96 ........................ 1,000 998,234
Morgan (J.P.) & Co. Incorporated,
5.88%, 1-8-96 ......................... 1,355 1,353,451
Nestle Capital Corp.,
5.75%, 1-12-96 ........................ 1,000 998,243
Total ................................. 3,349,928
Food and Related - 12.24%
General Mills, Inc.,
Master Note ........................... 2,183 2,183,000
Quaker Oats Co.,
5.82%, 1-23-96 ........................ 2,000 1,992,887
Sara Lee Corporation,
Master Note............................ 1,970 1,970,000
Total ................................. 6,145,887
Public Utilities - Gas - 1.99%
Michigan Consolidated Gas Company,
5.8%, 1-10-96 ......................... 1,000 998,550
Telecommunications - 3.98%
Southwestern Bell Telephone Company,
5.8%, 1-8-96 .......................... 2,000 1,997,744
TOTAL SHORT-TERM SECURITIES - 28.52% $14,318,109
(Cost: $14,318,109)
TOTAL INVESTMENT SECURITIES - 99.43% $49,908,626
(Cost: $48,903,120)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE INTERNATIONAL PORTFOLIO
DECEMBER 31, 1995
Value
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.57% $ 287,719
NET ASSETS - 100.00% $50,196,345
See Notes to Schedules of Investments on page 71.
<PAGE>
SMALL CAP PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Small Cap Portfolio during the
fiscal year. The following discussion, graphs and tables provide you with
information regarding the Portfolio's performance during that period.
The strong performance of the stock market during 1995 was fueled by steadily
declining interest rates, non-inflationary economic growth and strongly rising
corporate profits. Overall, technology stocks made the most impressive gains
during 1995, although various components of the technology sector had both ups
and downs during the year.
During 1995, the Portfolio emphasized the stocks of companies associated heavily
with the personal computer industry. Due to the widespread expansion of the
personal computer, particularly into the home and the medical field, the
Portfolio actively invested in software companies serving primarily these
growing markets.
The strategies and techniques we applied resulted in the Portfolio outperforming
the Nasdaq Industrials Index charted on the following page. That index reflects
the performance of securities that generally represent the small companies
sector of the stock market.
In 1996, we expect low inflation and low interest rates to prevail. We
anticipate that corporate profits in 1996 may fall short of 1995's record levels
and profit growth will certainly be significantly slower. Based upon these
factors, we expect the stock market to experience moderate growth in 1996 with
small cap issues growing at a faster rate than large cap stocks. We expect to
continue to pursue the same strategies we have employed in the recent past in
seeking to achieve the Portfolio's objectives.
Thank you very much for your continued support and confidence.
Respectfully,
Zachary H. Shafran
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
Average Annual Total Return*
1 year 1+ years**
32.32% 32.66%
TMK/United Nasdaq
SMALL CAP Industrials
Portfolio Index
---------- -----------
05/03/94 Purchase $10,000 $10,000
12/31/94 12,091 9,862
12/31/95 15,999 12,620
----- TMK/United Small Cap Portfolio**** -- $15,999
+++++ Nasdaq Industrials Index*** -- $12,620
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 12-31-95.
***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, 1995
Shares Value
COMMON STOCKS
Beverages - 0.28%
Redhook Ale Brewery, Incorporated* ..... 6,000 $ 157,500
Biotechnology and Medical Services - 5.85%
American Healthcorp, Inc.* ............. 100,000 937,500
Daig Corporation* ...................... 30,000 693,750
Owen Healthcare, Inc.* ................. 15,000 405,000
St. Jude Medical, Inc.* ................ 16,500 707,437
Tecnol Medical Products, Inc.* ......... 10,000 177,500
Ventritex, Inc.* ....................... 5,000 87,810
VidaMed, Inc.* ......................... 25,000 243,750
Total ................................. 3,252,747
Computer Services and Software - 25.17%
Adobe Systems Incorporated ............. 20,000 1,242,500
AVANT! Corporation* .................... 37,300 704,037
CyCare Systems, Inc.* .................. 20,000 512,500
Desktop Data, Inc.* .................... 10,000 246,250
Eagle Point Software Corporation* ...... 30,000 622,500
Electronic Arts Inc.* .................. 8,000 209,496
Expert Software, Inc.* ................. 50,000 706,250
GT Interactive Software Corp.* ......... 50,000 703,100
HCIA Inc.* ............................. 20,000 932,500
HPR Inc.* .............................. 6,500 195,000
Macromedia, Inc.* ...................... 15,000 780,930
MapInfo Corporation* ................... 5,000 102,500
Mecon, Inc.* ........................... 35,000 555,625
Medic Computer Systems, Inc.* .......... 7,000 422,625
Meta-Software, Inc.* ................... 45,400 777,475
Minnesota Educational Computing
Corporation* .......................... 15,000 376,875
Parametric Technology Corporation* ..... 18,000 1,194,750
Pure Software Inc.* .................... 11,600 371,200
Quarterdeck Corporation* ............... 15,000 412,500
Shiva Corporation* ..................... 15,000 1,095,000
Summit Medical Systems, Inc.* .......... 35,000 743,750
Synopsys, Inc.* ........................ 10,000 381,250
Wall Data Incorporated* ................ 20,000 327,500
Wonderware Corporation* ................ 22,000 372,614
Total ................................. 13,988,727
Computer Systems - 4.03%
America Online, Inc.*. ................. 22,000 820,864
Cerner Corporation* .................... 40,000 820,000
PHAMIS, Inc.* .......................... 20,000 600,000
Total ................................. 2,240,864
Drugs and Hospital Supply - 5.18%
LUNAR CORPORATION ...................... 37,500 1,017,187
OmniCare, Inc. ......................... 10,000 447,500
PacifiCare Health Systems, Inc.* ....... 9,000 785,250
Watson Pharmaceuticals Inc.* ........... 12,900 632,100
Total ................................. 2,882,037
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Electronics - 3.37%
Information Storage Devices, Inc.* ..... 30,000 $ 330,000
LSI Logic Corporation* ................. 7,000 229,250
SDL, Inc.* ............................. 36,000 882,000
Silicon Valley Group, Inc.* ............ 17,000 430,304
Total ................................. 1,871,554
Hospital Management - 7.72%
ARV Assisted Living, Inc.* ............. 70,000 822,500
Emeritus Corporation* .................. 50,000 581,250
Inphynet Medical Management Inc.* ...... 20,000 477,500
Quorum Health Group, Inc.* ............. 11,000 240,625
Sierra Health Services, Inc.* .......... 15,000 476,250
Sterling House Corporation* ............ 58,500 563,063
United HealthCare Corporation .......... 7,000 458,500
Vencor, Incorporated* .................. 20,675 671,938
Total ................................. 4,291,626
Insurance - 0.75%
United Dental Care, Inc.* .............. 10,000 415,000
Leisure Time - 0.65%
Longhorn Steaks, Inc.* ................. 20,000 362,500
Publishing and Advertising - 1.06%
Franklin Electronic Publishers, Inc.* .. 20,000 590,000
Retailing - 1.07%
Eastbay, Inc.* ......................... 7,000 135,625
Movie Gallery, Inc.* ................... 15,000 459,375
Total ................................. 595,000
Services, Consumer and Business - 5.91%
CMG Information Services, Inc.* ........ 25,000 2,312,500
Stewart Enterprises, Inc., Class A ..... 26,500 973,875
Total ................................. 3,286,375
Telecommunications - 3.90%
MFS Communications Company, Inc.* ...... 22,000 1,177,000
Mobile Telecommunication Technologies
Corp.* ................................ 20,000 427,500
TESSCO Technologies Incorporated* ...... 20,000 562,500
Total ................................. 2,167,000
Textiles and Apparel - 0.90%
Department 56, Inc.* ................... 13,000 498,875
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Trucking - 0.25%
Knight Transportation, Inc.* ........... 10,000 $ 140,000
TOTAL COMMON STOCKS - 66.09% $36,739,805
(Cost: $27,788,215)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.41%
U.S. Bancorp,
Master Note ........................... $ 1,896 1,896,000
Consumer Electronics and Appliances - 3.59%
TDK (USA) Corp.,
5.71%, 1-22-96 ........................ 2,000 1,993,338
Financial - 6.30%
Merrill Lynch & Co., Inc.,
5.75%, 1-19-96 ........................ 2,000 1,994,250
Philip Morris Capital Corp.,
5.72%, 1-19-96 ........................ 1,510 1,505,681
Total ................................. 3,499,931
Food and Related - 5.53%
General Mills, Inc.,
Master Note ........................... 1,719 1,719,000
Sara Lee Corporation,
Master Note............................ 1,355 1,355,000
Total ................................. 3,074,000
Insurance - 2.88%
Aon Corporation,
5.72%, 1-9-96 ......................... 1,605 1,602,960
Public Utilities - Electric - 3.61%
Pacificorp,
5.72%, 2-2-96 ......................... 2,020 2,009,729
Public Utilities - Gas - 4.58%
Michigan Consolidated Gas Company,
5.8%, 1-10-96 ......................... 2,550 2,546,303
Telecommunications - 3.59%
Southwestern Bell Telephone Company,
5.8%, 1-8-96 .......................... 2,000 1,997,745
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE SMALL CAP PORTFOLIO
DECEMBER 31, 1995
Value
TOTAL SHORT-TERM SECURITIES - 33.49% $18,620,006
(Cost: $18,620,006)
TOTAL INVESTMENT SECURITIES - 99.58% $55,359,811
(Cost: $46,408,221)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.42% 231,636
NET ASSETS - 100.00% $55,591,447
See Notes to Schedules of Investments on page 71.
<PAGE>
BALANCED PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Balanced Portfolio for the fiscal
year ended December 31, 1995. The discussion, graphs and tables contained in
this report will provide you with information regarding the Portfolio's
performance during that period.
During most of 1995, interest rates and inflation declined and corporate profits
rose. A number of corporate takeovers and share repurchases caused a reduction
in the supply of available stock. These factors contributed to strong
performances in both the stock and bond markets for 1995. Throughout much of
1995, interest-sensitive industries and technology issues posted impressive
returns, while consumer cyclical industries underperformed due to consumer price
resistance and income constraints.
In 1995, we pursued a strategy of continuing to focus on total return for the
Portfolio while preserving the safety of capital. In furtherance of this
approach, we attempted to reduce risk to the Portfolio by diversifying across a
broad number of industries and maintaining a cash position to enhance
flexibility.
The strategies and techniques we applied resulted in the direction of the
Portfolio's overall performance, and the performance of its holdings in the
various categories of securities in which the Portfolio invests, outperforming
the bond market index and underperforming compared to the stock market index
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). A variety of
indexes is presented because the Portfolio invests in stocks and bonds. The
positive return of the markets in 1995 was driven primarily by the performance
of a select number of stocks. Our strategies of diversification and maintaining
a cash position contributed to the underperformance of the Portfolio as compared
to the indexes.
We anticipate that interest rates will continue to decline in 1996 and that
inflation will remain low. Congressional action on the federal budget deficit
could have an impact upon the country's economic condition and financial markets
during the year. Without a budget agreement in place, it may be difficult for
interest rates to decline significantly. Slow economic growth seems likely and
corporate profits growth should weaken, resulting in a more volatile stock
market than experienced in 1995. We intend to continue to search for
investments that present the best prospects for positive long-term returns
consistent with the Portfolio's investment objectives.
Thank you for your continued 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 S&P 500 INDEX, AND THE
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
Average Annual Total Return*
1 year 1+ years**
24.19% 13.66%
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
12/31/94 9,963 10,398 10,046
12/31/95 12,373 14,306 11,979
- ----- S&P 500 Index*** -- $14,306
===== TMK/United Balanced Portfolio**** -- $12,373
+++++ Lehman Bros Gov't/Corp Bond Index*** -- $11,979
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 12-31-95.
