-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AbR+W0/tGH0tKjrGtUrVsFIl2Df+CXPsRqbgU7JywvXHpHNWfB0lqyP6M4KF12eO c0K8vMw2mc4KH+D2U4PhTg== 0001047469-05-022534.txt : 20050906 0001047469-05-022534.hdr.sgml : 20050905 20050906164204 ACCESSION NUMBER: 0001047469-05-022534 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050906 DATE AS OF CHANGE: 20050906 EFFECTIVENESS DATE: 20050906 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTUS SERIES FUND INC CENTRAL INDEX KEY: 0000766351 IRS NUMBER: 000000000 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04279 FILM NUMBER: 051070761 BUSINESS ADDRESS: STREET 1: 400 N ROBERT ST CITY: ST PAUL STATE: MN ZIP: 55101 BUSINESS PHONE: 6516656918 MAIL ADDRESS: STREET 1: 400 ROBERT STREET NORTH CITY: ST PAUL STATE: MN ZIP: 55101-2098 FORMER COMPANY: FORMER CONFORMED NAME: MIMLIC SERIES FUND INC DATE OF NAME CHANGE: 19920703 N-CSRS 1 a2162487zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4279 Advantus Series Fund, Inc. (Exact name of registrant as specified in charter) 400 Robert Street North St. Paul, Minnesota 55101-2098 (Address of principal executive offices) (Zip code) Eric J. Bentley, Esq. 400 Robert Street North St. Paul, Minnesota 55101-2098 (Name and address of agent for service) Registrant's telephone number, including area code: (651) 665-3500 Date of fiscal year end: December 31 Date of reporting period: June 30, 2005 ITEM 1. REPORT TO STOCKHOLDERS. Filed herewith. [GRAPHIC] ADVANTUS(TM) SERIES FUND, INC. JUNE 30, 2005 EQUITIES INDEX 400 MID-CAP PORTFOLIO INDEX 500 PORTFOLIO REAL ESTATE SECURITIES PORTFOLIO FIXED INCOME INTERNATIONAL BOND PORTFOLIO BOND PORTFOLIO MORTGAGE SECURITIES PORTFOLIO MATURING GOVERNMENT BOND 2006 PORTFOLIO MATURING GOVERNMENT BOND 2010 PORTFOLIO MONEY MARKET MONEY MARKET PORTFOLIO MINNESOTA LIFE VARIABLE LIFE INSURANCE* VARIABLE ADJUSTABLE LIFE VARIABLE ADJUSTABLE LIFE-SECOND DEATH VARIABLE ADJUSTABLE LIFE-HORIZON VARIABLE ADJUSTABLE LIFE-SUMMIT VARIABLE ADJUSTABLE LIFE-SURVIVOR VARIABLE ANNUITIES* MULTIOPTION(R) ADVISOR B, C, L MULTIOPTION(R) ACHIEVER MULTIOPTION(R) CLASSIC MULTIOPTION(R) SELECT MULTIOPTION(R) SINGLE MULTIOPTION(R) FLEXIBLE MEGANNUITY UNIVERSITY OF MINNESOTA MULTIOPTION(R) ANNUITY ADJUSTABLE INCOME ANNUITY(TM) FLEXANNUITY PLUS INVESTANNUITY PLUS INDIVIDUAL ACCUMULATION ANNUITY GROUP ACCUMULATION ANNUITY GROUP VARIABLE LIFE* VARIABLE GROUP UNIVERSAL LIFE SEMI-ANNUAL REPORT ADVANTUS SERIES FUND, INC. OFFERED IN MINNESOTA LIFE VARIABLE PRODUCTS *SECURITIES OFFERED THROUGH SECURIAN FINANCIAL SERVICES, INC. MEMBER NASD/SIPC (This page has been left blank intentionally.) TABLE OF CONTENTS
PAGE NO. HOW TO USE THIS REPORT 1 PORTFOLIO TOTAL RETURN 2 PRESIDENT'S LETTER 3 PORTFOLIO MANAGER REVIEWS Bond Portfolio 4 Money Market Portfolio 8 Mortgage Securities Portfolio 10 Index 500 Portfolio 12 Maturing Government Bond 2006 Portfolio 14 Maturing Government Bond 2010 Portfolio 14 International Bond Portfolio 18 Index 400 Mid-Cap Portfolio 22 Real Estate Securities Portfolio 24 INVESTMENTS IN SECURITIES Bond Portfolio 27 Money Market Portfolio 36 Mortgage Securities Portfolio 39 Index 500 Portfolio 46 Maturing Government Bond 2006 Portfolio 58 Maturing Government Bond 2010 Portfolio 59 International Bond Portfolio 60 Index 400 Mid-Cap Portfolio 64 Real Estate Securities Portfolio 75 FINANCIAL STATEMENTS Statements of Assets and Liabilities 78 Statements of Operations 80 Statements of Changes in Net Assets 82 Notes to Financial Statements 86 FUND EXPENSE EXAMPLES 101 PROXY VOTING AND QUARTERLY HOLDINGS INFORMATION 103 STATEMENT REGARDING BASIS FOR APPROVAL OF ADVISORY CONTRACTS 104 DIRECTORS AND EXECUTIVE OFFICERS 109
ADVANTUS SERIES FUND, INC. PROSPECTUS SUPPLEMENT DATED MAY 25, 2005 TO THE PROSPECTUS DATED APRIL 29, 2005 The portfolio manager information for the Real Estate Securities Portfolio which appears under the heading "Portfolio Managers" in the Prospectus is amended to read as follows:
PORTFOLIO MANAGER PRIMARY PORTFOLIO BUSINESS EXPERIENCE DURING PORTFOLIO AND TITLE MANAGER SINCE PAST FIVE YEARS Real Estate Joseph R. Betlej May 1, 1998 Vice President and Portfolio Securities Portfolio Manager Manager, Advantus Capital
Investors should retain this supplement for future reference. F63031 5-2005 HOW TO USE THIS REPORT Some of our clients prefer a narrative account of their Advantus Series Fund investments while other clients prefer full financial statements. This report is designed to meet both preferences. For a narrative account of each Portfolio's performance, investment strategies and holdings by the Portfolio Manager, refer to the front section of the report. Comprehensive investment holdings, market values and financial reports begin on page 27. Performance charts graphically compare each Portfolio's performance with select investment indices and other benchmarks. This comparison provides you with more information about your investments. The charts are useful because they illustrate performance over the same time frame and over a long period. There are limitations, however. An index may reflect the performance of securities that the Portfolio may not hold. Also, the index does not incur investment advisory fees and other fund expenses--whereas your Portfolio does. Individuals cannot invest in the index itself, nor can they invest in any fund which seeks to track the performance of the index without incurring some charges and expenses. This report is just one of several tools you can use to learn more about your investment(s) in the Advantus Series Fund. Your Securian Sales Representative, who understands your personal financial situation, can best explain the features of your investment and how they apply to your financial needs. 1 PORTFOLIO TOTAL RETURN [CHART] PERIOD FROM JANUARY 1, 2005 TO JUNE 30, 2005
PERCENTAGE OF RETURN Bond 2.5% Money Market 0.9% Mortgage Securities 2.5% Index 500 -1.0% MGB 2006 -0.3% MGB 2010 2.1% International Bond -5.8% Index 400 Mid-Cap 3.7% Real Estate Securities 5.4%
Historical results are not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Fund do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Fund's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. Please refer to the individual Portfolio reviews contained within the prospectus for information regarding the standardized performance for 1, 5 and 10 years. 2 Letter from the President [PHOTO OF DIANNE ORBISON] Dear Shareholder: Second quarter 2005 was characterized by modest growth and mild inflation, a continuation of the steady but sideways economic environment that we have been experiencing for the past several quarters. In the first half of 2005, business spending made a greater contribution to the growth of the economy than in 2004. Job growth continues to fluctuate from month to month, although it remains on a positive path. A relatively low unemployment rate of 5.1 percent and moderate job growth allowed the stability of the current economy to continue. The overall rate of inflation has been slowly creeping up, driven by increases in oil and gas prices among other factors. Steady productivity gains of between 1.50 and 2.0 percent continue to mitigate the impact of wage increases. The Federal Reserve raised rates in the last week of the second quarter to 3.25 percent. With this increase, the Fed continues to view the level of short rates as accommodative, suggesting that additional rate hikes totaling 25 to 50 basis points are in store. The S&P 500 increased by around 1 percent in the second quarter with the NASDAQ up approximately 3.0 percent. Stock returns have been held back by a slightly more pessimistic business mood, concerns that rising interest rates could slow growth and the high price of oil. With less concern about a recession, fixed income spread widening has moderated, with a positive impact on performance. The issuance of corporate bonds below industry norms and strong overseas demand for U.S. bonds are contributing to positive technicals. Demand for residential mortgage-backed securities (MBS) remains strong, despite a refinancing wave fueled by a reduction in mortgage rates in the second quarter. While talk about the threat of a regional bust in the residential real estate market continues, it has had and will likely continue to have a limited impact on the MBS market. Overall, the commercial real estate market is benefiting from the strength in the economy, low inflation and modest job growth. The hotel sector produced the strongest results in the past quarter yielding double-digit returns in response to better operating margins driven by room rate increases. The prospects for investors are encouraging for the second half of 2005. Driven by slowly rising interest rates, we expect overall stock market returns for 2005 to be similar to those achieved in 2004. We also expect fixed income returns to be positive over the year, with most of this gain coming from coupon income rather than price appreciation. Returns from the real estate market are expected to continue to be strong, fueled by relatively low mortgage rates and a positive labor market. For information about specific investment strategies, contact your financial advisor. Sincerely, /s/ Dianne Orbison Dianne Orbison President, Advantus Series Fund, Inc. 3 Bond Portfolio HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the portfolio provided a return of 2.54 percent*, slightly outperforming the Lehman Brothers Aggregate Bond Index**, which returned 2.51 percent. WHAT HELPED THE PORTFOLIO OUTPERFORM ITS BENCHMARK INDEX DURING THE PERIOD? Security selection was the main driver of performance for the portfolio. Additionally, the portfolio was overweight in commercial mortgage-backed securities and asset-backed securities and both of these sectors outperformed in the portfolio compared to the index. Also, the portfolio maintained a curve flattening position and, indeed, the yield curve flattened substantially over the period. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? Longer-term interest rates fell while very short-term rates rose with the increases in the Federal Funds Rate. The 10-year Treasury fell by 31 basis points (0.31 percent) and the two-year rate rose by 57 basis points (0.57 percent). The continued flattening of the yield curve spurred debate about a slowing economy, speculation about an oncoming recession and a turn in the credit cycle. The major change in the corporate sector was the downgrade of General Motors (GM) to BB+ by Standard & Poor's and Fitch, and the downgrade of Ford to BB+ by Standard and Poor's. GM will no longer be a part of the investment grade corporate bond index and Ford is teetering on the edge of elimination. For the period, spread changes (in basis points) and performance versus the benchmark (in percentages) were as follows for the investment grade sectors: mortgage-backed securities (+12 basis points/0.13 percent), corporates (+12 basis points/-1.06 percent), commercial mortgage-backed securities (-4 basis points/0.32 percent), asset-backed securities (-2 basis points/0.31 percent) and agencies (-3 basis points/0.28 percent). WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIO'S PERFORMANCE? Significant portfolio changes over the period included an increase in mortgage-backed securities (MBS)/collateralized mortgage obligations (CMO) securities within the portfolio and increased trading in corporate bonds. Spreads narrowed on corporate bonds about midway through the first half of the year prompting us to take profits on corporate securities that had narrowed in spread. Subsequently, spreads weakened across the market, spurred by the GM downgrades, giving us the opportunity to add to corporate holdings as the bonds of good companies became cheaper. As a result of these changes, the portfolio's corporate holdings increased by 1 percent. We also took advantage of the widening in MBS option-adjusted spreads, which increased from a low of 24 basis points to 36 basis points. We increased the portfolio's MBS/CMO position by 4.5 percent on this cheapening, reducing the portfolio's position in Treasuries. We have given up on our expectation that long-term interest rates will rise in the near term. Although long-term interest rates look low for the current environment of growth and inflation expectations, too many new variables appear to render these measures temporarily useless. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF CHRIS SEBALD] [PHOTO OF TOM HOUGHTON] [PHOTO OF DAVID LAND] CHRIS SEBALD, CFA, TOM HOUGHTON AND DAVID LAND, CFA PORTFOLIO MANAGERS The Bond Portfolio seeks as high a level of long-term total return as is consistent with prudent investment risk. Preservation of capital is a secondary objective. The Bond Portfolio invests primarily in long-term, fixed income, high quality debt instruments. 4 WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE PERIOD, AND WHAT LOOKS ATTRACTIVE TO YOU GOING FORWARD? We remain cautious on the spread sectors and believe we are at or close to a maximum allocation to credit positions given the current spread levels and potential for risk. We expect spread in corporate bonds, commercial mortgage-backed securities and asset-backed securities to narrow slightly from this level, but the movement is unlikely to be smooth. The credit cycle is maturing and corporate bonds are likely to come under pressure due to management's actions to please shareholders. We will likely require further cheapening (spread widening) to increase holdings in credit related positions in the portfolio. And while the MBS market clearly offers more value at the current wider spread levels, the technical situation for MBS should continue to wane, as rising short rates will crimp their attractiveness to traditional carry investors. THE OPINIONS EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGERS AND ARE CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS, AND NO FORECASTS CAN BE GUARANTEED. PLEASE NOTE THE SECURITIES ISSUED BY CERTAIN U.S. GOVERNMENT-SPONSORED ENTITIES, INCLUDING THE FEDERAL HOME LOAN MORTGAGE CORPORATION ("FREDDIE MAC"), THE FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE') AND THE FEDERAL HOME LOAN BANKS ("FHLBs") ARE NOT FUNDED BY CONGRESSIONAL APPROPRIATIONS AND THE DEBT AND MORTGAGE-BACKED SECURITIES ISSUED BY THEM ARE NEITHER GUARANTEED NOR INSURED BY THE UNITED STATES GOVERNMENT. 5 TEN LARGEST BOND HOLDINGS***
MARKET % OF BOND SECURITY DESCRIPTION VALUE PORTFOLIO - -------------------- ------------- --------- Federal National Mortgage Association--5.500%, 04/01/34 $ 8,184,648 2.6% Federal National Mortgage Association--5.500%, 07/01/34 8,036,563 2.5% Federal Home Loan Mortgage Corporation--5.500%, 05/01/34 6,960,529 2.2% U.S. Treasury Bond--2.50%, 10/31/06 6,062,553 1.9% U.S. Treasury Bond--5.375%, 02/15/31 6,053,400 1.9% Federal Home Loan Mortgage Corporation--5.500%, 07/01/35 5,012,994 1.6% U.S. Treasury Note--4.250%, 11/15/14 4,677,290 1.5% Federal National Mortgage Association--5.500%, 04/01/33 4,316,171 1.4% Federal National Mortgage Association--5.500%, 03/01/34 4,118,626 1.3% Federal National Mortgage Association--6.000%, 03/01/33 4,115,366 1.3% ------------- ---- $ 57,538,140 18.2% ============= ====
[CHART] ASSET QUALITY (SHOWN AS A PERCENT OF NET ASSETS)*** U.S. Treasury 6.5% U.S. Government Agencies 35.0% AAA Rated 9.2% AA Rated 12.6% A Rated 8.3% BBB Rated 24.1% BB Rated 2.2% Preferred Stock 1.0% Cash and Other Assets/Liabilities 1.1%
[CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN BOND PORTFOLIO, LEHMAN BROTHERS AGGREGATE BOND INDEX AND CONSUMER PRICE INDEX
LEHMAN AGGREGATE BOND PORTFOLIO BOND INDEX CPI 6/30/95 $ 10.000 $ 10.000 $ 10.000 12/31/95 $ 10.689 $ 10.631 $ 10.066 12/31/96 $ 11.006 $ 11.017 $ 10.400 12/31/97 $ 12.043 $ 12.080 $ 10.577 12/31/98 $ 12.775 $ 13.130 $ 10.748 12/31/99 $ 12.426 $ 13.022 $ 11.036 12/31/2000 $ 13.724 $ 14.536 $ 11.410 12/31/2001 $ 14.808 $ 15.763 $ 11.587 12/31/2002 $ 16.363 $ 17.380 $ 11.862 12/31/2003 $ 17.238 $ 18.093 $ 12.085 12/31/2004 $ 18.096 $ 18.878 $ 12.479 6/30/2005 $ 18.556 $ 19.353 $ 12.754
AVERAGE ANNUAL TOTAL RETURN: One year 7.31% Five year 7.73% Ten year 6.38%
On the chart above you can see how the Bond Portfolio's total return compared to the Lehman Brothers Aggregate Bond Index and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on June 30, 1995 through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **The Lehman Brothers Aggregate Bond Index is an unmanaged benchmark composite representing average market-weighted performance of U.S. Treasury and agency securities, investment-grade corporate bonds and mortgage-backed securities with maturities greater than one year. ***Composition is as of June 30, 2005. 6 (This page has been left blank intentionally.) 7 Money Market Portfolio HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the portfolio provided a return of 0.94 percent.* The portfolio's benchmark, the Lehman 3-Month Treasury Bill Index, returned 1.28 percent. WHAT CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? The portfolio's underperformance is largely attributable to fund expenses, which are not borne by the benchmark. The portfolio stuck to its strategy of investing primarily in high-quality U.S. corporate commercial paper (rated A-1 or higher by Standard & Poor's and P-1 by Moody's). This strategy continues to offer an incremental yield advantage relative to Treasury bills and remains a sound alternative for investors seeking a high degree of safety and liquidity. The portfolio's holdings continue to be well diversified over a variety of stable industries and companies. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? Rates in the short end rose as the Fed continued to raise the Fed Funds rate. The yield on the 3-month Treasury bill increased 35 basis points (0.35 percent) to 3.12 percent, noticeably lagging the increase in the Fed Funds rate. Yields offered in the commercial paper market climbed as well, practically mirroring the rise in the Fed Funds rate in the short end of the curve (less than 30 days), but lagging somewhat in the longer end of the commercial paper curve. WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIO'S PERFORMANCE? The Fed has been signaling for well over a year that it will continue to raise the Fed Funds rate at a measured pace for the foreseeable future. We have been keeping the average days to maturity in the fund relatively short to take advantage of higher rates as our holdings mature. WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE PERIOD, AND WHAT LOOKS ATTRACTIVE TO YOU GOING FORWARD? We plan on keeping the portfolio's holdings well diversified over a variety of stable industries and companies. We continue to search for additional high quality issuers of commercial paper across all sectors, but particularly in the industrial sector. THE OPINION EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGERS AND ARE CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS, AND NO FORECASTS CAN BE GUARANTEED. PLEASE NOTE THE SECURITIES ISSUED BY CERTAIN U.S. GOVERNMENT-SPONSORED ENTITIES, INCLUDING THE FEDERAL HOME LOAN MORTGAGE CORPORATION ("FREDDIE MAC"), THE FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE') AND THE FEDERAL HOME LOAN BANKS ("FHLBs") ARE NOT FUNDED BY CONGRESSIONAL APPROPRIATIONS AND THE DEBT AND MORTGAGE-BACKED SECURITIES ISSUED BY THEM ARE NEITHER GUARANTEED NOR INSURED BY THE UNITED STATES GOVERNMENT. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF TOM HOUGHTON] TOM HOUGHTON PORTFOLIO MANAGER The Money Market Portfolio seeks maximum current income to the extent consistent with liquidity and the preservation of capital. It invests in short-term money market instruments and other debt securities that mature within 397 days. INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO. 8 [CHART] AVERAGE DAYS TO MATURITY
NUMBER OF DAYS Jan 62 Jan 56 Jan 62 Jan 62 Feb 60 Feb 58 Feb 57 Feb 54 Mar 51 Mar 49 Mar 49 Mar 48 Apr 45 Apr 44 Apr 44 Apr 43 Apr 42 May 43 May 42 May 42 May 41 Jun 40 Jun 40 Jun 39 Jun 36 Jun 36
[CHART] SEVEN-DAY COMPOUND YIELD*
PERCENTAGE Jan 1.7% Jan 1.7% Jan 1.7% Jan 1.7% Feb 1.8% Feb 1.7% Feb 1.5% Feb 1.6% Mar 1.6% Mar 1.6% Mar 1.6% Mar 1.7% Apr 1.7% Apr 1.8% Apr 2.1% Apr 2.1% Apr 2.1% May 2.1% May 2.2% May 2.2% May 2.2% Jun 2.3% Jun 2.3% Jun 2.3% Jun 2.3% Jun 2.4%
The yield quotation more closely represents the current earnings of the Money Market Portfolio than the total return quotation. The seven-day compound yield is computed by determining the net change in the value of a hypothetical account having a balance of one share at the beginning of a seven calendar day period, dividing that change by seven, adding one to the quotient, raising the sum to the 365th power and subtracting one from the result. [SIDENOTE] *Historical performance is not an indication of future performance. Investment in the Money Market Portfolio is neither insured nor guaranteed by the U.S. Government or any other agency, and there can be no assurance that the Portfolio will be able to maintain a stable net asset value of $1.00 per share. Shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. 9 Mortgage Securities Portfolio HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the portfolio provided a return of 2.52 percent*, outperforming the Lehman Brothers Mortgage Backed Securities Index**, which returned 2.15 percent. WHAT HELPED THE PORTFOLIO OUTPERFORM ITS BENCHMARK INDEX DURING THE PERIOD? Security selection and an overweight in commercial mortgage-backed securities and asset-backed securities were the main drivers of the portfolio's outperformance. Both of these sectors outperformed in the portfolio compared to the index. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? Longer-term interest rates fell while very short-term rates rose with the increases in the Federal Funds Rate. The 10-year Treasury fell by 31 basis points (0.31 percent) and the two-year rate rose by 57 basis points (0.57 percent). A major change for the mortgage market was the increased supply of 30-year fixed rate mortgages. The increase in supply pushed spreads wider. For the period, spread changes (in basis points) and performance versus the benchmark (in percentages) were as follows for the investment grade sectors: mortgage-backed securities (+12 basis points/0.13 percent), corporates (+12 basis points/-1.06 percent), commercial mortgage-backed securities (-4 basis points/0.32 percent), asset-backed securities (-2 basis points/0.31 percent) and agencies (-3 basis points/0.28 percent). WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIO'S PERFORMANCE? Allocations to asset-backed securities (ABS)/collateralized mortgage obligations (CMO) increased over the period, albeit modestly, relative to mortgage-backed securities (MBS). Over the period, the portfolio's cash and MBS exposure dropped 3.8 percent while ABS increased 2.1 percent, CMO 1.6 percent and CMBS 0.1 percent. The portfolio benefited from our allocation to CMBS/ABS, since these sectors generated positive returns versus the benchmark. We have given up on our expectations that long-term interest rates will rise in the near term. Although long-term interest rates look low for the current environment of growth and inflation expectations, too many new variables appear to render these measures temporarily useless. WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE PERIOD, AND WHAT LOOKS ATTRACTIVE TO YOU GOING FORWARD? The MBS market offers more value at the current wider spread levels. However, the technical situation for MBS should continue to wane, as rising short-term rates will crimp their attractiveness to traditional carry investors and the increased supply will weigh on the market. CMBS and ABS spreads are likely to remain stable to narrowing slightly, but the movement is unlikely to be smooth. THE OPINION EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGERS AND ARE CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS, AND NO FORECASTS CAN BE GUARANTEED. PLEASE NOTE THE SECURITIES ISSUED BY CERTAIN U.S. GOVERNMENT-SPONSORED ENTITIES, INCLUDING THE FEDERAL HOME LOAN MORTGAGE CORPORATION ("FREDDIE MAC"), THE FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE') AND THE FEDERAL HOME LOAN BANKS ("FHLBs") ARE NOT FUNDED BY CONGRESSIONAL APPROPRIATIONS AND THE DEBT AND MORTGAGE-BACKED SECURITIES ISSUED BY THEM ARE NEITHER GUARANTEED NOR INSURED BY THE UNITED STATES GOVERNMENT. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF CHRIS SEBALD] [PHOTO OF DAVID LAND] CHRIS SEBALD, CFA AND DAVID LAND, CFA PORTFOLIO MANAGERS The Mortgage Securities Portfolio seeks a high level of current income consistent with prudent investment risk. The Mortgage Securities Portfolio will invest primarily in mortgage-related securities. The risks incurred by Mortgage Securities include, but are not limited to, reinvestment of prepaid loans at low rates of return and fluctuation in net asset value relating to changes in interest rates. 10 [CHART] SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** FHLMC 1.4% Vendee Mortgage Trust 0.1% State and Local Government Obligations 0.6% FNMA 46.1% Corporate Obligations-Financial-Real Estate 1.1% GNMA 3.6% Commercial Mortgage 9.9% Asset Backed Securities 19.7% Collateralized Mortgage Obligations/Mortage Revenue Bonds 15.9% Cash and Other Assets/Liabilities 1.6%
[CHART] SOLID LIQUIDITY (SHOWN AS A PERCENT OF NET ASSETS)*** Public Issues 87.6% Liquid 144A Issues 3.7% Illiquid 144A Issues and Other Private Placement Illiquid Issues 7.1% Cash and Other Assets/Liabilities 1.6%
[CHART] HIGH QUALITY ASSETS (SHOWN AS A PERCENT OF NET ASSETS)*** U.S. Government Agencies 51.8% AAA rated 16.4% AA rated 13.5% A rated 4.7% BBB rated 11.4% BB rated 0.5% D rated 0.1% Cash and Other Assets/Liabilities 1.6%
[CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN MORTGAGE SECURITIES PORTFOLIO, LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX AND CONSUMER PRICE INDEX
MORTGAGE LEHMAN BROTHERS SECURITIES MORTGAGE-BACKED PORTFOLIO SECURITIES INDEX CPI 6/30/95 $ 10.000 $ 10.000 $ 10.000 12/31/95 $ 10.568 $ 10.548 $ 10.066 12/31/96 $ 11.124 $ 11.113 $ 10.400 12/31/97 $ 12.141 $ 12.168 $ 10.577 12/31/98 $ 12.939 $ 13.014 $ 10.748 12/31/99 $ 13.196 $ 13.256 $ 11.036 12/31/2000 $ 14.753 $ 14.736 $ 11.410 12/31/2001 $ 16.086 $ 15.947 $ 11.587 12/31/2002 $ 17.640 $ 17.342 $ 11.862 12/31/2003 $ 18.373 $ 17.874 $ 12.085 12/31/2004 $ 19.257 $ 18.714 $ 12.479 6/30/2005 $ 19.743 $ 19.117 $ 12.754
AVERAGE ANNUAL TOTAL RETURN: One year 6.45% Five year 7.52% Ten year 7.04%
On the chart above you can see how the Mortgage Securities Portfolio's total return compared to the Lehman Brothers Mortgage-Backed Securities Index and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on June 30, 1995 through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **The Lehman Brothers Mortgage-Backed Securities Index is an unmanaged benchmark composite which includes all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). ***Composition is as of June 30, 2005 11 Index 500 Portfolio HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the Index 500 Portfolio finished down 1.02 percent*. For the same period, S&P 500 Index** was down 0.81 percent. WHAT FACTORS AFFECTED PERFORMANCE DURING THE PERIOD? The Advantus Series Index 500 Portfolio is passively managed. The Portfolio is fully invested and holds all 500 names at published index weights. The Portfolio seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P 500. Sector performance was predominantly negative, with only three of the 11 sectors posting positive returns. Rising oil and energy prices propelled the energy sector to the largest positive return in the index (20.07 percent). That sector contributed 1.39 percent to the index's overall return. Technology led the sectors that detracted from the six-month performance, with a return of -5.48 percent; its "contribution" to the index was -0.89 percent. The largest 100 stocks (quintile 1) and smallest 100 (quintile 5) had the worst performance, while the mid-sized companies (quintile 3) within the S&P 500 increased 3.8 percent. WHAT MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? The first half of 2005 was characterized by modest growth and mild inflation. This is a continuation of the steady but sideways economic environment that we have been experiencing for the past several quarters. Consumer spending continues to help sustain economic momentum, though lately it has trailed off slightly. The exception to this spending slowdown is the housing market, which continues to be robust. Business spending in 2005 is increasing over 2004, as firms are looking for growth opportunities. The overall rate of inflation has been slowly creeping up, driven by increases in gas prices. Core inflation, however, has remained benign. This is a result of only moderate increases in labor costs. Steady productivity gains of between 1.5 percent and 2 percent continue to further offset the impact of these wage increases. Inflation clearly has been more muted than some in the market had anticipated. WHAT WILL AFFECT THE PORTFOLIO GOING FORWARD? Overall signs indicate that the U.S. economy is in good shape, especially in relation to other regions of the world. As the year progresses, our gross domestic product is expected to slow down from 2004 levels, and expected to approach 3.50 percent by the end of 2005. Bolstered by monies generated through refinancing and some wage increases, we expect consumer spending to continue to remain strong through the second half of 2005. We also expect job growth to continue at the current rate, sufficient to replace jobs lost but not enough to impress. Mild inflation is expected to continue with a core consumer price index of around 2.0 percent projected through year end. Driven by slowly rising interest rates, we expect overall stock market returns for 2005 to be similar to those achieved in 2004. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF JAMES SEIFERT] JAMES SEIFERT PORTFOLIO MANAGER The Index 500 Portfolio+ seeks investment results that correspond generally to the price and yield performance of the common stocks included in the Standard and Poor's Corporation 500 Composite Stock Index (S&P 500)+. It is designed to provide an economical and convenient means of maintaining a broad position in the equity market as part of an overall investment strategy. 12 TEN LARGEST STOCK HOLDINGS***
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO - -------------------- -------- -------------- ---------- General Electric Company 617,903 $ 21,410,339 3.4% Exxon Mobil Corporation 370,869 21,313,839 3.4% Microsoft Corporation 585,401 14,541,361 2.3% Citigroup, Inc. 303,080 14,011,388 2.2% Pfizer, Inc. 433,184 11,947,215 1.9% Johnson & Johnson 173,240 11,260,600 1.8% Bank of America Corporation 234,298 10,686,332 1.7% Wal-Mart Stores, Inc. 194,916 9,394,951 1.5% Intel Corporation 359,640 9,372,218 1.5% American International Group, Inc. 151,180 8,783,558 1.4% -------------- ---------- $ 132,721,801 21.1% ============== ==========
[CHART] SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** Basic Materials 3.1% Capital Goods 8.8% Communication Services 4.6% Consumer Cyclical 10.7% Consumer Staples 10.6% Energy 8.7% Financial 20.6% Health Care 13.0% Technology 14.3% Transportation 1.6% Utilities 3.4% Cash and Other Assets/Liabilities 0.6%
[CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 500 PORTFOLIO, S&P 500 INDEX AND CONSUMER PRICE INDEX
INDEX 500 PORTFOLIO S&P 500 INDEX CPI 6/30/95 $ 10.000 $ 10.000 $ 10.000 12/31/95 $ 11.407 $ 11.445 $ 10.066 12/31/96 $ 13.876 $ 14.072 $ 10.400 12/31/97 $ 18.367 $ 18.768 $ 10.577 12/31/98 $ 23.508 $ 24.131 $ 10.748 12/31/99 $ 28.274 $ 29.212 $ 11.036 12/31/2000 $ 25.620 $ 26.546 $ 11.410 12/31/2001 $ 22.480 $ 23.392 $ 11.587 12/31/2002 $ 17.452 $ 18.223 $ 11.862 12/31/2003 $ 22.347 $ 23.449 $ 12.085 12/31/2004 $ 24.670 $ 26.000 $ 12.479 6/30/2005 $ 24.419 $ 25.790 $ 12.754
AVERAGE ANNUAL TOTAL RETURN: One year 5.85% Five year -2.77% Ten year 9.34%