***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/Corporate 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, 1995
Shares Value
COMMON STOCKS
Airlines - 0.79%
Southwest Airlines Co. ................. 8,000 $ 186,000
Automotive - 1.81%
Eaton Corporation ...................... 6,000 321,750
AB Volvo AK, ADR, Series B ............. 5,100 104,866
Total ................................. 426,616
Banks and Savings and Loans - 4.05%
Ahmanson (H.F.) & Company .............. 14,500 384,250
BankAmerica Corporation ................ 4,500 291,375
Great Western Financial Corporation .... 11,000 280,500
Total ................................. 956,125
Beverages - 1.47%
PepsiCo, Inc. .......................... 6,200 346,425
Biotechnology and Medical Services - 0.60%
St. Jude Medical, Inc.* ................ 3,300 141,488
Building - 2.51%
National Health Investors, Inc. ........ 12,000 397,500
Temple-Inland Inc. ..................... 800 35,300
York International Corporation ......... 3,400 159,800
Total ................................. 592,600
Chemicals Major - 3.22%
du Pont (E.I.) de Nemours and Company .. 2,400 167,700
PPG Industries, Inc. ................... 6,500 297,375
Praxair, Inc. .......................... 8,800 295,900
Total ................................. 760,975
Chemicals Specialty and Miscellaneous
Technology - 0.80%
Crompton & Knowles Corporation ......... 14,300 189,475
Computer Systems - 1.04%
Cerner Corporation* .................... 12,000 246,000
Domestic Oil - 3.31%
Amoco Corporation ....................... 4,100 294,688
Apache Corporation ..................... 6,000 177,000
Atlantic Richfield Company ............. 2,800 310,100
Total ................................. 781,788
Drugs and Hospital Supply - 1.44%
American Home Products Corporation ..... 3,500 339,500
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Electrical Equipment - 1.04%
Emerson Electric Co. ................... 3,000 $ 245,250
Electronics - 3.04%
AVX Corporation ........................ 13,700 363,050
Applied Materials, Inc.* ............... 9,000 353,808
Total ................................. 716,858
Engineering and Construction - 0.99%
Foster Wheeler Corporation ............. 5,500 233,750
Hospital Management - 3.21%
LTC Properties, Inc. ................... 18,000 270,000
Tenet Healthcare Corporation* .......... 9,600 199,200
United HealthCare Corporation .......... 4,400 288,200
Total ................................. 757,400
Household Products - 0.90%
Estee Lauder Companies Inc. (The),
Class A* .............................. 6,100 212,737
Insurance - 3.39%
Amerin Corporation* .................... 18,700 499,103
Chubb Corporation (The) ................ 3,100 299,925
Total ................................. 799,028
International Oil - 0.71%
Mobil Corporation ...................... 1,500 168,000
Leisure Time - 1.33%
Red Lion Hotels, Inc.* ................. 6,500 113,750
Time Warner Incorporated ............... 5,300 200,737
Total ................................. 314,487
Machinery - 2.34%
Deere & Company ........................ 6,000 211,500
Keystone International, Inc. ........... 17,000 340,000
Total ................................. 551,500
Metals and Mining - 1.34%
Aluminum Company of America ............ 6,000 317,250
Multi-Industry - 2.18%
ITT Corporation* ....................... 4,100 217,300
ITT Hartford Group, Inc.* .............. 4,100 198,338
ITT Industries, Inc. ................... 4,100 98,400
Total ................................. 514,038
Oil Services - 1.11%
Schlumberger Limited ................... 3,800 263,150
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Paper - 1.40%
Champion International Corporation ..... 5,800 $ 243,600
Union Camp Corporation ................. 1,800 85,725
Total ................................. 329,325
Public Utilities - Electric - 1.23%
Houston Industries Incorporated ........ 12,000 291,000
Publishing and Advertising - 0.96%
McGraw-Hill, Inc. ...................... 2,600 226,525
Railroads - 0.47%
Conrail Inc. ........................... 1,600 112,000
Retailing - 6.18%
Gymboree Corporation (The)* ............ 8,600 176,833
May Department Stores Company (The) .... 10,400 439,400
Mercantile Stores Company, Inc. ........ 3,000 138,750
Penney (J.C.) Company, Inc. ............ 4,000 190,500
SYSCO Corporation ...................... 9,000 292,500
Tommy Hilfiger Corporation* ............ 5,200 220,350
Total ................................. 1,458,333
Services, Consumer and Business - 0.98%
Block (H & R), Inc. .................... 5,700 230,850
Steel - 1.21%
Nucor Corporation ...................... 5,000 285,625
Telecommunications - 5.93%
AT&T Corporation ....................... 4,100 265,475
BellSouth Corporation .................. 4,800 208,800
GTE Corporation ........................ 5,300 233,200
General Motors Corporation, Class H .... 6,600 324,225
MCI Communications Corporation ......... 6,000 157,122
Motorola, Inc. ......................... 2,600 148,200
Nokia Corporation, Series A, ADS ....... 1,600 62,200
Total ................................. 1,399,222
TOTAL COMMON STOCKS - 60.98% $14,393,320
(Cost: $12,530,593)
PREFERRED STOCKS
Airlines - 0.15%
Delta Air Lines, Incorporated, Depository
Shares, Convertible ................... 600 35,625
Computer Services and Software - 0.34%
General Motors Corporation, Class E,
Depository Shares, Convertible ........ 1,100 80,575
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1995
Shares Value
PREFERRED STOCKS (Continued)
Drugs and Hospital Supply - 1.18%
United States Surgical Corporation,
Series A, Convertible ................. 11,000 $ 277,750
TOTAL PREFERRED STOCKS - 1.67% $ 393,950
(Cost: $374,906)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Domestic oil - 1.22%
Enron Corp.,
6.25%, 12-13-98 (Exchangeable) ........ $ 261 288,000
Metals and Mining - 1.11%
Cooper Industries, Inc.,
6.0%, 1-1-99 (Exchangeable) ........... 257 261,250
TOTAL CORPORATE DEBT SECURITIES - 2.33%
(Cost: $517,500) $ 549,250
UNITED STATES GOVERNMENT SECURITIES - 18.99%
United States Treasury:
6.875%, 8-31-99 ....................... 250 262,735
7.75%, 11-30-99 ....................... 1,500 1,625,385
7.125%, 2-29-2000 ..................... 500 532,265
6.375%, 8-15-2002 ..................... 100 104,859
7.5%, 2-15-2005 ....................... 1,500 1,700,160
6.25%, 8-15-2023 ...................... 250 257,227
Total ................................. $ 4,482,631
(Cost: $4,130,639)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 2.21%
U.S. Bancorp,
Master Note ........................... 521 521,000
Financial - 2.96%
Merrill Lynch & Co., Inc.,
5.75%, 1-19-96 ........................ 700 697,988
Food and Related - 7.81%
General Mills, Inc.,
Master Note ........................... 759 759,000
Sara Lee Corporation,
Master Note............................ 1,086 1,086,000
Total ................................. 1,845,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BALANCED PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Paper - 2.11%
Kimberly-Clark Corp.,
5.75%, 1-26-96 ........................ $500 $ 498,003
TOTAL SHORT-TERM SECURITIES - 15.09% $ 3,561,991
(Cost: $3,561,991)
TOTAL INVESTMENT SECURITIES - 99.06% $23,381,142
(Cost: $21,115,629)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.94% 221,730
NET ASSETS - 100.00% $23,602,872
See Notes to Schedules of Investments on page 71.
<PAGE>
ASSET STRATEGY PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Asset Strategy Portfolio for the
fiscal year ended December 31, 1995. The discussion, graphs and tables
contained in this report will provide you with information regarding the
Portfolio's performance during that period. The public offering of shares of
the Portfolio began on May 1, 1995. Consequently, the performance data
contained in this report will reflect activity for less than a full year.
Since the inception of the Portfolio, the U.S. stock market has achieved an all-
time high and the U.S. fixed income markets have risen strongly. Due to the
high levels of the markets, the second half of 1995 was not perceived as an
attractive period for aggressive investment by the Portfolio.
Accordingly, we chose to pursue a strategy of maintaining a high cash position
in 1995. However, since its inception, the Portfolio has gradually been
invested in value-oriented stocks and fixed income securities. We have
emphasized investments in securities which we perceive to carry limited risk and
substantial potential for appreciation over time.
The strategies and techniques we applied resulted in the direction of the
Portfolio's overall performance, and the performance of its holdings in the
various categories of securities in which the Portfolio invests, remaining below
that 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), one-month certificates of deposit (Salomon Brothers Short-Term Index for
1 Month Certificates of Deposit) and the bond market (the Lehman Brothers
Aggregate Bond Index). A variety of indexes is presented because the Portfolio
invests in stocks, bonds and other instruments. The Portfolio underperformed
the indexes primarily due to the high levels of cash maintained during the
Portfolio's start-up period.
In 1996, we anticipate slow economic growth and low inflation. As corporate
earnings growth slows and perhaps even declines, we expect both domestic and
international stock markets to exhibit increased volatility. Such periods,
although wrought with uncertainty, often provide excellent investment
opportunities in both stocks and in fixed income securities. The Portfolio is
well-positioned to take advantage of these opportunities due to its large cash
position and its ability to invest in a wide variety of asset types.
Thank you for your continued confidence.
Respectfully,
James D. Wineland
Manager, Asset Strategy Portfolio
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TMK/UNITED ASSET STRATEGY PORTFOLIO,
THE S&P 500 INDEX,
THE LEHMAN BROTHERS AGGREGATE BOND INDEX, AND
THE SALOMON BROTHERS SHORT-TERM INDEX FOR 1 MONTH CERTIFICATES OF DEPOSIT
Aggregate
Period Total Return*
5/1/95-12/31/95** 1.80%
Salomon
Brothers
United LehmanShort-Term
Asset Brothers Index
StrategyS&PAggregatefor 1 month
Fund, 500 BondCertificates
Inc. Index Indexof Deposit
--------------------------------------
05/01/95 Purchase $10,000 $10,000 $10,000 $10,000
06/30/95 10,07210,641 10,463 10,100
09/30/95 10,18411,487 10,669 10,250
12/31/95 10,18012,179 11,123 10,401
++++ S&P 500 Index*** -- $12,179
**** Lehman Brothers Aggregate Bond Index*** -- $11,123
*--*-- Salomon Brothers Short-Term Index for 1 Month Certificates of
Deposit*** -- $10,401
==== TMK/United Asset Strategy Portfolio**** -- $10,180
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.
**5-1-95 (the initial offering date) through 12-31-95.
***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 above
indexes (including income) are not available, investment in the indexes was
effected as of April 30, 1995.
****The value of the investment in the Fund is impacted by the ongoing expenses
of the Fund.
<PAGE>
THE INVESTMENTS OF THE ASSET STRATEGY PORTFOLIO
DECEMBER 31, 1995
Shares Value
COMMON STOCKS
Beverages - 1.57%
Buenos Aires Embotelladora
S.A., ADR ............................. 3,300 $ 68,063
Computer Systems - 1.03%
SanDisk Corporation* ................... 3,000 44,625
Electronics - 4.83%
Silicon Valley Group, Inc.* ............ 4,200 106,310
Texas Instruments Incorporated ......... 2,000 103,500
Total ................................. 209,810
Retailing - 3.63%
adidas AG (A)* ......................... 3,000 157,950
Telecommunications - 4.77%
Motorola, Inc. ......................... 2,000 114,000
Nokia Corporation, Series A, ADS ....... 2,400 93,300
Total ................................. 207,300
TOTAL COMMON STOCKS - 15.83% $ 687,748
(Cost: $741,729)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Banks and Savings and Loans - 3.18%
U.S. Bancorp,
Master Note ........................... $ 138 138,000
Consumer Electronics and Appliances - 3.44%
TDK (USA) Corp.,
5.71%, 1-22-96 ........................ 150 149,500
Financial - 11.48%
BHP Finance (USA) Inc.,
5.78%, 1-12-96 ........................ 150 149,735
Merrill Lynch & Co., Inc.,
5.75%, 1-19-96 ........................ 150 149,569
Nestle Capital Corp.,
5.75%, 1-12-96 ........................ 200 199,649
Total ................................. 498,953
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE ASSET STRATEGY PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Food and Related - 12.42%
General Mills, Inc.,
Master Note ........................... $ 204 $ 204,000
Quaker Oats Co.,
5.82%, 1-23-96 ........................ 150 149,467
Sara Lee Corporation,
Master Note............................ 186 186,000
Total ................................. 539,467
Insurance - 4.60%
Aon Corporation,
5.72%, 1-9-96 ......................... 200 199,746
Public Utilities - Electric - 4.60%
Potomac Electric Power Co.,
5.75%, 1-4-96 ......................... 200 199,904
Telecommunications - 4.60%
Southwestern Bell Telephone Company,
5.8%, 1-8-96 .......................... 200 199,774
Total Commercial Paper - 44.32% 1,925,344
Commercial Paper (backed by irrevocable
letter of credit) - 3.33%
Centric Funding Corp. (Wachovia Bank
of North Carolina N.A.),
5.77%, 1-16-96 ........................ 145 144,651
United States Treasury Bill - 34.90%
Federal National Mortgage Association,
5.57%, 2-8-96 ......................... 1,525 1,516,034
TOTAL SHORT-TERM SECURITIES - 82.55% $3,586,029
(Cost: $3,586,029)
TOTAL INVESTMENT SECURITIES - 98.38% $4,273,777
(Cost: $4,327,758)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.62% 70,165
NET ASSETS - 100.00% $4,343,942
<PAGE>
MONEY MARKET PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report covers the operation of the Money Market Portfolio for the fiscal
year ended December 31, 1995. The following discussion provides you with
information regarding the Portfolio's performance during that period.