On the chart above you can see how the Index 500 Portfolio's total return compared to the S&P 500 Index (as adjusted for dividend reinvestment) and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on June 30, 1995 through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] +"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Advantus Series Fund, Inc.--Index 500 Portfolio. The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **The S&P 500 Index is a broad, unmanaged index of 500 common stocks which are representative of the U.S. stock market overall. ***Composition is as of June 30, 2005 13 Maturing Government Bond 2006 Portfolio Maturing Government Bond 2010 Portfolio HOW DID THE PORTFOLIOS PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the Maturing Government Bond portfolios generated the following returns: Maturing Government Bond 2006 portfolio*: -0.28 percent Maturing Government Bond 2010 portfolio*: 2.13 percent During the same period, the portfolios' indices, Ryan Labs U.S. Treasury Strip Indices of comparable maturity, generated the following returns: Ryan Labs Inc. September 2006 Index**: 0.97 percent Ryan Labs Inc. September 2010 Index**: 2.97 percent WHAT CONTRIBUTED TO THE PORTFOLIOS' PERFORMANCE DURING THE PERIOD? Each portfolios' underperformance during the period was largely attributable to fund expenses which are not borne by their respective indices. The portfolios' strategy of investing in higher yielding out-of-index securities contributed positively to returns as the spreads on these securities performed well versus Treasuries. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIOS' PERFORMANCE DURING THE PERIOD? Longer-term interest rates fell while very short-term rates rose with the increases in the Federal Funds Rate. The 10-year Treasury fell by 31 basis points and the two-year rate rose by 57 basis points. WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIOS' PERFORMANCE? The portfolios maintained the same strategy of investing in out-of-benchmark issues that provide a higher yield than the benchmark with similar credit quality. The duration was maintained very close to the benchmark. WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE PERIOD, AND WHAT LOOKS ATTRACTIVE TO YOU GOING FORWARD? The portfolios will maintain the same strategy going forward of investing in out-of-benchmark securities and maintaining a duration similar to each index. [SIDENOTE] [PHOTO OF CHRIS SEBALD] CHRIS SEBALD, CFA PORTFOLIO MANAGER The Maturing Government Bond 2006 and 2010 Portfolios seek as high an investment return as is consistent with prudent investment risk for a specified period of time ending on a specified liquidation date. The Portfolios invest primarily in U.S. Government and Agency zero coupon fixed income securities with maturities near the 2006 and 2010 liquidation dates of each Portfolio. 14 [CHART] MATURING GOVERNMENT BOND 2006 PORTFOLIO SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** FHLMC Strip 13.9% FNMA Strip 13.0% Resolution Funding Corporation Strip 10.5% Israel Government Aid Bond 21.6% Financing Corporation Strip 38.4% Cash and Other Assets/Liabilities 2.6%
[CHART] MATURING GOVERNMENT BOND 2010 PORTFOLIO SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** FNMA Strip 19.9% Financing Corporation Strip 19.2% Government Trust Certificate 14.1% Israel Government Aid Bond 22.0% Resolution Funding Corporation Strip 14.1% Tennessee Valley Authority 6.7% U.S. Treasury Strip 4.0%
15 [CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2006 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2006 INDEX OF TREASURY STRIPS AND CONSUMER PRICE INDEX MATURING GOVERNMENT BOND PORTFOLIOS
MATURING GOVERNMENT BOND 2006 PORTFOLIO RYAN LABS INDEX CPI 6/30/95 $ 10.000 $ 10.000 $ 10.000 12/31/95 $ 11.124 $ 11.122 $ 10.066 12/31/96 $ 10.989 $ 10.973 $ 10.400 12/31/97 $ 12.376 $ 12.424 $ 10.577 12/31/98 $ 14.154 $ 14.285 $ 10.748 12/31/99 $ 13.049 $ 13.222 $ 11.036 12/31/2000 $ 15.088 $ 15.458 $ 11.410 12/31/2001 $ 16.306 $ 17.017 $ 11.587 12/31/2002 $ 18.425 $ 19.177 $ 11.862 12/31/2003 $ 18.783 $ 19.627 $ 12.085 12/31/2004 $ 18.806 $ 19.879 $ 12.479 6/30/2005 $ 18.753 $ 20.036 $ 12.754
AVERAGE ANNUAL TOTAL RETURN: One year 0.36% Five year 6.34% Ten year 6.49%
On the chart above you can see how the Maturing Government Bond 2006 Portfolio's total return compared to the Ryan Labs, Inc. September 2006 Index of Treasury Strips and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on June 30, 1995 through June 30, 2005, assuming reinvestment of distributions, if any. 16 [CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN MATURING GOVERNMENT BOND 2010 PORTFOLIO, RYAN LABS, INC. SEPTEMBER 2010 INDEX OF TREASURY STRIPS AND CONSUMER PRICE INDEX
MATURING GOVERNMENT BOND 2010 PORTFOLIO RYAN LABS INDEX CPI 6/30/95 $ 10.000 $ 10.000 $ 10.000 12/31/95 $ 11.484 $ 11.479 $ 10.066 12/31/96 $ 11.092 $ 11.132 $ 10.400 12/31/97 $ 13.073 $ 13.033 $ 10.577 12/31/98 $ 14.940 $ 15.097 $ 10.748 12/31/99 $ 13.217 $ 13.382 $ 11.036 12/31/2000 $ 16.039 $ 16.566 $ 11.410 12/31/2001 $ 16.836 $ 17.071 $ 11.587 12/31/2002 $ 20.010 $ 20.298 $ 11.862 12/31/2003 $ 20.561 $ 20.955 $ 12.085 12/31/2004 $ 21.242 $ 21.941 $ 12.479 6/30/2005 $ 21.694 $ 22.594 $ 12.754
AVERAGE ANNUAL TOTAL RETURN: One year 6.18% Five year 8.70% Ten year 8.05%
On the chart above you can see how the Maturing Government Bond 2010 Portfolio's total return compared to the Ryan Labs, Inc. September 2010 Index of Treasury Strips and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on June 30, 1995 through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **Ryan Labs, Inc. September 2006 and 2010 Index of U.S. Treasury Strips consists of all active zero-coupon U.S. Treasury issues with maturities in September 2006 and 2010, respectively. ***Composition is as of June 30, 2005. 17 INTERNATIONAL BOND PORTFOLIO HOW DID THE PORTFOLIO PERFORM DURING THE 1ST HALF OF 2005? The International Bond Portfolio returned -5.79 percent* for the six-month period ended June 30, 2005. The Portfolio's benchmark, the Citigroup Non-US World Government Bond Index**, returned -5.71 percent during the same period. WHAT CONTRIBUTED TO THE PORTFOLIO'S PERFORMANCE DURING THE 1ST HALF OF 2005? The Portfolio's underperformance during the period was largely attributable to the Portfolio expenses which are not borne by the relevant index. Currency selection decisions were the major contributors, with exposure to off-index countries also contributing positively. Short duration was a major drawdown. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE 1ST HALF OF 2005? European markets found good reason to rally as a further deterioration in domestic conditions led to speculation of a rate cut from the European Community Bank (ECB). This prospect gained further momentum as the Riksbank delivered a 50bp cut and the Bank of England (BoE) minutes indicated an increase in support for the idea of lower rates in response to its own lacklustre growth backdrop. The Japanese market generated limited positive growth surprises and yields traded in tandem with those in US and Europe finishing the quarter modestly lower across the maturity spectrum. WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIO'S PERFORMANCE DURING THE 1ST HALF OF 2005? Euro currency allocation decisions, contributed positively. Exposure to Mexico and New Zealand markets contributed positively. Short duration in Japan contributed positively. Short duration in Euroland was a negative contribution Currency exposures in Poland and Norway were negative contributors WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE 1ST HALF OF 2005? The portfolio duration was shorter than the benchmark throughout the period, ranging from 0.5 to 1.2 years. The portfolio was underweight Japan throughout the period, and was overweight Emerging Markets and New Zealand. WHAT LOOKS ATTRACTIVE FOR THE PORTFOLIO GOING FORWARD? The US bond market looks destined to flatten still further, with Fed Funds heading towards 4 percent but with longer dates focusing beyond the end of the rate hike cycle and taking comfort from the benign inflation backdrop and slowing growth outlook. With European growth continuing to disappoint and the ECB at least considering lower rates, German government bonds should be encouraged to outperform the US bond market. That said, bond yields are at historically low levels and there are likely to be periods of volatility. We continue to use pullbacks to bring duration back to neutral. The Japanese market offers the least value of the majors with ten year yields at 1.20. In Foreign Exchange markets positioning has normalised and once again the fundamental picture will increasingly play a role. The coming month may see some range bound moves but we see the Dollar coming under pressure again to the extent that it will again trade back to the break of its three year trend channel. The general trend of Euro weakness looks like it will persist certainly versus its neighbours as the fundamental picture there looks weak. We retain an overweight in the Norwegian Krona and continue to stay long the convergence currencies of Eastern Europe. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF PHILIP MANN] PHILIP MANN JULIUS BAER INVESTMENTS LIMITED The International Bond Portfolio seeks to maximize current income consistent with protection of principal. The Portfolio pursues its objective by investing primarily in debt securities issued by issuers located anywhere in the world. While Advantus Capital Management, Inc. acts as the investment adviser for the portfolio, Julius Baer Investments Limited provides investment advice to the International Bond Portfolio under a sub-advisory agreement. Investment risks associated with international investing, in addition to other risks, include currency fluctuations, political and economic instability, and differences in accounting standards when investing in foreign markets. 18 TEN LARGEST BOND HOLDINGS***
MARKET % OF BOND SECURITY DESCRIPTION VALUE PORTFOLIO - --------------------------------------------- ---------------- ----------- France Government Bond (Euro)--4.000%, 10/25/14 $ 4,622,478 7.4% Bundesschatzanweisungen-- 2.250%, 12/15/06 4,070,524 6.5% Belgium Government Bond (Euro)--4.750%, 09/28/06 2,939,985 4.7% Spain Government Bond (Euro)--4.800%, 10/31/06 2,937,207 4.7% Netherlands Government Bond (Euro)--3.750%, 07/15/09 2,895,206 4.7% Ireland Government Bond (Euro)--3.250%, 04/18/09 2,876,817 4.6% Kingdom of Sweden (Euro)--5.000%, 01/28/09 2,840,584 4.6% Development Bank of Japan (Japanese Yen)--1.050%, 06/20/23 2,745,311 4.4% Kingdom of Denmark (Euro)--3.125%, 10/15/09 2,721,620 4.4% Finland Government Bond (Euro)--5.750%, 02/23/11 2,675,631 4.3% ---------------- ----------- $ 31,325,363 50.3% ================ ===========
[CHART] COUNTRY DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** Austria 3.3% Belgium 4.6% Canada 3.5% Cayman Islands 0.9% Denmark 4.2% Finland 4.1% France 9.7% Germany 11.3% Greece 4.0% Ireland 4.5% Italy 2.7% Japan 6.4% Luxembourg 0.7% Mexico 10.2% Netherlands 4.5% Portugal 3.5% Spain 4.5% Supranational 3.1% Sweden 4.4% United Kingdom 6.1% Cash & Other Assets/Liabilities 3.8%
[CHART] CURRENCY DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** British Sterling Pound 6.1% Euro 63.5% Mexican Peso 10.2% Japanese Yen 16.4% Cash and Other Assets 3.8%
19 [CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN INTERNATIONAL BOND PORTFOLIO, CITGROUP NON-USD WORLD GOVERNMENT BOND INDEX AND CONSUMER PRICE INDEX
CITIGROUP NON-USD INTERNATIONAL WORLD GOVERNMENT BOND PORTFOLIO CPI BOND INDEX 10/1/97 $ 10.000 $ 10.000 $ 10.000 12/31/97 $ 10.008 $ 10.006 $ 9.645 12/31/98 $ 11.626 $ 10.168 $ 11.361 12/31/99 $ 10.719 $ 10.441 $ 10.785 12/31/2000 $ 10.871 $ 10.794 $ 10.501 12/31/2001 $ 10.706 $ 10.962 $ 10.129 12/31/2002 $ 12.627 $ 11.222 $ 12.357 12/31/2003 $ 15.185 $ 11.433 $ 14.645 12/31/2004 $ 16.921 $ 11.805 $ 16.423 6/30/2005 $ 15.941 $ 12.066 $ 15.485
AVERAGE ANNUAL TOTAL RETURN: One year 7.40% Five year 8.59% Since inception (10/1/97) 6.20%
On the chart above you can see how the International Bond Portfolio's total return compared to the CitiGroup Non-USD World Government Bond Index and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on the inception date of the International Bond Portfolio (October 1, 1997) through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **The Citigroup Non U.S. World Government Bond Index is a market value-weighted index of government debt securities issued by eleven different nations: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, The Netherlands, Spain and the United Kingdom. The goal of the index is to include all fixed-rate institutionally traded bonds issued by the above governments. The minimum maturity is one year, and the minimum outstanding must be at least $25 million U.S. dollars. Also included in the index are zero-coupon renewable securities. Floating rate and private placement issues are excluded from the index. Returns are available in both U.S. dollars and local currency terms. ***Composition is as of June 30, 2005. 20 (This page has been left blank intentionally.) 21 INDEX 400 MID-CAP PORTFOLIO HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? For the six-month period ended June 30, 2005, the Index 400 Mid-Cap Portfolio provided a return of 3.66 percent*. For the same period, the S&P MidCap 400 Index** finished up 3.85 percent. WHAT FACTORS AFFECTED PERFORMANCE DURING THE PERIOD? The Portfolio is passively managed. The Portfolio is fully invested and holds all 400 names in the S&P 400 at published index weights. The Portfolio seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the index. Seven of the 11 sectors within the index posted positive returns. Rising oil and energy prices propelled the energy sector to the largest positive return within the index (24.48 percent). That sector contributed 1.64 percent to the index's overall return. Technology led the sectors that detracted from the six-month performance, with a return of -5.37 percent; its "contribution" to the index was - -0.65 percent. The largest 160 stocks (quintiles 1 and 2) within the S&P 400 Mid-Cap Index provided the best returns, while smaller stocks (quintile 4) provided the poorest returns for the period (-2.52 percent) WHAT MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? The first half of 2005 was characterized by modest growth and mild inflation. This is a continuation of the steady but sideways economic environment that we have been experiencing for the past several quarters. Consumer spending continues to help sustain economic momentum, though lately it has trailed off slightly. The exception to this spending slowdown is the housing market, which continues to be robust. Business spending in 2005 is increasing over 2004, as firms are looking for growth opportunities. The overall rate of inflation has been slowly creeping up, driven by increases in gas prices. Core inflation, however, has remained benign. This is a result of only moderate increases in labor costs. Steady productivity gains of between 1.5 percent and 2 percent continue to further offset the impact of these wage increases. Inflation clearly has been more muted than some in the market had anticipated. WHAT WILL AFFECT THE PORTFOLIO GOING FORWARD? Overall signs indicate that the U.S. economy is in good shape, especially in relation to other regions of the world. As the year progresses, our gross domestic product is expected to slow down from 2004 levels, and expected to approach 3.50 percent by the end of 2005. Bolstered by monies generated through refinancing and some wage increases, we expect consumer spending to continue to remain strong through the second half of 2005. We also expect job growth to continue at the current rate, sufficient to replace jobs lost but not enough to impress. Mild inflation is expected to continue with a core consumer price index of around 2.0 percent projected through year end. Driven by slowly rising interest rates, we expect overall stock market returns for 2005 to be similar to those achieved in 2004. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF JAMES SEIFERT] JAMES SEIFERT, PORTFOLIO MANAGER The Index 400 Mid-Cap Portfolio seeks to provide investment results generally corresponding to the aggregate price and dividend performance of publicly traded common stocks that comprise the Standard & Poor's 400 MidCap Index (S&P 400)+. It is designed to provide an economical and convenient means of maintaining a diversified portfolio in this equity security area as part of an over-all investment strategy. 22 TEN LARGEST STOCK HOLDINGS***
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO - -------------------------------------------- -------- ------------ ---------- Legg Mason, Inc. 10,415 $ 1,084,306 1.1% DR Horton, Inc. 27,784 1,044,956 1.0% Lennar Corporation 13,689 868,567 0.9% Murphy Oil Corporation 16,584 866,182 0.9% Weatherford International, Ltd. 13,096 759,306 0.7% Whole Foods Market, Inc. 6,184 731,567 0.7% Coventry Health Care, Inc. 10,164 719,103 0.7% Smith International, Inc. 10,047 639,994 0.6% Noble Energy, Inc. 8,239 623,280 0.6% Washington Post 736 614,582 0.6% ------------ ---------- $ 7,951,843 7.8% ============ ==========
[CHART] SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** Basic Materials 4.2% Capital Goods 6.0% Consumer Cyclical 16.7% Communication Services 1.5% Consumer Staples 7.8% Energy 9.0% Financial 16.3% Health Care 11.3% Transportation 2.7% Technology 13.2% Utilities 6.2% S&P Depository Receipts 0.1% Cash and Other Assets/Liabilities 5.0%
[CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN INDEX 400 MID-CAP PORTFOLIO, S&P 400 MIDCAP INDEX AND CONSUMER PRICE INDEX
INDEX 400 S&P 400 MID-CAP MIDCAP PORTFOLIO INDEX CPI 10/1/97 $ 10.000 $ 10.000 $ 10.000 12/31/97 $ 10.006 $ 10.052 $ 10.006 12/31/98 $ 11.675 $ 11.971 $ 10.167 12/31/99 $ 13.539 $ 13.736 $ 10.440 12/31/2000 $ 15.712 $ 16.142 $ 10.794 12/31/2001 $ 15.544 $ 16.045 $ 10.962 12/31/2002 $ 13.207 $ 13.718 $ 11.222 12/31/2003 $ 17.775 $ 18.604 $ 11.433 12/31/2004 $ 20.571 $ 21.671 $ 11.805 6/30/2005 $ 21.323 $ 22.505 $ 12.066
AVERAGE ANNUAL TOTAL RETURN: One year 13.41% Five year 7.81% Since inception (10/1/97) 10.27%
On the chart above you can see how the Index 400 Mid-Cap Portfolio's total return compared to the S&P 400 MidCap Index and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on the inception date of the Index 400 Mid-Cap Portfolio (October 1, 1997) through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **S&P 400 MidCap Index consists of 400 domestic stocks chosen for market size (median market capitalization of about $610 million), liquidity and industry group representation. It is a market-weighted index (stock price times shares outstanding), with each stock affecting the index in proportion to its market value. ***Composition is as of June 30, 2005. +"Standard & Poor's(R)", "S&P(R)", "Standard & Poor's MidCap 400" and "S&P MidCap 400" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by the Advantus Series Fund, Inc.--Index 400 Mid-Cap Portfolio. The Portfolio is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. 23 REAL ESTATE SECURITIES PORTFOLIO HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD? The fund had a roller coaster pattern in the returns during the first half of the calendar year 2005. The year started with much profit taking and the real estate market was down sharply in the first week of trading. After bouncing around over the following few months, real estate began to rally over the balance of the period. The Real Estate Securities Portfolio delivered strong performance during the period, generating a net return of 5.38 percent*. The Portfolio's benchmark index, the Dow Jones Wilshire Real Estate Securities Index** finished the period with a return of 6.63 percent. WHAT CAUSED THE PORTFOLIO TO UNDERPERFORM ITS BENCHMARK INDEX DURING THE PERIOD? The Portfolio initially outperformed the benchmark during the period due to its underweight to large market cap real estate stocks. These stocks became strong performers as the period progressed, with a broader segment of investors chasing the rebound in real estate stocks, particularly the larger, more liquid names. This shift hurt the Portfolio's performance during this time frame. Due to our typical underweight in larger stocks, the Portfolio often underperforms during times of sharp rises in the benchmark return. The root cause of underperformance was the Portfolio's underweight position in office companies, and particularly in Equity Office--the second largest company in the index. Investors sought office companies, expecting them to deliver strong near-term performance in reaction to the steady growth in the economy. The Portfolio remains underweight in office companies, because of the weak fundamentals in most U.S. office markets that will not change very quickly. Landlords are spending large amounts of money to put tenants in their buildings--a fact that will not change until markets approach stabilized occupancy (typically above 92 percent). The national office occupancy rate is approximately 87 percent, so further rebound in this property type will be necessary before better conditions exist. WHAT OTHER MARKET CONDITIONS OR EVENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE DURING THE PERIOD? Buyers of real estate investments continue to be aggressive, seeking exposure to improving fundamentals of occupancy and rental rates for most real estate property types. Investors also like the solid dividend yield provided by many REITs. Adding to these improving fundamentals is the availability of mortgage financing, which has driven up property values. This strength has been reflected in the merger and acquisition market for real estate companies. Announced acquisitions by ING Clarion's of Gables Property Trust, DRA Advisors buying CRT Properties, and Prologis acquiring Catellus Development have highlighted the strength of demand for real estate property, pushing initial cap rates to lower and lower levels. The higher prices seen in the market have forced investors to reevaluate their valuations for real estate securities. This reevaluation made these stocks appear cheap on a net asset value basis and caused a recent increase in prices. WHAT STRATEGIES AND TECHNIQUES DID YOU EMPLOY THAT SPECIFICALLY AFFECTED THE PORTFOLIO'S PERFORMANCE? After the dip in real estate stock prices in January, the Portfolio added to positions in some large capitalization names, recognizing that they would be rewarded in the ensuing rally. [SIDENOTE] PERFORMANCE UPDATE [PHOTO OF JOE BETLEJ] JOE BETLEJ, CFA PORTFOLIO MANAGER The Real Estate Securities Portfolio seeks above-average income and long-term growth of capital. The Portfolio intends to pursue its objective by investing primarily in equity securities of companies in the real estate or real estate related industries. Investment risks associated with investing in the Real Estate Portfolio, in addition to other risks, include rental income fluctuations, depreciation, property tax value changes, and differences in real estate market value. 24 The economic scenario continues to show steady economic growth, low inflation, and modest job growth, and in response the Portfolio has become further exposed to companies with stronger prospects for earnings growth. Additional exposure was added to office and apartment companies with strong exposure to supply-constrained markets in coastal U.S. markets. Additionally, the Portfolio's exposure to hotel companies was increased during the recent months' pricing drop, as confidence built in strong revenue growth from this group. During the second quarter the Portfolio, in turn, reduced its exposure to slower growing groups, such as net lease and health care REITs. It is expected that prices in these sectors will not keep up with their faster growing peers. The Portfolio also saw increased exposure to companies exhibiting the "asset manager" strategy. These are companies that use their property type expertise, connections in the market and operational strengths to bring in investors (typically foreign investors or pension funds) with lower required returns on their capital to invest side-by-side in the REIT's properties. The REIT sponsor earns fees and receives a higher return on their capital after achieving the lower return for their partner, resulting in a higher return on equity for the sponsor. As these business models have matured, the market has been more willing to apply a higher valuation to the earnings generated in this strategy. WHAT INDUSTRIES OR SECTORS DID YOU EMPHASIZE DURING THE QUARTER AND WHAT LOOKS ATTRACTIVE GOING FORWARD? Hotels continued to be emphasized during the period due to the strength of the business traveler, pushing average daily rates at hotels higher. This force has delivered strong growth in earnings for these companies. Apartment companies continued to be added during the period, particularly those with exposure to Florida and Southern California markets, to capture outsized earnings growth. Office companies with exposure to New York, Washington, D.C., and Southern California were added in expectation of further rent and occupancy growth. Going forward, the expectation is that the "Goldilocks" economic scenario of steady growth, low inflation and moderate job growth will continue. As the expected occupancy and rental rates improve, the Portfolio will be positioned for increased exposure to companies with rental income growth. Additionally, in some markets it is difficult to find land with entitlements to build. Certain companies able to generate development opportunities in these markets will be favored by investors. Real estate markets with few "barriers to entry" will continue to be deemphasized in the fund, because the returns do not justify the risk and pricing inherent in these situations. 25 TEN LARGEST STOCK HOLDINGS***
MARKET % OF STOCK SECURITY DESCRIPTION SHARES VALUE PORTFOLIO - -------------------------------------------- -------- ------------- ---------- Simon Property Group, Inc. 81,900 $ 5,936,931 5.7% Prologis 142,100 5,718,104 5.5% Starwood Hotels & Resorts Worldwide, Inc. 83,300 4,878,881 4.7% General Growth Properties, Inc. 108,720 4,467,305 4.3% Hilton Hotels Corporation 172,800 4,121,280 4.0% The Mills Corporation 66,600 4,048,614 3.9% Developers Diversified Realty Corporation 87,400 4,016,904 3.9% Brookfield Properties Company 139,200 4,008,960 3.9% Kimco Realty Corporation 54,250 3,195,867 3.1% Camden Property Trust 59,200 3,182,000 3.1% ------------- ---------- $ 43,574,846 42.1% ============= ==========
[CHART] SECTOR DIVERSIFICATION (SHOWN AS A PERCENT OF NET ASSETS)*** Cash and Other Assets/Liabilities 0.8% Consumer Cyclical (Entertainment) 0.1% Consumer Cyclical (Lodging-Hotel) 9.8% Real Estate 6.1% Real Estate Investment Trust-Apartments 17.7% Real Estate Investment Trust-Diversified 5.5% Real Estate Investment Trust-Health Care 1.7% Real Estate Investment Trust-Hotels 5.5% Real Estate Investment Trust-Mortgage 3.3% Real Estate Investment Trust-Office Property 14.0% Real Estate Investment Trust-Regional Mall 13.9% Real Estate Investment Trust-Self Storage 1.9% Real Estate Investment Trust-Shopping Centers 11.9% Real Estate Investment Trust-Warehouse/Industrial 7.8%
[CHART] COMPARISON OF CHANGE IN INVESTMENT VALUE* A HYPOTHETICAL $10,000 INVESTMENT IN REAL ESTATE SECURITIES PORTFOLIO, DOW JONES WILSHIRE ASSOCIATES REAL ESTATE SECURITIES INDEX AND CONSUMER PRICE INDEX
REAL ESTATE WILSHIRE ASSOCIATES SECURITIES REAL ESTATE PORTFOLIO SECURITIES INDEX CPI 5/1/98 $ 10.000 $ 10.000 $ 10.000 12/31/98 $ 8.510 $ 8.568 $ 10.086 12/31/99 $ 8.179 $ 8.294 $ 10.357 12/31/2000 $ 10.274 $ 10.843 $ 10.708 12/31/2001 $ 11.305 $ 11.964 $ 10.874 12/31/2002 $ 12.092 $ 12.278 $ 11.132 12/31/2003 $ 17.196 $ 16.829 $ 11.342 12/31/2004 $ 23.304 $ 22.686 $ 11.711 6/30/2005 $ 24.558 $ 24.190 $ 11.969
AVERAGE ANNUAL TOTAL RETURN: One year 34.95% Five year 21.56% Since inception (5/1/98) 13.36%
On the chart above you can see how the Real Estate Securities Portfolio's total return compared to the Dow Jones Wilshire Associates Real Estate Securities Index and the Consumer Price Index. The three lines represent the total return of a hypothetical $10,000 investment made on the inception date of the Real Estate Securities Portfolio (May 1, 1998) through June 30, 2005, assuming reinvestment of distributions, if any. [SIDENOTE] *Historical performance is not an indication of future performance. Investment returns on principal values will fluctuate so that shares upon redemption may be worth more or less than their original cost. Performance figures of the Portfolio do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. When such charges are deducted, actual investment performance in a variable policy or contract will be lower. **The Dow Jones-Wilshire Associates Real Estate Securities Index is a market capitalization-weighted index of equity securities whose primary business is equity ownership of commercial real estate (REITS). ***Composition is as of June 30, 2005. 26 BOND PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- LONG-TERM DEBT SECURITIES (97.8%) GOVERNMENT OBLIGATIONS (42%) U.S. Government and Agencies Obligations (41.5%) Federal Home Loan Mortgage Corporation (FHLMC) (7.1%) $ 1,550,000 3.500% 02/15/30 $ 1,483,362 1,825,000 4.500% 01/15/15 1,858,631 2,049,070 (k) 5.000% 04/01/35 2,051,673 945,000 (i) 5.000% 07/01/35 945,000 951,748 (k) 5.500% 12/01/17 978,656 6,844,024 (k) 5.500% 05/01/34 6,960,529 3,425,605 5.500% 10/01/34 3,478,874 4,945,000 (i) 5.500% 07/01/35 5,012,994 525,258 (k) 6.500% 09/01/32 548,246 --------------- 23,317,965 --------------- Federal National Mortgage Association (FNMA) (25.5%) 2,150,000 3.250% 01/15/08 2,120,412 1,375,000 3.500% 01/28/08 1,360,414 500,000 4.250% 05/15/09 505,408 3,000,000 (i) 4.500% 07/01/20 2,985,936 367,980 5.000% 05/01/18 372,715 740,593 5.000% 06/01/18 749,838 1,562,409 (k) 5.000% 07/01/18 1,582,469 2,730,000 (i) 5.000% 07/01/33 2,730,000 986,058 5.000% 11/01/33 987,442 444,011 5.000% 05/01/34 444,490 2,900,000 5.125% 01/02/14 3,024,648 257,264 5.500% 09/01/17 264,579 1,130,912 5.500% 02/01/18 1,163,479 2,000,000 (i) 5.500% 07/01/19 2,052,500 4,241,021 (k) 5.500% 04/01/33 4,316,171 1,813,907 5.500% 05/01/33 1,846,057 1,299,339 5.500% 12/01/33 1,319,105 1,666,673 5.500% 02/01/34 1,692,433 4,054,219 5.500% 03/01/34 4,118,626 8,060,662 5.500% 04/01/34 8,184,648 7,930,000 (i) 5.500% 07/01/34 8,036,563 578,026 5.500% 09/01/34 586,810 1,945,669 5.500% 02/01/35 1,973,424 1,393,446 (k) 6.000% 09/01/17 1,444,500 3,158,765 6.000% 10/01/32 3,253,919 2,291,660 6.000% 11/01/32 2,362,343 3,989,147 6.000% 03/01/33 4,115,366 1,616,967 6.437% 01/01/08 1,673,791 836,453 (k) 6.500% 12/01/31 871,948 232,303 6.500% 02/01/32 241,874 1,334,704 (k) 6.500% 04/01/32 1,391,175 513,473 6.500% 05/01/32 534,621 1,077,161 6.500% 07/01/32 1,122,590 1,345,320 6.500% 08/01/32 1,401,741
See accompanying notes to financial statements. 27
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- GOVERNMENT OBLIGATIONS--CONTINUED $ 960,021 6.500% 09/01/32 $ 1,000,207 3,768,208 (k) 6.500% 09/01/32 3,926,676 1,194,175 6.500% 10/01/32 1,246,005 839,028 7.000% 07/01/31 892,330 1,253,351 7.000% 09/01/31 1,332,421 1,324,959 (k) 7.000% 11/01/31 1,399,061 404,190 7.000% 02/01/32 428,367 190,524 7.000% 03/01/32 201,917 837,382 7.000% 07/01/32 887,789 642,518 7.500% 04/01/31 692,526 321,067 7.500% 05/01/31 346,058 --------------- 83,185,392 --------------- Government National Mortgage Association (GNMA) (1.0%) -- (c) (g) 0.994% 06/17/45 1,876,800 826,108 5.500% 12/15/34 844,467 365,000 (i) 5.500% 07/01/35 372,642 25,028 8.500% 10/15/22 27,545 13,509 8.500% 12/15/22 14,867 --------------- 3,136,321 --------------- Other Agency Obligations (1.4%) 4,500,000 Federal Home Loan Bank (k) 3.250% 08/11/06 4,473,725 --------------- U.S. Treasury (6.5%) 825,000 U.S. Treasury Bond 1.875% 01/31/06 817,717 150,000 U.S. Treasury Bond 2.250% 02/15/07 146,783 6,150,000 U.S. Treasury Bond 2.500% 10/31/06 6,062,553 2,190,000 U.S. Treasury Bond 3.375% 10/15/09 2,159,204 5,130,000 U.S. Treasury Bond 5.375% 02/15/31 6,053,400 1,112,265 U.S. Treasury Inflation Indexed Notes (h) 1.875% 07/15/13 1,136,031 4,570,000 U.S. Treasury Note 4.250% 11/15/14 4,677,290 --------------- 21,052,978 --------------- Total U.S. government and agencies obligations (cost: $133,570,601) 135,166,381 --------------- OTHER GOVERNMENT OBLIGATIONS (.5%) Provincial or Local Government Obligations (.5%) 1,500,000 Province of Quebec (b) 7.000% 01/30/07 1,569,206 --------------- Total other government obligations (cost: $1,590,187) 1,569,206 --------------- CORPORATE OBLIGATIONS (55.8%) BASIC MATERIALS (.8%) Agriculture Products (.8%) 2,250,000 Cargill, Inc. - 144A Issue (f) 6.375% 06/01/12 2,506,851 --------------- CAPITAL GOODS (.3%) Asset-Backed Securities (.3%) 1,110,408 MMCA Automobile Trust 4.560% 11/16/09 1,109,705 ---------------
See accompanying notes to financial statements. 28
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- COMMUNICATION SERVICES (1.4%) Broadcasting (.5%) $ 1,525,000 COX Communications, Inc. 7.750% 11/01/10 $ 1,726,697 --------------- Telephone (.9%) 2,100,000 Sprint Capital Corporation 8.750% 03/15/32 2,921,333 --------------- CONSUMER CYCLICAL (1.3%) Beverage (.4%) 1,400,000 Fosters Finance Corporation - 144A Issue (f) 5.875% 06/15/35 1,407,031 --------------- Textiles (.9%) 2,850,000 Mohawk Industries, Inc. 6.500% 04/15/07 2,952,195 --------------- CONSUMER STAPLES (.7%) Printing and Publishing (.7%) 2,175,000 Donnelley & Sons - 144A Issue (f) 4.950% 05/15/10 2,185,159 --------------- ENERGY (3.5%) Oil & Gas (1.9%) 2,500,000 Husky Energy, Inc. (b) 6.250% 06/15/12 2,705,035 1,585,000 Nexen, Inc. (b) 5.875% 03/10/35 1,610,853 1,700,000 Valero Logistics Operations LP 6.050% 03/15/13 1,800,546 --------------- 6,116,434 --------------- Oil & Gas Services (.3%) 1,075,000 Enterprise Products Operating LP 4.950% 06/01/10 1,080,057 --------------- Pipelines (1.3%) 2,400,000 Energy Transfer Partners - 144A Issue (f) 5.950% 02/01/15 2,420,753 1,650,000 Magellan Midstream Partners 6.450% 06/01/14 1,802,277 --------------- 4,223,030 --------------- FINANCIAL (43%) Asset-Backed Securities (9%) 151,320 Associates Manufactured Housing Pass Through Certificates 6.900% 06/15/27 152,845 1,900,000 Associates Manufactured Housing Pass Through Certificates 7.725% 06/15/28 2,005,088 2,230,000 Centex Home Equity (l) (m) 5.048% 06/25/35 2,234,181 2,650,000 Citibank Credit Card Issuance Trust 5.500% 03/24/17 2,773,800 1,755,000 Countryplace Manufactured Housing Contract - 144A Issue (e) (i) (m) 5.200% 08/15/15 1,785,439 1,359,740 Green Tree Financial Corporation 6.400% 10/15/18 1,386,329 919,247 Green Tree Financial Corporation 7.350% 05/15/27 968,909 18,374 Green Tree Financial Corporation 8.900% 04/15/25 18,413 2,694,645 Metropolitan Asset Funding, Inc. - 144A Issue (f) 7.525% 04/20/27 2,703,101 887,302 Mid-State Trust 7.400% 07/01/35 946,584 2,011,635 MMCA Automobile Trust 4.600% 08/17/09 2,021,751 1,172,653 MMCA Automobile Trust 5.370% 01/15/10 1,175,648 745,048 National Collegiate Trust 7.240% 09/20/14 745,793 1,448,923 Oakwood Mortgage Investors, Inc. (e) 8.100% 08/15/26 1,498,740 1,500,000 Origen Manufactured Housing 5.700% 01/15/35 1,557,216