In February of 1995, the Federal Reserve Bank took action to tighten bank
reserves. As a result, short-term interest rates rose during the first six
months of the year. As the economy began to show signs of slowing during the
second half of 1995 and inflation appeared to be under control, the Federal
Reserve Bank eased its monetary policies and short-term interest rates began to
fall.
As short-term interest rates began their decline in June of 1995, we increased
the average maturity of the Portfolio's holdings from thirty-five days to sixty-
five days by mid-December to take advantage of the higher interest rates
accompanying longer maturities. We also added floating-rate securities tied to
money market indices to the Portfolio's asset base, which adjust quickly to
changes in yield as short-term interest rates rise.
In 1996, we expect the economy to continue its slow rate of growth. Slow
economic growth should allow the Federal Reserve Bank to ease its monetary
policy and reduce short-term interest rates. As short-term interest rates
decrease, we will continue to look for opportunities to purchase instruments
with longer maturities to lock in the higher interest rates. We also expect to
continue searching for floating-rate securities which promise to provide above-
market yields for the Portfolio.
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, 1995
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit
Domestic - 5.42%
Barnett Bank of Florida, Jacksonville,
5.9375%, 1-26-96 ...................... $1,000 $ 999,981
Wachovia Bank and Trust,
5.82%, 1-29-96 ........................ 1,000 1,000,000
Total ................................. 1,999,981
Yankee - 8.13%
Banque Nationale de Paris,
6.1%, 10-10-96 ........................ 1,000 999,125
Creditanstalt - Bankverein,
6.0%, 10-11-96 ........................ 1,000 999,257
Societe Generale - New York,
5.75%, 2-8-96 ......................... 1,000 1,000,000
Total ................................. 2,998,382
Total Certificates of Deposit - 13.55% 4,998,363
Commercial Paper - 3.57%
U.S. Bancorp,
Master Note ........................... 1,315 1,315,000
Notes - 4.07%
Bank One Milwaukee, N.A.,
7.25%, 2-9-96 ......................... 500 500,000
PNC Bank, N.A.,
5.88%, 12-20-96 ....................... 1,000 999,623
Total ................................. 1,499,623
TOTAL BANK OBLIGATIONS - 21.19% $ 7,812,986
(Cost: $7,812,986)
CORPORATE OBLIGATIONS
Commercial Paper
Chemicals Major - 5.41%
Air Products and Chemicals, Inc.,
5.75%, 1-16-96 ........................ 1,000 997,604
du Pont (E.I.) de Nemours and Company,
5.77%, 1-19-96 ........................ 1,000 997,115
Total ................................. 1,994,719
Chemicals Specialty and Miscellaneous Technology - 3.10%
Minnesota Mining and Manufacturing Company,
5.75%, 1-18-96 ........................ 1,145 1,141,891
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Consumer Electronics and Appliances - 2.70%
TDK (USA) Corp.,
5.71%, 1-22-96 ........................ $1,000 $ 996,669
Domestic Oil - 4.88%
Amoco Corporation,
5.77%, 2-16-96 ........................ 1,000 1,000,000
Atlantic Richfield Company,
5.78%, 1-19-96 ........................ 800 797,688
Total ................................. 1,797,688
Financial - 19.67%
AT&T Capital Corp.,
5.72%, 1-26-96 ........................ 1,000 996,028
Avco Financial Services, Inc.,
5.67%, 2-9-96 ......................... 1,000 993,858
B.A.T. Capital Corp.,
5.72%, 1-18-96 ........................ 600 598,379
Merrill Lynch & Co., Inc.,
5.75%, 1-29-96 ........................ 500 497,764
Safeco Credit Company, Inc.,
5.71%, 1-25-96 ........................ 1,000 996,193
Sony Capital Corp.,
5.7%, 2-13-96 ......................... 1,000 993,192
Swedish Export Credit Corporation,
5.72%, 1-24-96 ........................ 1,000 996,346
Transamerica Financial Group:
5.72%, 1-11-96 ........................ 750 748,808
5.72%, 1-25-96 ........................ 435 433,341
Total ................................. 7,253,909
Food and Related - 8.07%
CPC International Inc.,
5.62%, 3-13-96 ........................ 875 865,165
General Mills, Inc.,
Master Note ........................... 1,000 1,000,000
Sara Lee Corporation,
Master Note ........................... 1,110 1,110,000
Total ................................. 2,975,165
Insurance - 2.71%
Aon Corporation,
5.72%, 1-9-96 ......................... 1,000 998,729
Paper - 2.90%
Kimberly-Clark Corp.,
5.75%, 1-26-96 ........................ 1,075 1,070,707
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Public Utilities - Electric - 3.52%
Baltimore Gas and Electric Company,
5.7%, 1-11-96 ......................... $1,300 $ 1,297,942
Public Utilities - Gas - 5.41%
Michigan Consolidated Gas Company,
5.8%, 1-10-96 ......................... 1,000 998,550
Questar Corp.,
5.9%, 1-19-96 ......................... 1,000 997,050
Total ................................. 1,995,600
Telecommunications - 2.71%
U.S. West Communications, Inc.,
5.77%, 1-19-96 ........................ 1,000 997,115
Total Commercial Paper - 61.08% 22,520,134
Notes - 1.35%
Financial
Merrill Lynch & Co., Inc.,
5.935%, 2-20-96 ....................... 500 500,007
TOTAL CORPORATE OBLIGATIONS - 62.43% $23,020,141
(Cost: $23,020,141)
MUNICIPAL OBLIGATIONS
California - 3.53%
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
5.9%, 2-1-96 .......................... 800 800,000
Oakland-Alameda County Coliseum Lease
Revenue Bonds (Oakland Coliseum Project),
1995 Series B-1 (Canadian Imperial Bank
of Commerce),
5.85%, 1-10-96 ........................ 500 500,000
Total ................................. 1,300,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE MONEY MARKET PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Pennsylvania - 0.54%
Montgomery County Industrial Development
Authority, Revenue Bonds (410 Horsham Associates
Project), Series of 1995 (Meridian Bank),
6.1%, 1-3-96 .......................... $ 200 $ 200,000
Texas - 1.35%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
5.85%, 1-31-96 ........................ 500 497,562
TOTAL MUNICIPAL OBLIGATIONS - 5.42% $ 1,997,562
(Cost: $1,997,562)
UNITED STATES GOVERNMENT
OBLIGATIONS
Federal Home Loan Banks,
5.9%, 7-8-96 .......................... 1,000 1,000,000
Federal Home Loan Mortgage Corporation,
5.95%, 6-7-96 ......................... 1,000 1,000,000
Student Loan Management Association,
5.35%, 1-3-96 ......................... 1,000 1,000,000
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS - 8.14% $ 3,000,000
(Cost: $3,000,000)
TOTAL INVESTMENT SECURITIES - 97.18% $35,830,689
(Cost: $35,830,689)
CASH AND OTHER ASSETS,
NET OF LIABILITIES - 2.82% 1,041,555
NET ASSETS - 100.00% $36,872,244
See Notes to Schedules of Investments on page 71.
<PAGE>
LIMITED-TERM BOND PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Limited-Term Bond Portfolio during
the fiscal year ended on December 31, 1995. The following discussion, graphs
and tables provide you with information regarding the Portfolio's performance
during that period.
During 1995, the bond markets were impacted significantly by the downward trend
in interest rates over the course of the year. At the beginning of 1995, the
economy still appeared to be experiencing above-average growth and the Federal
Reserve Bank increased further the restrictive monetary policy initiated during
the prior year. By mid-year, the economy began to show signs of slowing and the
Federal Reserve Bank responded by lowering the federal funds rate. Two-year
Treasury Notes yields declined from 7.75% to 5.50% during the summer of 1995.
Action by the Federal Reserve Bank, a slowing economy, low inflation and
prospects for a balanced federal budget contributed to the decline in interest
rates during the year.
To take advantage of the trend to lower interest rates, the average maturity and
duration of the Portfolio was increased during 1995 and cash levels decreased.
We increased the Portfolio's average maturity to above the mid-point of its 2 to
5 year maturity range, to best position for total returns from income and
principal appreciation in light of the prevailing economic conditions.
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.
1996 presents an uncertain economic picture. We expect the economy to grow at a
slow rate until it is stimulated by a less restrictive monetary policy on the
part of the Federal Reserve Bank or stronger overseas activity. We anticipate
that low inflation will continue through the first part of 1996 creating a
favorable environment for fixed income securities. Our strategy will be to
maintain the average maturity of the Portfolio at present levels and continue to
identify and invest in undervalued sectors of the market in an effort to add
value and provide extra return potential to the Portfolio.
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
Average Annual Total Return*
1 year 1+ years**
14.29% 8.53%
Lehman
Brothers
Mutual Fund
TMK/United Short
Limited-Term Investment
Bond Grade Debt
Portfolio Index
--------- ---------
05/03/94 Purchase $10,000 $10,000
12/31/94 10,026 10,142
12/31/95 11,458 11,605
- ----- Lehman Bros MF Short Inv Grade Debt Index*** -- $11,605
+++++ TMK/United Limited-Term Bond Portfolio**** -- $11,458
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 12-31-95.
***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)
are 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, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Airlines - 3.86%
Federal Express Corporation,
10.0%, 9-1-98 ......................... $100 $ 110,147
Automotive - 1.79%
General Motors Corporation,
7.625%, 2-15-97 ....................... 50 51,091
Banks and Savings and Loans - 13.63%
BankAmerica Corporation,
9.7%, 8-1-2000 ........................ 100 114,773
Boatmen's Bancshares, Inc.,
9.25%, 11-1-2001 ...................... 50 57,363
NCNB Corporation,
10.5%, 3-15-99 ........................ 50 50,458
Norwest Financial, Inc.,
7.75%, 8-15-2001 ...................... 50 54,437
Wells Fargo & Company,
8.375%, 5-15-2002 ..................... 100 111,864
Total ................................. 388,895
Chemicals Major - 3.01%
ICI Wilmington, Inc.,
9.5%, 11-15-2000 ...................... 75 85,790
Chemicals Specialty and Miscellaneous
Technology - 4.90%
Polaroid Corporation,
8.0%, 3-15-99 ......................... 85 89,790
Xerox Credit Corporation,
6.25%, 1-15-96 ........................ 50 50,003
Total ................................. 139,793
Domestic Oil - 1.88%
BP America Inc.,
9.5%, 1-1-98 .......................... 50 53,738
Drugs and Hospital Supply - 5.54%
American Home Products Corporation,
7.7%, 2-15-2000 ....................... 100 106,999
Baxter International Inc.,
9.25%, 9-15-96 ........................ 50 51,190
Total ................................. 158,189
Electrical Equipment - 4.89%
Burlington Resources Inc.,
8.5%, 10-1-2001 ....................... 125 139,672
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE LIMITED-TERM BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial - 15.64%
American General Finance Corporation,
8.25%, 1-15-98 ........................ $ 50 $ 52,470
Associates Corporation of North America,
7.875%, 9-30-2001 ..................... 100 109,113
Avco Financial Services, Inc.,
5.5%, 4-1-2000 ........................ 50 49,133
Ford Motor Credit Company,
8.0%, 1-15-99 ......................... 75 79,294
General Motors Acceptance Corporation,
7.75%, 1-15-99 ........................ 100 104,899
Household Finance Corporation,
7.75%, 6-15-97 ........................ 50 51,454
Total ................................. 446,363
Insurance - 1.92%
Transamerica Finance Corporation,
8.75%, 10-1-99 ........................ 50 54,705
International Oil - 3.89%
Chevron Corporation,
8.11%, 12-1-2004 ...................... 50 55,390
Texaco Capital Inc.,
9.0%, 12-15-99 ........................ 50 55,576
Total ................................. 110,966
Machinery - 1.78%
Ingersoll-Rand Company,
8.25%, 11-1-96 ........................ 50 50,928
Multi-Industry - 1.78%
ITT Hartford,
7.25%, 12-1-96 ........................ 50 50,664
Public Utilities - Pipelines - 1.91%
Consolidated Natural Gas Company,
8.75%, 6-1-99 ......................... 50 54,529
Retailing - 7.54%
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 100 107,460
Sears, Roebuck and Co.,
9.25%, 4-15-98 ........................ 100 107,592
Total ................................. 215,052
TOTAL CORPORATE DEBT SECURITIES - 73.96% $2,110,522
(Cost: $2,036,895)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE LIMITED-TERM BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal National Mortgage Association:
6.0%, 11-1-2000 ....................... $82 $ 82,148
5.0%, 12-25-2001 ...................... 100 99,312
11.0%, 10-1-2020 ...................... 41 47,274
Government National Mortgage Association,
7.0%, 9-15-2008 ....................... 90 91,684
United States Treasury:
6.375%, 8-15-2002...................... 50 52,429
6.25%, 2-15-2003 ...................... 100 104,328
TOTAL UNITED STATES GOVERNMENT SECURITIES - 16.72% $ 477,175
(Cost: $458,965)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.15%
U.S. Bancorp,
Master Note ........................... 90 90,000
Food and Related - 3.44%
General Mills, Inc.,
Master Note ........................... 98 98,000
TOTAL SHORT-TERM SECURITIES - 6.59% $ 188,000
(Cost: $188,000)
TOTAL INVESTMENT SECURITIES - 97.27% $2,775,697
(Cost: $2,683,860)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.73% 77,782
NET ASSETS - 100.00% $2,853,479
See Notes to Schedules of Investments on page 71.