See accompanying notes to financial statements. 29
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- FINANCIAL--CONTINUED $ 725,000 Origen Manufactured Housing (c) 5.730% 11/15/35 $ 740,041 725,000 Origen Manufactured Housing (c) 5.860% 06/15/36 735,137 1,275,000 Residential Asset Mortgage Products, Inc. (l) 5.683% 09/25/33 1,308,395 1,125,000 Residential Asset Mortgage Products, Inc. 5.920% 08/25/33 1,150,002 1,500,000 Residential Asset Mortgage Products, Inc. (l) 6.092% 12/25/33 1,532,222 1,100,000 Residential Funding Mortgage Securities (l) 5.090% 07/25/33 1,095,501 928,351 Vanderbilt Mortgage Finance 1997 - A (c) 4.210% 03/07/28 927,145 --------------- 29,462,280 --------------- Auto Finance (2.4%) 3,085,000 ERAC USA Finance Company - 144A Issue (f) 5.600% 05/01/15 3,187,768 1,525,000 Ford Motor Credit Company (c) 4.218% 11/16/06 1,511,577 3,325,000 General Motors Acceptance Corporation (c) 4.050% 01/16/07 3,252,256 --------------- 7,951,601 --------------- Banks (.5%) 1,525,000 Wachovia Bank NA 4.800% 11/01/14 1,542,806 --------------- Collateralized Mortgage Obligations/Mortgage Revenue Bonds (4.8%) 763,271 Banc of America Mortgage Securities Corporation 5.750% 08/25/34 775,098 57,000 Banco Hipotecario Nacional - 144A Issue (b) (e) (j) 7.916% 07/25/09 1,425 191,196 BlackRock Capital Finance LP - 144A Issue (f) 7.750% 09/25/26 194,966 1,954,993 Charlie Mac 5.000% 10/25/34 1,945,489 965,649 Chase Mortgage Financial Corporation 5.500% 10/25/33 969,876 568,144 Credit Suisse First Boston Mortgage Securities Corporation 6.000% 11/25/18 583,229 1,328,576 Global Mortgage Securitization, Ltd. 5.250% 04/25/32 1,322,763 2,568,132 Global Mortgage Securitization, Ltd. - 144A Issue (e) 5.250% 11/25/32 2,577,822 2,745,949 Master Asset Securitization Trust 5.500% 11/25/33 2,766,406 722,838 Mellon Residential Funding Corporation 6.750% 06/25/28 721,052 2,266,224 Residential Accredit Loans, Inc. 5.750% 05/25/33 2,334,927 109,798 Sequoia Mortgage Funding Company - 144A Issue (f) 6.380% 08/28/31 109,340 1,254,000 Structured Asset Securities Corporation (l) 5.630% 05/25/34 1,267,411 --------------- 15,569,804 --------------- Commercial Finance (.1%) 465,000 Block Financial Corporation 5.125% 10/30/14 462,415 --------------- Commercial Mortgage-Backed Securities (11.1%) 740,792 277 Park Avenue Finance Corporation - 144A Issue (f) 7.580% 05/12/12 773,322 -- Asset Securitization Corporation (c) (g) 2.263% 08/13/29 241,552 2,250,000 Asset Securitization Corporation (c) 7.641% 11/13/29 2,385,533 -- Asset Securitization Corporation - 144A Issue (c) (f) (g) 1.798% 10/13/26 639,370 2,350,000 Bear Stearns Commercial Mortgage - 144A Issue (f) 5.426% 05/14/16 2,377,150 1,125,000 Bear Stearns Commercial Mortgage - 144A Issue (f) 6.000% 07/15/31 1,176,170
See accompanying notes to financial statements. 30
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- FINANCIAL--CONTINUED $ 951,440 FFCA Secured Lending Corporation - 144A Issue (f) 6.730% 07/18/13 $ 986,350 2,500,000 FFCA Secured Lending Corporation - 144A Issue (f) 6.940% 09/18/25 2,686,810 2,000,000 First Union - Chase Commercial Mortgage 7.062% 06/15/31 2,170,754 1,400,000 GS Mortage Securities Corporation 2001 - LIBA E - 144A Issue (f) 6.733% 02/14/16 1,526,412 1,500,000 GS Mortgage Securities Corporation II (c) 7.242% 07/13/30 1,586,116 3,270,000 Hilton Hotel Pool Trust - 144A Issue (c) (f) 3.611% 10/03/15 3,290,441 1,575,000 Hilton Hotel Pool Trust - 144A Issue (f) 7.458% 10/03/15 1,765,610 2,000,000 LB-UBS Commercial Mortgage Trust 4.742% 02/15/30 2,025,094 1,250,000 Meristar Commercial Mortgage Trust - 144A Issue (f) 8.290% 03/03/16 1,371,872 1,300,000 Morgan Stanley Dean Witter Capital - 144A Issue (f) 6.321% 07/11/11 1,328,287 Multi Security Asset Trust - 144A Issue (c) (e) (g) 1.067% 11/28/35 1,449,211 1,540,000 Multi Security Asset Trust - 144A Issue (c) (e) 5.880% 11/28/35 1,549,460 1,525,000 Nomura Asset Securities Corporation - 144A Issue (f) 6.000% 03/15/30 1,630,858 2,500,000 Paine Webber Mortgage Acceptance Corporation - 144A Issue (f) 7.655% 01/02/12 2,623,218 2,500,000 Wachovia Bank Commercial Mortgage Trust (c) 4.847% 10/15/41 2,549,617 --------------- 36,133,207 --------------- Consumer Finance (1.4%) 3,165,000 American General Finance 4.875% 05/15/10 3,195,685 1,550,000 Household Finance Corporation 4.125% 11/16/09 1,533,246 --------------- 4,728,931 --------------- Finance -- Diversified (5.3%) 1,666,558 500 Grant Street Associates - 144A Issue (e) 2.593% 12/01/08 1,588,830 2,000,000 Allstate Life Global Funding II 3.500% 07/30/07 1,976,372 2,750,000 Capital One Finance 5.500% 06/01/15 2,813,360 2,993,000 Fund American Companies, Inc. 5.875% 05/15/13 3,117,377 2,500,000 International Lease Finance Corporation 4.350% 09/15/08 2,498,302 2,000,000 Principal Life Global Funding I - 144A Issue (f) 6.250% 02/15/12 2,206,284 2,800,000 St. George Funding Company LLC - 144A Issue (b) (c) (e) 8.485% 12/29/49 3,164,196 --------------- 17,364,721 --------------- Insurance (2.2%) 1,150,000 Assurant, Inc. 6.750% 02/15/34 1,313,953 1,900,000 Berkshire Hathaway Financial - 144A Issue (f) 4.750% 05/15/12 1,917,345 2,800,000 Stancorp Financial Group, Inc. 6.875% 10/01/12 3,085,880 835,000 Willis Group North America, Inc. (i) 5.125% 07/15/10 839,499 --------------- 7,156,677 --------------- Investment Bankers/Brokers (2.6%) 3,150,000 Goldman Sachs Group, Inc. 4.500% 06/15/10 3,160,171 2,610,000 JP Morgan Chase Cap XV 5.875% 03/15/35 2,678,943
See accompanying notes to financial statements. 31
PRINCIPAL/ MARKET SHARES COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- FINANCIAL--CONTINUED $ 2,500,000 Morgan Stanley 6.750% 04/15/11 $ 2,768,090 --------------- 8,607,204 --------------- Real Estate Investment Trust -- Apartments (.1%) 250,000 Avalon Properties, Inc. 6.875% 12/15/07 263,772 --------------- Real Estate Investment Trust -- Diversified (1.0%) 3,050,000 Vornado Realty LP 5.625% 06/15/07 3,108,755 --------------- Real Estate Investment Trust -- Health Care (1.2%) 2,210,000 Healthcare Realty Trust, Inc. 5.125% 04/01/14 2,184,925 1,585,000 Nationwide Health Properties 6.000% 05/20/15 1,601,449 --------------- 3,786,374 --------------- Real Estate Investment Trust -- Office Property (.5%) 1,500,000 Arden Realty LP 5.250% 03/01/15 1,510,044 --------------- Real Estate Investment Trust -- Shopping Centers (.8%) 2,700,000 Simon Property Group LP - 144A Issue (f) 5.100% 06/15/15 2,698,556 --------------- HEALTH CARE (.4%) Managed Care (.4%) 1,250,000 WellPoint, Inc. 5.950% 12/15/34 1,364,451 --------------- TECHNOLOGY (.5%) Computer Services & Software (.5%) 1,625,000 Computer Associates International, Inc. - 144A Issue (f) 5.625% 12/01/14 1,647,999 --------------- TRANSPORTATION (1.2%) Railroads (1.2%) 2,400,000 Norfolk Southern Corporation 5.590% 05/17/25 2,494,392 1,250,000 Union Pacific Corporation - 144A Issue (f) 5.214% 09/30/14 1,288,138 --------------- 3,782,530 --------------- UTILITIES (2.7%) Electric Companies (2.7%) 1,300,000 Exelon Corporation 5.625% 06/15/35 1,310,496 2,250,000 Georgia Power Company 5.500% 12/01/05 2,265,534 2,600,000 Oncor Electric Delivery Company 7.250% 01/15/33 3,241,839 1,950,000 Pennsylvania Electric Company 5.125% 04/01/14 1,988,507 --------------- 8,806,376 --------------- Total corporate obligations (cost: $179,303,426) 182,176,995 --------------- Total long-term debt securities (cost: $314,464,214) 318,912,582 =============== PREFERRED STOCKS (1.0%) FINANCIAL (1.0%) Real Estate Investment Trust -- Diversified (.5%) 70,000 PS Business Parks, Inc. 7.000% 1,722,000 --------------- Real Estate Investment Trust -- Self Storage (.5%) 65,000 Public Storage, Inc. 6.250% 1,585,350 --------------- Total preferred stocks (cost: $3,375,000) 3,307,350 ---------------
See accompanying notes to financial statements. 32
PRINCIPAL/ MARKET SHARES COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- SHORT-TERM SECURITIES (18.2%) SECURITY LENDING COLLATERAL (10.1%) Commercial Paper (6.2%) 1,560,783 Amsterdam Funding Corporation (d) 3.100% 07/11/05 $ 1,559,363 947,618 ANZ National, Ltd. (d) 3.100% 07/08/05 947,012 1,114,845 BHP Billiton Financial USA, Ltd. (d) 3.100% 07/05/05 1,114,444 1,895,236 Cedar Springs Capital Company (d) 3.140% 07/20/05 1,891,958 1,684,531 Concord Minutemen Capital Company (d) 3.130% 07/07/05 1,683,621 1,828,346 Crown Point Capital Company (d) 3.100% 07/05/05 1,827,687 222,969 Eiffel Funding LLC (d) 3.100% 07/05/05 222,889 1,609,613 Eiffel Funding LLC (d) 3.080% 07/08/05 1,608,583 624,313 Irish Life & Permanent (d) 3.040% 07/08/05 623,913 1,560,783 KLIO II Funding Corporation (d) 3.170% 08/02/05 1,556,210 1,337,814 Lehman Brothers Holdings (d) 2.762% 08/16/05 1,337,814 1,560,783 Liquid Funding, Ltd. (d) 3.080% 07/05/05 1,560,221 624,313 Morgan Stanley (d) 2.470% 02/03/06 624,313 222,969 Neptune Funding Corporation (d) 3.100% 07/06/05 222,869 1,337,814 Sedna Finance, Inc. (d) 3.080% 07/11/05 1,336,596 401,344 Sedna Finance, Inc. (d) 3.100% 07/14/05 400,871 111,484 Sedna Finance, Inc. (d) 3.110% 07/19/05 111,303 1,560,783 Solitaire Funding, LLC (d) 3.130% 07/21/05 1,557,942 --------------- 20,187,609 --------------- Corporate Note (2.1%) 1,560,783 American General Finance (c) 3.090% 07/14/06 1,560,923 891,876 Beta Finance, Inc. (c) 2.990% 06/02/06 892,090 2,006,721 General Electric Capital Assurance Company 3.162% 06/16/06 2,006,721 1,114,845 Metropolitan Life Global Funding I (c) 3.182% 03/06/06 1,114,667 1,114,845 Morgan Stanley (c) 3.090% 08/13/10 1,114,934 --------------- 6,689,335 --------------- Repurchase Agreement (1.8%) 5,989,619 Morgan Stanley, Wells Fargo and Bank of New York Repurchase Agreement account; dated 6/30/05, rate 3.487%, due 7/1/05; proceeds $5,990,199 (Collateralized by Corporate Obligations) 5,989,619 --------------- Total security lending collateral (cost: $32,866,563) 32,866,563 --------------- INVESTMENT COMPANIES (8.1%) 14,971,592 American Beacon Funds, current rate 3.190% 14,971,592 1,049,498 BlackRock Provident Institutional TempFund, current rate 3.086% 1,049,498 10,500,000 JPMorgan Prime Money Market Fund, current rate 3.150% 10,500,000 --------------- Total investment companies (cost: $26,521,090) 26,521,090 --------------- Total short-term securities (cost: $59,387,653) 59,387,653 --------------- Total investments in securities (cost: $377,226,867) (n) $ 381,607,585 --------------- Payable upon return of securities loaned (10.1%) (32,866,563) Liabilities in excess of cash and other assets (-6.9%) (22,432,638) --------------- Total net assets (100%) $ 326,308,384 ===============
See accompanying notes to financial statements. 33 INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) The Portfolio held 2.8% of net assets in foreign securities at June 30, 2005. (c) Variable rate security. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 5.6% of the Portfolio's net assets at June 30, 2005. (e) Represents ownership in an illiquid security. (See note 6 to the financial statements.) Information concerning the illiquid securities held at June 30, 2005, which includes cost and acquisition date, is as follows:
ACQUISITION ACQUISITION SECURITY: DATE COST --------- ------------- ------------- 500 Grant St Associates - 144A Issue* 06/12/03 $ 1,840,085 Banco Hipotecario Nacional - 144A Issue* 01/08/01 56,237 Global Mortgage Securitization, Ltd. - 144A Issue* 11/24/04 2,546,183 Multi Security Asset Trust - 144A Issue* 02/24/05 1,560,000 Multi Security Asset Trust - 144A Issue* 02/24/05 1,521,239 Oakwood Mortgage Investors, Inc.+ 03/25/03 1,518,616 St. George Funding Company LLC - 144A Issue* 06/12/97 2,800,935 Countryplace Manufactured Housing Contract - 144A Issue* 06/29/05 1,754,843 ------------- $ 13,598,138 =============
* A 144A Issue represents a security which has not been registered with the Securities and Exchange Commission under the Securities Act of 1933. + Represents a private placement security. (f) Long-term debt security sold within terms of a private placement memorandum exempt from registration under Section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors". These securities have been determined to be liquid under guidelines established by the Board of Directors. (g) Interest-only security that entitles holders to receive only interest on the underlying mortgages. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The yield to maturity of an interest-only security is sensitive to the rate of principal payments on the underlying mortgage assets. The rate disclosed represents the market yield based upon the current cost basis and estimated timing and amount of future cash flows. (h) U.S. Treasury inflation-protected securities (TIPS) are securities in which the principal amount is adjusted for inflation and the semi-annual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (i) At June 30, 2005 the total cost of investments issued on a when-issued or forward commitment basis is $24,677,840. (j) Security is in default with respect to interest payments. Income is not being accrued on this security and any payments received are treated as a reduction of principal. (k) Security pledged as collateral for when-issued purchase commitments outstanding as of June 30, 2005. (l) Stepped rate security. Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below the stated level, the issuer will either initiate a cleanup call or increase the stated rate. (m) This security is being fair-valued according to procedures approved by the Board of Directors. See accompanying notes to financial statements. 34 (n) At June 30, 2005 the cost of securities for federal income tax purposes was $377,444,365. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 6,432,727 Gross unrealized depreciation (2,269,507) ------------- Net Unrealized Appreciation $ 4,163,220 =============
See accompanying notes to financial statements. 35 MONEY MARKET PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL RATE MATURITY VALUE(a) - --------- ------ -------- --------------- COMMERCIAL PAPER (33.5%) BASIC MATERIALS (1.6%) Chemicals (1.6%) $ 1,500,000 El Du Pont De Nemours Company 3.230% 09/06/05 $ 1,490,983 --------------- CONSUMER CYCLICAL (9.5%) Hardware and Tools (2.6%) 2,500,000 The Stanley Works (d) 3.280% 08/29/05 2,486,561 --------------- Household Products (3.2%) 3,000,000 Proctor & Gamble Company (d) 3.060% 07/20/05 2,995,155 --------------- Publishing (2.1%) 2,000,000 Gannett Company, Inc. (d) 2.960% 07/06/05 1,999,178 --------------- Retail (1.6%) 1,500,000 Wal-Mart Stores, Inc. (d) 3.120% 08/12/05 1,494,540 --------------- CONSUMER STAPLES (9.6%) Beverage (4.8%) 2,000,000 Anheuser-Busch Companies, Inc. (d) 3.100% 08/11/05 1,992,939 2,500,000 The Coca-Cola Company 3.060% 07/28/05 2,494,262 --------------- 4,487,201 --------------- Food (4.8%) 3,000,000 Nestle Capital Corporation (d) 3.050% 07/06/05 2,998,729 1,500,000 Nestle Capital Corporation (d) 3.090% 08/02/05 1,495,880 --------------- 4,494,609 --------------- FINANCIAL (8.7%) Auto Finance (2.1%) 2,000,000 American Honda Finance 3.200% 08/04/05 1,993,956 --------------- Commercial Finance (2.1%) 2,000,000 General Electric Capital Corporation 3.200% 08/03/05 1,994,133 --------------- Consumer Finance (2.1%) 2,000,000 AIG Sunamerica Global Financing II 3.080% 07/12/05 1,998,118 --------------- Insurance (2.4%) 2,250,000 American General Corporation 3.110% 08/01/05 2,243,974 --------------- HEALTH CARE (1.1%) Medical Products/Supplies (1.1%) 1,000,000 Medtronic, Inc. (d) 3.140% 07/27/05 997,732 --------------- TECHNOLOGY (2.7%) Computer Hardware (2.7%) 2,500,000 IBM Corporation 3.000% 07/14/05 2,497,292 --------------- TRANSPORTATION (.3%) Auto (.3%) 300,000 Toyota Motor Credit Corporation 3.250% 08/22/05 298,592 --------------- Total commercial paper (cost: $31,472,024) 31,472,024 ---------------
See accompanying notes to financial statements. 36
MARKET PRINCIPAL RATE MATURITY VALUE(a) - --------- ------ -------- --------------- U.S. GOVERNMENT OBLIGATIONS (54.3%) DISCOUNT NOTE (54.3%) $ 1,500,000 Federal Home Loan Bank 2.980% 07/15/05 $ 1,498,262 1,500,000 Federal Home Loan Bank 2.990% 07/21/05 1,497,508 2,500,000 Federal Home Loan Bank 3.000% 07/25/05 2,495,000 1,500,000 Federal Home Loan Bank 3.055% 07/22/05 1,497,327 2,250,000 Federal Home Loan Bank 3.090% 08/05/05 2,243,241 2,500,000 Federal Home Loan Bank 3.225% 08/19/05 2,489,026 1,500,000 Federal Home Loan Bank 3.280% 09/08/05 1,490,570 2,000,000 Federal Home Loan Mortgage Corporation 2.953% 07/01/05 2,000,000 2,000,000 Federal Home Loan Mortgage Corporation 3.030% 07/19/05 1,996,970 2,035,000 Federal Home Loan Mortgage Corporation 3.070% 07/26/05 2,030,661 1,500,000 Federal Home Loan Mortgage Corporation 3.100% 08/08/05 1,495,092 2,900,000 Federal Home Loan Mortgage Corporation 3.130% 08/16/05 2,888,402 2,500,000 Federal Home Loan Mortgage Corporation 3.150% 08/09/05 2,491,469 2,000,000 Federal Home Loan Mortgage Corporation 3.250% 08/30/05 1,989,167 2,000,000 Federal Home Loan Mortgage Corporation 3.290% 09/07/05 1,987,571 2,000,000 Federal National Mortgage Association 2.940% 07/08/05 1,998,857 2,500,000 Federal National Mortgage Association 2.940% 07/07/05 2,498,775 1,250,000 Federal National Mortgage Association 2.990% 07/13/05 1,248,754 700,000 Federal National Mortgage Association 3.000% 07/13/05 699,300 2,000,000 Federal National Mortgage Association 3.000% 07/20/05 1,996,833 1,500,000 Federal National Mortgage Association 3.000% 07/18/05 1,497,875 1,000,000 Federal National Mortgage Association 3.030% 07/29/05 997,643 1,000,000 Federal National Mortgage Association 3.070% 07/18/05 998,574 2,500,000 Federal National Mortgage Association 3.110% 08/10/05 2,491,361 1,500,000 Federal National Mortgage Association 3.130% 08/17/05 1,493,870 2,500,000 Federal National Mortgage Association 3.150% 07/11/05 2,497,944 2,500,000 Federal National Mortgage Association 3.250% 08/24/05 2,487,812 --------------- Total U.S. government obligations (cost: $50,997,864) 50,997,864 --------------- OTHER SHORT-TERM INVESTMENTS (10.6%) Beverage (2.2%) 2,000,000 Diageo Capital PLC (b) 6.125% 08/15/05 2,009,384 --------------- Drugs (4.8%) 1,516,000 Merck & Company, Inc. 6.750% 09/19/05 1,529,872 3,000,000 Pfizer, Inc. (c) 3.150% 11/04/05 3,000,000 --------------- 4,529,872 --------------- Manufacturing (1.6%) 1,500,000 Honeywell International, Inc. 6.875% 10/03/05 1,516,941 --------------- Oil & Gas (2.0%) 1,860,000 Total SA (b) 7.000% 10/05/05 1,881,511 --------------- Total other short-term investments (cost: $9,937,708) 9,937,708 ---------------
See accompanying notes to financial statements. 37
MARKET SHARES VALUE(a) - ------ --------------- INVESTMENT COMPANIES (1.7%) 1,328,009 Federated Money Market Obligation Trust--Prime Obligation Fund, current rate 3.080% $ 1,328,009 265,486 JPMorgan Prime Money Market Fund, current rate 3.150% 265,486 --------------- Total investment companies (cost: $1,593,495) 1,593,495 --------------- Total investments in securities (cost: $94,001,091) (e) $ 94,001,091 --------------- Liabilities in excess of cash and other assets (-.1%) (127,701) --------------- Total net assets (100%) $ 93,873,390 ===============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) The Portfolio held 4.1% of net assets in foreign securities at June 30, 2005. (c) Variable rate security. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 17.5% of the Portfolio's net assets as of June 30, 2005. (e) Also represents the cost of securities for federal income tax purposes at June 30, 2005. See accompanying notes to financial statements. 38 MORTGAGE SECURITIES PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- LONG-TERM DEBT SECURITIES (98.4%) GOVERNMENT OBLIGATIONS (51.8%) U.S. Government and Agencies Obligations (51.8%) Federal Home Loan Mortgage Corporation (FHLMC) (1.4%) $ 917,325 (k) 5.500% 05/01/34 $ 932,934 689,035 5.500% 05/01/34 700,771 701,117 6.500% 11/01/32 726,903 425,453 6.500% 09/01/34 440,453 --------------- 2,801,061 --------------- Federal National Mortgage Association (FNMA) (46.1%) 2,130,000 (h) 4.500% 07/01/20 2,120,014 1,729,507 (k) 5.000% 05/01/18 1,751,761 1,020,000 (h) 5.000% 07/01/33 1,020,000 8,815,545 (k) 5.000% 11/01/33 8,827,917 3,382,745 (k) 5.000% 01/01/34 3,387,492 11,532,123 5.000% 03/01/34 11,544,565 1,085,603 5.000% 05/01/34 1,086,774 1,544,579 5.000% 03/01/35 1,546,246 1,222,607 (k) 5.500% 02/01/18 1,257,815 970,000 (h) 5.500% 07/01/19 995,462 1,573,674 5.500% 02/01/24 1,606,429 3,029,301 5.500% 04/01/33 3,082,979 1,209,524 5.500% 05/01/33 1,229,110 5,248,235 5.500% 03/01/34 5,336,300 5,974,989 5.500% 04/01/34 6,069,223 413,301 5.500% 05/01/34 419,197 5,626,739 5.500% 07/01/34 5,720,190 4,150,000 (h) 5.500% 07/01/34 4,205,768 1,926,752 5.500% 09/01/34 1,956,034 1,497,276 5.500% 10/01/34 1,518,634 1,958,568 5.500% 02/01/35 1,987,427 266,054 6.000% 09/01/32 274,300 559,215 6.000% 10/01/32 576,446 2,405,220 (k) 6.000% 10/01/32 2,476,433 2,297,679 6.000% 11/01/32 2,368,185 2,516,412 6.000% 03/01/33 2,596,043 773,299 6.000% 12/01/33 793,099 944,074 6.000% 08/01/34 968,216 837,447 6.000% 09/01/34 858,862 427,901 6.000% 11/01/34 438,843 1,998,443 6.000% 12/01/34 2,049,548 1,172,167 6.500% 02/01/32 1,220,487 956,838 (k) 6.500% 02/01/32 $ 996,259 819,389 6.500% 04/01/32 854,058 366,766 6.500% 05/01/32 381,872 2,685,712 6.500% 07/01/32 2,796,774 81,369 6.500% 09/01/32 84,351 214,402 6.500% 11/01/34 221,961 1,950,000 6.500% 03/01/35 2,021,451
See accompanying notes to financial statements. 39
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- GOVERNMENT OBLIGATIONS--CONTINUED $ 1,146,444 (k) 7.000% 09/01/31 $ 1,214,312 129,898 7.000% 11/01/31 137,163 731,209 7.000% 02/01/32 774,935 847,645 7.000% 06/25/32 892,941 133,287 7.000% 07/01/32 141,069 215,492 7.500% 04/01/31 232,264 212,948 (c) (k) 8.108% 12/25/15 217,343 --------------- 92,256,552 --------------- Government National Mortgage Association (GNMA) (3.6%) -- (c) (g) 0.378% 03/16/42 720,016 -- (c) (g) 0.994% 06/17/45 1,311,729 -- (c) (g) 1.188% 07/16/40 819,026 -- (c) (g) 1.310% 03/16/34 719,902 433,829 5.000% 11/15/33 437,813 3,110,052 5.500% 12/15/34 3,179,170 --------------- 7,187,656 --------------- State and Local Government Obligations (.6%) 1,305,000 Pleasant Hill California 7.950% 09/20/15 1,338,330 --------------- Vendee Mortgage Trust (.1%) 235,718 Vendee Mortgage Trust 7.793% 02/15/25 249,669 --------------- Total U.S. government and agencies obligations (cost: $103,665,179) 103,833,268 --------------- ASSET-BACKED SECURITIES (19.7%) 1,405,000 ABFS Mortgage Loan Trust (l) 7.423% 12/15/33 1,427,364 2,200,000 Associates Manufactured Housing Pass Through Certificates 7.900% 03/15/27 2,357,230 1,250,000 BankAmerica Manufactured Housing Contract Trust 7.015% 01/10/28 1,307,146 5,291,000 BankAmerica Manufactured Housing Contract Trust 7.800% 10/10/26 5,606,964 350,000 Centex Home Equity (l) (m) 5.048% 06/25/35 350,656 900,000 Countryplace Manufactured Housing Contract - 144A Issue (e) (h) (m) 4.420% 07/15/09 901,969 1,080,000 Countryplace Manufactured Housing Contract - 144A Issue (e) (h) (m) 4.800% 11/15/13 1,088,268 1,000,000 Credit-Based Asset Servicing and Securities (l) 4.974% 01/25/35 1,001,158 1,300,000 Credit-Based Asset Servicing and Securitization (l) 5.109% 06/25/35 1,311,276 127,728 Green Tree Financial Corporation 7.050% 01/15/19 133,641 350,000 Green Tree Financial Corporation 7.950% 08/15/25 372,702 694,595 Green Tree Financial Corporation 8.300% 11/15/19 734,425 882,236 Green Tree Financial Corporation 8.400% 06/15/19 935,130 1,418,442 Green Tree Financial Corporation (n) 9.100% 04/15/25 1,760,945 1,330,319 GRMT Fairbanks Trust - 144A Issue (c) (e) 5.360% 06/20/32 1,342,569 1,950,723 Lehman ABS Manufactured Housing Contract 5.873% 05/15/22 2,001,908 283,860 Metropolitan Asset Funding, Inc. - 144A Issue (f) 6.980% 05/20/12 283,333 282,544 Metropolitan Asset Funding, Inc. - 144A Issue (f) 7.130% 06/20/12 282,004 2,492,896 Mid-State Trust 7.790% 07/01/35 2,657,712 789,665 MMCA Automobile Trust 5.370% 01/15/10 791,682
See accompanying notes to financial statements. 40
MARKET PRINCIPAL COUPON MATURITY VALUE(a) - --------- ------ -------- --------------- ASSET-BACKED SECURITIES--CONTINUED $ 1,397,706 Oakwood Mortgage Investors, Inc. 7.375% 08/15/27 $ 1,457,959 1,595,828 Oakwood Mortgage Investors, Inc. (e) 8.100% 08/15/26 1,650,695 79,044 Origen Manufactured Housing 2.020% 10/15/13 78,472 500,000 Origen Manufactured Housing 4.750% 08/15/21 499,057 870,000 Origen Manufactured Housing 4.970% 10/15/21 883,278 1,600,000 Origen Manufactured Housing 5.910% 01/15/35 1,655,269 500,000 Residential Asset Mortgage Products, Inc. (c) 5.145% 01/25/35 500,900 1,250,000 Residential Asset Mortgage Products, Inc. (l) 6.092% 12/25/33 1,276,852 1,000,000 Residential Funding Mortgage Securities (l) 5.090% 07/25/33 995,910 439,188 The Money Store Home Equity Trust (c) 3.370% 08/15/29 439,153 808,681 Vanderbilt Mortgage Finance 7.070% 12/07/14 826,176 2,250,000 Vanderbilt Mortgage Finance 7.955% 12/07/24 2,436,528 --------------- Total Asset-Backed Securities (Cost: $38,670,630) 39,348,331 --------------- OTHER MORTGAGE-BACKED SECURITIES (25.8%) Collateralized Mortgage Obligations/Mortgage Revenue Bonds (15.9%) 373,561 Banc of America Alternative Loan Trust 6.000% 12/25/34 380,555 2,506,371 Banc of America Funding Corporation (c) 5.027% 09/20/34 2,517,312 1,476,842 Banc of America Funding Corporation 6.500% 07/20/32 1,558,328 1,641,032 Banc of America Mortgage Securities Corporation 5.750% 08/25/34 1,666,460 10,000 Banco Hipotecario Nacional - 144A Issue (b) (c) (e) (j) 4.764% 03/25/11 250 483,591 Banco Hipotecario Nacional - 144A Issue (b) (e) (j) 7.540% 05/31/17 24,180 50,980 Banco Hipotecario Nacional - 144A Issue (b) (e) (j) 7.916% 07/25/09 1,274 985,869 Bear Stearns Mortgage Securities, Inc. 8.000% 11/25/29 983,223 1,823,711 BlackRock Capital Finance LP - 144A Issue (f) 7.750% 09/25/26 1,859,673 2,541,490 Charlie Mac 5.000% 10/25/34 2,529,136 1,131,619 Chase Mortgage Financial Corporation 5.500% 10/25/33 1,136,574 2,000,000 Countrywide Home Loan Mortgage Pass Through Trust 4.150% 08/25/33 1,902,475 1,704,433 Credit Suisse First Boston Mortgage Securities Corporation 6.000% 11/25/18 1,749,688 852,668 Global Mortgage Securitization, Ltd. 5.250% 04/25/32 848,937 2,132,035 Global Mortgage Securitization, Ltd. - 144A Issue (e) 5.250% 11/25/32 2,140,168 2,461,747 Master Asset Securitization Trust 5.500% 11/25/33 2,480,087 243,926 Prudential Home Mortgage Securities - 144A Issue (f) 7.900% 04/28/22 242,741 47,412 Prudential Home Mortgage Securities - 144A Issue (c) (f) 8.004% 09/28/24 47,238 1,498,505 Residential Accredit Loans, Inc. 5.750% 06/25/33 1,544,074 369,552 Residential Accredit Loans, Inc. - 144A Issue (f) 6.250% 03/25/14 370,364 145,913 Sequoia Mortgage Funding Company - 144A Issue (f) 6.380% 08/28/31 145,305 83,355 Structured Asset Mortgage Investments, Inc. 6.750% 04/30/30 83,023 2,000,000 Structured Asset Securities Corporation (l) 5.630% 5/25/34 2,021,390 2,700,000 Structured Asset Securities Corporation (l) 6.000% 06/25/34 2,769,330 1,200,000 Wells Fargo Mortgage Backed Securities (c) 4.520% 11/25/33 1,191,720 1,619,246 Wells Fargo Mortgage Backed Securities 5.500% 02/25/34 1,653,096 --------------- 31,846,601 ---------------
See accompanying notes to financial statements. 41
MARKET PRINCIPAL/SHARES COUPON MATURITY VALUE(a) - ---------------- ------ -------- --------------- OTHER MORTGAGE-BACKED SECURITIES--CONTINUED Commercial Mortgage-Backed Securities (9.9%) $ -- Asset Securitization Corporation (c) (g) 2.263% 08/13/29 $ 861,451 -- Asset Securitization Corporation (e) (g) 2.433% 08/13/27 578,187 -- Asset Securitization Corporation - 144A Issue (c) (f) (g) 1.798% 10/13/26 823,588 1,500,000 Bear Stearns Commercial Mortgage - 144A Issue (f) 5.064% 05/14/16 1,529,558 4,936,000 FFCA Secured Lending Corporation 8.910% 06/01/20 5,203,615 2,726,000 FFCA Secured Lending Corporation - 144A Issue (c) (e) 4.360% 02/18/22 2,532,774 1,290,000 FFCA Secured Lending Corporation - 144A Issue (c) (e) 4.610% 02/18/22 1,188,380 586,613 GMAC Commercial Mortgage Securities (e) (m) 5.940% 07/01/13 587,713 500,000 Hilton Hotel Pool Trust - 144A Issue (c) (f) (i) 3.611% 10/03/15 503,126 1,000,000 Hilton Hotel Pool Trust - 144A Issue (f) 7.458% 10/03/15 1,121,022 1,500,000 JP Morgan Chase Commercial Mortgage Sec. - 144A Issue (f) 6.221% 10/12/37 1,623,751 -- Multi Security Asset Trust - 144A Issue (c) (e) (g) 1.067% 11/28/35 1,226,364 990,000 Multi Security Asset Trust - 144A Issue (c) (e) 5.880% 11/28/35 994,353 1,000,000 Nationslink Funding Corporation - 144A Issue (f) 5.000% 08/20/30 974,354 --------------- 19,748,236 --------------- Total other mortgage-backed securities (cost: $53,028,140) 51,594,837 --------------- CORPORATE OBLIGATIONS (1.1%) FINANCIAL (1.1%) Real Estate (1.1%) 2,250,000 Covenant Retirement Communities, Inc. (c) 7.000% 06/01/06 2,258,831 --------------- Total corporate obligations (cost: $2,250,000) 2,258,831 --------------- Total long-term debt securities (cost: $197,613,949) 197,035,267 --------------- SHORT-TERM SECURITIES (13.0%) SECURITY LENDING COLLATERAL (6.6%) Commercial Paper (4.1%) 627,977 Amsterdam Funding Corporation (d) 3.100% 07/11/05 627,405 381,272 ANZ National, Ltd. (d) 3.100% 07/08/05 381,028 448,555 BHP Billiton Financial USA, Ltd. (d) 3.100% 07/05/05 448,394 762,544 Cedar Springs Capital Company (d) 3.140% 07/20/05 761,224 677,767 Concord Minutemen Capital Company (d) 3.130% 07/07/05 677,401 735,630 Crown Point Capital Company (d) 3.100% 07/05/05 735,365 89,711 Eiffel Funding LLC (d) 3.100% 07/05/05 89,679 647,624 Eiffel Funding LLC (d) 3.080% 07/08/05 647,209 251,191 Irish Life & Permanent (d) 3.040% 07/08/05 251,030 627,977 KLIO II Funding Corporation (d) 3.170% 08/02/05 626,137 538,266 Lehman Brothers Holdings (d) 2.762% 08/16/05 538,266 627,977 Liquid Funding, Ltd. (d) 3.080% 07/05/05 627,751 251,191 Morgan Stanley (d) 2.470% 02/03/06 251,191 89,711 Neptune Funding Corporation (d) 3.100% 07/06/05 89,671 538,266 Sedna Finance, Inc. (d) 3.080% 07/11/05 537,776 161,480 Sedna Finance, Inc. (d) 3.100% 07/14/05 161,289
See accompanying notes to financial statements. 42
PRINCIPAL/ MARKET SHARES COUPON MATURITY VALUE(a) - ---------------- ------ -------- --------------- SECURITY LENDING COLLATERAL--CONTINUED 44,856 Sedna Finance, Inc. (d) 3.110% 07/19/05 $ 44,782 627,977 Solitaire Funding, LLC (d) 3.130% 07/21/05 626,834 --------------- 8,122,432 --------------- Corporate Note (1.3%) 627,977 American General Finance (c) 3.090% 07/14/06 628,034 358,844 Beta Finance, Inc. (c) 2.990% 06/02/06 358,930 807,399 General Electric Capital Assurance Company 3.162% 06/16/06 807,399 448,555 Metropolitan Life Global Funding I (c) 3.182% 03/06/06 448,483 448,555 Morgan Stanley (c) 3.090% 08/13/10 448,591 --------------- 2,691,437 --------------- Repurchase Agreement (1.2%) 2,409,908 Morgan Stanley, Wells Fargo and Bank of New York Repurchase Agreement account; dated 6/30/05, rate 3.487%, due 7/1/05; proceeds $2,410,141 (Collateralized by Corporate Obligations) 2,409,908 --------------- Total security lending collateral (cost: $13,223,777) 13,223,777 --------------- INVESTMENT COMPANIES (6.4%) 9,060,145 American Beacon Funds, current rate 3.190% 9,060,145 145,039 BlackRock Provident Institutional TempFund, current rate 3.086% 145,039 3,500,298 JPMorgan Prime Money Market Fund, current rate 3.150% 3,500,298 --------------- Total investment companies (cost: $12,705,482) 12,705,482 --------------- Total short-term securities (cost: $25,929,259) 25,929,259 --------------- Total investments in securities (cost: $223,543,208) (o) $ 222,964,526 --------------- Payable upon return of securities loaned (-6.6%) (13,223,777) Liabilities in excess of cash and other assets (-4.8%) (9,585,672) --------------- Total net assets (100%) $ 200,155,077 ===============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) The Portfolio held .01% of net assets in foreign securities at June 30, 2005. (c) Variable rate security. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 3.66% of the Portfolio's net assets at June 30, 2005. See accompanying notes to financial statements. 43 (e) Represents ownership in an illiquid security. (See note 6 to the financial statements.) Information concerning the illiquid securities held at June 30, 2005, which includes cost and acquisition date, is as follows:
ACQUISITION ACQUISITION SECURITY: DATE COST --------- ------------- ------------- Banco Hipotecario Nacional - 144A Issue* 09/06/02 $ 746 Banco Hipotecario Nacional - 144A Issue* Various 454,308 Banco Hipotecario Nacional - 144A Issue* Various 48,918 Countryplace Manufactured Housing Contract - 144A Issue* 06/29/05 899,961 Countryplace Manufactured Housing Contract - 144A Issue* 06/29/05 1,079,864 FFCA Secured Lending Corporation - 144A Issue* 05/14/03 2,384,398 FFCA Secured Lending Corporation - 144A Issue* 05/19/03 1,086,220 Global Mortgage Securitization, Ltd. - 144A Issue* 11/24/04 2,113,995 GRMT Fairbanks Trust - 144A Issue* 07/15/03 1,297,892 Multi Security Asset Trust - 144A Issue* 02/24/05 976,198 Multi Security Asset Trust - 144A Issue* 02/24/05 1,320,116 Asset Securitization Corporation+ 11/28/98 760,514 GMAC Commercial Mortgage Securities+ 11/12/01 562,072 Oakwood Mortgage Investors, Inc.+ 03/25/03 1,664,843 ------------- $ 14,650,045 =============
* A 144A Issue represents a security which has not been registered with the Securities and Exchange Commission under the Securities Act of 1933. + Represents a private placement security. (f) Long-term debt security sold within terms of a private placement memorandum exempt from registration under Section 144A of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors". These securities have been determined to be liquid under guidelines established by the Board of Directors. (g) Interest-only security that entitles holders to receive only interest on the underlying mortgages. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The yield to maturity of an interest-only security is sensitive to the rate of principal payments on the underlying mortgage assets. The rate disclosed represents the market yield based upon the current cost basis and estimate timing and amount of future cash flows. (h) At June 30, 2005 the total cost of investments issued on a when-issued or forward commitment basis is $10,300,053. See accompanying notes to financial statements. 44 (i) Partially pledged as initial margin deposit on open Euro futures purchase contracts. HOLDINGS OF OPEN FUTURES CONTRACTS On June 30, 2005, securities with an aggregate market value of $503,126 have been segregated to cover margin requirements for the following open futures contracts:
NUMBER OF POSITION UNREALIZED UNREALIZED TYPE EXPIRATION CONTRACTS TYPE APPRECIATION DEPRECIATION ----------- -------------- --------- -------- ------------ ------------ 90 Day Euro September 2005 4 Long $ -- $ 10,070 90 Day Euro December 2005 4 Long -- 8,858 90 Day Euro March 2006 4 Long -- 7,007 90 Day Euro June 2006 4 Long -- 5,345 90 Day Euro September 2006 4 Long -- 4,070 90 Day Euro December 2006 3 Long -- 2,752 90 Day Euro March 2007 3 Long -- 1,928 90 Day Euro June 2007 3 Long -- 1,290 90 Day Euro September 2007 3 Long -- 615 90 Day Euro December 2007 3 Long 22 -- 90 Day Euro March 2008 3 Long 660 -- 90 Day Euro June 2008 3 Long 1,260 -- 90 Day Euro September 2008 3 Long 1,748 -- 90 Day Euro December 2008 3 Long 2,235 -- 90 Day Euro March 2009 3 Long 2,760 -- 90 Day Euro June 2009 3 Long 3,210 -- 90 Day Euro September 2009 3 Long 3,622 -- -- --------- --------- 56 $ 15,517 $ 41,935 == ========= =========
(j) Security is in default with respect to interest payments. Income is not being accrued on this security and any payments received are treated as a reduction of principal. This security is being fair valued according to procedures approved by the board of directors. (k) Security pledged as collateral for when-issued purchase commitments outstanding as of June 30, 2005. (l) Stepped rate security. Stated interest rate is contingent upon sufficient collateral market value. If collateral market value falls below the stated level, the issuer will either initiate a clean-up call or increase the stated rate. (m) This security is being fair-valued according to procedures approved by the Board of Directors. (n) Security is in default with respect to interest payments. (o) At June 30, 2005 the cost of securities for federal income tax purposes was $223,662,721. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 2,985,630 Gross unrealized depreciation (3,683,825) ------------- Net unrealized depreciation $ (698,195) =============
See accompanying notes to financial statements. 45 INDEX 500 PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) - --------- -------------- COMMON STOCKS (99.4%) BASIC MATERIALS (3.1%) Chemicals (1.6%) 13,386 Air Products and Chemicals, Inc. $ 807,176 3,905 Ashland, Inc. (b) 280,652 4,700 Eastman Chemical Company 259,205 12,790 Ecolab, Inc. 413,884 58,032 EI Du Pont de Nemours & Company 2,495,956 6,994 Engelhard Corporation 199,679 3,036 Great Lakes Chemical Corporation 95,543 6,493 Hercules, Inc. (b) 91,876 5,116 International Flavors & Fragrances, Inc. 185,301 9,999 PPG Industries, Inc. 627,537 18,841 Praxair, Inc. 877,991 11,243 Rohm & Haas Company 521,000 4,028 Sigma-Aldrich Corporation 225,729 56,003 The Dow Chemical Company 2,493,814 7,253 The Sherwin-Williams Company 341,544 -------------- 9,916,887 -------------- Construction (.1%) 5,950 Vulcan Materials Company 386,690 -------------- Iron and Steel (.1%) 5,170 Allegheny Technologies, Inc. 114,050 9,308 Nucor Corporation 424,631 6,654 United States Steel Corporation 228,698 -------------- 767,379 -------------- Mining (.5%) 50,775 Alcoa, Inc. 1,326,751 10,440 Freeport-McMoRan Copper & Gold, Inc. 390,874 26,013 Newmont Mining Corporation 1,015,287 5,692 Phelps Dodge Corporation 526,510 -------------- 3,259,422 -------------- Paper and Forest (.8%) 6,240 Bemis Company $ 165,610 15,168 Georgia-Pacific Corporation 482,342 28,523 International Paper Company 861,680 27,873 Kimberly-Clark Corporation 1,744,571 6,422 Louisiana-Pacific Corporation 157,853 10,879 MeadWestvaco Corporation 305,047 10,723 Plum Creek Timber Company, Inc. 389,245 7,270 Temple-Inland, Inc. 270,080 14,270 Weyerhaeuser Company 908,286 -------------- 5,284,714 -------------- CAPITAL GOODS (8.8%) Aerospace/Defense (2.0%) 11,683 General Dynamics Corporation 1,279,756 6,970 Goodrich Corporation 285,491 6,914 L-3 Communications Holdings, Inc. 529,474 23,539 Lockheed Martin Corporation 1,526,975 20,920 Northrop Grumman Corporation 1,155,830 26,347 Raytheon Company 1,030,695 10,203 Rockwell Automation, Inc. 496,988 10,404 Rockwell Collins, Inc. 496,063 48,142 The Boeing Company 3,177,372 59,638 United Technologies Corporation 3,062,411 -------------- 13,041,055 -------------- Containers -- Metal/Glass (--) 6,374 Ball Corporation 229,209 -------------- Electrical Equipment (4.1%) 10,486 American Power Conversion Corporation 247,365 5,456 Cooper Industries, Ltd. 348,638 24,277 Emerson Electric Company 1,520,468
See accompanying notes to financial statements. 46
MARKET SHARES VALUE(a) - --------- -------------- CAPITAL GOODS--CONTINUED 617,903 General Electric Company (f) $ 21,410,339 49,665 Honeywell International, Inc. 1,819,229 9,774 Molex, Inc. 254,515 9,318 Thermo Electron Corporation (b) 250,375 -------------- 25,850,929 -------------- Engineering/Construction (.3%) 19,907 Caterpillar, Inc. 1,897,336 5,038 Fluor Corporation 290,138 -------------- 2,187,474 -------------- Machinery (.3%) 14,411 Deere & Company 943,776 9,821 Ingersoll-Rand Company, Ltd. (c) 700,728 -------------- 1,644,504 -------------- Manufacturing (1.9%) 44,836 3M Company 3,241,643 16,064 Danaher Corporation 840,790 11,891 Dover Corporation 432,594 8,780 Eaton Corporation 525,922 15,904 Illinois Tool Works, Inc. 1,267,231 5,426 ITT Industries, Inc. 529,740 11,037 Leggett & Platt, Inc. 293,363 7,247 Pall Corporation 220,019 6,976 Parker Hannifin Corporation 432,582 4,911 Sealed Air Corporation (b) 244,519 7,891 Textron, Inc. 598,532 117,659 Tyco International, Ltd. (c) 3,435,643 -------------- 12,062,578 -------------- Trucks and Parts (--) 2,520 Cummins, Inc. 188,017 -------------- Waste Management (.2%) 15,741 Allied Waste Industries, Inc. (b) 124,826 33,084 Waste Management, Inc. 937,601 -------------- 1,062,427 -------------- COMMUNICATION SERVICES (4.6%) Cellular (.3%) 65,565 Nextel Communications, Inc. (b) $ 2,118,405 -------------- Telecommunication (1.5%) 6,661 ADC Telecommunications, Inc. (b) 145,010 9,380 Andrew Corporation (b) 119,689 27,792 Avaya, Inc. (b) 231,229 33,588 Ciena Corporation (b) 70,199 11,668 Comverse Technology, Inc. (b) 275,948 84,433 Corning, Inc. (b) 1,403,276 84,335 JDS Uniphase Corporation (b) 128,189 258,101 Lucent Technologies, Inc. (b) 751,074 142,867 Motorola, Inc. 2,608,751 95,173 Qualcomm, Inc. 3,141,661 8,854 Scientific-Atlanta, Inc. 294,573 26,116 Tellabs, Inc. (b) 227,209 -------------- 9,396,808 -------------- Telephone (2.8%) 19,061 Alltel Corporation 1,187,119 46,620 AT&T Corporation 887,645 106,675 BellSouth Corporation 2,834,355 7,649 CenturyTel, Inc. 264,885 19,843 Citizens Communications Company 266,690 97,419 Qwest Communications International, Inc. (b) 361,424 192,440 SBC Communications, Inc. 4,570,450 86,180 Sprint Corporation-FON Group 2,162,256 161,216 Verizon Communications, Inc. 5,570,013 -------------- 18,104,837 -------------- CONSUMER CYCLICAL (10.7%) Auto (.5%) 3,642 Cooper Tire & Rubber Company 67,632 8,742 Dana Corporation 131,217 32,659 Delphi Corporation 151,864 107,219 Ford Motor Company 1,097,923 32,971 General Motors Corporation 1,121,014
See accompanying notes to financial statements. 47
MARKET SHARES VALUE(a) - --------- -------------- CONSUMER CYCLICAL--CONTINUED 11,157 Johnson Controls, Inc. $ 628,474 10,250 The Goodyear Tire & Rubber Company (b) 152,725 7,427 Visteon Corporation 44,785 -------------- 3,395,634 -------------- Building Materials (.2%) 10,410 American Standard Companies, Inc. 436,387 25,267 Masco Corporation 802,480 -------------- 1,238,867 -------------- Construction (.1%) 7,453 Centex Corporation 526,704 4,906 KB Home 373,984 -------------- 900,688 -------------- Distribution Durables (.1%) 10,188 Genuine Parts Company 418,625 4,912 WW Grainger, Inc. 269,128 -------------- 687,753 -------------- Entertainment (.1%) 20,028 International Game Technology 563,788 -------------- Hardware and Tools (.1%) 4,733 Black & Decker Corporation 425,260 3,338 Snap-On, Inc. 114,493 4,427 The Stanley Works 201,606 -------------- 741,359 -------------- Home Builders (.1%) 6,977 Pulte Homes, Inc. 587,812 -------------- Houseware (.1%) 4,581 Maytag Corporation 71,738 3,920 Whirlpool Corporation 274,831 -------------- 346,569 -------------- Leisure (.6%) 5,625 Brunswick Corporation 243,675 30,755 Carnival Corporation 1,677,685 16,585 Harley-Davidson, Inc. 822,616 9,728 Hasbro, Inc. 202,245 23,981 Mattel, Inc. 438,852 7,544 Sabre Holdings Corporation 150,503 -------------- 3,535,576 -------------- Lodging -- Hotel (.4%) 10,582 Harrah's Entertainment, Inc. $ 762,645 22,247 Hilton Hotels Corporation 530,591 11,564 Marriott International, Inc. 788,896 12,591 Starwood Hotels & Resorts Worldwide, Inc. 737,455 -------------- 2,819,587 -------------- Photography/Imagery (.1%) 16,735 Eastman Kodak Company 449,335 -------------- Publishing (1.0%) 4,157 Dow Jones & Company, Inc. 147,366 14,471 Gannett Company, Inc. 1,029,322 4,334 Knight-Ridder, Inc. 265,847 2,578 Meredith Corporation 126,477 8,484 New York Times Company 264,277 168,047 News Corporation 2,719,000 21,824 The McGraw-Hill Companies, Inc. 965,712 17,312 Tribune Company 609,036 -------------- 6,127,037 -------------- Retail (6.1%) 13,008 Autonation, Inc. (b) 266,924 3,825 Autozone, Inc. (b) 353,660 17,212 Bed Bath & Beyond, Inc. (b) 719,117 17,428 Best Buy Company, Inc. 1,194,689 6,546 Big Lots, Inc. (b) 86,669 11,091 Circuit City Stores, Inc. 191,763 27,829 Costco Wholesale Corporation 1,247,296 47,194 CVS Corporation 1,371,930 4,171 Dillards, Inc. 97,685 17,497 Dollar General Corporation 356,239 9,675 Family Dollar Stores, Inc. 252,518 9,973 Federated Department Stores, Inc. 730,821 125,046 Home Depot, Inc. 4,864,289
See accompanying notes to financial statements. 48
MARKET SHARES VALUE(a) - --------- -------------- CONSUMER CYCLICAL--CONTINUED 15,340 JC Penney Company, Inc. $ 806,577 19,027 Kohl's Corporation (b) 1,063,800 22,150 Limited Brands, Inc. 474,453 45,004 Lowe's Companies, Inc. 2,620,133 13,307 Nike, Inc. 1,152,386 7,161 Nordstrom, Inc. 486,733 18,401 Office Depot, Inc. (b) 420,279 4,114 OfficeMax, Inc. 122,474 9,069 RadioShack Corporation 210,129 3,278 Reebok International, Ltd. 137,119 5,957 Sears Holding Corporation (b) 892,776 42,915 Staples, Inc. 914,948 51,465 Target Corporation 2,800,211 44,147 The Gap, Inc. 871,903 17,446 The May Department Stores Company 700,631 8,367 Tiffany & Company 274,103 27,407 TJX Companies, Inc. 667,360 12,904 Toys 'R' Us, Inc. (b) 341,698 59,524 Walgreen Company 2,737,509 194,916 Wal-Mart Stores, Inc. 9,394,951 -------------- 38,823,773 -------------- Service (.8%) 61,264 Cendant Corporation 1,370,476 8,268 Convergys Corporation (b) 117,571 70,775 eBay, Inc. (b) 2,336,283 24,585 Interpublic Group of Companies, Inc. (b) 299,445 7,007 Monster Worldwide, Inc. (b) 200,961 10,684 Omnicom Group 853,224 9,279 Robert Half International, Inc. 231,696 -------------- 5,409,656 -------------- Textiles (.3%) 8,697 Cintas Corporation 335,704 21,971 Coach, Inc. (b) 737,566 7,024 Jones Apparel Group, Inc. 218,025 6,334 Liz Claiborne, Inc. 251,840 5,788 VF Corporation 331,189 -------------- 1,874,324 -------------- Trucks and Parts (.1%) 3,773 Navistar International Corporation (b) $ 120,736 10,128 Paccar, Inc. 688,704 -------------- 809,440 -------------- CONSUMER STAPLES (10.6%) Agriculture Products (.3%) 36,276 Archer-Daniels-Midland Company 775,581 15,644 Monsanto Company 983,538 -------------- 1,759,119 -------------- Beverage (2.2%) 45,231 Anheuser-Busch Companies, Inc. 2,069,318 5,308 Brown-Forman Corporation 320,922 20,489 Coca-Cola Enterprises, Inc. 450,963 4,573 Molson Coors Brewing Company 283,526 11,417 Pepsi Bottling Group, Inc. 326,640 97,560 PepsiCo, Inc. 5,261,411 131,861 The Coca-Cola Company 5,505,197 -------------- 14,217,977 -------------- Broadcasting (.8%) 29,708 Clear Channel Communications, Inc. 918,868 128,491 Comcast Corporation (b) 3,944,674 16,935 Univision Communications, Inc. (b) 466,559 -------------- 5,330,101 -------------- Entertainment (1.0%) 93,932 Viacom, Inc. 3,007,703 118,927 Walt Disney Company 2,994,582 -------------- 6,002,285 -------------- Food (1.3%) 18,908 Campbell Soup Company 581,799 30,091 ConAgra Foods, Inc. 696,908 21,539 General Mills, Inc. 1,007,810 12,668 Hershey Company 786,683
See accompanying notes to financial statements. 49
MARKET SHARES VALUE(a) - --------- -------------- CONSUMER STAPLES--CONTINUED 20,335 HJ Heinz Company $ 720,266 20,369 Kellogg Company 905,198 7,877 McCormick & Company, Inc. 257,420 45,867 Sara Lee Corporation 908,625 36,881 Sysco Corporation 1,334,723 11,417 WM Wrigley Jr Company 785,946 -------------- 7,985,378 -------------- Household Products (.3%) 5,884 Avery Dennison Corporation 311,617 9,032 Clorox Company 503,263 8,532 Fortune Brands, Inc. 757,642 15,941 Newell Rubbermaid, Inc. 380,033 8,640 Pactiv Corporation (b) 186,451 -------------- 2,139,006 -------------- Personal Care (2.1%) 4,992 Alberto-Culver Company 216,303 27,527 Avon Products, Inc. 1,041,897 30,480 Colgate-Palmolive Company 1,521,257 144,168 Procter & Gamble Company 7,604,862 58,121 The Gillette Company 2,942,666 -------------- 13,326,985 -------------- Restaurants (.7%) 8,488 Darden Restaurants, Inc. 279,934 73,843 McDonald's Corporation 2,049,143 22,709 Starbucks Corporation (b) 1,173,147 6,651 Wendy's International, Inc. 316,920 16,881 Yum! Brands, Inc. 879,162 -------------- 4,698,306 -------------- Retail (.3%) 21,384 Albertson's, Inc. 442,221 42,458 Kroger Company (b) 807,976 26,022 Safeway, Inc. 587,837 7,955 Supervalu, Inc. 259,413 -------------- 2,097,447 -------------- Service (.2%) 9,524 Apollo Group, Inc. (b) $ 744,967 12,409 RR Donnelly & Sons Company 428,235 -------------- 1,173,202 -------------- Tobacco (1.4%) 120,654 Altria Group, Inc. 7,801,488 6,757 Reynolds American, Inc. 532,452 9,634 UST, Inc. 439,888 -------------- 8,773,828 -------------- ENERGY (8.7%) Oil & Gas (7.5%) 5,019 Amerada Hess Corporation 534,574 13,726 Anadarko Petroleum Corporation 1,127,591 19,158 Apache Corporation 1,237,607 22,459 Burlington Resources, Inc. 1,240,635 122,243 ChevronTexaco Corporation 6,835,829 81,116 ConocoPhillips 4,663,359 27,600 Devon Energy Corporation 1,398,768 13,950 EOG Resources, Inc. 792,360 370,869 Exxon Mobil Corporation (f) 21,313,839 6,812 Kerr-McGee Corporation 519,824 20,258 Marathon Oil Corporation 1,081,169 8,690 Nabors Industries, Ltd. (b) (c) 526,788 7,899 Noble Corporation 485,867 23,189 Occidental Petroleum Corporation 1,783,930 6,308 Rowan Companies, Inc. 187,411 4,011 Sunoco, Inc. 455,970 18,999 Transocean, Inc. (b) 1,025,376 15,895 Unocal Corporation 1,033,970 14,983 Valero Energy Corporation 1,185,305 21,028 XTO Energy, Inc. 714,742 -------------- 48,144,914 --------------
See accompanying notes to financial statements. 50
MARKET SHARES VALUE(a) - --------- -------------- ENERGY--CONTINUED Oil & Gas Services (.9%) 19,742 Baker Hughes, Inc. $ 1,010,001 9,466 BJ Services Company 496,776 29,447 Halliburton Company 1,408,156 10,024 National Oilwell Varco, Inc. (b) 476,541 34,318 Schlumberger, Ltd. 2,606,109 -------------- 5,997,583 -------------- Pipelines (.3%) 19,332 Dynegy, Inc. (b) 93,954 37,546 El Paso Corporation 432,530 6,322 Kinder Morgan, Inc. 525,990 33,186 Williams Companies, Inc. 630,534 -------------- 1,683,008 -------------- FINANCIAL (20.6%) Banks (6.4%) 20,563 AmSouth Bancorp 534,638 234,298 Bank of America Corporation 10,686,332 31,831 BB&T Corporation 1,272,285 9,822 Comerica, Inc. 567,712 7,176 Compass Bancshares, Inc. 322,920 30,361 Fifth Third Bancorp 1,251,177 7,185 First Horizon National Corporation 303,207 13,534 Huntington Bancshares, Inc. 326,711 23,718 Keycorp 786,252 5,691 M&T Bank Corporation 598,466 12,405 Marshal & Ilsley Corporation 551,402 24,637 Mellon Financial Corporation 706,836 34,589 National City Corporation 1,180,177 27,825 North Fork Bancorporation, Inc. 781,604 11,872 Northern Trust Corporation 541,244 16,499 PNC Financial Services Group, Inc. 898,536 27,021 Regions Financial Corporation 915,471 19,283 State Street Corporation 930,405 19,801 SunTrust Banks, Inc. 1,430,424 18,046 Synovus Financial Corporation $ 517,379 45,341 The Bank of New York Company, Inc. 1,304,914 106,776 U.S. Bancorp 3,117,859 91,843 Wachovia Corporation 4,555,413 98,305 Wells Fargo & Company 6,053,622 5,291 Zions Bancorporation 389,047 -------------- 40,524,033 -------------- Commercial Services (.3%) 7,563 Equifax, Inc. 270,075 9,631 H&R Block, Inc. 561,969 16,091 Moody's Corporation 723,451 20,661 Paychex, Inc. 672,309 -------------- 2,227,804 -------------- Finance -- Diversified (2.8%) 68,231 American Express Company 3,631,936 14,688 Capital One Financial Corporation 1,175,187 12,208 CIT Group, Inc. 524,578 34,239 Countrywide Financial Corporation 1,321,968 5,502 Federated Investors, Inc. 165,115 13,217 Janus Capital Group, Inc. 198,784 205,000 JP Morgan Chase & Company 7,240,600 73,854 MBNA Corporation 1,932,021 17,109 Providian Financial Corporation (b) 301,632 24,442 SLM Corporation 1,241,654 -------------- 17,733,475 -------------- Insurance (4.7%) 16,747 ACE, Ltd. (c) 751,103 29,195 Aflac, Inc. 1,263,560 6,330 AMBAC Financial Group, Inc. 441,581 151,180 American International Group, Inc. 8,783,558 18,472 AON Corporation 462,539 11,381 Chubb Corporation 974,327 7,626 Cigna Corporation 816,211 9,718 Cincinnati Financial Corporation 384,444
See accompanying notes to financial statements. 51
MARKET SHARES VALUE(a) - --------- -------------- FINANCIAL--CONTINUED 17,263 Hartford Financial Services Group, Inc. $ 1,290,927 7,969 Jefferson-Pilot Corporation 401,797 10,166 Lincoln National Corporation 476,989 9,300 Loews Corporation 720,750 31,046 Marsh & McLennan Companies, Inc. 859,974 7,889 MBIA, Inc. 467,897 42,684 Metlife, Inc. 1,918,219 5,498 MGIC Investment Corporation 358,580 17,115 Principal Financial Group 717,118 30,412 Prudential Financial, Inc. 1,996,852 7,401 Safeco Corporation 402,170 38,932 The Allstate Corporation 2,326,187 11,582 The Progressive Corporation 1,144,417 39,254 The St. Paul Travelers Companies, Inc. 1,551,711 6,067 Torchmark Corporation 316,697 17,269 UnumProvident Corporation 316,368 8,207 XL Capital, Ltd. (c) 610,765 -------------- 29,754,741 -------------- Investment Bankers/Brokers (4.3%) 303,080 Citigroup, Inc. 14,011,388 21,468 E*Trade Financial Corporation (b) 300,337 11,548 Franklin Resources, Inc. 888,965 25,744 Goldman Sachs Group, Inc. 2,626,403 16,114 Lehman Brothers Holdings, Inc. 1,599,798 55,076 Merrill Lynch & Company, Inc. 3,029,731 63,830 Morgan Stanley 3,349,160 7,188 T Rowe Price Group, Inc. 449,969 6,672 The Bear Stearns Companies, Inc. 693,488 66,385 The Charles Schwab Corporation 748,823 -------------- 27,698,062 -------------- Real Estate Investment Trust -- Apartments (.2%) 5,532 Apartment Investment & Management Company $ 226,369 11,562 Archstone-Smith Trust 446,524 16,698 Equity Residential 614,820 -------------- 1,287,713 -------------- Real Estate Investment Trust -- Office Property (.1%) 23,744 Equity Office Properties Trust 785,926 -------------- Real Estate Investment Trust -- Regional Mall (.2%) 12,798 Simon Property Group, Inc. 927,727 -------------- Real Estate Investment Trust -- Warehouse/Industrial (.1%) 10,875 Prologis 437,610 -------------- Savings and Loans (.6%) 16,484 Golden West Financial Corporation 1,061,240 21,246 Sovereign Bancorp, Inc. 474,636 51,108 Washington Mutual, Inc. 2,079,585 -------------- 3,615,461 -------------- U.S. Government Obligations (.9%) 56,390 Fannie Mae 3,293,176 40,263 Freddie Mac 2,626,355 -------------- 5,919,531 -------------- HEALTH CARE (13.0%) Biotechnology (1.1%) 72,096 Amgen, Inc. (b) 4,358,924 20,078 Biogen Idec, Inc. (b) 691,687 8,592 Chiron Corporation (b) 299,775 14,698 Genzyme Corporation (b) 883,203 14,418 Medimmune, Inc. (b) 385,249 2,901 Millipore Corporation (b) 164,574 -------------- 6,783,412 --------------
See accompanying notes to financial statements. 52
MARKET SHARES VALUE(a) - --------- -------------- HEALTH CARE--CONTINUED Drugs (6.2%) 90,343 Abbott Laboratories $ 4,427,710 7,655 Allergan, Inc. 652,512 6,152 AmerisourceBergen Corporation 425,411 113,855 Bristol-Myers Squibb Company 2,844,098 24,951 Cardinal Health, Inc. 1,436,679 26,428 Caremark Rx, Inc. (b) 1,176,575 66,014 Eli Lilly & Company 3,677,640 8,644 Express Scripts, Inc. (b) 432,027 19,835 Forest Laboratories, Inc. (b) 770,590 26,323 Gilead Sciences, Inc. (b) 1,157,949 9,210 Hospira, Inc. (b) 359,190 14,000 King Pharmaceuticals, Inc. (b) 145,880 16,174 Medco Health Solutions, Inc. (b) 863,045 128,355 Merck & Company, Inc. 3,953,334 15,616 Mylan Laboratories, Inc. 300,452 433,184 Pfizer, Inc. 11,947,215 85,938 Schering-Plough Corporation 1,637,978 6,348 Watson Pharmaceuticals, Inc. (b) 187,647 77,993 Wyeth 3,470,688 -------------- 39,866,620 -------------- Health Care -- Diversified (.1%) 7,852 Laboratory Corporation of America Holdings (b) 391,815 -------------- Hospital Management (.3%) 24,417 HCA, Inc. 1,383,711 14,363 Health Management Associates, Inc. 376,023 27,237 Tenet Healthcare Corporation (b) 333,381 -------------- 2,093,115 -------------- Managed Care (1.4%) 16,922 Aetna, Inc. 1,401,480 9,369 Humana, Inc. (b) 372,324 5,043 Manor Care, Inc. 200,358 17,233 McKesson Corporation 771,866 73,767 UnitedHealth Group, Inc. 3,846,211 35,710 Wellpoint, Inc. (b) $ 2,486,844 -------------- 9,079,083 -------------- Medical Products/Supplies (3.7%) 3,154 Bausch & Lomb, Inc. 261,782 36,175 Baxter International, Inc. 1,342,092 14,765 Becton Dickinson & Company 774,720 14,649 Biomet, Inc. 507,441 43,685 Boston Scientific Corporation (b) 1,179,495 6,106 CR Bard, Inc. 406,110 18,935 Guidant Corporation 1,274,326 173,240 Johnson & Johnson 11,260,600 70,467 Medtronic, Inc. 3,649,486 21,067 St. Jude Medical, Inc. (b) 918,732 21,874 Stryker Corporation 1,040,327 14,401 Zimmer Holdings, Inc. (b) 1,096,924 -------------- 23,712,035 -------------- Special Services (.2%) 6,998 Fisher Scientific International, Inc. (b) 454,170 10,750 Quest Diagnostics 572,652 -------------- 1,026,822 -------------- TECHNOLOGY (14.3%) Computer Hardware (3.4%) 7,395 Affiliated Computer Services, Inc. (b) 377,884 48,002 Apple Computer, Inc. (b) 1,766,954 141,053 Dell, Inc. (b) 5,573,004 17,303 Gateway, Inc. (b) 57,100 168,157 Hewlett-Packard Company 3,953,371 93,993 International Business Machines Corporation 6,974,281 7,350 Lexmark International, Inc. (b) 476,500 10,865 NCR Corporation (b) 381,579 13,375 Pitney Bowes, Inc. 582,481 198,435 Sun Microsystems, Inc. (b) 740,163 14,064 Symbol Technologies, Inc. 138,812 55,786 Xerox Corporation (b) 769,289 -------------- 21,791,418 --------------
See accompanying notes to financial statements. 53
MARKET SHARES VALUE(a) - --------- -------------- TECHNOLOGY--CONTINUED Computer Networking (1.5%) 372,322 Cisco Systems, Inc. (b) $ 7,115,073 76,476 Yahoo!, Inc. (b) 2,649,893 -------------- 9,764,966 -------------- Computer Peripherals (.4%) 139,985 EMC Corporation Massachusetts (b) 1,919,194 21,274 Network Appliance, Inc. (b) 601,416 -------------- 2,520,610 -------------- Computer Services & Software (4.9%) 28,510 Adobe Systems, Inc. 815,956 13,296 Autodesk, Inc. 456,984 33,939 Automatic Data Processing, Inc. 1,424,420 12,832 BMC Software, Inc. (b) 230,334 9,780 Citrix Systems, Inc. (b) 211,835 30,969 Computer Associates International, Inc. 851,028 10,726 Computer Sciences Corporation (b) 468,726 22,610 Compuware Corporation (b) 162,566 17,858 Electronic Arts, Inc. (b) 1,010,941 13,201 IMS Health, Inc. 326,989 5,045 Mercury Interactive Corporation (b) 193,526 585,401 Microsoft Corporation 14,541,361 22,121 Novell, Inc. (b) 137,150 257,602 Oracle Corporation (b) 3,400,346 15,789 Parametric Technology Corporation (b) 100,734 30,051 Siebel Systems, Inc. 267,454 16,862 Sungard Data Systems, Inc. (b) 593,037 41,420 Symantec Corporation (b) 900,471 272,989 Time Warner, Inc. (b) 4,561,646 19,689 Unisys Corporation (b) 124,631 24,901 Veritas Software Corporation (b) 607,584 -------------- 31,387,719 -------------- Electrical Equipment (.1%) 10,707 Jabil Circuit, Inc. (b) 329,026 30,555 Sanmina-SCI Corporation (b) 167,136 56,586 Solectron Corporation (b) $ 214,461 -------------- 710,623 -------------- Electrical Instruments (.2%) 25,131 Agilent Technologies, Inc. (b) 578,516 11,460 Applera Corporation - Applied Biosystems Group 225,418 7,527 PerkinElmer, Inc. 142,260 5,114 Tektronix, Inc. 119,003 6,840 Waters Corporation (b) 254,243 -------------- 1,319,440 -------------- Electronic Components -- Semiconductor (3.3%) 22,997 Advanced Micro Devices, Inc. (b) 398,768 21,632 Altera Corporation (b) 428,746 21,556 Analog Devices, Inc. 804,254 95,776 Applied Materials, Inc. 1,549,656 17,857 Applied Micro Circuits Corporation (b) 45,714 17,078 Broadcom Corporation (b) 606,440 23,341 Freescale Semiconductor, Inc. (b) 494,362 359,640 Intel Corporation 9,372,218 11,474 Kla-Tencor Corporation 501,414 17,826 Linear Technology Corporation 654,036 22,592 LSI Logic Corporation (b) 191,806 19,072 Maxim Integrated Products, Inc. 728,741 35,731 Micron Technology, Inc. (b) 364,814 20,337 National Semiconductor Corporation 448,024 8,046 Novellus Systems, Inc. (b) 198,817 9,843 Nvidia Corporation (b) 263,005 10,486 PMC - Sierra, Inc. (b) 97,834 5,230 QLogic Corporation (b) 161,450 11,334 Teradyne, Inc. (b) 135,668 96,838 Texas Instruments, Inc. 2,718,243 20,444 Xilinx, Inc. 521,322 -------------- 20,685,332 --------------
See accompanying notes to financial statements. 54
MARKET SHARES VALUE(a) - --------- -------------- TECHNOLOGY--CONTINUED Service -- Data Processing (.5%) 30,217 Electronic Data Systems Corporation $ 581,677 45,364 First Data Corporation 1,820,911 11,113 Fiserv, Inc. (b) 477,303 10,823 Intuit, Inc. (b) 488,226 -------------- 3,368,117 -------------- TRANSPORTATION (1.6%) Air Freight (1.0%) 17,591 FedEx Corporation 1,425,047 64,897 United Parcel Service, Inc. Georgia 4,488,277 -------------- 5,913,324 -------------- Airlines (.1%) 8,368 Delta Air Lines, Inc. (b) 31,464 42,907 Southwest Airlines Company 597,695 -------------- 629,159 -------------- Railroads (.5%) 21,938 Burlington Northern Santa Fe Corporation 1,032,841 12,587 CSX Corporation 536,961 23,553 Norfolk Southern Corporation 729,201 15,337 Union Pacific Corporation 993,838 -------------- 3,292,841 -------------- Trucking (--) 3,745 Ryder System, Inc. 137,067 -------------- UTILITIES (3.4%) Electric Companies (3.2%) 9,454 Allegheny Energy, Inc. (b) 238,430 11,845 Ameren Corporation 655,028 22,378 American Electric Power Company, Inc. 825,077 16,890 Centerpoint Energy, Inc. 223,117 11,555 Cinergy Corporation 517,895 12,746 CMS Energy Corporation (b) 191,955 14,159 Consolidated Edison, Inc. 663,208 10,314 Constellation Energy Group, Inc. 595,015 19,882 Dominion Resources, Inc. $ 1,459,140 10,143 DTE Energy Company 474,388 53,990 Duke Energy Corporation 1,605,123 19,019 Edison International 771,220 12,343 Entergy Corporation 932,514 38,984 Exelon Corporation 2,001,049 19,254 FirstEnergy Corporation 926,310 22,835 FPL Group, Inc. 960,440 15,834 NiSource, Inc. 391,575 21,561 PG&E Corporation 809,400 5,755 Pinnacle West Capital Corporation 255,810 11,036 PPL Corporation 655,318 14,521 Progress Energy, Inc. 656,930 13,913 Public Service Enterprise Group, Inc. 846,189 12,055 TECO Energy, Inc. 227,960 38,054 The AES Corporation (b) 623,325 43,363 The Southern Company 1,503,395 14,024 TXU Corporation 1,165,254 23,402 Xcel Energy, Inc. 456,807 -------------- 20,631,872 -------------- Natural Gas (.2%) 10,106 KeySpan Corporation 411,314 2,543 Nicor, Inc. 104,695 2,247 Peoples Energy Corporation 97,655 13,894 Sempra Energy 573,961 -------------- 1,187,625 -------------- Power Products -- Industrial (--) 31,344 Calpine Corporation (b) 106,570 -------------- Total common stocks (cost: $395,779,959) 634,453,340 --------------
See accompanying notes to financial statements. 55
MARKET PRINCIPAL/SHARES RATE MATURITY VALUE(a) - ---------------- ----- -------- -------------- SHORT-TERM SECURITIES (11.6%) SECURITY LENDING COLLATERAL (11.1%) Commercial Paper (6.8%) $ 3,368,925 Amsterdam Funding Corporation (e) 3.100% 07/11/05 $ 3,365,859 2,045,419 ANZ National, Ltd. (e) 3.100% 07/08/05 2,044,110 2,406,375 BHP Billiton Financial USA, Ltd. (e) 3.100% 07/05/05 2,405,509 4,090,838 Cedar Springs Capital Company (e) 3.140% 07/20/05 4,083,760 3,636,033 Concord Minutemen Capital Company (e) 3.130% 07/07/05 3,634,069 3,946,455 Crown Point Capital Company (e) 3.100% 07/05/05 3,945,034 481,275 Eiffel Funding LLC (e) 3.100% 07/05/05 481,102 3,474,324 Eiffel Funding LLC (e) 3.080% 07/08/05 3,472,101 1,347,570 Irish Life & Permanent (e) 3.040% 07/08/05 1,346,708 3,368,925 KLIO II Funding Corporation (e) 3.170% 08/02/05 3,359,054 2,887,650 Lehman Brothers Holdings (e) 2.762% 08/16/05 2,887,650 3,368,925 Liquid Funding, Ltd. (e) 3.080% 07/05/05 3,367,712 1,347,570 Morgan Stanley (e) 2.470% 02/03/06 1,347,570 481,275 Neptune Funding Corporation (e) 3.100% 07/06/05 481,058 2,887,650 Sedna Finance, Inc. (e) 3.080% 07/11/05 2,885,022 866,295 Sedna Finance, Inc. (e) 3.100% 07/14/05 865,273 240,638 Sedna Finance, Inc. (e) 3.110% 07/19/05 240,245 3,368,925 Solitaire Funding, LLC (e) 3.130% 07/21/05 3,362,794 -------------- 43,574,630 -------------- Corporate Note (2.3%) 3,368,925 American General Finance (d) 3.090% 07/14/06 3,369,228 1,925,100 Beta Finance, Inc. (d) 2.990% 06/02/06 1,925,562 4,331,475 General Electric Capital Assurance Company 3.162% 06/16/06 4,331,475 2,406,375 Metropolitan Life Global Funding I (d) 3.182% 03/06/06 2,405,990 2,406,375 Morgan Stanley (d) 3.090% 08/13/10 2,406,568 -------------- 14,438,823 -------------- Repurchase Agreement (2.0%) 12,928,495 Morgan Stanley, Wells Fargo and Bank of New York Repurchase Agreement account; dated 6/30/05, rate 3.487%, due 7/1/05; proceeds $12,929,747 (Collateralized by Corporate Obligations) 12,928,495 -------------- Total security lending collateral (cost: $70,941,948) 70,941,948 -------------- INVESTMENT COMPANIES (.5%) 3,300,000 American Beacon Funds, current rate 3.190% 3,300,000 93,057 Federated Money Market Obligation Trust - Prime Obligation, current rate 3.080% 93,057 -------------- Total investment companies (cost: $3,393,057) 3,393,057 -------------- Total short-term securities (cost: $74,335,005) 74,335,005 -------------- Total investments in securities (cost: $470,114,964) (g) $ 708,788,345 -------------- Payable upon return of securities loaned (-11.1%) (70,941,948) Cash and other assets in excess of liabilities (.1%) 578,174 -------------- Total net assets (100%) $ 638,424,571 ==============
See accompanying notes to financial statements. 56 INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Portfolio held .9% of net assets in foreign securities at June 30, 2005. (d) Variable rate security. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 6.2% of the Portfolio's net assets at June 30, 2005. (f) Fully or partially pledged as initial margin deposits on open index futures purchased contracts. HOLDINGS OF OPEN FUTURES CONTRACTS On June 30, 2005, securities with an aggregate market value of $18,272,408 have been segregated to cover margin requirements for the following open futures contracts:
NUMBER OF POSITION UNREALIZED TYPE EXPIRATION CONTRACTS TYPE DEPRECIATION - --------------- -------------- --------- --------- ------------ S&P 500(R) EMINI September 2005 54 long $ 49,240 == ========