<PAGE>
BOND PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
This report relates to the operation of the Bond Portfolio for the fiscal year
ended December 31, 1995. The following discussion, graphs and tables provide
you with information regarding Portfolio's performance during that period.
During 1995, slowing economic growth resulted in lower interest rates across the
maturity spectrum. Despite a weakening economy, the Federal Reserve Bank only
made minor reductions in interest rates. The relatively restrictive policy of
the Federal Reserve Bank during 1995 fueled expectations of declining inflation
which boosted returns on longer-term bonds. Strong corporate profit growth in
1995 resulted in strong relative performance by the corporate bond market during
the year.
In response to prevailing economic conditions at the beginning of 1995, the
average maturity of the Portfolio was lengthened. Further, the Portfolio's
exposure to callable and mortgaged-backed bonds that tend to underperform during
periods of declining interest rates was lowered.
The strategies and techniques we applied resulted in the Portfolio outperforming
the Lehman Brothers Government/Corporate Bond Index during 1995 charted on the
following page. That index reflects the performance of securities that
generally represent the bond market.
In 1996, we anticipate volatility in the fixed income markets will continue,
albeit at somewhat reduced magnitude relative to the extremes experienced in
1994 and 1995. Congressional action is expected to significantly alter the
federal government's fiscal policy and the uncertainty created by the ongoing
negotiations promises to add some volatility to the markets. The uncertainty
regarding the course of political, fiscal and monetary policies has caused us to
reduce the duration of the Portfolio's holdings relative to the beginning of
1995.
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 8+ years**
20.56% 9.66% 9.30%
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 13,705
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
12/31/95 21,246 21,877
- ----- Lehman Bros Gov't/Corp Bond Index*** -- $21,877
+++++ TMK/United Bond Portfolio**** -- $21,246
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 12-31-95.
***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/Corporate Bond Index (including income) are 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, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Aerospace - 1.28%
McDonnell Douglas Corporation:
8.625%, 4-1-97 ........................ $ 534 $ 552,957
9.25%, 4-1-2002 ....................... 500 582,200
Total ................................. 1,135,157
Airlines - 1.23%
Federal Express Corporation,
7.89%, 9-23-2008 ...................... 1,000 1,088,980
Automotive - 2.78%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 2,000 2,465,060
Banks and Savings and Loans - 15.92%
Bank of Boston Corporation,
6.625%, 12-1-2005 ..................... 500 508,695
BarclaysAmericanCorporation,
9.125%, 12-1-97 ....................... 225 238,743
BayBanks, Inc.,
5.812%, 9-30-97 ....................... 2,900 2,894,896
Bayerische Landesbank Girozentale, NY
Branch, CD, Currency Protected Deutschemark
Swap Rate Inverse Floating Rate,
5.235%, 3-28-97 (C) ................... 1,000 997,500
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 500 510,000
Citicorp,
7.75%, 6-15-2006 ...................... 1,000 1,111,780
First Union Corporation,
6.55%, 10-15-2035 ..................... 500 520,015
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 1,000 1,196,440
NBD Bank, National Association,
8.25%, 11-1-2024 ...................... 1,000 1,223,770
NationsBank Corporation,
8.57%, 11-15-2024 ..................... 1,000 1,215,340
Riggs National Corporation,
8.5%, 2-1-2006 ........................ 1,000 1,070,000
Skandia Enskilda Banken, NY Branch
Certificate of Deposit Dollarized
Australian Dollar Reset,
4.0%, 4-5-99 .......................... 1,000 931,250
SouthTrust Bank of Alabama, N.A.,
7.69%, 5-15-2025 ...................... 500 550,610
Wells Fargo & Company,
8.75%, 5-1-2002 ....................... 1,000 1,131,860
Total ................................. 14,100,899
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Beverages - 1.15%
Coca-Cola Enterprises Inc.,
0.0%, 6-20-2020 ....................... $ 5,000 $ 1,014,600
Building - 7.59%
Boise Cascade Office Products Corporation,
9.875%, 2-15-2001 ..................... 500 551,535
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ...................... 1,000 1,120,830
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 500 473,750
Noranda Forest Inc.,
7.5%, 7-15-2003 ....................... 1,000 1,054,250
Noranda Inc.,
7.0%, 7-15-2005 ....................... 500 517,740
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 1,000 1,120,240
USG Corporation,
9.25%, 9-15-2001 ...................... 1,000 1,070,000
Del Webb Corporation,
10.875%, 3-31-2000 .................... 800 816,000
Total ................................. 6,724,345
Chemicals Major - 1.02%
Dow Capital BV,
9.0%, 5-15-2010 ....................... 750 899,677
Computer Systems - 0.55%
Unisys Corporation,
9.75%, 9-15-96 ........................ 500 485,000
Domestic Oil - 3.30%
Anadarko Petroleum Corporation,
7.25%, 3-15-2025 ...................... 1,000 1,148,550
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 1,250 1,243,750
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 500 532,090
Total ................................. 2,924,390
Electrical Equipment - 2.02%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 1,500 1,791,825
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial - 9.40%
Banc One Credit Card Master Trust,
7.55%, 12-15-99 ....................... $1,000 $ 1,036,560
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 1,000 1,227,580
Countrywide Mortgage Backed Securities,
Inc.,
6.5%, 4-25-2024 ....................... 2,000 1,974,200
DLJ Mortgage Acceptance Corp.,
6.5%, 4-25-2024 ....................... 970 950,949
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 1,000 1,217,310
JCP Master Credit Card Trust,
9.625%, 6-15-2000 ..................... 500 546,715
National Credit Card Trust 1989-4,
9.45%, 12-31-97 ....................... 350 355,688
Residential Asset Securities Corporation,
Mortgage Pass-Through Certificates,
8.0%, 10-25-2024 ...................... 1,000 1,015,370
Total ................................. 8,324,372
Hospital Management - 0.59%
Tenet Healthcare Corporation,
8.625%, 12-1-2003 ..................... 500 525,000
Household Products - 2.81%
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 2,000 2,488,180
International Oil - 0.53%
YPF Sociedad Anoima,
8.0%, 2-15-2004 ....................... 500 470,000
Leisure Time - 6.46%
Jones Intercable, Inc.,
9.625%, 3-15-2002 ..................... 500 537,500
Marriott International, Inc.,
6.75%, 12-15-2003 ..................... 1,000 1,019,970
Tele-Communications, Inc.,
6.58%, 2-15-2005 ...................... 1,000 1,056,840
Time Warner Incorporated,
7.75%, 6-15-2005 ...................... 1,000 1,041,030
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 1,000 1,038,060
Viacom International Inc.:
9.125%, 8-15-99 ....................... 500 522,500
6.75%, 1-15-2003 ...................... 500 504,295
Total ................................. 5,720,195
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Machinery - 1.27%
Joy Technologies Inc.,
10.25%, 9-1-2003 ...................... $1,000 $ 1,120,000
Multi-Industry - 1.17%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 1,000 1,040,000
Public Utilities - Electric - 1.22%
Kansas Gas and Electric Company,
7.6%, 12-15-2003 ...................... 1,000 1,082,560
Public Utilities - Pipelines - 1.85%
Arkla, Inc.,
8.875%, 7-15-99 ....................... 500 536,305
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 500 584,340
NorAm Energy Corp.,
7.5%, 8-1-2000 ........................ 500 513,065
Total ................................. 1,633,710
Publishing and Advertising - 0.62%
News America Holdings Incorporated,
9.125%, 10-15-99 ...................... 500 552,690
Railroads - 1.21%
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... 1,000 1,068,560
Steel - 1.22%
USX Corporation,
8.21%, 1-21-2000 ...................... 1,000 1,082,620
Telecommunications - 3.24%
Motorola, Inc.,
8.4%, 8-15-2031 ....................... 1,000 1,271,060
Southwestern Bell Telephone Company,
7.0%, 8-26-2002 ....................... 1,000 1,058,810
US WEST, Inc.,
8.4%, 9-15-99 ......................... 500 541,595
Total ................................. 2,871,465
TOTAL CORPORATE DEBT SECURITIES - 68.43% $60,609,285
(Cost: $57,395,820)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITIES
Australia - 0.82%
New South Wales Treasury,
7.0%, 2-1-2000 (D) .................... $A 1,000 $ 723,075
Canada - 3.91%
Hydro Quebec:
8.05%, 7-7-2024 ....................... $ 1,000 1,141,760
7.4%, 3-28-2025 ....................... 1,000 1,158,630
Province of Nova Scotia,
8.25%, 11-15-2019...................... 1,000 1,163,570
Total ................................. 3,463,960
Supranationals - 1.39%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 1,000 1,229,480
TOTAL OTHER GOVERNMENT SECURITIES - 6.12% $ 5,416,515
(Cost: $4,975,832)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.83%, 7-3-2002 ....................... 500 512,580
7.5%, 11-15-2017 ...................... 1,538 1,592,783
7.5%, 4-15-2019 ....................... 1,283 1,292,650
7.95%, 12-15-2020 ..................... 3,000 3,127,500
7.0%, 1-15-2021 ....................... 500 506,560
8.0%, 11-1-2024 ....................... 931 965,010
8.0%, 4-1-2025 ........................ 879 911,118
Federal National Mortgage Association,
7.09%, 4-1-2004 ....................... 500 505,780
United States Treasury:
7.875%, 11-15-99 ...................... 2,000 2,174,380
7.875%, 8-15-2001 ..................... 2,000 2,233,740
7.5%, 2-15-2005 ....................... 1,000 1,133,440
5.875%, 11-15-2005 .................... 2,000 2,045,000
0.0%, 5-15-2020 ....................... 8,000 1,768,800
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 21.19% $18,769,341
(Cost: $18,161,720)
TOTAL SHORT-TERM SECURITIES - 2.84% $ 2,516,805
(Cost: $2,516,805)
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE BOND PORTFOLIO
DECEMBER 31, 1995
Value
TOTAL INVESTMENT SECURITIES - 98.58% $87,311,946
(Cost: $83,050,177)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.42% 1,257,561
NET ASSETS - 100.00% $88,569,507
See Notes to Schedules of Investments on page 71.
<PAGE>
HIGH INCOME PORTFOLIO
MANAGER'S LETTER
DECEMBER 31, 1995
- ---------------------------------------------------------------------------
Dear Policyholder:
Dear Policyholder:
This report relates to the operation of the High Income Portfolio for the fiscal
year ended December 31, 1995. The following discussion, graphs and tables
provide you with information regarding the Portfolio's performance during that
period.
Early in 1995, the economy was growing at an above-average rate. In this
environment, high yield investments were perceived favorably by investors.
However, by mid-year economic growth was beginning to show signs of slowing. A
number of bankruptcies in the consumer and retail sectors of the economy during
the second half of 1995 dampened investor confidence not only in these areas but
in cyclical issues of all types.
In early 1995, we sold a substantial portion of the Portfolio's holdings in the
consumer and retail sectors. As we perceived prices beginning to peak, we also
decreased the Portfolio's exposure to cyclical issues such as companies in the
paper and chemical industries. During 1995, we increased the Portfolio's
investments in the cable and media sectors, as well as in healthcare, gaming and
telecommunications issues that tend to perform well in times of economic
downturn. In response to the prevailing economic conditions, the Portfolio
currently has approximately 10% of its assets in cash to provide investment
flexibility during the coming year.
The strategies and techniques we applied resulted in the performance of the
Portfolio slightly exceeding 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 superior
performance of the Portfolio as compared to the index was due in large part to
the investment strategies described in the previous paragraph which tended to
precede similar actions taken by other market participants.
In 1996 we expect the slow economic growth to continue. We also expect the
Federal Reserve Bank to continue to lower interest rates in an effort to spur
the economy. To take advantage of lower interest rates, we anticipate moving
out of shorter maturity callable paper to investments with longer maturities.
We will continue to monitor the cyclical industries for investment opportunities
and maintain a slightly defensive posture until the economy improves.
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 8+ years**
18.19% 16.08% 9.41%
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
12/31/95 21,427 24,980
- ----- First Boston High Yield Index*** -- $24,980
+++++ TMK/United High Income Portfolio**** -- $21,427
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 12-31-95.
***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) are 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, 1995
Shares Value
COMMON STOCKS
Building - 0.35%
Walter Industries, Inc.* ............... 23,272 $ 303,979
Gaming - 0.16%
Trump Hotels & Casino Resorts, Inc.* ... 6,250 134,375
Leisure Time - 1.46%
Infinity Broadcasting Corporation* ..... 33,750 1,257,187
Sinclair Broadcast Group, Inc.* ........ 500 8,500
Total ................................. 1,265,687
Hospital Management - 0.87%
LTC Properties, Inc. ................... 50,000 750,000
Services, Consumer and Business - 0.40%
Bell & Howell Holdings Company* ........ 12,500 350,000
TOTAL COMMON STOCKS - 3.24% $ 2,804,041
(Cost: $1,580,674)
PREFERRED STOCKS
Banks and Savings and Loans - 0.62%
California Federal Bank, F.S.B. ........ 5,000 541,875
Leisure Time - 0.63%
Cablevision Systems Corporation,
Convertible* .......................... 20,000 545,000
TOTAL PREFERRED STOCKS - 1.25% $ 1,086,875
(Cost: $1,000,000)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Automotive - 2.27%
Lear Seating Corporation,
8.25%, 2-1-2002 ....................... $1,500 1,470,000
Walbro Corporation,
9.875%, 7-15-2005 ..................... 500 498,750
Total ................................. 1,968,750
Beverages - 0.47%
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (E) ................... 500 410,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Biotechnology and Medical Services - 3.70%
Abbey Healthcare Group, Incorporated,
9.5%, 11-1-2002 ....................... $ 500 $ 532,500
IVAC Corporation,
9.25%, 12-1-2002 ...................... 500 517,500
Quorum Health Group, Inc.:
11.875%, 12-15-2002 ................... 1,000 1,120,000
8.75%, 11-1-2005 ...................... 1,000 1,035,000
Total ................................. 3,205,000
Building - 7.64%
American Standard Inc.:
9.875%, 6-1-2001 ...................... 1,000 1,077,500
9.25%, 12-1-2016 ...................... 500 520,000
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ........................ 750 727,500
Eagle Industries, Inc.,
0.0%, 7-15-2003 (E) ................... 1,500 1,256,250
NVR L.P.,
11.0%, 4-15-2003 ...................... 1,000 1,006,250
Nortek, Inc.,
9.875%, 3-1-2004 ...................... 500 467,500
Triangle Pacific Corp.,
10.5%, 8-1-2003 ....................... 1,000 1,060,000
U.S. Home Corporation,
9.75%, 6-15-2003 ...................... 500 511,875
Total ................................. 6,626,875
Chemicals Specialty and Miscellaneous Technology - 0.35%
UCAR Global Enterprises Inc.,
12.0%, 1-15-2005 ...................... 265 306,075
Computers Services and Software - 0.56%
Mail-Well Corporation,
10.5%, 2-15-2004 ...................... 500 482,500
Domestic Oil - 1.54%
Clark R & M Holdings, Inc.,
0.0%, 2-15-2000 ....................... 2,000 1,337,500
Drugs and Hospital Supply - 1.70%
AmeriSource Distribution Corporation,
11.25%, 7-15-2005 ..................... 368 399,275
General Medical Corporation,
12.125%, 8-15-2005 .................... 1,124 1,078,093
Total ................................. 1,477,368
Electronics - 1.13%
Essex Group, Inc.,
10.0%, 5-1-2003 ....................... 1,000 980,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial - 0.58%
Scotsman Group, Inc.,
9.5%, 12-15-2000 ...................... $ 500 $ 505,000
Food and Related - 2.51%
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ..................... 300 265,500
Specialty Foods Corporation:
10.25%, 8-15-2001 ..................... 1,000 940,000
11.125%, 10-1-2002 .................... 1,000 970,000
Total ................................. 2,175,500
Gaming - 7.74%
California Hotel Finance Corporation,
11.0%, 12-1-2002 ...................... 1,000 1,060,000
GNF, CORP.,
10.625%, 4-1-2003 ..................... 1,000 932,500
GNS Finance Corp.,
9.25%, 3-15-2003 ...................... 1,500 1,616,250
Rio Hotel & Casino, Inc.,
10.625%, 7-15-2005 .................... 1,000 1,025,000
Showboat, Inc.,
9.25%, 5-1-2008 ....................... 1,000 1,005,000
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 ...................... 1,000 1,070,000
Total ................................. 6,708,750
Hospital Management - 2.42%
LTC Properties, Inc., Convertible,
8.5%, 1-1-2000 ........................ 1,000 1,000,000
Tenet Healthcare Corporation,
9.625%, 9-1-2002 ...................... 1,000 1,100,000
Total ................................. 2,100,000
Household Products - 2.79%
Exide Corporation:
10.75%, 12-15-2002 .................... 750 813,750
0.0%, 12-15-2004 (E) .................. 500 420,000
10.0%, 4-15-2005 ...................... 1,000 1,085,000
MacAndrews & Forbes Group, Incorporated,
13.0%, 3-1-99 ......................... 100 100,750
Total ................................. 2,419,500
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Leisure Time - 18.93%
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 ...................... $1,000 $ 995,000
Cablevision Systems Corporation,
9.875%, 2-15-2013 ..................... 1,450 1,540,625
Comcast Corporation,
0.0%, 3-5-2000 ........................ 1,000 770,000
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................... 500 533,750
8.875%, 9-15-2005 ..................... 500 523,750
8.3%, 5-15-2006 (B) ................... 500 501,875
11.0%, 6-1-2007 ....................... 500 558,750
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (E) .................. 500 293,750
EZ Communications, Inc.,
9.75%, 12-1-2005 ...................... 1,000 1,007,500
FLAGSTAR COMPANIES, INC.,
10.75%, 9-15-2001 ..................... 500 455,000
Granite Broadcasting Corporation,
10.375%, 5-15-2005 .................... 500 512,500
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 (B) .................. 500 505,000
Hines Horticulture, Inc.,
11.75%, 10-15-2005 (B) ................ 500 522,500
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 1,000 1,075,000
Marcus Cable Operating Company, L.P.,
0.0%, 8-1-2004 (E) .................... 1,500 1,128,750
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................... 1,000 905,000
Sinclair Broadcast Group Inc.:
10.0%, 12-15-2003 ..................... 375 382,500
10.0%, 9-30-2005 ...................... 500 510,000
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 1,000 1,038,060
Viacom International, Inc.,
8.0%, 7-7-2006 ........................ 2,000 2,035,000
United International Holdings, Inc.,
0.0%, 11-15-99 ........................ 1,000 620,000
Total ................................. 16,414,310
Manufacturers - 0.57%
RBX Corporation,
11.25%, 10-15-2005 (B) ................ 500 495,000
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Metals and Mining - 0.56%
Russel Metals Inc.,
10.25%, 6-15-2000 ..................... $ 500 $ 485,000
Multi-Industry - 2.83%
Jordan Industries, Inc.,
10.375%, 8-1-2003 ..................... 1,000 890,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 1,500 1,560,000
Total ................................. 2,450,000
Packaging and Containers - 4.39%
Container Corporation of America,
11.25%, 5-1-2004 ...................... 1,500 1,545,000
Owens-Illinois, Inc.,
10.25%, 4-1-99 ........................ 1,000 1,030,000
Silgan Corporation,
0.0%, 12-15-2002 (E)................... 500 472,500
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ....................... 750 755,625
Total ................................. 3,803,125
Paper - 1.70%
APP International Finance Company B.V.,
11.75%, 10-1-2005 ..................... 1,000 980,000
Fort Howard Corporation,
11.0%, 1-2-2002 ....................... 468 491,724
Total ................................. 1,471,724
Publishing and Advertising - 3.08%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................... 1,000 1,010,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 ...................... 666 709,290
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ..................... 1,000 950,000
Total ................................. 2,669,290
Railroad Equipment - 0.60%
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ..................... 500 521,250
Railroads - 1.13%
Southern Pacific Rail Corporation,
9.375%, 8-15-2005 ..................... 900 976,500
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Retailing - 7.37%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 ...................... $ 500 $ 402,500
Bruno's, Inc.,
10.5%, 8-1-2005 ....................... 1,500 1,485,000
Kroger Co. (The),
9.75%, 2-15-2004 ...................... 1,000 1,080,000
Penn Traffic Company (The),
10.375%, 10-1-2004 .................... 1,500 1,417,500
Ralphs Grocery Company,
10.45%, 6-15-2004 ..................... 1,000 1,015,000
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................... 1,000 987,500
Total ................................. 6,387,500
Services, Consumer and Business - 1.55%
Bell & Howell Company,
10.75%, 10-1-2002 ..................... 750 795,000
United Stationers Supply Co.,
12.75%, 5-1-2005 ...................... 500 546,250
Total ................................. 1,341,250
Steel - 0.97%
AK Steel Corporation,
10.75%, 4-1-2004 ...................... 250 277,500
Inland Steel Industries, Inc.,
12.75%, 12-15-2002 .................... 500 562,500
Total ................................. 840,000
Telecommunications - 5.52%
A+ Network, Inc.,
11.875%, 11-1-2005 .................... 500 505,000
Heartland Wireless Communications,
Inc., Units,
13.0%, 4-15-2003 (B)(F) ............... 500 563,750
MFS Communications Company, Inc.,
0.0%, 1-15-2004 (E) ................... 1,000 807,500
Metrocall, Inc.,
10.375%, 10-1-2007 .................... 500 530,000
PanAmSat, L.P.:
9.75%, 8-1-2000 ....................... 1,000 1,060,000
0.0%, 8-1-2003 (E) .................... 1,000 820,000
USA Mobile Communications, Inc., II,
9.5%, 2-1-2004 ........................ 500 495,000
Total ................................. 4,781,250
See Notes to Schedules of Investments on page 71.
<PAGE>
THE INVESTMENTS OF THE HIGH INCOME PORTFOLIO
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 1.04%
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 ...................... $1,000 $ 900,000
TOTAL CORPORATE DEBT SECURITIES - 85.64% $74,239,017
(Cost: $72,177,584)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.01%
U.S. Bancorp,
Master Note ........................... 875 875,000
Financial - 1.31%
BHP Finance (U.S.A.) Inc.,
5.78%, 1-12-96 ........................ 1,135 1,132,996
Food and Related - 3.74%
General Mills, Inc.,
Master Note ........................... 2,624 2,624,000
Sara Lee Corporation,
Master Note ........................... 624 624,000
Total ................................. 3,248,000
TOTAL SHORT-TERM SECURITIES - 6.06% $ 5,255,996
(Cost: $5,255,996)
TOTAL INVESTMENT SECURITIES - 96.19% $83,385,929
(Cost: $80,014,254)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 3.81% 3,300,264
NET ASSETS - 100.00% $86,686,193
See Notes to Schedules of Investments on page 71.
<PAGE>
TMK/UNITED FUNDS, INC.
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) As of December 31, 1995, the following restricted security was owned in the
International Portfolio:
Acquisition Acquisition Market
Security Date Shares Cost Value
---------------- --------------------------------------------
Samsung Electronics Co.,
Ltd., GDR 05/17/95 15,000 $777,750$ 900,000
05/25/95 4,000 206,500 240,000
------------------
$984,250$1,140,000
==================
The total market value of restricted securities represents approximately
2.27% of the total net assets in the International Portfolio at December
31, 1995.