(g) At June 30, 2005 the cost of securities for federal income tax purposes was $474,826,331. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 271,027,451 Gross unrealized depreciation (37,065,437) -------------- Net unrealized appreciation $ 233,962,014 ==============
See accompanying notes to financial statements. 57 MATURING GOVERNMENT BOND 2006 PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL RATE MATURITY VALUE(a) - --------- ----- -------- ------------ LONG-TERM DEBT SECURITIES (97.5%) U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (97.5%) $ 650,000 Federal Home Loan Mortgage Corporation Strip (c) 2.992% 01/15/07 $ 612,706 613,000 Federal National Mortgage Association Strip (c) 5.825% 04/08/07 572,844 200,000 Financing Corporation Strip (c) 3.003% 05/11/06 193,858 686,000 Financing Corporation Strip (c) 5.181% 11/11/06 651,514 921,000 Financing Corporation Strip (c) 7.804% 09/07/07 847,219 1,000,000 Israel Government Aid Bond (b) (c) 8.464% 11/15/06 950,040 500,000 Resolution Funding Corporation Strip (c) 7.597% 07/15/07 464,484 ------------ Total U.S. government and agencies obligations (cost: $4,131,581) 4,292,665 ------------ Total long-term debt securities (cost: $4,131,581) 4,292,665 ------------
SHARES - ------ SHORT-TERM SECURITIES (2.9%) INVESTMENT COMPANIES (2.9%) 100,000 American Beacon Funds, current rate 3.190% 100,000 29,039 BlackRock Provident Institutional TempFund, current rate 3.086% 29,039 ------------ Total investment companies (cost: $129,039) 129,039 ------------ Total short-term securities (cost: $129,039) 129,039 ------------ Total investments in securities (cost: $4,260,620) (d) $ 4,421,704 ------------ Liabilities in excess of cash and other assets (-.4%) (17,519) ------------ Total net assets (100%) $ 4,404,185 ============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) The Portfolio held 21.6% of net assets in foreign securities at June 30, 2005. (c) For zero coupon issues (strips) the interest rate represents yield to maturity at June 30, 2005. (d) At June 30, 2005 the cost of securities for federal income tax purposes was $4,271,133. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 160,017 Gross unrealized depreciation (9,446) ------------ Net unrealized appreciation $ 150,571 ============
See accompanying notes to financial statements. 58 MATURING GOVERNMENT BOND 2010 PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL RATE MATURITY VALUE(a) - --------- ----- -------- ------------ LONG-TERM DEBT SECURITIES (100.0%) U.S. GOVERNMENT AND AGENCIES OBLIGATIONS (100.0%) $ 717,000 Federal National Mortgage Association Strip (c) 4.973% 05/15/11 $ 564,164 719,000 Federal National Mortgage Association Strip (c) 6.084% 11/29/09 603,974 412,000 Financing Corporation Strip (c) 5.563% 11/02/10 335,857 1,000,000 Financing Corporation Strip (c) 5.821% 04/05/11 793,915 350,000 Government Trust Certificate (c) 9.420% 05/15/10 289,857 132,000 Government Trust Certificate (c) 9.520% 05/15/10 109,318 524,000 Government Trust Certificate (c) 9.560% 11/15/10 426,708 515,000 Israel Government Aid Bond (b) (c) 6.760% 03/15/10 429,942 1,100,000 Israel Government Aid Bond (b) (c) 6.968% 08/15/11 862,520 1,032,000 Resolution Funding Corporation Strip (c) 5.580% 04/15/11 828,028 475,000 Tennessee Valley Authority (c) 8.700% 04/15/10 392,222 280,000 U.S. Treasury Strip (c) 3.841% 08/15/10 233,114 ------------ Total U.S. government and agencies obligations (cost: $5,274,352) 5,869,619 ------------ Total long-term debt securities (cost: $5,274,352) 5,869,619 ------------
SHARES - ------ SHORT-TERM SECURITIES (.2%) INVESTMENT COMPANY (.2%) 11,119 BlackRock Provident Institutional TempFund, current rate 3.086% 11,119 ------------ Total investment company (cost: $11,119) 11,119 ------------ Total short-term securities (cost: $11,119) 11,119 ------------ Total investments in securities (cost: $5,285,471) (d) $ 5,880,738 ------------ Liabilities in excess of cash and other assets (-.2%) (8,723) ------------ Total net assets (100%) $ 5,872,015 ============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) The Portfolio held 22% of net assets in foreign securities at June 30, 2005. (c) For zero coupon issues (strips) the interest rate represents yield to maturity at June 30, 2005. (d) At June 30, 2005 the cost of securities for federal income tax purposes was $5,285,471. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 595,267 Gross unrealized depreciation (--) ------------ Net unrealized appreciation $ 595,267 ============
See accompanying notes to financial statements. 59 INTERNATIONAL BOND PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET PRINCIPAL(b) COUPON MATURITY VALUE(a) - ------------ ------ -------- ------------ LONG-TERM DEBT SECURITIES (96.2%) AUSTRIA (3.3%) Banks (3.3%) 222,000,000 Oesterreichische Kontrollbank AG (Japanese Yen) 1.800% 03/22/10 $ 2,142,784 ------------ BELGIUM (4.6%) Government (4.6%) 2,350,000 Belgium Government Bond (Euro) 4.750% 09/28/06 2,939,985 ------------ CANADA (3.5%) Government (3.5%) 240,000,000 Quebec Province (Japanese Yen) 1.600% 05/09/13 2,275,374 ------------ CAYMAN ISLANDS (.9%) Finance -- Diversified (.9%) 440,000 Hutchison Whampoa Finance Cl, Ltd. (Euro) 5.875% 07/08/13 606,238 ------------ DENMARK (4.2%) Government (4.2%) 2,190,000 Kingdom of Denmark (Euro) 3.125% 10/15/09 2,721,620 ------------ FINLAND (4.1%) Government (4.1%) 1,900,000 Finland Government Bond (Euro) 5.750% 02/23/11 2,675,631 ------------ FRANCE (9.7%) Entertainment (1.0%) 520,000 Vivendi Universal SA (Euro) 3.625% 04/06/10 638,313 ------------ Government (8.7%) 3,560,000 France Government Bond (Euro) 4.000% 10/25/14 4,622,478 800,000 French Treasury Note (Euro) 3.500% 01/12/09 1,008,785 ------------ 6,269,576 ------------ GERMANY (11.3%) Government (11.3%) 3,350,000 Bundesschatzanweisungen (Euro) 2.250% 12/15/06 4,070,524 1,320,000 Deutsche Bundesrepublik (Euro) 3.250% 07/04/15 1,615,678 1,250,000 Deutsche Bundesrepublik (Euro) 3.750% 07/04/13 1,601,897 ------------ 7,288,099 ------------ GREECE (4.0%) Electric Companies (.2%) 80,000 Public Power Corporation (Euro) 4.500% 03/12/09 102,498 ------------ Government (3.8%) 2,000,000 Hellenic Republic Government Bond (Euro) 3.700% 07/20/15 2,489,292 ------------ 2,591,790 ------------ IRELAND (4.5%) Government (4.5%) 2,300,000 Ireland Government Bond (Euro) 3.250% 04/18/09 2,876,817 ------------
See accompanying notes to financial statements. 60
MARKET PRINCIPAL(b) COUPON MATURITY VALUE(a) - ------------ ------ -------- ------------ ITALY (2.7%) Government (2.7%) 1,400,000 Buoni Poliennali Del Tes (Euro) 3.000% 01/15/10 $ 1,731,328 ------------ JAPAN (6.4%) Government (6.4%) 340,000,000 Development Bank of Japan (Japanese Yen) 1.050% 06/20/23 2,745,311 150,000,000 Japan Finance Corporation for Municipal Enterprises (Japanese Yen) 1.350% 11/26/13 1,401,073 ------------ 4,146,384 ------------ LUXEMBOURG (.7%) Telephone (.7%) 300,000 Telecom Italia Fin SA (Euro) 7.250% 04/20/11 434,355 ------------ MEXICO (10.2%) Government (10.2%) 28,500,000 Mexican Bonos (Mexican Peso) 9.000% 12/24/09 2,626,336 1,700,000 Mexican Bonos (Mexican Peso) 9.500% 12/18/14 158,488 20,200,000 Mexican Fixed Rate Bonds (Mexican Peso) 8.000% 12/19/13 1,726,744 22,900,000 Mexican Fixed Rate Bonds (Mexican Peso) 9.000% 12/20/12 2,089,041 ------------ 6,600,609 ------------ NETHERLANDS (4.5%) Government (4.5%) 2,270,000 Netherlands Government Bond (Euro) 3.750% 07/15/09 2,895,206 ------------ PORTUGAL (3.5%) Government (3.5%) 1,700,000 Obrigacoes Do Tesouro (Euro) 4.375% 06/16/14 2,254,825 ------------ SPAIN (4.5%) Government (4.5%) 2,340,000 Spain Government Bond (Euro) 4.800% 10/31/06 2,937,207 ------------ SUPRANATIONAL (3.1%) Supra National Bank (3.1%) 1,000,000 European Investment Bank (British Sterling Pound) 6.250% 04/15/14 2,031,156 ------------ SWEDEN (4.4%) Government (4.4%) 2,150,000 Kingdom of Sweden (Euro) 5.000% 01/28/09 2,840,584 ------------ UNITED KINGDOM (6.1%) Banks (3.2%) 224,000,000 HBOS Treasury Services PLC (Japanese Yen) 0.250% 06/30/06 2,025,066 ------------ Government (2.9%) 830,000 United Kingdom Gilt (British Sterling Pound) 4.750% 09/07/15 1,559,930 180,000 United Kingdom Gilt (British Sterling Pound) 7.500% 12/07/06 337,843 ------------ 3,922,839 ------------ Total long-term debt securities (cost: $63,114,488) 62,182,407 ------------
See accompanying notes to financial statements. 61
MARKET SHARES VALUE(a) - ------ ------------ SHORT-TERM SECURITIES (1.4%) INVESTMENT COMPANY (1.4%) 926,217 Dreyfus Cash Management, current rate 3.040% $ 926,217 ------------ Total short-term securities (cost: $926,217) 926,217 ------------ Total investments in securities (cost: $64,040,705) (c) $ 63,108,624 ------------ Cash and other assets in excess of liabilities (2.4%) 1,566,713 ------------ Total net assets (100%) $ 64,675,337 ============
FORWARD FOREIGN CURRENCY CONTRACTS On June 30, 2005, International Bond Portfolio had entered into forward foreign currency contracts that obligate the portfolio to deliver currencies at specified future dates. Unrealized appreciation and depreciation on these contracts is included in the accompanying financial statements. The terms of the open contracts were as follows:
EXCHANGE CURRENCY TO BE CURRENCY TO BE UNREALIZED UNREALIZED DATE DELIVERED - SELL RECEIVED - BUY APPRECIATION DEPRECIATION - --------- ----------------- ------------------- ------------ ------------ 07/11/05 4,100,000 CAD 2,678,496 EUR $ - $ 104,437 07/11/05 2,579,939 EUR 4,100,000 CAD 223,805 - 07/11/05 1,509,743 EUR 2,400,000 CAD 128,799 - 07/29/05 12,412,769 EUR 1,672,000,000 JPY 58,889 - 08/12/05 705,874 EUR 5,712,000 NOK 29,656 - 08/12/05 1,861,547 EUR 15,048,000 NOK 94,007 - 08/18/05 2,042,460 EUR 3,550,000 NZD - 19,403 08/18/05 2,914,238 EUR 5,250,000 NZD 100,166 - 08/18/05 8,800,000 NZD 4,912,770 EUR - 134,013 08/22/05 2,229,223 EUR 9,340,000 PLN 97,822 - 08/22/05 3,970,000 PLN 933,722 EUR - 55,131 08/23/05 2,060,000 AUD 847,292 GBP - 47,574 08/23/05 849,229 GBP 2,060,000 AUD 44,110 - 09/08/05 615,895 USD 500,000 EUR - 9,255 09/20/05 1,573,000 GBP 2,349,023 EUR 40,751 - 09/20/05 309,000,000 JPY 1,580,724 GBP 15,414 - 09/27/05 70,000,000 MXN 5,261,180 EUR - 126,277 ----------- ------------ $ 833,419 $ 496,090 =========== ============
FORWARD FOREIGN CURRENCY CONTRACTS - CURRENCY LEGEND AUD Australian Dollar CAD Canadian Dollar EUR Euro Dollar GBP British Sterling Pound JPY Japanese Yen MXN Mexican Peso NOK Norwegian Krone NZD New Zealand Dollar PLN Polish Zloty USD United States Dollar See accompanying notes to financial statements. 62 INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Principal amounts for foreign debt securities are denominated in the currencies indicated. United States debt securities are denominated in U.S. Dollars. (c) At June 30, 2005 the cost of securities for federal income tax purposes was $64,123,791. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 968,521 Gross unrealized depreciation (1,983,688) ------------- Net unrealized depreciation $ (1,015,167) =============
See accompanying notes to financial statements. 63 INDEX 400 MID-CAP PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) - ------ --------------- COMMON STOCKS (94.9%) BASIC MATERIALS (4.2%) Chemicals (2.8%) 6,699 Airgas, Inc. $ 165,264 4,408 Albemarle Corporation 160,760 5,958 Cabot Corporation 196,614 2,276 Cabot Microcelectronics Corporation (b) 65,981 11,119 Crompton Corporation 157,337 4,090 Cytec Industries, Inc. 162,782 3,966 Ferro Corporation 78,765 3,551 FMC Corporation (b) 199,353 6,415 Lubrizol Corporation 269,494 20,916 Lyondell Chemical Company 552,601 1,890 Minerals Technologies, Inc. 116,424 6,736 Olin Corporation 122,864 11,122 RPM International, Inc. 203,088 4,471 Sensient Technologies Corporation 92,147 2,643 The Scotts Miracle-Gro Company (b) 188,208 4,841 Valspar Corporation 233,772 --------------- 2,965,454 --------------- Construction (.3%) 4,444 Martin Marietta Materials, Inc. 307,169 --------------- Iron and Steel (.1%) 3,807 Steel Dynamics, Inc. 99,934 --------------- Paper and Forest (1%) 5,293 Bowater, Inc. 171,334 3,538 Glatfelter 43,871 4,834 Longview Fibre Company 99,339 8,033 Packaging Corporation of America 169,095 2,767 Potlatch Corporation 144,797 4,757 Rayonier, Inc. 252,264 9,391 Sonoco Products Company 248,861 --------------- 1,129,561 --------------- CAPITAL GOODS (6.0%) Aerospace/Defense (.2%) 813 Sequa Corporation (b) 53,796 8,074 Titan Corporation (b) 183,603 --------------- 237,399 --------------- Electrical Equipment (.6%) 6,766 Energizer Holdings, Inc. (b) $ 420,642 5,830 Hubbell, Inc. 257,103 --------------- 677,745 --------------- Engineering/Construction (.5%) 4,623 Dycom Industries, Inc. (b) 91,582 3,514 Granite Construction, Inc. 98,743 5,430 Jacobs Engineering Group, Inc. (b) 305,492 9,245 Quanta Services, Inc. (b) 81,356 --------------- 577,173 --------------- Hardware and Tools (.2%) 3,593 Kennametal, Inc. 164,739 --------------- Machinery (.7%) 8,558 AGCO Corporation (b) 163,629 6,549 Graco, Inc. 223,125 1,702 Tecumseh Products Company 46,703 6,813 Zebra Technologies Corporation (b) 298,341 --------------- 731,798 --------------- Manufacturing (2.6%) 6,593 Ametek, Inc. 275,917 2,960 Carlisle Companies, Inc. 203,145 5,244 Crane Company 137,917 7,211 Donaldson Company, Inc. 218,710 4,580 Federal Signal Corporation 71,448 5,231 Flowserve Corporation (b) 158,290 3,937 Harsco Corporation 214,763 2,827 Lancaster Colony Corporation 121,335 3,107 Nordson Corporation 106,508 9,620 Pentair, Inc. 411,832 7,113 SPX Corporation 327,056 3,658 Teleflex, Inc. 217,175 5,370 The Brink's Company 193,320 4,029 Trinity Industries, Inc. 129,049 --------------- 2,786,465 ---------------
See accompanying notes to financial statements. 64
MARKET SHARES VALUE(a) - ------ --------------- CAPITAL GOODS--CONTINUED Metal Fabrication (.6%) 6,254 Precision Castparts Corporation $ 487,187 7,569 Worthington Industries 119,590 --------------- 606,777 --------------- Waste Management (.6%) 12,211 Republic Services, Inc. 439,718 4,131 Stericycle, Inc. (b) 207,872 --------------- 647,590 --------------- COMMUNICATION SERVICES (1.5%) Telecommunication (1%) 6,487 Adtran, Inc. 160,813 4,852 CommScope, Inc. (b) 84,473 12,643 Harris Corporation 394,588 4,083 Newport Corporation (b) 56,590 4,418 Plantronics, Inc. 160,639 9,435 Powerwave Technologies, Inc. (b) 96,426 17,805 RF Micro Devices, Inc. (b) 96,681 9,892 UTStarcom, Inc. (b) 74,091 --------------- 1,124,301 --------------- Telephone (.5%) 23,262 Cincinnati Bell, Inc. (b) (f) 100,027 10,350 Telephone & Data Systems, Inc. 422,384 --------------- 522,411 --------------- CONSUMER CYCLICAL (16.7%) Auto (.8%) 6,635 ArvinMeritor, Inc. 118,037 1,434 Bandag, Inc. 66,036 5,347 BorgWarner, Inc. 286,973 6,350 Lear Corporation 231,013 3,090 Modine Manufacturing Company 100,610 --------------- 802,669 --------------- Building Materials (.1%) 3,974 York International Corporation 151,012 --------------- Construction (2.8%) 27,784 DR Horton, Inc. 1,044,956 13,689 Lennar Corporation 868,567 4,478 Ryland Group, Inc. 339,746 4,242 Thor Industries, Inc. 133,326 5,934 Toll Brothers, Inc. (b) $ 602,598 --------------- 2,989,193 --------------- Distribution Durables (.9%) 6,812 CDW Corporation (f) 388,897 6,464 Fastenal Company 395,985 5,561 Tech Data Corporation (b) 203,588 --------------- 988,470 --------------- Entertainment (.6%) 10,876 GTECH Holdings Corporation 318,014 4,185 International Speedway Corporation 235,448 4,775 Macrovision Corporation (b) 107,629 --------------- 661,091 --------------- Home Builders (.3%) 4,618 Hovnanian Enterprises, Inc. (b) 301,094 --------------- Houseware (.1%) 5,022 Furniture Brands International, Inc. 108,525 --------------- Leisure (.1%) 6,715 Callaway Golf Company 103,612 --------------- Lodging -- Hotel (.3%) 6,357 Boyd Gaming Corporation 325,033 --------------- Office Equipment (.4%) 6,659 Herman Miller, Inc. 205,364 4,897 HNI Corporation 250,481 --------------- 455,845 --------------- Publishing (1.4%) 10,122 Belo Corporation 242,624 4,294 Lee Enterprises, Inc. 172,146 2,306 Media General, Inc. 149,337 3,473 Scholastic Corporation (b) 133,884 9,425 The Readers Digest Association, Inc. 155,513 736 Washington Post 614,582 --------------- 1,468,086 --------------- Retail (7.9%) 5,592 99 Cents Only Stores (b) 71,074
See accompanying notes to financial statements. 65
MARKET SHARES VALUE(a) - ------ --------------- CONSUMER CYCLICAL--CONTINUED 8,173 Abercrombie & Fitch Company $ 561,485 6,772 Advance Auto Parts (b) 437,133 5,248 Aeropostale, Inc. (b) 176,333 13,129 American Eagle Outfitters 402,404 6,485 American Greetings Corporation 171,852 6,907 AnnTaylor Stores Corporation (b) 167,702 5,983 Barnes & Noble, Inc. (b) 232,140 6,399 BJ's Wholesale Club, Inc. (b) 207,904 6,728 Borders Group, Inc. 170,286 9,865 Carmax, Inc. (b) 262,902 17,080 Chico's FAS, Inc. (b) 585,502 9,388 Claire's Stores, Inc. 225,781 7,602 Copart, Inc. (b) 180,928 10,266 Dollar Tree Stores, Inc. (b) 246,384 14,830 Foot Locker, Inc. 403,673 12,834 Michaels Stores, Inc. 530,943 4,633 Neiman-Marcus Group, Inc. 449,030 9,999 O'Reilly Automotive, Inc. (b) 298,070 7,102 Pacific Sunwear of California (b) 163,275 6,378 Payless Shoesource, Inc. (b) 122,458 13,588 Petsmart, Inc. 412,396 8,148 Pier 1 Imports, Inc. 115,620 4,258 Regis Corporation 166,403 13,937 Ross Stores, Inc. 402,919 13,226 Saks, Inc. (b) 250,897 5,652 Timberland Company (b) 218,845 6,207 Urban Outfitters, Inc. (b) 351,875 10,974 Williams-Sonoma, Inc. (b) 434,241 --------------- 8,420,455 --------------- Service (.6%) 8,442 Adesa, Inc. 183,782 4,444 Catalina Marketing Corporation 112,922 6,713 Harte-Hanks, Inc. 199,577 4,656 Rollins, Inc. 93,306 4,555 Sotheby's Holdings (b) 62,405 --------------- 651,992 --------------- Textiles (.4%) 5,619 Mohawk Industries, Inc. (b) $ 463,568 --------------- CONSUMER STAPLES (7.8%) Beverage (.8%) 19,770 Constellation Brands, Inc. (b) 583,215 9,870 PepsiAmericas, Inc. 253,264 --------------- 836,479 --------------- Broadcasting (.3%) 3,149 Emmis Communications Corporation (b) 55,643 3,965 Entercom Communications Corporation (b) 131,995 8,063 Westwood One, Inc. 164,727 --------------- 352,365 --------------- Food (1.8%) 14,245 Dean Foods Company (b) 501,994 9,943 Hormel Foods Corporation 291,628 9,481 Smithfield Foods, Inc. (b) 258,547 5,529 The JM Smucker Company 259,531 3,917 Tootsie Roll Industries, Inc. 114,572 28,783 Tyson Foods, Inc. (f) 512,338 --------------- 1,938,610 --------------- Household Products (.4%) 3,239 Blyth, Inc. 90,854 6,009 Church & Dwight Company, Inc. 217,526 5,351 Tupperware Corporation 125,053 --------------- 433,433 --------------- Restaurants (1.4%) 7,678 Applebees International, Inc. 203,390 3,256 Bob Evans Farms, Inc. 75,930 8,397 Brinker International, Inc. (b) 336,300 4,376 CBRL Group, Inc. 170,051 5,845 Krispy Kreme Doughnuts, Inc. (b) 40,681
See accompanying notes to financial statements. 66
MARKET SHARES VALUE(a) - ------ --------------- CONSUMER STAPLES--CONTINUED 6,435 Outback Steakhouse, Inc. $ 291,120 6,101 Ruby Tuesday, Inc. 158,016 7,390 The Cheesecake Factory (b) 256,655 --------------- 1,532,143 --------------- Retail (.8%) 4,262 Ruddick Corporation 108,809 6,184 Whole Foods Market, Inc. 731,567 --------------- 840,376 --------------- Service (2.2%) 2,296 Banta Corporation 104,147 9,722 Career Education Corporation (b) 355,922 8,611 Corinthian Colleges, Inc. (b) 109,962 6,132 Devry, Inc. (b) 122,027 6,471 Education Management Corporation (b) 218,267 4,370 ITT Educational Services, Inc. (b) 233,445 2,518 Kelly Services, Inc. 72,116 3,331 Korn/Ferry International (b) 59,125 4,676 Laureate Education, Inc. (b) 223,793 8,526 Manpower, Inc. 339,164 9,812 MPS Group, Inc. (b) 92,429 6,650 Rent-A-Center, Inc. (b) 154,879 6,852 United Rentals, Inc. (b) 138,479 4,722 Valassis Communications, Inc. (b) 174,950 --------------- 2,398,705 --------------- Tobacco (.1%) 2,360 Universal Corporation 103,321 --------------- ENERGY (9.0%) Mining (.8%) 6,000 Arch Coal, Inc. 326,820 11,263 Peabody Energy Corporation 586,127 --------------- 912,947 --------------- Oil & Gas (4.5%) 14,362 ENSCO International, Inc. 513,442 5,338 Forest Oil Corporation (b) $ 224,196 4,845 Helmerich & Payne, Inc. 227,328 16,584 Murphy Oil Corporation 866,182 11,964 Newfield Exploration Company (b) 477,244 8,239 Noble Energy, Inc. 623,280 16,051 Patterson-UTI Energy, Inc. 446,699 13,629 Pioneer Natural Resources Company 573,508 7,326 Plains Exploration & Production Company (b) 260,293 5,758 Pogo Producing Company 298,955 13,914 Pride International, Inc. (b) 357,590 --------------- 4,868,717 --------------- Oil & Gas Services (2.4%) 5,200 Cooper Cameron Corporation (b) 322,660 6,547 FMC Technologies, Inc. (b) 209,307 11,782 Grant Prideco, Inc. (b) 311,634 7,414 Hanover Compressor Company (b) 85,335 10,047 Smith International, Inc. 639,994 5,747 Tidewater, Inc. 219,076 13,096 Weatherford International, Ltd. (b) (f) 759,306 --------------- 2,547,312 --------------- Pipelines (1.3%) 5,766 Equitable Resources, Inc. 392,088 7,434 National Fuel Gas Company 214,917 8,029 Questar Corporation 529,111 6,112 Western Gas Resources, Inc. 213,309 --------------- 1,349,425 --------------- FINANCIAL (16.3%) Auto Finance (.3%) 13,891 AmeriCredit Corporation (b) 354,220 ---------------
See accompanying notes to financial statements. 67
MARKET SHARES VALUE(a) - ------ --------------- FINANCIAL--CONTINUED Banks (4.5%) 12,091 Associated Banc-Corporation $ 406,983 4,924 Bank of Hawaii Corporation 249,893 4,281 California City National Corporation 306,990 15,342 Commerce Bancorp, Inc. New Jersey 465,016 4,630 Cullen/Frost Bankers, Inc. 220,620 7,914 FirstMerit Corporation 206,635 4,843 Greater Bay Bancorp 127,710 14,852 Hibernia Corporation 492,789 6,322 Investors Financial Services Corporation 239,098 7,524 Mercantile Bankshares Corporation 387,712 3,327 SVB Financial Group (b) 159,363 11,907 TCF Financial Corporation 308,153 3,896 Texas Regional Bancshares, Inc. - A 118,750 14,680 The Colonial BancGroup, Inc. 323,841 8,209 Washington Federal, Inc. 193,076 5,090 Webster Financial Corporation 237,652 3,082 Westamerica Bancorporation 162,760 6,392 Wilmington Trust Corporation 230,176 --------------- 4,837,217 --------------- Commercial Services (.2%) 4,783 Deluxe Corporation 194,190 --------------- Finance -- Diversified (.8%) 12,453 Eaton Vance Corporation 297,751 5,913 IndyMac Bancorp, Inc. 240,836 8,964 Leucadia National Corporation 346,279 --------------- 884,866 --------------- Insurance (4.9%) 5,057 Allmerica Financial Corporation (b) 187,564 5,542 American Financial Group, Inc. $ 185,768 3,632 AmerUs Group Company 174,518 8,821 Arthur J Gallagher & Company 239,314 5,891 Brown & Brown, Inc. 264,741 5,336 Everest Re Group, Ltd. (c) 496,248 16,352 Fidelity National Financial, Inc. 583,603 8,134 First American Corporation 326,499 6,606 HCC Insurance Holdings, Inc. 250,169 4,059 Horace Mann Educators Corporation 76,390 5,928 Ohio Casualty Corporation 143,339 17,293 Old Republic International Corporation 437,340 6,589 Protective Life Corporation 278,188 8,146 Radian Group, Inc. (f) 384,654 2,619 Stancorp Financial Group, Inc. 200,563 8,851 The PMI Group, Inc. 345,012 5,487 Unitrin, Inc. 269,412 11,280 WR Berkley Corporation 402,470 --------------- 5,245,792 --------------- Investment Bankers/Brokers (1.8%) 7,289 AG Edwards, Inc. 329,098 4,913 Jefferies Group, Inc. 186,154 5,451 LaBranche & Company, Inc. (b) 34,341 10,415 Legg Mason, Inc. 1,084,306 6,311 Raymond James Financial, Inc. 178,286 7,918 Waddell & Reed Financial, Inc. 146,483 --------------- 1,958,668 --------------- Real Estate Investment Trust-- Apartments (.3%) 12,961 United Dominion Realty Trust, Inc. 311,712 ---------------
See accompanying notes to financial statements. 68
MARKET SHARES VALUE(a) - ------ --------------- FINANCIAL--CONTINUED Real Estate Investment Trust -- Diversified (.3%) 8,239 Liberty Property Trust $ 365,070 --------------- Real Estate Investment Trust -- Hotels (.3%) 6,380 Hospitality Properties Trust 281,167 --------------- Real Estate Investment Trust -- Office Property (.4%) 5,084 Highwoods Properties, Inc. 151,300 5,360 Mack-Cali Realty Corporation 242,808 --------------- 394,108 --------------- Real Estate Investment Trust -- Shopping Centers (1.3%) 10,277 Developers Diversified Realty Corporation 472,331 9,766 New Plan Excel Realty Trust 265,342 5,975 Regency Centers Corporation 341,770 8,017 Weingarten Realty Investors 314,427 --------------- 1,393,870 --------------- Real Estate Investment Trust -- Warehouse/Industrial (.3%) 7,956 AMB Property Corporation 345,529 --------------- Savings and Loans (.9%) 9,506 Astoria Financial Corporation 270,636 7,388 Independence Community Bank Corporation 272,839 23,125 New York Community Bancorp, Inc. 419,025 --------------- 962,500 --------------- HEALTH CARE (11.3%) Biotechnology (1.4%) 6,310 Charles River Laboratories International, Inc. (b) 304,458 4,916 Invitrogen Corporation (b) 409,454 2,997 Martek Biosciences Corporation (b) $ 113,736 29,116 Millennium Pharmaceuticals, Inc. (b) (f) 269,905 10,035 Protein Design Labs, Inc. (b) 202,807 8,806 Vertex Pharmaceuticals, Inc. (b) 148,293 --------------- 1,448,653 --------------- Drugs (2.5%) 8,796 Barr Pharmaceuticals, Inc. (b) 428,717 5,493 Cephalon, Inc. (b) 218,676 21,936 IVAX Corporation (b) (f) 471,624 9,935 Omnicare, Inc. 421,542 3,236 Par Pharmaceutical Companies, Inc. (b) 102,937 8,438 Perrigo Company 117,626 9,917 Sepracor, Inc. (b) (f) 595,119 8,759 Valeant Pharmaceuticals International 154,421 7,243 VCA Antech, Inc. (b) 175,643 --------------- 2,686,305 --------------- Hospital Management (1.2%) 6,415 Community Health Systems, Inc. (b) 242,423 4,866 LifePoint Hospitals, Inc. (b) 245,830 7,651 Triad Hospitals, Inc. (b) 418,051 5,499 Universal Health Services, Inc. 341,928 --------------- 1,248,232 --------------- Managed Care (1.6%) 10,164 Coventry Health Care, Inc. (b) 719,103 10,647 Health Net, Inc. (b) 406,290 8,247 Pacificare Health Systems (b) 589,248 --------------- 1,714,641 --------------- Medical Products/Supplies (3.6%) 6,153 Advanced Medical Optics, Inc. (b) 244,582 5,853 Beckman Coulter, Inc. 372,075 10,788 Cytyc Corporation (b) 237,983
See accompanying notes to financial statements. 69
MARKET SHARES VALUE(a) - ------ --------------- HEALTH CARE--CONTINUED 7,151 Dentsply International, Inc. $ 386,154 5,635 Edwards Lifesciences Corporation (b) 242,418 4,784 Gen-Probe, Inc. (b) 173,324 8,211 Henry Schein, Inc. (b) 340,921 5,537 Hillenbrand Industries, Inc. 279,895 3,421 Inamed Corporation (b) 229,104 13,006 Patterson Companies, Inc. (b) 586,310 6,546 Steris Corporation 168,690 3,639 Techne Corporation (b) 167,066 12,507 Varian Medical Systems, Inc. (b) 466,886 --------------- 3,895,408 --------------- Special Services (1.0%) 4,641 Apria Healthcare Group, Inc. (b) 160,764 5,965 Covance, Inc. (b) 267,650 9,374 Lincare Holdings, Inc. (b) 382,834 6,436 Renal Care Group, Inc. (b) 296,700 --------------- 1,107,948 --------------- TECHNOLOGY (13.2%) Computer Hardware (1.2%) 6,756 Diebold, Inc. 304,763 3,130 Imation Corporation 121,412 17,146 Sandisk Corporation (b) 406,875 5,455 The Reynolds & Reynolds Company 147,449 20,152 Western Digital Corporation (b) 270,440 --------------- 1,250,939 --------------- Computer Networking (.9%) 36,316 3COM Corporation (b) (f) 132,190 6,313 Alliance Data Systems Corporation (b) 256,055 3,045 Anteon International Corporation (b) 138,913 8,539 ChoicePoint, Inc. (b) 341,987 9,277 Polycom, Inc. (b) 138,320 --------------- 1,007,465 --------------- Computer Peripherals (.5%) 4,700 Avocent Corporation (b) 122,858 10,157 Storage Technology Corporation (b) $ 368,598 --------------- 491,456 --------------- Computer Services & Software (4.8%) 19,098 Activision, Inc. (b) 315,499 8,322 Acxiom Corporation 173,763 2,468 Advent Software, Inc. (b) 50,002 25,968 Cadence Design Systems, Inc. (b) (f) 354,723 14,175 Ceridian Corporation (b) 276,129 5,852 Certegy, Inc. 223,663 8,047 Checkfree Corporation (b) 274,081 12,816 Cognizant Technology Solutions Corporation (b) 604,018 4,704 CSG Systems International (b) 89,282 6,458 Dun & Bradstreet Corporation (b) 398,136 3,557 F5 Networks, Inc. (b) 168,015 8,177 Gartner, Inc. (b) 86,840 5,313 Keane, Inc. (b) 72,788 7,118 Macromedia, Inc. (b) 272,050 15,404 McAfee, Inc. (b) 403,277 14,931 McData Corporation (b) 59,724 7,395 Mentor Graphics Corporation (b) 75,799 8,174 MoneyGram International, Inc. 156,287 6,328 National Instruments Corporation 134,153 6,740 RSA Security, Inc. (b) 77,375 7,844 SEI Investments Company 292,973 8,491 Sybase, Inc. (b) 155,810 13,602 Synopsys, Inc. (b) 226,745 3,260 Transaction Systems Architects, Inc. (b) 80,294 7,479 Wind River Systems, Inc. (b) 117,271 --------------- 5,138,697 --------------- Computer Systems (.1%) 7,697 Jack Henry & Associates, Inc. 140,932 ---------------
See accompanying notes to financial statements. 70
MARKET SHARES VALUE(a) - ------ --------------- TECHNOLOGY--CONTINUED Electrical Defense (.2%) 3,482 Alliant Techsystems, Inc. (b) $ 245,829 --------------- Electrical Equipment (.6%) 14,762 Gentex Corporation 268,668 8,198 Kemet Corporation (b) 51,647 4,104 Plexus Corporation (b) 58,400 16,966 Vishay Intertechnology, Inc. (b) (f) 201,387 --------------- 580,102 --------------- Electrical Instruments (1.0%) 8,349 Amphenol Corporation 335,379 6,057 Harman International Industries, Inc. 492,797 5,679 Thomas & Betts Corporation (b) 160,375 3,235 Varian, Inc. (b) 122,251 --------------- 1,110,802 --------------- Electronic Components -- Semiconductor (2.7%) 42,748 Atmel Corporation (b) (f) 101,313 8,658 Credence Systems Corporation (b) 78,355 7,047 Cree, Inc. (b) 179,487 12,473 Cypress Semiconductor Corporation (b) 157,035 11,330 Fairchild Semiconductor International, Inc. (b) 167,118 6,622 Integrated Circuit Systems, Inc. (b) 136,678 9,951 Integrated Device Technology, Inc. (b) 106,973 6,103 International Rectifier Corporation (b) 291,235 14,469 Intersil Corporation 271,583 13,119 Lam Research Corporation (b) 379,664 10,753 Lattice Semiconductor Corporation (b) 47,743 5,810 LTX Corporation (b) 28,818 7,198 Micrel, Inc. (b) 82,921 19,734 Microchip Technology, Inc. (f) 584,521 6,995 Semtech Corporation (b) 116,467 4,300 Silicon Laboratories, Inc. (b) 112,703 13,140 Triquint Semiconductor, Inc. (b) $ 43,756 --------------- 2,886,370 --------------- Electronics -- Computer Distribution (.5%) 11,138 Arrow Electronics, Inc. (b) 302,508 11,421 Avnet, Inc. (b) 257,315 --------------- 559,823 --------------- Service -- Data Processing (.7%) 7,188 DST Systems, Inc. (b) 336,398 6,385 Fair Isaac Corporation 233,053 11,434 The BISYS Group, Inc. (b) 170,824 --------------- 740,275 --------------- TRANSPORTATION (2.7%) Air Freight (.9%) 8,105 CH Robinson Worldwide, Inc. 471,711 10,094 Expeditors International Washington, Inc. 502,782 --------------- 974,493 --------------- Airlines (.3%) 8,216 Airtran Holdings, Inc. (b) 75,833 2,385 Alaska Air Group, Inc. (b) 70,954 9,295 JetBlue Airways Corporation (b) 189,990 --------------- 336,777 --------------- Shipping (.4%) 4,143 Alexander & Baldwin, Inc. 192,028 3,297 Overseas Shipholding Group 196,666 --------------- 388,694 --------------- Transport Services (.3%) 5,435 Yellow Roadway Corporation (b) 276,098 --------------- Trucking (.8%) 4,982 CNF, Inc. 223,692 4,727 GATX Corporation 163,082 12,896 JB Hunt Transport Services, Inc. 248,893 5,877 Swift Transportation Company, Inc. (b) 136,875
See accompanying notes to financial statements. 71
MARKET SHARES VALUE(a) - ------ --------------- TRANSPORTATION--CONTINUED 6,013 Werner Enterprises, Inc. $ 118,095 --------------- 890,637 --------------- UTILITIES (6.2%) Electric Companies (5.0%) 11,000 Alliant Energy Corporation 309,650 22,892 Aquila, Inc. (b) 82,640 2,990 Black Hills Corporation 110,181 11,973 DPL, Inc. 328,659 7,339 Duquesne Light Holdings, Inc. 137,093 13,941 Energy East Corporation 404,010 7,059 Great Plains Energy, Inc. 225,112 7,648 Hawaiian Electric Industries, Inc. 205,043 3,994 Idacorp, Inc. 122,336 11,208 MDU Resources Group, Inc. 315,729 12,248 Northeast Utilities 255,493 10,098 NSTAR 311,321 8,537 OGE Energy Corporation 247,061 17,869 Pepco Holdings, Inc. 427,784 6,533 PNM Resources, Inc. 188,216 9,470 Puget Energy, Inc. $ 221,409 10,743 SCANA Corporation 458,833 11,128 Sierra Pacific Resources (b) 138,544 8,198 Westar Energy, Inc. 196,998 11,073 Wisconsin Energy Corporation 431,847 3,580 WPS Resources Corporation 201,375 --------------- 5,319,334 --------------- Natural Gas (.9%) 7,298 AGL Resources, Inc. 282,068 9,596 Oneok, Inc. 313,309 7,201 Vectren Corporation 206,885 4,609 WGL Holdings, Inc. 155,047 --------------- 957,309 --------------- Water Utilities (.3%) 9,067 Aqua America, Inc. 269,653 --------------- Total common stocks (Cost: $83,282,161) 101,778,775 --------------- S&P DEPOSITORY RECEIPT (.1%) 500 S&P MidCap 400 Index Depository Receipt 62,610 --------------- Total S&P depository receipt (cost: $56,624) 62,610 ---------------
PRINCIPAL RATE MATURITY - --------- ------ -------- SHORT-TERM SECURITIES (23.9%) SECURITY LENDING COLLATERAL (19.4%) Commercial Paper (11.9%) $ 988,274 Amsterdam Funding Corporation (e) 3.100% 07/11/05 987,375 600,024 ANZ National, Ltd. (e) 3.100% 07/08/05 599,639 705,910 BHP Billiton Financial USA, Ltd. (e) 3.100% 07/05/05 705,656 1,200,047 Cedar Springs Capital Company (e) 3.140% 07/20/05 1,197,971 1,066,630 Concord Minutemen Capital Company (e) 3.130% 07/07/05 1,066,054 1,157,692 Crown Point Capital Company (e) 3.100% 07/05/05 1,157,276 141,182 Eiffel Funding LLC (e) 3.100% 07/05/05 141,131 1,019,193 Eiffel Funding LLC (e) 3.080% 07/08/05 1,018,541 395,310 Irish Life & Permanent (e) 3.040% 07/08/05 395,057 988,274 KLIO II Funding Corporation (e) 3.170% 08/02/05 985,378 847,092 Lehman Brothers Holdings (e) 2.762% 08/16/05 847,092 988,274 Liquid Funding, Ltd. (e) 3.080% 07/05/05 987,918 395,310 Morgan Stanley (e) 2.470% 02/03/06 395,310 141,182 Neptune Funding Corporation (e) 3.100% 07/06/05 141,118
See accompanying notes to financial statements. 72
MARKET PRINCIPAL/SHARES RATE MATURITY VALUE(a) - ---------------- ----- -------- ------------- SECURITY LENDING COLLATERAL--CONTINUED $ 847,092 Sedna Finance, Inc. (e) 3.080% 07/11/05 $ 846,321 254,128 Sedna Finance, Inc. (e) 3.100% 07/14/05 253,828 70,591 Sedna Finance, Inc. (e) 3.110% 07/19/05 70,476 988,274 Solitaire Funding, LLC (e) 3.130% 07/21/05 986,475 ------------- 12,782,616 ------------- Corporate Note (4.0%) 988,274 American General Finance (d) 3.090% 07/14/06 988,363 564,728 Beta Finance, Inc. (d) 2.990% 06/02/06 564,864 1,270,638 General Electric Capital Assurance Company 3.162% 06/16/06 1,270,638 705,910 Metropolitan Life Global Funding I (d) 3.182% 03/06/06 705,797 705,910 Morgan Stanley (d) 3.090% 08/13/10 705,966 ------------- 4,235,628 ------------- Repurchase Agreement (3.5%) 3,792,574 Morgan Stanley, Wells Fargo and Bank of New York Repurchase Agreement account; dated 6/30/05, rate 3.487%, due 7/1/05; proceeds $3,792,941 (Collateralized by Corporate Obligations) 3,792,574 ------------- Total Security Lending Collateral (Cost: $20,810,818) 20,810,818 ------------- INVESTMENT COMPANIES (4.5%) 4,300,000 American Beacon Funds, current rate 3.190% 4,300,000 569,989 Federated Money Market Obligation Trust - Prime Obligation Fund, current rate 3.080% 569,989 ------------- Total investment companies (cost: $4,869,989) 4,869,989 ------------- Total short-term securities (cost: $25,680,807) 25,680,807 ------------- Total investments in securities (cost: $109,019,592) (g) 127,522,192 Payable upon return of securities loaned (19.4%) (20,810,818) Cash and other assets in excess of liabilities (.5%) 547,578 ------------- Total net assets (100%) $ 107,258,952 =============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Portfolio held .5% of net assets in foreign securities at June 30, 2005. (d) Variable rate security. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 10.8% of the Portfolio's net assets at June 30, 2005. (f) Fully or partially pledged as initial margin deposits on open index futures purchased contracts. See accompanying notes to financial statements. 73 HOLDINGS OF OPEN FUTURES CONTRACTS On June 30, 2005, securities with an aggregate market value of $2,266,735 have been segregated to cover margin requirements for the following open futures contracts:
NUMBER OF POSITION UNREALIZED UNREALIZED TYPE EXPIRATION CONTRACTS TYPE APPRECIATION DEPRECIATION - ---- -------------- --------- -------- ------------ ------------ S&P Mid 400(R) EMINI September 2005 71 Long $ 17,224 $ 4,122 == ============ ============
(g) At June 30, 2005 the cost of securities for federal income tax purposes was $109,335,254. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 24,248,423 Gross unrealized depreciation (6,061,485) --------------- Net unrealized appreciation $ 18,186,938 ===============
See accompanying notes to financial statements. 74 REAL ESTATE SECURITIES PORTFOLIO INVESTMENTS IN SECURITIES JUNE 30, 2005 (UNAUDITED) (Percentages of each investment category relate to total net assets.)
MARKET SHARES VALUE(a) - ------ --------------- COMMON STOCKS (99.2%) CONSUMER CYCLICAL (9.9%) Entertainment (.1%) 2,800 Great World Resorts, Inc. (b) $ 57,232 --------------- Lodging -- Hotel (9.8%) 172,800 Hilton Hotels Corporation 4,121,280 18,200 Marriott International, Inc. 1,241,604 83,300 Starwood Hotels & Resorts Worldwide, Inc. 4,878,881 --------------- 10,241,765 --------------- FINANCIAL (89.3%) Real Estate (6.1%) 139,200 Brookfield Properties Company (c) 4,008,960 22,434 Forest City Enterprises, Inc. 1,592,814 58,900 Thomas Properties Group, Inc. 736,839 --------------- 6,338,613 --------------- Real Estate Investment Trust -- Apartments (17.7%) 90,800 American Campus Communities, Inc. 2,059,344 49,400 Archstone-Smith Trust 1,907,828 28,600 AvalonBay Communities, Inc. 2,310,880 8,600 BRE Properties, Inc. 359,910 59,200 Camden Property Trust 3,182,000 102,000 Educational Realty Trust, Inc. 1,866,600 85,300 Equity Residential 3,140,746 12,900 Essex Property Trust, Inc. 1,071,474 104,675 United Dominion Realty Trust, Inc. 2,517,434 --------------- 18,416,216 --------------- Real Estate Investment Trust -- Diversified (5.5%) 10,500 Capital Automotive 400,785 46,900 Cousins Properties, Inc. 1,387,302 25,900 Liberty Property Trust 1,147,629 117,200 NorthStar Realty Finance Corporation 1,229,428 11,500 PS Business Parks, Inc. $ 511,175 12,900 Vornado Realty Trust 1,037,160 --------------- 5,713,479 --------------- Real Estate Investment Trust -- Health Care (1.7%) 58,200 Ventas, Inc. 1,757,640 --------------- Real Estate Investment Trust -- Hotels (5.5%) 102,200 DiamondRock Hospitality Company 1,154,860 96,500 Hersha Hospitality Trust 920,610 86,000 Host Marriott Corporation 1,505,000 83,300 Strategic Hotel Capital, Inc. 1,499,400 62,000 Winston Hotels, Inc. 698,120 --------------- 5,777,990 --------------- Real Estate Investment Trust -- Mortgage (3.3%) 44,700 Gramercy Capital Corporation 1,093,362 29,800 Newcastle Investment Corporation 898,470 80,400 Spirit Finance Corporation 944,700 48,300 Spirit Finance Corporation - 144A Issue (f) (g) 567,525 --------------- 3,504,057 --------------- Real Estate Investment Trust -- Office Property (14.0%) 20,300 Alexandria Real Estate Equities, Inc. 1,491,035 19,700 Arden Realty, Inc. 708,806 102,102 BioMed Realty Trust, Inc. 2,435,133 34,500 Boston Properties, Inc. 2,415,000 84,000 Brandywine Realty Trust 2,574,600 33,800 Columbia Equity Trust, Inc. (b) 518,830 40,800 Maguire Properties, Inc. 1,156,272 52,100 Prentiss Properties Trust 1,898,524 68,900 Trizec Properties, Inc. 1,417,273 --------------- 14,615,473 ---------------
See accompanying notes to financial statements. 75
MARKET SHARES VALUE(a) - ------ --------------- FINANCIAL--CONTINUED Real Estate Investment Trust -- Regional Mall (13.9%) 108,720 General Growth Properties, Inc. $ 4,467,305 81,900 Simon Property Group, Inc. 5,936,931 66,600 The Mills Corporation 4,048,614 --------------- 14,452,850 --------------- Real Estate Investment Trust -- Self Storage (1.9%) 37,061 Extra Space Storage, Inc. 531,084 20,600 Public Storage, Inc. 1,302,950 2,800 Sovran Self Storage, Inc. 127,288 --------------- 1,961,322 --------------- Real Estate Investment Trust -- Shopping Centers (11.9%) 87,400 Developers Diversified Realty Corporation 4,016,904 80,100 Equity One, Inc. 1,818,270 54,250 Kimco Realty Corporation $ 3,195,867 118,100 Kite Realty Group Trust 1,771,500 7,600 Pan Pacific Retail Properties, Inc. 504,488 19,300 Regency Centers Corporation 1,103,960 --------------- 12,410,989 --------------- Real Estate Investment Trust -- Warehouse/Industrial (7.8%) 41,700 Catellus Development Corporation 1,367,760 41,900 First Potomac Realty Trust 1,039,120 142,100 Prologis 5,718,104 --------------- 8,124,984 --------------- Total common stocks (cost: $76,038,527) 103,372,610 ---------------
PRINCIPAL RATE MATURITY - --------- ---- -------- SHORT-TERM SECURITIES (10.5%) SECURITY LENDING COLLATERAL (9.2%) Commercial Paper (5.6%) $ 454,027 Amsterdam Funding Corporation (e) 3.100% 07/11/05 453,614 275,659 ANZ National, Ltd. (e) 3.100% 07/08/05 275,483 324,305 BHP Billiton Financial USA, Ltd. (e) 3.100% 07/05/05 324,188 551,318 Cedar Springs Capital Company (e) 3.140% 07/20/05 550,365 490,025 Concord Minutemen Capital Company (e) 3.130% 07/07/05 489,760 531,860 Crown Point Capital Company (e) 3.100% 07/05/05 531,669 64,861 Eiffel Funding LLC (e) 3.100% 07/05/05 64,838 468,232 Eiffel Funding LLC (e) 3.080% 07/08/05 467,932 181,611 Irish Life & Permanent (e) 3.040% 07/08/05 181,494 454,027 KLIO II Funding Corporation (e) 3.170% 08/02/05 452,697 389,166 Lehman Brothers Holdings (e) 2.762% 08/16/05 389,166 454,027 Liquid Funding, Ltd. (e) 3.080% 07/05/05 453,863 181,611 Morgan Stanley (e) 2.470% 02/03/06 181,611 64,861 Neptune Funding Corporation (e) 3.100% 07/06/05 64,832 389,166 Sedna Finance, Inc. (e) 3.080% 07/11/05 388,812 116,750 Sedna Finance, Inc. (e) 3.100% 07/14/05 116,612 32,430 Sedna Finance, Inc. (e) 3.110% 07/19/05 32,377 454,027 Solitaire Funding LLC (e) 3.130% 07/21/05 453,201 --------- 5,872,514 ---------
See accompanying notes to financial statements. 76
MARKET PRINCIPAL/SHARES RATE MATURITY VALUE(a) - ---------------- ----- -------- -------------- SECURITY LENDING COLLATERAL--CONTINUED Corporate Note (1.9%) $ 454,027 American General Finance (d) 3.090% 07/14/06 $ 454,068 259,444 Beta Finance, Inc. (d) 2.990% 06/02/06 259,506 583,749 General Electric Capital Assurance Company 3.162% 06/16/06 583,749 324,305 Metropolitan Life Global Funding I (d) 3.182% 03/06/06 324,253 324,305 Morgan Stanley (d) 3.090% 08/13/10 324,331 -------------- 1,945,907 -------------- Repurchase Agreement (1.7%) 1,742,362 Morgan Stanley, Wells Fargo and Bank of New York Repurchase Agreement account; dated 6/30/05, rate 3.487%, due 7/1/05; proceeds $1,742,531 (Collateralized by Corporate Obligations) 1,742,362 -------------- Total security lending collateral (cost: $9,560,783) 9,560,783 -------------- INVESTMENT COMPANY (1.3%) 1,400,097 Federated Money Market Obligation Trust - Prime Obligation Fund, current rate 3.080% 1,400,097 -------------- Total investment company (cost: $1,400,097) 1,400,097 -------------- Total short-term securities (cost: $10,960,880) 10,960,880 -------------- Total investments in securities (cost: $86,999,407) (h) $ 114,333,490 -------------- Payable upon return of securities loaned (9.2%) (9,560,783) Liabilities in excess of cash and other assets (-.5%) (521,208) -------------- Total net assets (100%) $ 104,251,499 ==============
INVESTMENTS IN SECURITIES LEGEND (a) Securities are valued by procedures described in note 2 to the financial statements. (b) Non-income producing. (c) The Portfolio held 3.8% of net assets in foreign securities at June 30, 2005. (d) Variable rate security. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Board of Directors. In the aggregate such securities represent 5.1% of the Portfolio's net assets at June 30, 2005. (f) Represents ownership in an illiquid security. (See note 6 to the financial statements.) Information concerning the illiquid securities held at June 30, 2005, which includes cost and acquisition date, is as follows:
ACQUISITION ACQUISITION SECURITY: DATE COST --------- ----------- ----------- Spirit Finance Corporation - 144A Issue* various $ 483,000 ===========
* A 144A Issue represents a security which has not been registered with the Securities and Exchange Commission under the Securities Act of 1933. (g) This security is being fair-valued according to procedures approved by the Board of Directors. (h) At June 30, 2005 the cost of securities for federal income tax purposes was $87,165,518. The aggregate unrealized appreciation and depreciation of investments in securities based on this cost were: Gross unrealized appreciation $ 27,167,972 Gross unrealized depreciation -- ------------- Net unrealized appreciation $ 27,167,972 =============
See accompanying notes to financial statements. 77 ADVANTUS SERIES FUND, INC. STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (UNAUDITED)
MONEY MORTGAGE BOND MARKET SECURITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- ASSETS Investments in securities, at market value - see accompanying schedule for detailed listing*+ $ 381,607,585 $ 94,001,091 $ 222,964,526 Cash in bank on demand deposit 25,508 111 - Foreign currency in bank on deposit (identified cost: $109,574) - - - Receivable for Fund shares sold 5,311 - - Receivable for investment securities sold (including paydowns) 2,325,170 - 3,544,466 Dividends and accrued interest receivable 2,441,922 265,788 994,180 Receivable for refundable foreign income taxes withheld - - - Other receivables 8,888 - - Unrealized appreciation on forward foreign currency contracts held, at value (note 2) - - - Variation margin receivable - - 3,912 -------------- -------------- -------------- Total assets 386,414,384 94,266,990 227,507,084 -------------- -------------- -------------- LIABILITIES Bank overdraft - - 51,133 Payable for Fund shares repurchased - 161,970 131,143 Payable for investment securities purchased 27,063,748 - 13,825,283 Dividends payable to shareholders - 177,739 - Payable to Advisor 175,689 44,831 109,404 Accrued expenses - 9,060 11,267 Unrealized depreciation on forward foreign currency contracts held, at value (note 2) - - - Variation margin payable - - - Payable upon return of securities loaned (note 5) 32,866,563 - 13,223,777 -------------- -------------- -------------- Total liabilities 60,106,000 393,600 27,352,007 -------------- -------------- -------------- Net assets applicable to outstanding capital stock $ 326,308,384 $ 93,873,390 $ 200,155,077 -------------- -------------- -------------- -------------- -------------- -------------- Represented by: Capital stock - authorized 10 trillion shares of $.01 par value** $ 2,209,339 $ 938,750 $ 1,388,556 Additional paid-in capital 311,423,988 92,936,208 193,659,656 Undistributed net investment income 6,944,569 - 4,918,195 Accumulated net realized gains (losses) from investments and foreign currency transactions 1,349,770 (1,568) 793,771 Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 4,380,718 - (605,101) -------------- -------------- -------------- Total - representing net assets applicable to outstanding capital stock $ 326,308,384 $ 93,873,390 $ 200,155,077 ============== ============== ============== Net assets value per share of outstanding capital stock $ 1.48 $ 1.00 $ 1.44 ============== ============== ============== * Identified cost $ 377,226,867 $ 94,001,091 $ 223,543,208 ** Shares outstanding 220,933,894 93,874,958 138,855,591 + Including securities on loan of $ 32,226,331 $ - $ 12,936,986
See accompanying notes to financial statements. 78
MATURING MATURING GOVERNMENT GOVERNMENT INDEX 500 BOND 2006 BOND 2010 PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- ASSETS Investments in securities, at market value - see accompanying schedule for detailed listing*+ $ 708,788,345 $ 4,421,704 $ 5,880,738 Cash in bank on demand deposit 4,054 - - Foreign currency in bank on deposit (identified cost: $109,574) - - - Receivable for Fund shares sold - - 5,996 Receivable for investment securities sold (including paydowns) - - - Dividends and accrued interest receivable 769,550 450 31 Receivable for refundable foreign income taxes withheld - - - Other receivables 41,965 - - Unrealized appreciation on forward foreign currency contracts held, at value (note 2) - - - Variation margin receivable - - - -------------- -------------- -------------- Total assets 709,603,914 4,422,154 5,886,765 -------------- -------------- -------------- LIABILITIES Bank overdraft - - - Payable for Fund shares repurchased 3,151 124 - Payable for investment securities purchased - - - Dividends payable to shareholders - - - Payable to Advisor 214,668 3,495 3,778 Accrued expenses - 14,350 10,972 Unrealized depreciation on forward foreign currency contracts held, at value (note 2) - - - Variation margin payable 19,576 - - Payable upon return of securities loaned (note 5) 70,941,948 - - -------------- -------------- -------------- Total liabilities 71,179,343 17,969 14,750 -------------- -------------- -------------- Net assets applicable to outstanding capital stock $ 638,424,571 $ 4,404,185 $ 5,872,015 ============== ============== ============== Represented by: Capital stock - authorized 10 trillion shares of $.01 par value** $ 1,691,604 $ 31,452 $ 35,905 Additional paid-in capital 422,126,986 4,107,190 5,120,877 Undistributed net investment income 4,313,350 70,952 96,316 Accumulated net realized gains (losses) from investments and foreign currency transactions (28,341,237) 33,507 23,650 Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies 238,633,868 161,084 595,267 -------------- -------------- -------------- Total - representing net assets applicable to outstanding capital stock $ 638,424,571 $ 4,404,185 $ 5,872,015 ============== ============== ============== Net assets value per share of outstanding capital stock $ 3.77 $ 1.40 $ 1.64 ============== ============== ============== * Identified cost $ 470,114,964 $ 4,260,620 $ 5,285,471 ** Shares outstanding 169,160,409 3,145,155 3,590,468 + Including securities on loan of $ 67,957,278 $ - $ - INTERNATIONAL INDEX 400 REAL ESTATE BOND MID-CAP SECURITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- ASSETS Investments in securities, at market value - see accompanying schedule for detailed listing*+ $ 63,108,624 $ 127,522,192 $ 114,333,490 Cash in bank on demand deposit - - 21,083 Foreign currency in bank on deposit (identified cost: $109,574) 109,561 - - Receivable for Fund shares sold 12,476 483,726 - Receivable for investment securities sold (including paydowns) - 86,976 237,552 Dividends and accrued interest receivable 1,169,658 73,272 425,110 Receivable for refundable foreign income taxes withheld 18,743 - - Other receivables - - - Unrealized appreciation on forward foreign currency contracts held, at value (note 2) 833,419 - - Variation margin receivable - - - -------------- -------------- -------------- Total assets 65,252,481 128,166,166 115,017,235 -------------- -------------- -------------- LIABILITIES Bank overdraft - - - Payable for Fund shares repurchased - - 24,360 Payable for investment securities purchased - 37,704 1,089,482 Dividends payable to shareholders - - - Payable to Advisor 48,014 37,398 82,472 Accrued expenses 33,040 5,623 8,639 Unrealized depreciation on forward foreign currency contracts held, at value (note 2) 496,090 - - Variation margin payable - 15,671 - Payable upon return of securities loaned (note 5) - 20,810,818 9,560,783 -------------- -------------- -------------- Total liabilities 577,144 20,907,214 10,765,736 -------------- -------------- -------------- Net assets applicable to outstanding capital stock $ 64,675,337 $ 107,258,952 $ 104,251,499 ============== ============== ============== Represented by: Capital stock - authorized 10 trillion shares of $.01 par value** $ 471,779 $ 690,561 $ 501,318 Additional paid-in capital 61,957,447 86,878,638 72,038,536 Undistributed net investment income 863,016 488,701 1,367,681 Accumulated net realized gains (losses) from investments and foreign currency transactions 2,017,362 674,307 3,009,842 Unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies (634,267) 18,526,745 27,334,122 -------------- -------------- -------------- Total - representing net assets applicable to outstanding capital stock $ 64,675,337 $ 107,258,952 $ 104,251,499 ============== ============== ============== Net assets value per share of outstanding capital stock $ 1.37 $ 1.55 $ 2.08 ============== ============== ============== * Identified cost $ 64,040,705 $ 109,019,592 $ 86,999,407 ** Shares outstanding 47,177,900 69,056,055 50,131,799 + Including securities on loan of $ - $ 19,998,120 $ 9,273,243
79 STATEMENTS OF OPERATIONS PERIOD FROM JANUARY 1, 2005 TO JUNE 30, 2005 (UNAUDITED)
MONEY MORTGAGE BOND MARKET SECURITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- Investment Income Interest (net of foreign withholding taxes of $19,936 for International Bond Portfolio) $ 7,962,911 $ 1,192,367 $ 5,709,360 Dividends (net of foreign withholding taxes of $8,603 for Real Estate Securities Portfolio) 112,031 - - Income from securities lending activities 26,045 - 535 -------------- -------------- -------------- Total investment income 8,100,987 1,192,367 5,709,895 -------------- -------------- -------------- Expenses (note 4): Investment advisory fee 624,299 136,620 411,374 Rule 12b-1 fees 390,187 113,850 257,109 Administrative services fee 15,460 15,460 15,460 Custodian fees 2,594 2,429 2,403 Audit and accounting services 57,152 38,966 50,830 Legal fees 27,428 7,628 23,680 Printing and shareholder reports 20,446 6,072 16,555 Director's fees 6,197 1,728 4,757 Insurance 3,616 1,063 2,871 S&P licensing fee - - - Other 9,039 2,147 6,661 -------------- -------------- -------------- Total expenses 1,156,418 325,963 791,700 -------------- -------------- -------------- Investment income - net 6,944,569 866,404 4,918,195 -------------- -------------- -------------- Realized and Unrealized gains (losses) on investments and foreign currencies: Net realized gains (losses) from: Investments (note 3) 1,482,164 (132) 876,773 Foreign currency transactions - - - Futures transactions - - (13,668) Net change in unrealized appreciation or depreciation on: Investments (461,184) - (586,224) Translation of assets and liabilities in foreign currency - - - Futures transactions - - 18,215 -------------- -------------- -------------- Net gains (losses) on investments 1,020,980 (132) 295,096 -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations $ 7,965,549 $ 866,272 $ 5,213,291 ============== ============== ==============
See accompanying notes to financial statements. 80
MATURING MATURING GOVERNMENT GOVERNMENT INDEX 500 BOND 2006 BOND 2010 PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- Investment Income Interest (net of foreign withholding taxes of $19,936 for International Bond Portfolio) $ 45,709 $ 132,387 $ 158,575 Dividends (net of foreign withholding taxes of $8,603 for Real Estate Securities Portfolio) 5,783,537 - - Income from securities lending activities 39,180 - 242 -------------- -------------- -------------- Total investment income 5,868,426 132,387 158,817 -------------- -------------- -------------- Expenses (note 4): Investment advisory fee 478,329 6,136 7,700 Rule 12b-1 fees 797,214 - - Administrative services fee 15,460 15,460 15,460 Custodian fees 7,916 632 615 Audit and accounting services 93,546 37,091 36,619 Legal fees 53,248 658 620 Printing and shareholder reports 42,783 521 469 Director's fees 13,416 104 129 Insurance 7,824 62 77 S&P licensing fee 25,566 - - Other 19,774 771 812 -------------- -------------- -------------- Total expenses 1,555,076 61,435 62,501 -------------- -------------- -------------- Investment income - net 4,313,350 70,952 96,316 -------------- -------------- -------------- Realized and Unrealized gains (losses) on investments and foreign currencies: Net realized gains (losses) from: Investments (note 3) (3,366,397) 44,020 23,650 Foreign currency transactions - - - Futures transactions (30,977) - - Net change in unrealized appreciation or depreciation on: Investments (7,723,437) (132,217) (3,872) Translation of assets and liabilities in foreign currency - - - Futures transactions (110,959) - - -------------- -------------- -------------- Net gains (losses) on investments (11,231,770) (88,197) 19,778 -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations $ (6,918,420) $ (17,245) $ 116,094 ============== ============== ============== INTERNATIONAL INDEX 400 REAL ESTATE BOND MID-CAP SECURITIES PORTFOLIO PORTFOLIO PORTFOLIO -------------- -------------- -------------- Investment Income Interest (net of foreign withholding taxes of $19,936 for International Bond Portfolio) $ 1,209,454 $ 76,968 $ 15,656 Dividends (net of foreign withholding taxes of $8,603 for Real Estate Securities Portfolio) - 682,534 1,875,235 Income from securities lending activities 3,022 10,922 3,949 -------------- -------------- -------------- Total investment income 1,212,476 770,424 1,894,840 -------------- -------------- -------------- Expenses (note 4): Investment advisory fee 194,912 72,163 328,291 Rule 12b-1 fees 81,214 120,271 117,247 Administrative services fee 15,460 15,460 15,460 Custodian fees 21,760 6,728 6,547 Audit and accounting services 48,381 44,932 42,311 Legal fees 5,685 6,978 6,893 Printing and shareholder reports 4,570 5,055 5,004 Director's fees 1,323 1,761 1,875 Insurance 813 955 996 S&P licensing fee - 5,019 - Other 1,754 2,401 2,535 -------------- -------------- -------------- Total expenses 375,872 281,723 527,159 -------------- -------------- -------------- Investment income - net 836,604 488,701 1,367,681 -------------- -------------- -------------- Realized and Unrealized gains (losses) on investments and foreign currencies: Net realized gains (losses) from: Investments (note 3) 932,197 726,523 3,178,285 Foreign currency transactions 1,085,165 - (7,425) Futures transactions - 332,025 - Net change in unrealized appreciation or depreciation on: Investments (7,122,487) 2,341,760 901,831 Translation of assets and liabilities in foreign currency 251,012 - (67) Futures transactions - (58,292) - -------------- -------------- -------------- Net gains (losses) on investments (4,854,113) 3,342,016 4,072,624 -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations $ (4,017,509) $ 3,830,717 $ 5,440,305 ============== ============== ==============
81 STATEMENTS OF CHANGES IN NET ASSETS PERIOD FROM JANUARY 1, 2005 TO JUNE 30, 2005 AND YEAR ENDED DECEMBER 31, 2004 (UNAUDITED)
MONEY BOND MARKET PORTFOLIO PORTFOLIO ------------------------------ ------------------------------ 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Operations: Investment income - net $ 6,944,569 $ 12,955,095 $ 866,404 $ 638,092 Net realized gains (losses) on investments 1,482,164 2,122,715 (132) - Net change in unrealized appreciation or depreciation of investments (461,184) (878,406) - - ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 7,965,549 14,199,404 866,272 638,092 ------------- ------------- ------------- ------------- Distributions to shareholders from: Investment income - net - - (867,840) (638,092) Net realized gains - - - - ------------- ------------- ------------- ------------- Total distributions - - (867,840) (638,092) ------------- ------------- ------------- ------------- Capital share transactions (note 7): Proceeds from sales 18,849,399 17,293,210 38,248,194 36,820,062 Shares issued as a result of reinvested distributions - - 805,231 593,582 Payments for redemption of shares (5,442,525) (13,491,104) (30,611,359) (48,049,479) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions 13,406,874 3,802,106 8,442,066 (10,635,835) ------------- ------------- ------------- ------------- Total increase (decrease) in net assets 21,372,423 18,001,510 8,440,498 (10,635,835) ------------- ------------- ------------- ------------- Net assets at beginning of year 304,935,961 286,934,451 85,432,892 96,068,727 ------------- ------------- ------------- ------------- Net assets at end of period* $ 326,308,384 $ 304,935,961 $ 93,873,390 $ 85,432,892 ============= ============= ============= ============= * including undistributed net investment income of $ 6,944,569 $ - $ - $ 1,436
See accompanying notes to financial statements. 82
MORTGAGE SECURITIES INDEX 500 PORTFOLIO PORTFOLIO ------------------------------ ------------------------------ 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Operations: Investment income - net $ 4,918,195 $ 11,744,056 $ 4,313,350 $ 9,712,884 Net realized gains (losses) on investments 863,105 2,217,470 (3,397,374) 1,808,446 Net change in unrealized appreciation or depreciation of investments (568,009) (2,924,759) (7,834,396) 51,094,121 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 5,213,291 11,036,767 (6,918,420) 62,615,451 ------------- ------------- ------------- ------------- Distributions to shareholders from: Investment income - net - - - - Net realized gains - - - - ------------- ------------- ------------- ------------- Total distributions - - - - ------------- ------------- ------------- ------------- Capital share transactions (note 7): Proceeds from sales 3,003,413 6,734,041 4,616,784 38,335,596 Shares issued as a result of reinvested distributions - - - - Payments for redemption of shares (43,542,569) (24,286,969) (22,910,090) (24,156,726) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions (40,539,156) (17,552,928) (18,293,306) 14,178,870 ------------- ------------- ------------- ------------- Total increase (decrease) in net assets (35,325,865) (6,516,161) (25,211,726) 76,794,321 ------------- ------------- ------------- ------------- Net assets at beginning of year 235,480,942 241,997,103 663,636,297 586,841,976 ------------- ------------- ------------- ------------- Net assets at end of period* $ 200,155,077 $ 235,480,942 $ 638,424,571 $ 663,636,297 ============= ============= ============= ============= * including undistributed net investment income of $ 4,918,195 $ - $ 4,313,350 $ - MATURING GOVERNMENT BOND 2006 PORTFOLIO ------------------------------ 2005 2004 ------------- ------------- Operations: Investment income - net $ 70,952 $ 333,461 Net realized gains (losses) on investments 44,020 319,427 Net change in unrealized appreciation or depreciation of investments (132,217) (625,457) ------------- ------------- Net increase (decrease) in net assets resulting from operations (17,245) 27,431 ------------- ------------- Distributions to shareholders from: Investment income - net - - Net realized gains - - ------------- ------------- Total distributions - - ------------- ------------- Capital share transactions (note 7): Proceeds from sales 22,315 87,953 Shares issued as a result of reinvested distributions - - Payments for redemption of shares (1,178,186) (4,493,991) ------------- ------------- Increase (decrease) in net assets from capital share transactions (1,155,871) (4,406,038) ------------- ------------- Total increase (decrease) in net assets (1,173,116) (4,378,607) ------------- ------------- Net assets at beginning of year 5,577,301 9,955,908 ------------- ------------- Net assets at end of period* $ 4,404,185 $ 5,577,301 ============= ============= * including undistributed net investment income of $ 70,952 $ -
83
MATURING GOVERNMENT INTERNATIONAL BOND 2010 BOND PORTFOLIO PORTFOLIO ------------------------------ ------------------------------ 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Operations: Investment income (loss) - net $ 96,316 $ 254,699 $ 836,604 $ 1,394,356 Net realized gains (losses) on investments and foreign currencies 23,650 182,677 2,017,362 3,265,563 Net change in unrealized appreciation or depreciation of investments (3,872) (210,107) (6,871,475) 2,129,373 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 116,094 227,269 (4,017,509) 6,789,292 ------------- ------------- ------------- ------------- Capital share transactions (note 7): Proceeds from sales 465,409 487,880 3,232,985 5,466,361 Shares issued as a result of reinvested distributions - - - - Payments for redemption of shares (1,471,311) (1,607,581) (2,074,348) (13,033,612) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions (1,005,902) (1,119,701) 1,158,637 (7,567,251) ------------- ------------- ------------- ------------- Total increase (decrease) in net assets (889,808) (892,432) (2,858,872) (777,959) ------------- ------------- ------------- ------------- Net assets at beginning of year 6,761,823 7,654,255 67,534,209 68,312,168 ------------- ------------- ------------- ------------- Net assets at end of period* $ 5,872,015 $ 6,761,823 $ 64,675,337 $ 67,534,209 ============= ============= ============= ============= * including (distributions in excess of) undistributed net investment income of $ 96,316 $ - $ 863,016 $ 26,412
See accompanying notes to financial statements. 84
INDEX 400 REAL ESTATE MID-CAP SECURITIES PORTFOLIO PORTFOLIO ------------------------------ ------------------------------ 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Operations: Investment income (loss) - net $ 488,701 $ 414,224 $ 1,367,681 $ 1,520,625 Net realized gains (losses) on investments and foreign currencies 1,058,548 3,633,356 3,170,860 7,918,904 Net change in unrealized appreciation or depreciation of investments 2,283,468 7,415,724 901,764 13,136,199 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 3,830,717 11,463,304 5,440,305 22,575,728 ------------- ------------- ------------- ------------- Capital share transactions (note 7): Proceeds from sales 19,550,988 17,345,933 6,831,179 23,653,792 Shares issued as a result of reinvested distributions - - - - Payments for redemption of shares (3,289,745) (5,400,475) (3,430,016) (11,483,979) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions 16,261,243 11,945,458 3,401,163 12,169,813 ------------- ------------- ------------- ------------- Total increase (decrease) in net assets 20,091,960 23,408,762 8,841,468 34,745,541 ------------- ------------- ------------- ------------- Net assets at beginning of year 87,166,992 63,758,230 95,410,031 60,664,490 ------------- ------------- ------------- ------------- Net assets at end of period* $ 107,258,952 $ 87,166,992 $ 104,251,499 $ 95,410,031 ============= ============= ============= ============= * including (distributions in excess of) undistributed net investment income of $ 488,701 $ - $ 1,367,681 $ -