As of December 31, 1995, the following restricted securities were owned in the
High Income Portfolio:
Principal
Acquisition Amount Acquisition Market
Security Date (in 000's) Cost Value
---------------- --------------------------------------------
Continental Cablevision, Inc.:
8.3%, 5-15-2006 12/8/95 500$ 498,395$ 501,875
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 12/15/95 500 500,000 505,000
Heartland Wireless Communications,
Inc., Units,
13.0%, 4-15-2003 4/20/95 500 500,000 563,750
Hines Horticulture, Inc.,
11.75%, 10-15-2005 10/16/95 500 500,000 522,500
RBX Corporation,
11.25%, 10-15-2005 10/6/95 500 502,500 495,000
--------------------
$2,500,895$2,588,125
====================
The total market value of restricted securities represents approximately
2.99% of the total net assets in the High Income Portfolio at December 31,
1995.
(C) Coupon resets semiannually based on 14.13% - 1.5 (5 year Deutschemark swap
rate). Coupon guaranteed at 3%.
(D) Principal amounts are denominated in the indicated foreign currency where
applicable ($A - Australian dollar).
<PAGE>
TMK/UNITED FUNDS, INC.
Notes to Schedules of Investments
(E) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(F) Each unit consists of one thousand face value 13.0% corporate bonds due 4-
15-2003 and six warrants expiring 4-15-2003.
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, 1995
Growth IncomeInternational
Portfolio Portfolio Portfolio
Assets ----------- ---------- -----------
Investment securities--at
value (Notes 1 and 3) $423,841,168$330,032,290 $49,908,626
Cash .............. 3,825 5,663 3,210
Receivables:
Fund shares sold .. 866,174 841,200 186,096
Dividends and interest 716,658 424,875 125,293
Investment securities
sold ............ 1,461,714 --- ---
Prepaid insurance
premium ........... 2,035 1,111 309
------------------------ -----------
Total assets .... 426,891,574 331,305,139 50,223,534
Liabilities ------------------------ -----------
Payable for investment
securities purchased 7,938,034 --- ---
Payable for Fund shares
redeemed .......... 93,137 82,575 9,307
Accrued accounting
services fee ...... 5,000 4,167 1,667
Other .............. 29,719 24,365 16,215
------------------------ -----------
Total liabilities 8,065,890 111,107 27,189
------------------------ -----------
Total net assets $418,825,684$331,194,032 $50,196,345
Net Assets ======================== ===========
$0.01 par value capital stock
Capital stock ..... $ 613,573$ 381,755 $ 95,087
Additional paid-in
capital ......... 384,904,377 250,462,056 49,201,903
Accumulated undistributed gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized gain (loss)
(loss) on investment
transactions .... --- (1,764) (105,777)
Net unrealized appreciation
(depreciation) of investments
at end of period 33,307,734 80,351,985 1,005,132
------------------------ -----------
Net assets applicable to
outstanding units
of capital ..... $418,825,684$331,194,032 $50,196,345
======================== ===========
Net asset value, redemption
and offering price per share $6.8260 $8.6756 $5.2790
======= ======= =======
Capital shares outstanding 61,357,269 38,175,493 9,508,741
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, 1995
Small Cap BalancedAsset Strategy
Portfolio Portfolio Portfolio
Assets ---------- ---------- -----------
Investment securities--at
value (Notes 1 and 3) $55,359,811 $23,381,142 $4,273,777
Cash .............. 7,561 5,157 3,628
Receivables:
Fund shares sold .. 499,326 94,938 64,253
Dividends and interest 22,356 124,553 3,164
Investment securities
sold ............ 153,001 --- ---
Prepaid insurance
premium ........... 291 182 31
----------- ----------- ----------
Total assets .... 56,042,346 23,605,972 4,344,853
Liabilities ----------- ----------- ----------
Payable for investment
securities purchased 439,830 --- ---
Payable for Fund shares
redeemed .......... 3,359 251 ---
Accrued accounting
services fee ...... 2,500 833 ---
Other .............. 5,210 2,016 911
----------- ----------- ----------
Total liabilities 450,899 3,100 911
----------- ----------- ----------
Total net assets $55,591,447 $23,602,872 $4,343,942
Net Assets =========== =========== ==========
$0.01 par value capital stock
Capital stock ..... $ 72,260 $ 40,005 $ 8,664
Additional paid-in
capital ......... 46,567,597 21,297,354 4,389,259
Accumulated undistributed gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized gain
(loss) on investment
transactions ..... --- --- ---
Net unrealized appreciation
(depreciation) of investments
at end of period 8,951,590 2,265,513 (53,981)
----------- ----------- ----------
Net assets applicable to
outstanding units
of capital ..... $55,591,447 $23,602,872 $4,343,942
=========== =========== ==========
Net asset value, redemption
and offering price per share $7.6932 $5.9000 $5.0137
======= ======= =======
Capital shares outstanding 7,226,046 4,000,473 866,421
Capital shares authorized 100,000,000 50,000,000 100,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
Money MarketLimited-Term Bond
PortfolioBond Portfolio Portfolio
Assets ------------------------- -----------
Investment securities--at
value (Notes 1 and 3) $35,830,689 $2,775,697 $87,311,946
Cash .............. 20,525 4,043 3,039
Receivables:
Fund shares sold .. 2,722,876 21,581 97,792
Dividends and interest 135,212 52,400 1,278,908
Investment securities
sold ............ --- --- ---
Prepaid insurance
premium ........... 894 98 951
----------- ---------- -----------
Total assets .... 38,710,196 2,853,819 88,692,636
Liabilities ----------- ---------- -----------
Payable for investment
securities purchased --- --- ---
Payable for Fund shares
redeemed .......... 1,833,630 --- 115,253
Accrued accounting
services fee ...... 1,667 --- 2,500
Other .............. 2,655 340 5,376
----------- ---------- -----------
Total liabilities 1,837,952 340 123,129
----------- ---------- -----------
Total net assets $36,872,244 $2,853,479 $88,569,507
Net Assets =========== ========== ===========
$0.01 par value capital stock
Capital stock ..... $ 368,722 $ 5,433 $ 165,265
Additional paid-in
capital ......... 36,503,522 2,756,209 86,745,629
Accumulated undistributed gain (loss):
Accumulated undistributed
net investment income --- --- ---
Accumulated undistributed
net realized gain
(loss) on investment
transactions .... --- --- (2,603,035)
Net unrealized appreciation
(depreciation) of investments
at end of period --- 91,837 4,261,648
----------- ---------- -----------
Net assets applicable to
outstanding units
of capital ..... $36,872,244 $2,853,479 $88,569,507
=========== ========== ===========
Net asset value, redemption
and offering price per share $1.0000 $5.2521 $5.3592
======= ======= =======
Capital shares outstanding 36,872,244 543,300 16,526,517
Capital shares authorized 200,000,000 50,000,000 100,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
High Income
Portfolio
Assets -------------
Investment securities--at
value (Notes 1 and 3) $83,385,929
Cash .............. 22,283
Receivables:
Fund shares sold .. 58,940
Dividends and interest 1,847,331
Investment securities
sold ............ 1,551,250
Prepaid insurance
premium ........... 1,131
-----------
Total assets .... 86,866,864
Liabilities -----------
Payable for investment
securities purchased ---
Payable for Fund shares
redeemed .......... 99,291
Accrued accounting
services fee ...... 2,500
Other .............. 78,880
-----------
Total liabilities 180,671
-----------
Total net assets $86,686,193
Net Assets ===========
$0.01 par value capital stock
Capital stock ..... $195,030
Additional paid-in
capital ......... 86,308,522
Accumulated undistributed gain (loss):
Accumulated undistributed
net investment income ---
Accumulated undistributed
net realized gain
(loss) on investment
transactions ..... (3,189,034)
Net unrealized appreciation
(depreciation) of investments
at end of period 3,371,675
-----------
Net assets applicable to
outstanding units
of capital ..... $86,686,193
===========
Net asset value, redemption
and offering price per share $4.4448
=======
Capital shares outstanding 19,503,038
Capital shares authorized 100,000,000
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1995
Growth IncomeInternational
Portfolio Portfolio Portfolio
---------- ---------- ----------
Investment Income
Income:
Interest .......... $ 1,769,687 $ 988,611 $ 638,648
Dividends ......... 5,426,450 4,228,980 557,709
------------ ----------- ----------
Total income .... 7,196,137 5,217,591 1,196,357
----------- ----------- ----------
Expenses (Note 2):
Investment management
fee ............. 2,425,494 1,979,061 321,777
Accounting services
fee ............. 55,000 50,000 20,000
Custodian fees .... 31,799 16,336 48,394
Registration fees . 17,376 23,065 9,177
Audit fees ........ 15,809 12,886 2,641
Legal fees ........ 5,823 4,760 680
Other ............. 23,940 19,256 2,006
----------- ----------- ----------
Total expenses .. 2,575,241 2,105,364 404,675
----------- ----------- ----------
Net investment income 4,620,896 3,112,227 791,682
----------- ----------- ----------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on securities ..... 64,282,621 5,870,466 (84,768)
Realized net gain (loss)
on foreign currency
transactions ...... 612 447 (70,494)
----------- ----------- ----------
Realized net gain (loss)
on investments .. 64,283,233 5,870,913 (155,262)
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ 42,925,336 63,977,939 1,669,228
----------- ----------- ----------
Net gain (loss) on
investments .... 107,208,569 69,848,852 1,513,966
----------- ----------- ----------
Net increase in net
assets resulting
from operations $111,829,465 $72,961,079 $2,305,648
============ =========== ==========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1995
Small Cap BalancedAsset Strategy
Portfolio Portfolio Portfolio
---------- ---------- ----------
Investment Income
Income:
Interest .......... $ 960,351 $ 362,196 $72,008
Dividends ......... 3,340 264,024 740
---------- ---------- -------
Total income .... 963,691 626,220 72,748
---------- ---------- -------
Expenses (Note 2):
Investment management
fee ............. 302,739 96,718 10,993
Accounting services
fee ............. 19,167 9,167 ---
Custodian fees .... 6,190 2,263 1,259
Registration fees . 5,048 3,047 ---
Audit fees ........ 2,155 1,691 ---
Legal fees ........ 591 310 16
Other ............. 2,331 1,712 203
---------- ---------- -------
Total expenses .. 338,221 114,908 12,471
---------- ---------- -------
Net investment income 625,470 511,312 60,277
---------- ---------- -------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on securities ..... 1,011,622 375,170 5,026
Realized net gain (loss)
on foreign currency
transactions ...... --- --- (366)
---------- ---------- -------
Realized net gain (loss)
on investments .. 1,011,622 375,170 4,660
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ 7,643,311 2,500,947 (53,981)
---------- ---------- -------
Net gain (loss) on
investments..... 8,654,933 2,876,117 (49,321)
---------- ---------- -------
Net increase in net
assets resulting
from operations $9,280,403 $3,387,429 $10,956
========== ========== =======
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1995
Money MarketLimited-Term Bond
PortfolioBond Portfolio Portfolio
--------------- ---------- ----------
Investment Income
Income:
Interest .......... $1,755,470 $161,200 $ 6,004,853
Dividends ......... --- --- ---
---------- -------- ----------
Total income .... 1,755,470 161,200 6,004,853
---------- -------- ----------
Expenses (Note 2):
Investment management
fee ............. 147,383 12,948 440,716
Accounting services
fee ............. 20,000 --- 30,000
Custodian fees .... 5,660 620 8,353
Registration fees . 1,370 567 13
Audit fees ........ 2,567 1,288 5,081
Legal fees ........ 493 40 1,418
Other ............. 3,922 994 7,580
---------- -------- ----------
Total expenses .. 181,395 16,457 493,161
---------- -------- ----------
Net investment income 1,574,075 144,743 5,511,692
---------- -------- ----------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on securities ..... --- 10,804 876,661
Realized net gain (loss)
on foreign currency
transactions ...... --- --- 5,508
---------- -------- ----------
Realized net gain (loss)
on investments .. --- 10,804 882,169
Unrealized appreciation
(depreciation) in value
of investments during,
the period ........ --- 139,524 8,857,982
---------- -------- ----------
Net gain (loss) on
investments .... --- 150,328 9,740,151
---------- -------- ----------
Net increase in net
assets resulting
from operations $1,574,075 $295,071 $15,251,843
========== ======== ==========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended DECEMBER 31, 1995
High Income
Portfolio
---------------
Investment Income
Income:
Interest .......... $ 7,888,184
Dividends ......... 120,000
-----------
Total income .... 8,008,184
-----------
Expenses (Note 2):
Investment management
fee ............. 527,940
Accounting services
fee ............. 30,000
Custodian fees .... 5,167
Registration fees . 1,165
Audit fees ........ 4,982
Legal fees ........ 1,393
Other ............. 7,564
-----------
Total expenses .. 578,211
-----------
Net investment income 7,429,973
-----------
Realized and Unrealized Gain (Loss)
on Investments
Realized net gain (loss)
on securities ..... (1,443,930)
Realized net gain (loss)
on foreign currency
transactions ...... ---
-----------
Realized net gain (loss)
on investments .. (1,443,930)
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ 7,364,701
-----------
Net gain (loss) on
investments .... 5,920,771
-----------
Net increase in net
assets resulting
from operations $13,350,744
===========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1995
Growth IncomeInternational
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase in Net Assets
Operations:
Net investment
income .......... $ 4,620,896$ 3,112,227 $ 791,682
Realized net gain (loss)
on investments .. 64,283,233 5,870,913 (155,262)
Unrealized appreciation
(depreciation) .. 42,925,336 63,977,939 1,669,228
------------------------------------
Net increase in net
assets resulting
from operations. 111,829,465 72,961,079 2,305,648
------------------------ -----------
Dividends to shareholders:*
From net investment
income .......... (4,621,508) (3,112,674) (721,188)
From realized gains
on securities
transactions .... (64,282,621) (5,407,615) ---
In excess of realized
gains ---- (1,764) ---
------------------------ -----------
(68,904,129) (8,522,053) (721,188)
------------------------ -----------
Capital share
transactions** .... 99,163,713 47,981,404 22,592,251
------------------------ -----------
Total increase . 142,089,049 112,420,430 24,176,711
Net Assets
Beginning of period 276,736,635 218,773,602 26,019,634
------------------------ -----------
End of period ...... $418,825,684$331,194,032 $50,196,345
======================== ===========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 80-89.