85 ADVANTUS SERIES FUND, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) (1) ORGANIZATION Advantus Series Fund, Inc. (the Fund) is a Minnesota corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end management investment company with a series of nine portfolios (each a Portfolio and collectively the Fund: Bond, Money Market, Mortgage Securities, Index 500, Maturing Government Bond 2006, Maturing Government Bond 2010, International Bond, Index 400 Mid-Cap and Real Estate Securities.) Each Portfolio is diversified except for the International Bond Portfolio. The Fund's Prospectus provides a detailed description of each Portfolio's investment objective, policies and strategies. The Fund accounts for the assets, liabilities and operations of each Portfolio separately. Shares of the Fund will not be offered directly to the public, but sold only to Minnesota Life Insurance Company's (Minnesota Life) separate accounts in connection with Minnesota Life variable contracts and policies. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed consistently by the Fund are as follows: USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, as of the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENTS IN SECURITIES Each Portfolio's net asset value is generally calculated as of the close of normal trading on the New York Stock Exchange (typically 3:00 p.m. Central Time). Investments in securities traded on a U.S. or foreign securities exchange are valued at the last sale price on that exchange prior to the time when assets are valued; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued on the basis of the last current bid price, by an independent pricing service or at a price deemed best to reflect fair value quoted by dealers who make markets in these securities. The pricing service may use models that price securities based on current yields and relative security characteristics, such as coupon rate, maturity date, issuer credit quality, and prepayment speeds as applicable. When market quotations are not readily available, securities are valued at fair value as determined in good faith under procedures adopted by the Board of Directors. If either the Advisor or sub-Advisor becomes aware that a significant event impacting the value of a security or group of securities has occurred after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Portfolio calculates net asset value, it immediately notifies the Advisor's Valuation Committee, which then meets promptly to determine whether fair value pricing is needed in accordance with the Fund's valuation procedures and, if so, to approve the pricing methodology to be used. Short-term securities, with the exception of those held in Money Market, are valued at market. Pursuant to Rule 2a-7 of the 1940 Act, all securities in Money Market are valued at amortized cost, which approximates market value, in order to maintain a constant net asset value of $1.00 per share. However, there is no assurance the Money Market Portfolio will maintain the $1.00 net asset value. Security transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses are calculated on the identified-cost basis. Paydowns of securities are recorded as receivables as of the due date, which varies by the issuer. Dividend income is recognized on the ex-dividend date, or upon dividend notification for certain foreign securities, and interest income, including amortization of bond premium and discount computed on a level yield basis, is accrued daily. 86 FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities, income and expenses are translated at the exchange rate on the transaction date. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities. Such fluctuations are included with net realized and unrealized gains or losses from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between trade and settlement dates on security transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates. The International Bond Portfolio also may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuations. International Bond may also enter into these contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The net U.S. dollar value of foreign currency underlying all contractual commitments held by International Bond and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. International Bond is subject to the credit risk that the other party will not complete the obligations of the contract. The fair values of the forward currency exchange contracts are obtained from an independent pricing source. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes, the Fund (excluding Money Market) may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund may also buy and write put and call options on these future contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, a Portfolio is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by a Portfolio each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. A Portfolio recognizes a realized gain or loss when the contract is closed or expired. REPURCHASE AGREEMENTS Each Portfolio may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the Portfolio acquires a security and simultaneously commits to resell that security to the seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon date. Each Portfolio requires at all times that the repurchase agreement be collateralized by cash, U.S. Government securities, U.S. Government sponsored enterprises securities or corporate, securities having a value equal to, or in excess of, the value of the repurchase agreement. If the seller of the agreement defaults on its obligation to repurchase the underlying securities at a time when the value of those securities has declined, the Portfolio may incur a loss upon disposition of the securities. Repurchase agreements are carried at fair value obtained from an independent pricing source. FEDERAL TAXES Each Portfolio's policy is to comply with the requirements of Sub Chapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no income tax provision is required. Each Portfolio within the Fund is treated as a separate entity for federal income tax purposes. Each Portfolio's policy is to make the required minimum distributions prior to 87 December 31, in order to avoid Federal excise tax. The Fund (excluding Money Market) uses consent dividends in place of commercial distributions. For federal income tax purposes, the following Portfolios had capital loss carryovers at December 31, 2004 which are available to offset future capital gains, if any. It is unlikely the Board of Directors will authorize a distribution of any net realized capital gains until the available capital loss carryovers have been offset or expire:
CARRYOVER EXPIRING IN: ------------------------------------------------- PORTFOLIO 2009 2010 2011 2012 - --------- ---------- ----------- ---------- --------- Money Market - - - (1,436) Index 500 (6,432,817) (13,217,394) (1,535,500) -
Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of temporary book-to-tax differences. The character of distributions made during the year from net investment income or realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Portfolios. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders from net investment income for Money Market are declared daily and reinvested at month-end in additional shares of capital stock. For Portfolios other than Money Market, distributions from net investment income and realized gains, if any, will generally be declared and reinvested in additional shares on an annual basis. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS Delivery and payment for securities which have been purchased by the Portfolio on a forward commitment or when-issued basis can take place a month or more after the transaction date. During this period, such securities are subject to market fluctuations. As of June 30, 2005, the Bond and Mortgage Securities Portfolios had entered into outstanding, when-issued or forward commitments at fair value of $24,760,573 and $10,331,481, respectively. The Portfolio has segregated assets to cover such when-issued and forward commitments. (3) INVESTMENT SECURITY TRANSACTIONS The cost of purchases and proceeds from sales of investment securities, other than temporary or securities lending collateral investments in short-term securities, for the period ended June 30, 2005 were as follows:
NON-U.S. GOVERNMENT U.S. GOVERNMENT* ------------------------------ --------------------------------- PURCHASES SALES PURCHASES SALES -------------- ------------- --------------- --------------- Bond $ 83,700,814 $ 60,094,573 $ 173,601,826 $ 176,345,687 Mortgage Securities 22,316,753 30,712,261 162,647,304 189,810,287 Index 500 12,497,178 26,240,062 - - Maturing Government Bond 2006 - - 897,615 2,238,339 Maturing Government Bond 2010 - - - 1,074,917 International Bond 75,554,610 74,309,974 - - Index 400 Mid-Cap 19,835,061 5,168,852 - - Real Estate Securities 23,092,511 16,884,379 - -
- ---------- *Includes U.S. government sponsored enterprise securities 88 (4) EXPENSES AND RELATED PARTY TRANSACTIONS The Portfolios have an investment advisory agreement with Advantus Capital Management, Inc. (Advantus Capital), a wholly-owned subsidiary of Securian Financial Group. Under the advisory agreement, Advantus Capital manages the Portfolio's investments and provides research, statistical and advisory services and pays related office rental and executive expenses and salaries. Each Portfolio of the Fund pays Advantus Capital an annual fee, based on average daily net assets, in the following amounts:
ANNUAL FEE ON NET ASSETS ----------------------------------------- Bond .40% of net assets to $1 billion; and .35% of net assets exceeding $1 billion Money Market .30% of net assets to $1 billion; and .25% of net assets exceeding $1 billion Mortgage Securities .40% of net assets to $1 billion; and .35% of net assets exceeding $1 billion Index 500 .15% of net assets to $1 billion; and .10% of net assets exceeding $1 billion Maturing Government Bond 2006 .25% of net assets Maturing Government Bond 2010 .25% of net assets International Bond .60% of net assets to $1 billion; and .55% of net assets exceeding $1 billion Index 400 Mid-Cap .15% of net assets to $1 billion; .10% of net assets exceeding $1 billion Real Estate Securities .70% of net assets to $1 billion; and .65% of net assets exceeding $1 billion
Advantus Capital has a sub-advisory agreement with Julius Baer Investments Limited (the "sub-Advisor) a registered investment Advisor for International Bond, under which Advantus Capital pays the sub-Advisor an annual fee of .30% based on average daily net assets. The Fund bears certain other operating expenses including independent directors' fees, federal registration fees, printing and shareholder report expenses, legal fees, audit fees, custodian fees, and other miscellaneous expenses. Each Portfolio will pay all expenses directly related to its individual operations. Operating expenses not attributable to a specific Portfolio will be allocated based upon the proportionate daily net assets of each Portfolio. ADMINISTRATIVE SERVICES FEE Each Portfolio pays an administrative services fee to Minnesota Life for accounting, legal and other administrative services which Minnesota Life provides. The administrative services fee for each Portfolio is $2,600 per month. ACCOUNTING SERVICES The Fund has an agreement with State Street in which State Street provides daily fund accounting services. Under this agreement, the annual fee for each portfolio is equal to .02% of the first $2.5 billion in net assets, .015% of net assets from $2.5 billion to $5.0 billion, and .01% of net assets in excess of $5 billion. DISTRIBUTION FEES The Fund has adopted a Rule 12b-1 Distribution Plan covering all of its Portfolios except the Maturing Government Bond Portfolios. Each covered Portfolio pays distribution fees at the annual rate of .25% of the average daily net assets of the Portfolio. These fees are paid out of the Portfolio's assets, which reduces a Portfolio's net assets as do other Portfolio expenses. The fees are paid to Securian Financial Services, Inc. (Securian) the Fund's underwriter, to pay for distribution-related expenses and activities in connection with the distribution of the Portfolio's shares. Securian may also use the fees to pay insurance companies, dealers or others for certain non-distribution services as provided for in the Distribution Plan. 89 (5) SECURITIES LENDING To enhance returns, certain portfolios of the Fund loan securities to brokers in exchange for collateral. The Portfolios receive a fee from the brokers measured as a percent of the loaned securities. Upon initiation of the loan, 102% collateral for U.S. securities and 105% for foreign securities is required. If at anytime the collateral falls below 100%, brokers are required to fund back to 102% for U.S. securities and 105% for foreign securities. The market value of loaned securities is determined at the close of business of the Portfolios and any additional required collateral is delivered to the respective Portfolio on the next business day. The risks to the portfolios of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. These risks are mitigated by indemnification clauses in the securities lending contracts with the lending agents. The value of securities on loan at June 30, 2005 is as follows:
MARKET VALUE OF SECURITIES LOANED ----------------- Bond $ 32,226,331 Mortgage Securities 12,936,986 Index 500 67,957,278 Index 400 Mid-Cap 19,998,120 Real Estate Securities 9,273,243
Gain or loss in the market price of the securities loaned that may occur during the term of the loan is reflected in the value of the Portfolio. Wells Fargo Fund's Management, LLC receives 25% of income on securities lending activities and covers the expenses associated with securities lending activities. (6) ILLIQUID SECURITIES Each Portfolio currently limits investments in illiquid securities to 15% of net assets at the time of purchase, except for Money Market which limits the investment in illiquid securities to 10% of net assets. At June 30, 2005, investments in securities of Bond, Mortgage Securities, and Real Estate Securities include issues that are illiquid. The aggregate fair values of illiquid securities held by Bond, Mortgage Securities and Real Estate Securities were $13,615,123, $14,257,144 and $567,525, respectively, which represent 4.2%, 7.1%, and .5% of net assets, respectively. Pursuant to guidelines adopted by the Fund's Board of Directors, certain unregistered securities are determined to be liquid and are not included within the percent limitations specified above. (7) CAPITAL SHARE TRANSACTIONS Transactions in shares of Portfolios for the period ended June 30, 2005 and the year ended December 31, 2004 were as follows:
BOND MONEY MARKET -------------------------- -------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Sold 12,977,690 12,285,579 38,248,194 36,820,062 Issued for reinvested distributions - - 805,231 593,582 Redeemed (3,746,352) (9,707,723) (30,611,359) (48,049,479) ----------- ----------- ----------- ----------- 9,231,338 2,577,856 8,442,066 (10,635,835) =========== =========== =========== =========== MORTGAGE SECURITIES INDEX 500 -------------------------- -------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Sold 2,116,802 4,882,348 1,236,747 10,903,301 Redeemed (30,739,671) (17,800,555) (6,128,467) (6,760,038) ----------- ----------- ----------- ----------- (28,622,869) (12,918,207) (4,891,720) 4,143,263 =========== =========== =========== ===========
90
MATURING GOVERNMENT MATURING GOVERNMENT BOND 2006 BOND 2010 -------------------------- -------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Sold 15,937 62,224 288,318 304,490 Redeemed (842,383) (3,188,986) (920,145) (1,020,343) ----------- ----------- ----------- ----------- (826,446) (3,126,762) (631,827) (715,853) =========== =========== =========== =========== INTERNATIONAL BOND INDEX 400 MID-CAP -------------------------- -------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Sold 2,286,057 4,242,120 13,095,701 12,924,348 Redeemed (1,479,427) (10,182,668) (2,210,183) (3,995,094) ----------- ----------- ----------- ----------- 806,630 (5,940,548) 10,885,518 8,929,254 =========== =========== =========== =========== REAL ESTATE SECURITIES -------------------------- 2005 2004 ----------- ----------- Sold 3,599,883 14,567,773 Redeemed (1,816,000) (7,849,224) ----------- ----------- 1,783,883 6,718,549 =========== ===========
91 (8) FINANCIAL HIGHLIGHTS BOND PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.44 $ 1.37 $ 1.30 $ 1.18 $ 1.22 $ 1.18 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .03 .06 .06 .06 .06 .08 Net gains on securities (both realized and unrealized) .01 .01 .01 .06 .04 .03 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations 04 .07 .07 .12 .10 .11 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.14) (.07) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.14) (.07) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.48 $ 1.44 $ 1.37 $ 1.30 $ 1.18 $ 1.22 =========== ========== ========== ========== ========== ========== Total return (a) 2.54% 4.98% 5.35% 10.50% 7.90% 10.44% Net assets, end of period (in thousands) $ 326,308 $ 304,936 $ 286,934 $ 276,486 $ 235,318 $ 187,254 Ratios to average net assets: Expenses .74%(d) .64% .61% .61% .60% .61% Net investment income 4.45%(d) 4.42% 4.32% 5.20% 5.96% 6.43% Portfolio turnover rate (excluding short-term securities) 76.3% 124.2% 128.4% 140.8% 197.8% 206.8%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 92 MONEY MARKET PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .01 .01 .01 .01 .04 .06 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .01 .01 .01 .01 .04 .06 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income (.01) (.01) (.01) (.01) (.04) (.06) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 =========== ========== ========== ========== ========== ========== Total return (a) .94% .74% .61% 1.28% 3.75% 5.96% Net assets, end of period (in thousands) $ 93,873 $ 85,433 $ 96,069 $ 163,703 $ 140,058 $ 184,098 Ratios to average net assets: Expenses .72%(d) .64% .60% .57% .57% .58% Net investment income 1.90%(d) .75% .64% 1.26% 3.73% 5.83%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 93 MORTGAGE SECURITIES PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.41 $ 1.34 $ 1.29 $ 1.18 $ 1.22 $ 1.17 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .04 .07 .08 .08 .07 .09 Net gains (losses) on securities (both realized and unrealized) (.01) - (.03) .03 .04 .04 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .03 .07 .05 .11 .11 .13 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.15) (.08) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.15) (.08) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.44 $ 1.41 $ 1.34 $ 1.29 $ 1.18 $ 1.22 =========== ========== ========== ========== ========== ========== Total return (a) 2.52% 4.81% 4.15% 9.66% 9.04% 11.80% Net assets, end of period (in thousands) $ 200,155 $ 235,481 $ 241,997 $ 249,802 $ 230,141 $ 151,141 Ratios to average net assets: Expenses .77%(d) .65% .62% .62% .61% .62% Net investment income 4.79%(d) 4.98% 5.51% 6.41% 6.85% 7.30% Portfolio turnover rate (excluding short-term securities) 89.2% 152.2% 83.9% 82.4% 81.9% 48.9%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 94 INDEX 500 PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 3.81 $ 3.45 $ 2.70 $ 3.47 $ 4.05 $ 4.56 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .03 .06 .04 .04 .03 .03 Net gains (losses) on securities (both realized and unrealized) (.07) .30 .71 (.81) (.54) (.44) ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations (.04) .36 .75 (.77) (.51) (.41) ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.03) (.03) Distributions from net realized gains - - - - (.04) (.07) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.07) (.10) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 3.77 $ 3.81 $ 3.45 $ 2.70 $ 3.47 $ 4.05 =========== ========== ========== ========== ========== ========== Total return (a) (1.02)% 10.39% 28.04% (22.37)% (12.25)% (9.39)% Net assets, end of period (in thousands) $ 638,425 $ 663,636 $ 586,842 $ 418,897 $ 520,644 $ 584,239 Ratios to average net assets: Expenses .49%(d) .45% .45% .43% .42% .44% Net investment income 1.35%(d) 1.59% 1.34% 1.23% .93% .73% Portfolio turnover rate (excluding short-term securities) 2.0% 1.6% 2.8% 7.8% 6.1% 12.8%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 95 MATURING GOVERNMENT BOND 2006 PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.40 $ 1.40 $ 1.38 $ 1.22 $ 1.18 $ 1.09 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .02 .08 .06 .06 .06 .07 Net gains (losses) on securities (both realized and unrealized) (.02) (.08) (.04) .10 .04 .09 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations - - .02 .16 .10 .16 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.06) (.07) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.06) (.07) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.40 $ 1.40 $ 1.40 $ 1.38 $ 1.22 $ 1.18 =========== ========== ========== ========== ========== ========== Total return (a) (.28)% .12% 1.95% 12.99% 8.08% 15.63% Net assets, end of period (in thousands) $ 4,404 $ 5,577 $ 9,956 $ 10,650 $ 8,694 $ 6,429 Ratios to average net assets: Expenses 2.51%(d) 1.47% 1.00% .65% .40% .40% Net investment income 2.89%(d) 4.04% 3.95% 4.81% 5.39% 5.92% Expenses without waiver 2.51%(d) 1.47% 1.00% 1.02% 1.16% 1.41% Net investment income without waiver 2.89%(d) 4.04% 3.95% 4.44% 4.63% 4.91% Portfolio turnover rate (excluding short-term securities) 18.1% 22.8% 12.4% 5.9% 6.4% 3.4%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 96 MATURING GOVERNMENT BOND 2010 PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.60 $ 1.55 $ 1.51 $ 1.27 $ 1.35 $ 1.19 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .03 .06 .07 .05 .07 .08 Net gains (losses) on securities (both realized and unrealized) .01 (.01) (.03) .19 (.01) .17 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .04 .05 .04 .24 .06 .25 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.14) (.08) Distributions from net realized gains - - - - - (.01) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.14) (.09) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.64 $ 1.60 $ 1.55 $ 1.51 $ 1.27 $ 1.35 =========== ========== ========== ========== ========== ========== Total return (a) 2.13% 3.31% 2.75% 18.85% 4.96% 21.36% Net assets, end of period (in thousands) $ 5,872 $ 6,762 $ 7,654 $ 9,359 $ 5,855 $ 5,537 Ratios to average net assets: Expenses 2.03%(d) 1.62% 1.12% .65% .40% .40% Net investment income 3.13%(d) 3.53% 3.67% 4.79% 5.49% 6.22% Expenses without waiver 2.03%(d) 1.62% 1.12% 1.28% 1.42% 1.66% Net investment income without waiver 3.13%(d) 3.53% 3.67% 4.16% 4.47% 4.96% Portfolio turnover rate (excluding short-term securities) 0.0% 17.1% 10.5% 19.1% 17.3% 8.3%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 97 INTERNATIONAL BOND PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.46 $ 1.31 $ 1.09 $ 0.92 $ 0.95 $ 0.94 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .02 .03 .03 .05 .04 .04 Net gains (losses) on securities (both realized and unrealized) (.11) .12 .19 .12 (.06) (.03) ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations (.09) .15 .22 .17 (.02) .01 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.01) - ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.01) - ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.37 $ 1.46 $ 1.31 $ 1.09 $ 0.92 $ 0.95 =========== ========== ========== ========== ========== ========== Total return (a) (5.79)% 11.43% 20.25% 17.94% (1.51)% 1.42% Net assets, end of period (in thousands) $ 64,675 $ 67,534 $ 68,312 $ 53,683 $ 39,958 $ 37,177 Ratios to average net assets: Expenses 1.16%(d) 1.17% 1.09% 1.24% 1.20% 1.33% Net investment income 2.58%(d) 2.20% 2.55% 4.52% 4.50% 4.85% Portfolio turnover rate (excluding short-term securities) 116.6% 145.2% 364.8% 304.1% 251.7% 306.8%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 98 INDEX 400 MID-CAP PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.50 $ 1.29 $ 0.96 $ 1.13 $ 1.22 $ 1.18 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .01 .01 .01 - .01 .01 Net gains (losses) on securities (both realized and unrealized) .04 .20 .32 (.17) (.03) .19 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .05 .21 .33 (.17) (.02) .20 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.01) (.01) Distributions from net realized gains - - - - (.04) (.15) Tax return of capital - - - - (.02) - ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.07) (.16) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 1.55 $ 1.50 $ 1.29 $ 0.96 $ 1.13 $ 1.22 =========== ========== ========== ========== ========== ========== Total return (a) 3.66% 15.73% 34.59% (15.03)% (1.07)% 16.05% Net assets, end of period (in thousands) $ 107,259 $ 87,167 $ 63,758 $ 41,835 $ 41,069 $ 35,768 Ratios to average net assets: Expenses .58%(d) .64% .61% .65% .55% .55% Net investment income 1.01%(d) .56% .62% .42% .82% 1.18% Expenses without waiver .58%(d) .64% .61% .65% .67% .80% Net investment income without waiver 1.01%(d) .56% .62% .42% .70% .93% Portfolio turnover rate (excluding short-term securities) 5.6% 16.3% 11.0% 20.0% 29.8% 78.3%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 99 REAL ESTATE SECURITIES PORTFOLIO
PERIOD FROM JANUARY 1, 2005 TO JUNE 30, YEAR ENDED DECEMBER 31, 2005(c) --------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000(b) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.97 $ 1.46 $ 1.02 $ 0.96 $ 0.90 $ 0.76 ----------- ---------- ---------- ---------- ---------- ---------- Income from investment operations: Net investment income .03 .03 .03 .03 .03 .04 Net gains on securities (both realized and unrealized) .08 .48 .41 .03 .06 .15 ----------- ---------- ---------- ---------- ---------- ---------- Total from investment operations .11 .51 .44 .06 .09 .19 ----------- ---------- ---------- ---------- ---------- ---------- Less distributions: Dividends from net investment income - - - - (.03) (.04) Distributions from net realized gains - - - - - (.01) ----------- ---------- ---------- ---------- ---------- ---------- Total distributions - - - - (.03) (.05) ----------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 2.08 $ 1.97 $ 1.46 $ 1.02 $ 0.96 $ 0.90 =========== ========== ========== ========== ========== ========== Total return (a) 5.38% 35.52% 42.21% 6.97% 10.03% 25.61% Net assets, end of period (in thousands) $ 104,251 $ 95,410 $ 60,664 $ 33,912 $ 15,638 $ 9,947 Ratios to average net assets: Expenses 1.12%(d) 1.06% 1.11% 1.00% 1.00% .97% Net investment income 2.91%(d) 2.13% 2.78% 3.38% 4.43% 5.32% Expenses without waiver 1.12%(d) 1.06% 1.11% 1.18% 1.59% 2.03% Net investment income without waiver 2.91%(d) 2.13% 2.78% 3.23% 3.84% 4.26% Portfolio turnover rate (excluding short-term securities) 17.9% 85.3% 45.4% 70.2% 160.4% 143.7%
- ---------- (a) Total return figures are based on a share outstanding throughout the period and assume reinvestment of distributions at net asset value. Total return figures do not reflect charges pursuant to the terms of the variable life insurance policies and variable annuity contracts funded by separate accounts that invest in the Portfolio's shares. For periods less than one year, total return presented has not been annualized. (b) Effective May 1, 2000, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (c) Effective January 1, 2005, the Portfolio entered into a new investment advisory agreement with Advantus Capital Management, Inc., which replaces the prior investment advisory agreement. (d) Adjusted to an annual basis. 100 ADVANTUS SERIES FUND, INC. FUND EXPENSE EXAMPLES FUND EXPENSES PAID BY SHAREHOLDERS As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; (the Fund does not impose transaction costs, but you will incur such costs in connection with the variable life insurance policies and variable annuity contracts that invest in the Fund) and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolios and to compare these costs with the ongoing costs of investing in other mutual funds. The examples below are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses for the Portfolios. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table for the portfolio you own under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical account values and hypothetical expenses based on the Portfolios' actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Portfolios' actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolios and other funds. To do so, compare the 5% hypothetical example of the portfolios you own with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. 101
ACCOUNT VALUE ------------------------------ BEGINNING OF PERIOD END OF PERIOD EXPENSES PAID EXPENSE RATIO JANURY 1, 2005 JUNE 30, 2005 DURING PERIOD* DURING PERIOD* -------------- ------------- -------------- -------------- BOND PORTFOLIO Actual Return $ 1,000.00 $ 1,025.40 $ 3.72 0.74% Hypothetical return before expenses $ 1,000.00 $ 1,021.12 $ 3.71 0.74% MONEY MARKET PORTFOLIO Actual Return $ 1,000.00 $ 1,009.40 $ 3.59 0.72% Hypothetical return before expenses $ 1,000.00 $ 1,021.22 $ 3.61 0.72% MORTGAGE SECURITIES PORTFOLIO Actual Return $ 1,000.00 $ 1,025.20 $ 3.87 0.77% Hypothetical return before expenses $ 1,000.00 $ 1,020.98 $ 3.86 0.77% INDEX 500 PORTFOLIO Actual Return $ 1,000.00 $ 989.80 $ 2.42 0.49% Hypothetical return before expenses $ 1,000.00 $ 1,022.36 $ 2.46 0.49% MATURING GOVERNMENT BOND 2006 PORTFOLIO Actual Return $ 1,000.00 $ 997.20 $ 12.43 2.51% Hypothetical return before expenses $ 1,000.00 $ 1,012.35 $ 12.52 2.51% MATURING GOVERNMENT BOND 2010 PORTFOLIO Actual Return $ 1,000.00 $ 1,021.30 $ 10.17 2.03% Hypothetical return before expenses $ 1,000.00 $ 1,014.73 $ 10.14 2.03% INTERNATIONAL BOND PORTFOLIO Actual Return $ 1,000.00 $ 942.10 $ 5.59 1.16% Hypothetical return before expenses $ 1,000.00 $ 1,019.04 $ 5.81 1.16% INDEX 400 MID-CAP PORTFOLIO Actual Return $ 1,000.00 $ 1,036.60 $ 2.93 0.58% Hypothetical return before expenses $ 1,000.00 $ 1,021.92 $ 2.91 0.58% REAL ESTATE SECURITIES PORTFOLIO Actual Return $ 1,000.00 $ 1,053.80 $ 5.70 1.12% Hypothetical return before expenses $ 1,000.00 $ 1,019.24 $ 5.61 1.12%