**Shares issued from sale
of shares .......... 8,244,920 7,529,946 5,011,325
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 10,094,216 982,290 136,620
Shares redeemed ...... (3,897,735) (2,657,368) (850,796)
---------- --------- ---------
Increase in outstanding
capital shares ...... 14,441,401 5,854,868 4,297,149
========== ========= =========
Value issued from sale
of shares .......... $57,245,750 $60,548,279 $26,298,441
Value issued from reinvest-
ment of dividends and/or,
distributions ...... 68,904,129 8,522,053 721,188
Value redeemed ....... (26,986,166)(21,088,928) (4,427,378)
----------- ----------- -----------
Increase in
outstanding capital $99,163,713 $47,981,404 $22,592,251
=========== =========== ===========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1995
Small Cap BalancedAsset Strategy
Portfolio Portfolio Portfolio
----------- ----------- -----------
Increase in Net Assets
Operations:
Net investment income $ 625,470 $ 511,312 $ 60,277
Realized net gain (loss)
on investments .. 1,011,622 375,170 4,660
Unrealized appreciation
(depreciation) .. 7,643,311 2,500,947 (53,981)
----------- ----------- ----------
Net increase in net
assets resulting
from operations. 9,280,403 3,387,429 10,956
----------- ----------- ----------
Dividends to shareholders:*
From net investment
income .......... (625,470) (511,312) (59,911)
From realized gains
on securities
transactions .... (1,011,622) (371,952) (5,026)
In excess of realized
gains ---- --- ---
------------------------ ----------
(1,637,092) (883,264) (64,937)
------------------------ ----------
Capital share
transactions** .... 31,867,974 12,427,639 4,397,923
----------- ----------- ----------
Total increase . 39,511,285 14,931,804 4,343,942
Net Assets
Beginning of period 16,080,162 8,671,068 ---
----------- ----------- ----------
End of period ...... $55,591,447 $23,602,872 $4,343,942
=========== =========== ==========
Undistributed net
investment income $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 80-89.
**Shares issued from sale
of shares .......... 4,818,197 2,264,439 876,052
Shares issued from reinvest-
ment of dividends and/or,
distributions ...... 212,809 149,718 12,955
Shares redeemed ...... (488,640) (170,404) (22,586)
----------- ----------- ----------
Increase in outstanding
capital shares..... 4,542,366 2,243,753 866,421
=========== =========== ==========
Value issued from sale
of shares .......... $33,624,752 $12,476,652 $4,448,147
Value issued from reinvest-
ment of dividends and/or
distributions ...... 1,637,092 883,263 64,938
Value redeemed ....... (3,393,870) (932,276) (115,162)
----------- ----------- ----------
Increase in
outstanding capital $31,867,974 $12,427,639 $4,397,923
=========== =========== ==========
See notes to financial statements.
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1995
Money MarketLimited-Term Bond
PortfolioBond Portfolio Portfolio
-------------- ----------- -----------
Increase in Net Assets
Operations:
Net investment income $ 1,574,075 $ 144,743 $ 5,511,692
Realized net gain (loss)
on investments .. --- 10,804 882,169
Unrealized appreciation
(depreciation) .. --- 139,524 8,857,982
----------- ---------- -----------
Net increase in net
assets resulting
from operations. 1,574,075 295,071 15,251,843
----------- ---------- -----------
Dividends to shareholders:*
From net investment
income .......... (1,574,075) (144,743) (5,517,200)
From realized gains
on securities
transactions .... --- (10,804) ---
In excess of realized
gains ---- --- ---
------------------------ ----------
(1,574,075) (155,547) (5,517,200)
Capital share
transactions**..... 6,059,981 1,068,809 4,818,014
----------- ---------- -----------
Total increase .. 6,059,981 1,208,333 14,552,657
Net Assets
Beginning of period 30,812,263 1,645,146 74,016,850
----------- ---------- -----------
End of period ...... $36,872,244 $2,853,479 $88,569,507
=========== ========== ===========
Undistributed net
investment income $--- $--- $---
==== ======= ====
*See "Financial Highlights" on pages 80-89.
**Shares issued from sale
of shares .......... 169,760,641 294,605 1,918,955
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 1,573,890 29,626 1,029,828
Shares redeemed ...... (165,274,550) (119,359) (2,040,023)
----------- ------- ---------
Increase in outstanding
capital shares ..... 6,059,981 204,872 908,760
=========== ======= =========
Value issued from sale
of shares .......... $169,760,641 $1,551,139 $9,976,902
Value issued from reinvest-
ment of dividends and/or
distributions ...... 1,573,890 155,548 5,517,200
Value redeemed ....... (165,274,550) (637,878)(10,676,088)
------------ ---------- ----------
Increase in
outstanding capital $ 6,059,981 $1,068,809 $4,818,014
============ ========== ==========
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended DECEMBER 31, 1995
High Income
Portfolio
-----------
Increase in Net Assets
Operations:
Net investment income $ 7,429,973
Realized net gain (loss)
on investments .. (1,443,930)
Unrealized appreciation
(depreciation) .. 7,364,701
-----------
Net increase in net
assets resulting
from operations. 13,350,744
-----------
Dividends to shareholders:*
From net investment
income .......... (7,429,973)
From realized gains
on securities
transactions .... ---
In excess of realized
gains ----
------------
(7,429,973)
------------
Capital share
transactions**..... 8,121,747
-----------
Total increase .. 14,042,518
Net Assets
Beginning of period 72,643,675
-----------
End of period ...... $86,686,193
===========
Undistributed net
investment income $---
====
*See "Financial Highlights" on pages 80-89.
**Shares issued from sale
of shares .......... 2,353,273
Shares issued from reinvest-
ment of dividends and/or
distributions ...... 1,672,287
Shares redeemed ...... (2,189,523)
---------
Increase in outstanding
capital shares ..... 1,836,037
=========
Value issued from sale
of shares .......... $10,517,788
Value issued from reinvest-
ment of dividends and/or
distributions ...... 7,429,973
Value redeemed ....... (9,826,014)
----------
Increase in
outstanding capital $8,121,747
==========
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 80-89 .
**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 80-89 .
**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 80-89 .
**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>
FINANCIAL HIGHLIGHTS OF
THE GROWTH PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
-----------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $5.8986 $6.1962 $6.1505 $5.5973 $4.9479
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.0903 0.1211 0.0537 0.1013 0.1229
Net realized and
unrealized gain
on investments .. 2.1842 0.0268 0.8087 1.0653 1.6636
------- ------- ------- ------- -------
Total from investment
operations ....... 2.2745 0.1479 0.8624 1.1666 1.7865
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.0903)(0.1211) (0.0537)(0.1013) (0.1229)
Distribution from
capital gains ... (1.2568)(0.3244) (0.7569)(0.5121) (1.0142)
Distribution in
excess of capital
gains ........... (0.0000)(0.0000) (0.0061)(0.0000) (0.0000)
------- ------- ------- ------- -------
Total distributions. (1.3471)(0.4455) (0.8167)(0.6134) (1.1371)
------- ------- ------- ------- -------
Net asset value,
end of period .... $6.8260 $5.8986 $6.1962 $6.1505 $5.5973
======= ======= ======= ======= =======
Total return ....... 38.57% 2.39% 14.02% 20.84% 36.10%
Net assets, end of
period (000
omitted) ......... $418,826$276,737 $220,590$122,363 $69,044
Ratio of expenses
to average net
assets ............ 0.75% 0.77% 0.78% 0.80% 0.86%
Ratio of net investment
income to average
net assets ....... 1.35% 2.07% 1.01% 2.00% 2.43%
Portfolio turnover
rate ............. 245.80% 277.36% 297.81% 225.87% 316.72%
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,
-----------------------------------------
1995 1994 1993 1992 1991*
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $6.7689 $6.9180 $5.9530 $5.3158 $5.0000
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.0839 0.0703 0.0651 0.0803 0.0633
Net realized and
unrealized gain (loss)
on investments .. 2.0525 (0.1491) 0.9650 0.6496 0.3158
------- ------- ------- ------- -------
Total from investment
operations ....... 2.1364 (0.0788) 1.0301 0.7299 0.3791
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.0839)(0.0703) (0.0651)(0.0803) (0.0633)
Distribution from
capital gains.... (0.1457)(0.0000) (0.0000)(0.0124) (0.0000)
Distribution in excess
of capital gains (0.0001)(0.0000) (0.0000)(0.0000) (0.0000)
------- ------- ------- ------- -------
Total distributions. (0.2297)(0.0703) (0.0651)(0.0927) (0.0633)
------- ------- ------- ------- -------
Net asset value,
end of period .... $8.6756 $6.7689 $6.9180 $5.9530 $5.3158
======= ======= ======= ======= =======
Total return........ 31.56% -1.14% 17.30% 13.78% 17.43%
Net assets, end of
period (000
omitted) ......... $331,194$218,774 $155,092 $65,027 $15,640
Ratio of expenses
to average net
assets ............ 0.77% 0.77% 0.79% 0.85% 0.89%
Ratio of net investment
income to average
net assets ....... 1.13% 1.16% 1.36% 1.78% 2.47%
Portfolio turnover
rate ............. 15.00% 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 Each Period:
For the For the
fiscal year period
ended ended
12/31/95 12/31/94*
---------- ----------
Net asset value,
beginning of
period ........... $4.9926 $5.0000
------- -------
Income from investment
operations:
Net investment
income .......... 0.0846 0.0207
Net realized and
unrealized gain (loss)
on investments... 0.2790 (0.0074)
------- -------
Total from investment
operations ....... 0.3636 0.0133
Less dividends from net
investment
income .......... (0.0772) (0.0207)
------- -------
Net asset value,
end of period .... $5.2790 $4.9926
======= =======
Total return........ 7.28% 0.26%
Net assets, end of
period (000
omitted) ......... $50,196 $26,020
Ratio of expenses
to average net
assets ............ 1.02% 1.26%
Ratio of net investment
income to average
net assets ....... 1.99% 1.36%
Portfolio turnover
rate ............. 34.93% 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 Each Period:
For the For the
fiscal year period
ended ended
12/31/95 12/31/94*
---------- ----------
Net asset value,
beginning of
period ........... $5.9918 $5.0000
------- -------
Income from investment
operations:
Net investment
income .......... 0.0900 0.0376
Net realized and
unrealized gain
on investments .. 1.8470 1.0086
------- -------
Total from investment
operations ....... 1.9370 1.0462
------- -------
Less distributions:
Dividends from net
investment income (0.0900) (0.0376)
Distribution from
capital gains.... (0.1456) (0.0168)
------- -------
Total distributions (0.2356) (0.0544)
------- -------
Net asset value,
end of period .... $7.6932 $5.9918
======= =======
Total return........ 32.32% 20.92%
Net assets, end of
period (000
omitted) ......... $55,591 $16,080
Ratio of expenses
to average net
assets ............ 0.96% 1.08%
Ratio of net investment
income to average
net assets ....... 1.77% 2.35%
Portfolio turnover
rate ............. 43.27% 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 Each Period:
For the For the
fiscal year period
ended ended
12/31/95 12/31/94*
---------- ----------
Net asset value,
beginning of
period ........... $4.9359 $5.0000
------- -------
Income from investment
operations:
Net investment
income .......... 0.1333 0.0460
Net realized and
unrealized gain (loss)
on investments .. 1.0611 (0.0641)
------- -------
Total from investment
operations ....... 1.1944 (0.0181)
------- -------
Less distributions:
Dividends from net
investment
income .......... (0.1333) (0.0460)
Distribution from
capital gains.... (0.0970) (0.0000)
------- -------
Total distributions (0.2303) (0.0460)
------- -------
Net asset value,
end of period .... $5.9000 $4.9359
======= =======
Total return........ 24.19% -0.37%
Net assets, end of
period (000
omitted) ......... $23,603 $8,671
Ratio of expenses
to average net
assets ............ 0.72% 0.95%
Ratio of net investment
income to average
net assets ....... 3.22% 3.14%
Portfolio turnover
rate ............. 62.87% 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 ASSET STRATEGY PORTFOLIO
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period
ended
12/31/95*
----------
Net asset value,
beginning of
period ........... $5.0000
-------
Income from investment
operations:
Net investment
income .......... 0.0717
Net realized and
unrealized gain
on investments .. 0.0193
-------
Total from investment
operations ....... 0.0910
-------
Less distributions:
Dividends from net
investment
income .......... (0.0713)
Distribution from
capital gains.... (0.0060)
-------
Total distributions (0.0773)
-------
Net asset value,
end of period .... $5.0137
=======
Total return........ 1.80%
Net assets, end of
period (000
omitted) ......... $4,344
Ratio of expenses
to average net
assets ............ 0.91%
Ratio of net investment
income to average
net assets ....... 4.42%
Portfolio turnover
rate ............. 149.17%
*The Asset Strategy Portfolio's inception date is February 14, 1995; 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 1, 1995 (initial offering)
through December 31, 1995. Ratios 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,
-----------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
Net investment
income .......... 0.0542 0.0368 0.0260 0.0324 0.0536
Less dividends
declared ......... (0.0542)(0.0368) (0.0260)(0.0324) (0.0536)
------- ------- ------- ------- -------
Net asset value,
end of period .... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total return ....... 5.56% 3.72% 2.63% 3.29% 5.49%
Net assets, end of
period (000
omitted) ......... $36,872 $30,812 $26,000 $23,995 $19,797
Ratio of expenses
to average net
assets ............ 0.62% 0.65% 0.65% 0.65% 0.76%
Ratio of net investment
income to average
net assets ....... 5.42% 3.72% 2.61% 3.17% 5.33%
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
THE LIMITED-TERM BOND PORTFOLIO
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
fiscal year period
ended ended
12/31/95 12/31/94*
---------- ----------
Net asset value,
beginning of
period ........... $4.8611 $5.0000
------- -------
Income from investment
operations:
Net investment
income .......... 0.2841 0.1507
Net realized and
unrealized gain (loss)
on investments .. 0.4122 (0.1375)
------- -------
Total from investment
operations ....... 0.6963 0.0132
------- -------
Less distributions:
Dividends from net
investment
income .......... (0.2841) (0.1507)
Distribution from
capital gains ... (0.0212) (0.0014)
------- -------
Total distributions (0.3053) (0.1521)
------- -------
Net asset value,
end of period .... $5.2521 $4.8611
======= =======
Total return........ 14.29% 0.26%
Net assets, end of
period (000
omitted) ......... $2,853 $1,645
Ratio of expenses
to average net
assets ............ 0.71% 0.93%
Ratio of net investment
income to average
net assets ....... 6.22% 5.89%
Portfolio turnover
rate ............. 18.16% 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,
-----------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $4.7393 $5.4045 $5.2626 $5.2661 $4.9534
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.3556 0.3507 0.3334 0.3643 0.3867
Net realized and
unrealized gain
(loss) on
investments ..... 0.6202 (0.6652) 0.3046 0.0216 0.3771
------- ------- ------- ------- -------
Total from investment
operations ....... 0.9758 (0.3145) 0.6380 0.3859 0.7638
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income .......... (0.3559)(0.3507) (0.3334)(0.3643) (0.3867)
Distribution from
capital gains ... (0.0000)(0.0000) (0.1627)(0.0251) (0.0644)
------- ------- ------- ------- -------
Total distributions. (0.3559)(0.3507) (0.4961)(0.3894) (0.4511)
------- ------- ------- ------- -------
Net asset value,
end of period .... $5.3592 $4.7393 $5.4045 $5.2626 $5.2661
======= ======= ======= ======= =======
Total return ....... 20.56% -5.90% 12.37% 7.67% 16.19%
Net assets, end of
period (000
omitted) ......... $88,570 $74,017 $81,727 $49,428 $29,112
Ratio of expenses
to average net
assets ............ 0.60% 0.62% 0.62% 0.64% 0.72%
Ratio of net investment
income to average
net assets ....... 6.73% 6.73% 6.01% 6.91% 7.65%
Portfolio turnover
rate ............. 71.17% 135.82% 68.75% 44.32% 52.50%
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,
-----------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $4.1118 $4.6373 $4.2886 $4.0770 $3.4067
------- ------- ------- ------- -------
Income from investment
operations:
Net investment
income .......... 0.4165 0.4106 0.3899 0.4050 0.4368
Net realized and
unrealized gain
(loss) on
investments ..... 0.3330 (0.5255) 0.3487 0.2116 0.6703
------- ------- ------- ------- -------
Total from investment
operations ....... 0.7495 (0.1149) 0.7386 0.6166 1.1071
------- ------- ------- ------- -------
Less dividends from
net investment
income ........... (0.4165)(0.4106) (0.3899)(0.4050) (0.4368)
------- ------- ------- ------- -------
Net asset value,
end of period .... $4.4448 $4.1118 $4.6373 $4.2886 $4.0770
======= ======= ======= ======= =======
Total return ....... 18.19% -2.55% 17.90% 15.70% 34.19%
Net assets, end of
period (000
omitted) ......... $86,686 $72,644 $71,265 $41,456 $24,394
Ratio of expenses
to average net
assets ............ 0.72% 0.74% 0.75% 0.77% 0.87%
Ratio of net investment
income to average
net assets ....... 9.25% 9.03% 8.66% 9.48% 11.32%
Portfolio turnover
rate ............. 41.78% 37.86% 54.22% 60.79% 34.00%
See notes to financial statements.
<PAGE>
TMK/UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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 ten classes that are designated the
Growth Portfolio, the Income Portfolio, the International Portfolio, the Small
Cap Portfolio, the Balanced Portfolio, the Asset Strategy 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. For International Portfolio,
dividend income is net of foreign withholding taxes of $58,345. 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. At December 31, 1995 the following amounts were
reclassified between accumulated undistributed net investment income and
accumulated undistributed net realized gain on investment transactions:
Increase/(Decrease) Increase/(Decrease)
Accumulated Undistributed Accumulated Undistributed
Fund Net Investment Income Net Realized Capital Gains
---- ------------------------- --------------------------
Growth Portfolio $ 612 (612)
Income Portfolio 447 (447)
International
Portfolio (70,494) 70,494
Asset Strategy
Portfolio (366) 366
Bond Portfolio 5,508 (5,508)
Net investment income, net realized gains and net assets were not affected
by these changes.
F. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
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; Asset Strategy Portfolio - .30% 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 $1.1 billion of combined net assets at
December 31, 1995) 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 $32,281.
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 period ended December 31, 1995
are summarized as follows:
Growth Income International
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $858,227,387 $ 67,266,958 $ 30,438,851
Purchases of U.S. Government
securities --- --- ---
Purchases of short-term
securities 544,778,904 181,097,949 102,145,443
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 768,587,760 39,254,207 10,062,978
Proceeds from maturities
and sales of U.S.
Government securities --- --- ---
Proceeds from maturities
and sales of short-term
securities 596,124,525 168,364,484 100,399,849
Small Cap BalancedAsset Strategy
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $ 29,765,631 $16,851,592 $1,027,187
Purchases of U.S. Government
securities --- 3,574,140 ---
Purchases of short-term
securities 166,754,150 23,964,894 12,719,588
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 8,589,305 8,647,752 290,484
Proceeds from maturities
and sales of U.S.
Government securities --- --- ---
Proceeds from maturities
and sales of short-term
securities 157,985,380 23,878,329 9,179,000
Limited- High
Term Bond Bond Income
Portfolio Portfolio Portfolio
----------- --------- ---------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $1,041,998 $32,469,563 $ 35,416,260
Purchases of U.S. Government
securities 230,219 26,733,254 ---
Purchases of short-term
securities 2,291,827 54,807,829 59,283,828
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 210,644 34,237,921 29,954,086
Proceeds from maturities
and sales of U.S.
Government securities 163,617 21,395,617 ---
Proceeds from maturities
and sales of short-term
securities 2,263,040 53,268,459 59,170,000
For Federal income tax purposes, cost of investments owned at December 31,
1995 and the related unrealized appreciation (depreciation) were as follows:
Aggregate
Appreciation
CostAppreciationDepreciation
(Depreciation)
---------------------------------------------
- --
Growth Portfolio $390,533,434$44,741,347$11,433,613$33,307,734
Income Portfolio 249,682,126 82,973,918 2,623,75480,350,164
International Portfolio 48,903,120 3,742,582 2,737,0761,005,506
Small Cap Portfolio 46,408,221 11,135,467 2,183,8778,951,590
Balanced Portfolio 21,115,629 2,544,157 278,6442,265,513
Asset Strategy Portfolio 4,327,758 32,522 86,503 (53,981)
Money Market Portfolio 35,830,689 --- --- ---
Limited-Term Bond Portfolio 2,683,860 92,966 1,129 91,837
Bond Portfolio 83,050,177 4,488,637 226,8684,261,769
High Income Portfolio 80,014,254 4,352,155 980,4803,371,675
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, Asset Strategy, Small Cap, Limited-Term Bond
and Growth Portfolios realized capital gain net income of $5,026, $1,041,204,
$10,804 and $64,691,827, respectively, during the year ended December 31, 1995.
For Federal income tax purposes, Bond Portfolio realized capital gains of
$876,661 during the year ended December 31, 1995. The capital gains were
entirely offset by utilization of capital loss carryforwards. Remaining capital
loss carryforwards of Bond Portfolio totaled $2,603,035 at December 31, 1995,
and are available to offset future realized capital gain net income through
December 31, 2002. For Federal income tax purposes, Income, International and
Balanced Portfolios realized capital gain net income of $5,409,380, $169,132 and
$371,952, respectively, which includes utilization of capital loss carryovers of
$459,928, $21,009 and $3,218, respectively. For Federal income tax purposes,
High Income Portfolio realized capital losses of $1,443,930 during the year
ended December 31, 1995. These amounts are available to offset future realized
capital gain net income through December 31, 2003. Remaining prior year capital
loss carryforwards of High Income Portfolio aggregated $1,745,105, which are
available to offset future realized capital gain net income through December 31,
1999; $1,428,392 is available through December 31, 2002. The capital gain net
income of Asset Strategy, Limited-Term Bond, Income and Balanced Portfolios was
paid to shareholders during the year ended December 31, 1995. A portion of the
capital gain net income of Growth, Small Cap and International Portfolios was
paid to shareholders during the period ended December 31, 1995. Remaining
capital gain net income will be distributed to shareholders.
Internal Revenue Code regulations permit each Portfolio to defer into its
next calendar year net capital losses or net long-term capital losses incurred
between each November 1 and the end of its calendar year ("post-October
losses"). From November 1, 1995 through December 31, 1995, Growth,
International and Small Cap Portfolios incurred post-October losses of $409,206,
$274,909 and $29,582, respectively, which have been deferred to the calendar
year ending December 31, 1996.
Note 5 -- Organization
The inception date of the Asset Strategy Portfolio is February 14, 1995;
however, this Portfolio did not have any investment activity or incur expenses
prior to the date of initial offering, May 1, 1995. The accompanying financial
statements reflect activity for these periods.
<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 ten portfolios
comprising TMK/United Funds, Inc. (hereafter referred to as the "Fund") at
December 31, 1995, the results of its operations, the changes in its net assets
and the financial highlights for each of 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, 1995 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
February 8, 1996
<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
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
James B. Judd, Kansas City, Missouri
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, 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
Zachary H. Shafran, Vice President
W. Patrick Sterner, Vice President
Carl E. Sturgeon, Vice President
Russell E. Thompson, Vice President
James D. Wineland, 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.
ASSET STRATEGY Portfolio
Objective: High total return with reduced risk over the long term.
Invested In: An allocation of its assets among stocks, bonds, and short-term
instruments.
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(12-95)
printed on recycled paper