- ---------- * Expenses are equal to the portfolio's annualized expense ratio, multiplied by the average account value over the period, multiplied by number of days in most recent fiscal half-year (181) divided by 365 to reflect the one-half year period. Please note that the expenses shown in both tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the information provided in the hypothetical example table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. 102 ADVANTUS SERIES FUND, INC. PROXY VOTING AND QUARTERLY HOLDINGS INFORMATION PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that Advantus uses to vote proxies related to the Fund's portfolio securities is set forth in the Fund's Statement of Additional Information which is available without charge, upon request, by calling, toll free, 866-330-7355 or on the Securities and Exchange Commission's website at www.sec.gov. The Fund will provide this document, within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. PROXY VOTING RECORD The Fund's proxy voting record for the 12 month period ended June 30 is available by calling, toll free, 866-330-7355 or on the Securities and Exchange Commission's website at www.sec.gov no later than August 31 each year. The Fund will also provide this information, within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery. AVAILABILITY OF QUARTERLY SCHEDULE OF INVESTMENTS The Fund files its complete schedule of investment holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available to shareholders without charge on the SEC's website at www.sec.gov. Form N-Q may also be reviewed and copied at the Commission's Public Reference Room in Washington, DC. More information of the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 103 ADVANTUS SERIES FUND, INC. STATEMENT REGARDING BASIS FOR APPROVAL OF ADVISORY CONTRACTS GENERAL Advantus Capital Management, Inc. ("Advantus Capital") acts as investment adviser and manager of each Portfolio under an Investment Advisory Agreement dated May 1, 2000 (the "Advisory Agreement"). Schedule A to the Advisory Agreement (reflecting the fees paid by each Portfolio) was amended by shareholders of each affected Portfolio on December 28, 2004, and the amended Schedule A became effective on January 1, 2005. The Advisory Agreement, as amended, was most recently approved by the Board of Directors of the Fund (including a majority of the directors who are not parties to the contract, or interested persons of any such party) on January 27, 2005. Although the directors are required to review the Advisory Agreement once a year, the directors receive a wide variety of materials and information throughout each year about the Fund's and each Portfolio's investment performance, adherence to stated investment objectives and strategies, expenses, sales and redemptions, regulatory compliance and management. The directors meet personally with each Portfolio's primary portfolio manager (and such manager's team members) at least once each year, and review and evaluate each portfolio manager's professional experience, credentials and qualifications. The directors also receive frequent updates on industry and regulatory developments and best practices. The directors also considered and reviewed detailed comparative expense and performance information and responses to various inquiries from Advantus Capital, as more fully discussed below. The directors also requested and evaluated other information, including a report on Advantus Capital's organization and current staffing, a report on brokerage allocation practices and related soft dollar arrangements, assurances that each Portfolio is being managed in accordance with its stated investment objectives, policies and limitations, assurances that all disclosures relating to the Fund, each Portfolio, Advantus Capital and others reflected in the Fund's registration statement and other reports are complete and accurate, and assurance that the Fund, each Portfolio and Advantus Capital are operating in full compliance with applicable laws, regulations and exemptive orders. The directors reviewed the terms of the Advisory Agreement relating to each Portfolio and their legal duties and responsibilities as directors in connection with this annual review. In reaching their determinations relating to the continuance of the Advisory Agreement for each Portfolio, the directors met in private session with counsel, including independent legal counsel, at which no representatives of Advantus or its affiliates were present. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and each director may have attributed different weights to the various factors. The directors evaluated all information available to them on a Portfolio-by-Portfolio basis, and their determinations were made separately with respect to each Portfolio. The material factors and conclusions that formed the basis for the directors' reaching their determination to approve the continuation of the Advisory Agreement for each Portfolio (including their determination that Advantus should continue to be the investment adviser for each Portfolio and that the fees payable to Advantus pursuant to the Advisory Agreement are appropriate) were separately discussed by the directors. The directors determined that the overall arrangements between each Portfolio and Advantus Capital, as provided in the Advisory Agreement for that Portfolio, are fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their reasonable judgement. MANAGEMENT FEE AND OTHER EXPENSES In preparation for the meeting on January 27, 2005, the directors requested and evaluated extensive additional materials, including a report prepared by Lipper Analytical Service, Inc. ("Lipper") containing comparisons of 104 each Portfolio's investment management, transfer agency, custodial, non-management, Rule 12b-1 and total expenses with industry peers independently selected by Lipper as well as Lipper peer group comparisons and quintile rankings. The Lipper report indicated with respect to each Portfolio that its investment advisory fee level is less than the average advisory fee levels of the Lipper peer group (in all cited cases, within the first or second quintiles of the Lipper peers--the first quintile being the most favorable comparison, the second being the next most favorable comparison, and so forth). The Lipper report also indicated with respect to six of the nine Portfolios (the Bond, Index 400, Index 500, International Bond, Money Market and Mortgage Securities Portfolios) that total expenses were less than peer group averages (again, in the first or second peer group quintiles), that the Real Estate Securities Portfolio's total expenses were approximately equal to its peer group average, and that the total expense ratios for the Maturing Government Bond 2006 and the Maturing Government Bond 2010 Portfolios were somewhat in excess of their peer group averages, but that each such Portfolio was approximately 1/4 of the size of the average fund in the peer group (thus explaining the higher total expense ratio). Based on the foregoing information, the directors concluded that the advisory fee payable by each Portfolio to Advantus Capital under the Advisory Agreement is competitive and is fair and reasonable to the Portfolio. The Lipper report informed directors that the Advisory Agreement for each Portfolio contains fee level breakpoints. Such breakpoints will result in a lower advisory fee and total expenses for such Portfolio as and when the assets of such Portfolio grow above the stated breakpoint level (typically, when each Portfolio's total net assets exceed $1 billion, an asset level considerably greater than each Portfolio's current asset level). The directors have observed that, among each Portfolio's peers (as documented in part by the Lipper report), there appears to be no uniformity or pattern in the existence of breakpoints or in the fees and asset levels at which breakpoints apply, and meaningful comparisons with peers are therefore difficult to draw. The directors nonetheless believe that the Portfolios' current schedules of breakpoints are consistent with the objective of expecting Advantus Capital to share any economies of scale it realizes with the Portfolios. FEES CHARGED TO OTHER ADVISORY CLIENTS OF ADVANTUS The directors received and evaluated information on the level of advisory fees charged by Advantus Capital for non-mutual fund institutional clients and for sub-advising certain mutual funds managed by Waddell & Reed (a mutual fund organization), and a report on ancillary, non-monetary and other benefits received by Advantus Capital and its affiliates in connection with managing the Portfolios. While the advisory fees Advantus Capital charges these other institutional clients are generally lower than the advisory fees charged to each Portfolio with a similar objective and strategies, the directors noted that many additional services are provided (and costs are incurred) by Advantus Capital in managing the Portfolios. For example, Advantus Capital provides the Fund (and each Portfolio) with office facilities, Fund officers and various administrative, compliance and other services and assumes the attendant costs and exposure to liability. Advantus Capital also coordinates the provision of services to the Fund by nonaffiliated service providers (administrators, custodians, accountants, auditors, attorneys and others) and coordinates or supports all board and committee functions, regulatory filings, and all other aspects of the Fund's operations. These services are generally not provided to non-fund clients or to fund clients to which Advantus Capital provides sub-advisory services only. The directors have observed that the nature and extent of these ancillary duties and responsibilities, and their attendant liability exposure, has increased significantly over the past couple of years (with the passage of the Sarbanes-Oxley Act of 2002, the USA PATRIOT Act, and similar legislation, and numerous related new SEC regulations). In general, the directors believe that the nature and number of services provided to the Fund and the Portfolios merit higher fees than those paid to non-fund clients and to sub-advised fund clients of Advantus Capital. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO ADVANTUS At each quarterly meeting, the directors receive and evaluate a report on Advantus Capital's profitability in managing each Portfolio. Over the past year, the assets being managed by Advantus Capital have decreased (in 105 large part due to the transfer in 2003 of the retail Advantus mutual funds and most of the equity-related Portfolios of the Fund to Waddell & Reed Financial), thereby causing Advantus Capital's overall revenue to decrease. While variable costs associated with Advantus Capital's management of these assets also decreased (for example, the salaries, benefits and ancillary costs of portfolio managers and staff that are no longer employed by Advantus Capital following the Waddell & Reed transaction), various fixed costs remained. Nonetheless, because the management of many of the funds transferred to Waddell & Reed was not profitable to Advantus Capital (most in fact incurred operating losses), Advantus Capital's overall profitability from managing mutual funds (including the Portfolios) increased from 2003 to 2004. Portfolio-specific profitability information revealed that Advantus Capital realized profits in managing six of the nine Portfolios, and that its management of the remaining three Portfolios resulted in losses. The directors recognized that it is difficult to make comparisons of profitability because comparative profitability information is not generally publicly available and is affected by numerous factors. Nonetheless, the directors did not view Advantus Capital's profitability on any of the six "profitable" portfolios as approaching a level that could be viewed as unreasonable or excessive. INVESTMENT RESULTS Supplementing the Lipper report was the quarterly board meeting report prepared by Advantus Capital, from information supplied by Lipper, comparing each Portfolio's investment performance for the most recently completed calendar quarter and one, three, five and (where applicable) ten year periods then ended with Lipper peer groups and with the broad-based, unmanaged index selected by the directors as the Portfolio's benchmark. In evaluating each Portfolio's investment performance, the directors evaluated the degree to which each Portfolio is managed in accordance with its stated objectives. Based upon their review, the directors believe that Advantus Capital endeavors to manage each Portfolio in a manner that is consistent with its stated objective and style. The directors likewise understand that market conditions and specific investment decisions may adversely affect a Portfolio's investment performance in absolute and relative terms of short or longer periods of time, and therefore the analysis of each Portfolio's performance included an analysis over various periods of time, comparing each to its Lipper peer group and its benchmark. The directors noted that the performance for each of the Bond Portfolio, Mortgage Securities Portfolio, Real Estate Securities Portfolio and International Bond Portfolio was consistently within the top one or two quartiles of its respective Lipper peer group during the one, three and five years ended December 31, 2004. The Bond Portfolio's performance over the ten years ended December 31, 2004 was in the top half of its peers, but during the one, three and five years ended December 31, 2004 was well within the top quartile. The Mortgage Securities Fund rated highly within the top quartile in all such periods, and Real Estate Securities Fund rated within the top decile of performance for the three and five year periods ended December 31, 2004, and at the 29th percentile during the most recent year. The directors noted that the performance for each of the S&P 400 and S&P 500 Portfolios ranked most recently within the 2nd or 3rd quartiles on performance. However, the directors observed that the performance of index products was largely a function of their expenses, which in turn was in large part of function of their relative size (observing that each such Portfolio was substantially smaller than its peer group). The directors noted similar 3rd quartile performance for the Money Market Portfolio, observing the Portfolio's relatively small size. The directors also noted with respect to the Money Market Portfolio that the performance spread between the Portfolio and its peer group average ranged between only one and nine basis points over all reported performance periods. The directors observed a recent weakening of Maturing Government Bond 2006 Portfolio's performance (90th percentile during the most recent year), but also observed that the peer group for such Portfolio is very 106 small (and meaningful comparisons are therefore difficult at best), that the Portfolio will mature within one year (and replacement of an investment adviser would therefore be impracticable and uneconomic), and that asset levels continue to decline (thereby putting increasing pressure on total expenses and performance). The directors also observed that the quarterly performance of the Maturing Government Bond 2010 Portfolio each year ranged from the 28th to the 92nd percentile with an average performance appearing to approximate the average of its peer group (likewise, a very small and difficult to compare group). Based upon the foregoing information, the directors concluded that Advantus Capital is producing competitive to outstanding investment results for each managed Portfolio consistent with its stated objective and policies. ANCILLARY BENEFITS TO ADVANTUS AND ITS AFFILIATES In completing its evaluation and review of Advantus Capital and the Advisory Agreement, the directors also considered that Advantus Capital and its affiliates benefit from certain soft-dollar arrangements. The directors noted that Advantus Capital's profitability would be somewhat lower if it did not receive these benefits and had to pay for them out of its own assets. The directors also noted that Securian Financial Services, Inc. (the Fund's distributor) receives 12b-1 fees from the Portfolios. The directors also noted that Minnesota Life Insurance Company, an affiliate of Advantus Capital, benefits by performing certain legal, compliance and other administrative services for the Fund, in return for a reimbursement of costs it incurs in connection with its provision of such services. The directors also noted and recognize that Advantus Capital and its affiliates derive reputational and other benefits from their association with the Portfolios and Fund. NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY ADVANTUS Under the Advisory Agreement, Advantus Capital administers the Fund's and each Portfolio's business and other affairs. In addition to its provision of investment management services for each Portfolio, Advantus Capital also provides the Fund with office space, administrative and other services (exclusive of, and in addition to, any such services provided by other services providers to the Fund and Portfolios) and executive and other personnel as are necessary for its operations. Advantus Capital pays all of the compensation of management directors, officers and employees of the Fund. The directors considered the scope and quality of services provided by Advantus Capital under the Advisory Agreement and noted that the scope of such services has expanded over time as a result of regulatory and other developments. In 2004, in response to new SEC Rule 38a-1 and other regulatory requirements, Advantus Capital substantially upgraded its and the Fund's regulatory compliance programs and has kept the Board of Directors fully apprised of and has appeared to adhere to industry best practices. Based on the foregoing, as well as the directors' frequent meetings with Advantus Capital's executives, managers and staff, the directors concluded that Advantus Capital has provided commendable executive and administrative management and other services during and prior to the last year. SUB-ADVISORY AGREEMENT WITH JULIUS BAER INVESTMENTS LIMITED In addition to the directors annual evaluation and approval of the Advisory Agreement between each Portfolio and Advantus Capital, at the board meeting held on January 27, 2005, the directors also unanimously approved the continuance of the Sub-Advisory Agreement (the "Sub-Advisory Agreement") between Advantus Capital and Julius Baer Investments Limited ("Julius Baer") relating to the International Bond Portfolio. 107 In addition to the directors' review and consideration of the investment performance of the International Bond Portfolio (discussed above) and of the Portfolio's total expenses, the directors also requested and evaluated other information, including a report on Julius Baer's organization and current staffing, a report on brokerage allocation practices and related soft dollar arrangements, assurances that International Bond Portfolio is being managed in accordance with its stated investment objectives, policies and limitations, assurances that all disclosures relating to Julius Baer reflected in the Fund's registration statement are complete and accurate, and assurance that Julius Baer, in its management of the Portfolio, is operating in full compliance with applicable laws, regulations and exemptive. The directors also requested and reviewed a summary of Julius Baer's code of ethics and overall compliance program. The directors requested, but did not receive, an analysis of Julius Baer's profitability in managing the Portfolio, but noted that sub-advisers such as Julius Baer do not typically disclose this proprietary information. The directors also noted that, earlier in the year, the International Bond Portfolio's portfolio manager and certain other Julius Baer personnel had attended and made a detailed presentation on the Portfolio and Julius Baer to the board. The directors further noted again that the International Bond Portfolio had performed consistently within the top quartile of its peer group over the past one and three years, and had performed at the 27th percentile of its peer group over the past five years. The directors reviewed the terms of the Sub-Advisory Agreement and met in private session with counsel, including independent legal counsel, at which no representatives of Advantus Capital, Julius Baer or their respective affiliates were present. Based on the foregoing factors, the directors concluded that Julius Baer has provided the International Bond Portfolio with high quality advisory services during and prior to the last year. 108 ADVANTUS SERIES FUND, INC. DIRECTORS AND EXECUTIVE OFFICERS Under Minnesota law, the Board of Directors of the Fund has overall responsibility for managing the Fund in good faith and in a manner reasonably believed to be in the best interests of the Fund. The directors meet periodically throughout the year to oversee the Fund's activities, review contractual arrangements with companies that provide services to the Fund, and review the performance of the Fund and its Portfolios. Certain of the directors are considered "interested persons" (as defined in the Investment Company Act of 1940) of the Fund primarily by reason of their engagement as officers of the Fund's investment adviser, Advantus Capital Management, Inc. ("Advantus Capital"), or as officers of companies affiliated with Advantus Capital, including Minnesota Life Insurance Company ("Minnesota Life"). The remaining directors, because they are not interested persons of the Fund, are considered independent ("Independent Directors") and are not employees or officers of, and have no financial interest in, Advantus Capital, Minnesota Life or their other affiliates. A majority of the Board of Directors is comprised of Independent Directors. The individuals listed in the table below serve as directors and officers of the Fund, consisting of 9 portfolios, for which Advantus Capital serves as the investment adviser). Only executive officers and other officers who perform policy-making functions with the Fund are listed. None of the directors is a director of any public company (a company required to file reports under the Securities Exchange Act of 1934) or of any registered investment companies other than the Advantus Funds. Each director serves for an indefinite term, until his or her resignation, death or removal.
POSITION WITH FUND NAME, ADDRESS(1) AND LENGTH OF PRINCIPAL OCCUPATION(S) AND AGE TIME SERVED DURING PAST 5 YEARS - --------------------------------------------------------------------------------------------------- INTERESTED DIRECTORS Dianne M. Orbison President since President, Chief Investment Officer, Age: 53 July 25, 2002 Treasurer and Director, Advantus Capital Director since Management, Inc.; Senior Vice President December 28, and Treasurer, Minnesota Life Insurance 2004 Company; Vice President and Treasurer, Minnesota Mutual Companies, Inc.; Senior Vice President and Treasurer, Securian Financial Group, Inc.; Vice President and Treasurer, Securian Holding Company; President, MIMLIC Funding, Inc. (entity holding legal title to bonds beneficially owned by certain clients of Advantus Capital); President and Treasurer, MCM Funding 1997-1, Inc. and MCM Funding 1998-1, Inc. (entities holding legal title to mortgages beneficially owned by certain clients of Advantus Capital); Treasurer, Securian Life Insurance Company
109
POSITION WITH FUND NAME, ADDRESS(1) AND LENGTH OF PRINCIPAL OCCUPATION(S) AND AGE TIME SERVED DURING PAST 5 YEARS - --------------------------------------------------------------------------------------------------- INDEPENDENT DIRECTORS Ralph D. Ebbott Director since Retired, Vice President and Treasurer of Age: 78 October 22, 1985 Minnesota Mining and Manufacturing Company (industrial and consumer products) through June 1989 William C. Melton Director since Founder and President of Melton Age: 58 April 25, 2002 Research Inc. since 1997; member of the Advisory Board of Macroeconomic Advisors LLC since 1998; member, Minneapolis StarTribune Board of Economists since 1986; member, State of Minnesota Council of Economic Advisors from 1988 to 1994; various senior positions at American Express Financial Advisors (formerly Investors Diversified Services and, thereafter, IDS/American Express) from 1982 through 1997, including Chief Economist and, thereafter, Chief International Economist Dorothy J. Bridges Director since Chief Executive Officer and President Age: 50 December 28, of Franklin National Bank of 2004 Minneapolis OTHER EXECUTIVE OFFICERS Vicki L. Bailey Chief Vice President, Investment Law, Chief Age: 49 Compliance Compliance Officer and Secretary, Officer since Advantus Capital Management, Inc.; July 2004 Second Vice President, Investment Law and Advantus Compliance Officer, Minnesota Life Insurance Company; Vice President and Secretary, MCM Funding 1997-1, Inc. and MCM Funding 1998-1, Inc. (entities holding legal title to mortgages beneficially owned by certain clients of Advantus Capital); Second Vice President, Securian Financial Group, Inc.
110
POSITION WITH FUND NAME, ADDRESS(1) AND LENGTH OF PRINCIPAL OCCUPATION(S) AND AGE TIME SERVED DURING PAST 5 YEARS - --------------------------------------------------------------------------------------------------- OTHER EXECUTIVE OFFICERS -- CONTINUED Gary M. Kliest Vice President Financial Vice President, Chief Age: 45 and Treasurer Operations Officer, Advantus Capital since July 24, Management, Inc.; Second Vice 2003 President, Minnesota Life Insurance Company; Vice President and Secretary/Treasurer, MIMLIC Funding, Inc. (entity holding legal title to bonds beneficially owned by certain clients of Advantus Capital); Financial Vice President, MCM Funding 1997-1, Inc. and MCM Funding 1998-1, Inc. (entities holding legal title to mortgages beneficially owned by certain clients of Advantus Capital); Second Vice President, Securian Financial Group, Inc. Michael J. Radmer Secretary since Partner with the law firm of Dorsey & Dorsey & Whitney LLP April 16, 1998 Whitney LLP 50 South Sixth Street Minneapolis, Minnesota 55402 Age: 60
- ----------- (1) Unless otherwise noted, the address of each director and officer is the address of the Fund: 400 Robert Street North, St. Paul, Minnesota 55101. The Fund's Statement of Additional Information (SAI) includes additional information about Fund directors, and is available, without charge, upon request. You may request a copy of the current SAI by telephoning Minnesota Life, toll free, at (800) 995-3850. 111 (This page has been left blank intentionally.) (This page has been left blank intentionally.) (This page has been left blank intentionally.) THIS OFFERING IS AVAILABLE THROUGH SECURIAN FINANCIAL SERVICES, INC., A REGISTERED BROKER/DEALER. SECURIAN FINANCIAL SERVICES, INC. IS THE DISTRIBUTOR OF MINNESOTA LIFE VARIABLE INSURANCE PRODUCTS. THIS REPORT MAY BE USED AS SALES LITERATURE IN CONNECTION WITH THE OFFER OR SALE OF VARIABLE ANNUITY OR LIFE INSURANCE CONTRACTS FUNDED BY ADVANTUS SERIES FUND, INC. ("FUND") IF PRECEDED OR ACCOMPANIED BY (a) THE CURRENT PROSPECTUS FOR THE FUND AND SUCH CONTRACTS AND (b) THE CURRENT VARIABLE ANNUITY PERFORMANCE REPORT (MOA CLASSIC, MOA ACHIEVER OR MOA ADVISOR), ADJUSTABLE INCOME ANNUITY PERFORMANCE REPORT, VARIABLE FUND D PERFORMANCE REPORT, VARIABLE GROUP UNIVERSAL LIFE PORTFOLIO PERFORMANCE AND HISTORICAL POLICY VALUES REPORT AND VARIABLE ADJUSTABLE LIFE (VAL, VAL - SD, VAL HORIZON, VAL SUMMIT OR VAL SURVIVOR) PORTFOLIO PERFORMANCE AND HISTORICAL POLICY VALUES REPORT, RESPECTIVELY. YOU SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF A PORTFOLIO AND THE VARIABLE INSURANCE PRODUCT CAREFULLY BEFORE INVESTING. THE PORTFOLIO AND VARIABLE INSURANCE PRODUCT PROSPECTUSES CONTAIN THIS AND OTHER INFORMATION. PLEASE READ THE PROSPECTUSES CAREFULLY BEFORE INVESTING. [SECURIAN FINANCIAL SERVICES LOGO] SECURIAN FINANCIAL SERVICES, INC. SECURITIES DEALER, MEMBER NASD/SIPC 400 ROBERT STREET NORTH ST. PAUL, MN 55101-2098 (1.888.237.1838) A02436-0705 ABOUT MINNESOTA LIFE FOUNDED IN 1880, MINNESOTA LIFE INSURANCE COMPANY SERVES MILLIONS OF PEOPLE WITH A WIDE RANGE OF INSURANCE AND INVESTMENT PRODUCTS FOR INDIVIDUALS, FAMILIES AND BUSINESSES. WE PROVIDE MORE THAN $430 BILLION OF LIFE INSURANCE PROTECTION AND MANAGE MORE THAN $25 BILLION IN ASSETS. ONE OF THE MOST HIGHLY-RATED LIFE INSURERS IN AMERICA, WE WILL BE THERE WHEN OUR CLIENTS NEED US. [MINNESOTA LIFE LOGO] A MINNESOTA MUTUAL COMPANY 400 Robert Street North PRESORTED STANDARD St. Paul, MN 55101-2098 U.S. POSTAGE PAID www.minnesotalife.com ST. PAUL MN PERMIT NO. 3547 CHANGE SERVICE REQUESTED (C) 2001 Minnesota Life Insurance Company. All rights reserved. F. 34490 Rev. 8-2005 ITEM 2. CODE OF ETHICS. Filed herewith as Exhibit 12(a)(1). During the period covered by this report, there has been no amendment to the code of ethics that relates to any element of the code of ethics definition set forth in paragraph (b) of Item 2 of Form N-CSR, nor has the registrant granted a waiver, including an implicit waiver, from a provision of the code of ethics to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions that relates to one or more of the items set forth in paragraph (b) of Item 2 of Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The board of directors of the registrant has determined that Ralph D. Ebbott, a member of the board's audit committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert," and has designated Mr. Ebbott as the audit committee's financial expert. Mr. Ebbott is an "independent" director pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. Required only for annual reports on Form N-CSR. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. Schedule I - Investments in Securities of Unaffiliated Issuers is included as part of the report to shareholders filed under Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The registrant has a nominating committee of its board of directors, the members of which are all directors who are not "interested persons" of the registrant, as defined in Section 2(a)(19) of the Investment Company Act of 1940 ("independent directors"). The nominating committee, which operates in accordance with a separate nominating committee charter approved by the board of directors, selects and recommends to the board of directors individuals for nomination as independent directors. The names of potential independent director candidates are drawn from a number of sources, including recommendations from management of Advantus Capital Management, Inc., the registrant's investment adviser. Each candidate is evaluated by the nominating committee with respect to the relevant business and industry experience that would enable the candidate to serve effectively as an independent director, as well as his or her compatibility with respect to business philosophy and style. The members of the nominating committee may conduct an in-person interview of each viable candidate using a standardized questionnaire. When all of the viable candidates have been evaluated and interviewed, the nominating committee determines which of the viable candidates should be presented to the board of directors for selection to become a member of the board of directors. Inasmuch as the registrant does not hold annual meetings of shareholders and meetings of shareholders occur only intermittently, the nominating committee does not at present consider nominees recommended by shareholders. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Exhibit 99.CODE ETH attached hereto. (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2): Exhibit 99.CERT attached hereto. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by this report by or on behalf of the registrant to 10 or more persons: Not applicable. (b) If the report is filed under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, provide the certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14 under the Securities Exchange Act of 1934 (17 CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference: Exhibit 99.906 CERT attached hereto SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Advantus Series Fund, Inc. By (Signature and Title) /s/ Dianne M. Orbison -------------------------------- Dianne M. Orbison, President Date: September 5, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Dianne M. Orbison -------------------------------- Dianne M. Orbison, President (Principal Executive Officer) By (Signature and Title) /s/ Gary M. Kleist -------------------------------- Gary M. Kleist, Treasurer (Principal Financial Officer Officer) Date: September 5, 2005
EX-99.CODEETH 2 a2162487zex-99_codeeth.txt EX-99.CODEETH EX-99.CODE ETH Advantus Series Fund, Inc. Exhibit 12(a)(1) to Form N-CSR ADVANTUS FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE This Advantus Series Fund, Inc. ("Advantus Funds") code of ethics (the "Code") applies to the Advantus Funds' Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that the Advantus Funds file with, or submit to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Advantus Funds; - compliance with applicable laws and government rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest has the potential to interfere with the interests of, or his or her service to, the Advantus Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Advantus Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Advantus Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Advantus Funds because of their status as "affiliated persons" of the Advantus Funds. The Advantus Funds and the investment adviser, Advantus Capital Management, Inc. ("Advantus Capital") compliance programs and procedures are designed to prevent or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Advantus Funds and Advantus Capital of which the Covered Officers are also affiliated persons. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Advantus Funds or for Advantus Capital, or both), be involved in establishing policies and implementing the decisions that will have different effects on Advantus Capital and the Advantus Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Advantus Funds and Advantus Capital and is consistent with the performance by the Covered Officers of their duties as officers of the Advantus Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Advantus Funds' Board of Directors ("Board") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are subject to provisions in the Investment Company Act and Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Advantus Funds. Each Covered Officer must: - not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Advantus Funds whereby the Covered Officer would benefit personally to the detriment of the Advantus Funds; - not cause the Advantus Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Advantus Funds: - not use material non-public knowledge of portfolio transactions made or contemplated for the Advantus Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. There are some conflict of interest situations that should always be reported to the Audit Committee of the Advantus Funds. Examples of these include: - service as director on the board of any public or private company; - any direct or indirect ownership interest in, financial relationship with, or any consulting or employment relationship with, any of the Advantus Funds' service providers; - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Advantus Funds for effecting portfolio transactions. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Advantus Funds; - Each Covered Officer should not knowingly or negligently misrepresent, or cause others to misrepresent, facts about the Advantus Funds to others, whether within or outside the Advantus Funds, including to the Advantus Funds' directors and independent auditors, and to governmental regulators and self-regulatory organizations; - Each Covered Officer should to the extent appropriate within his or her area of responsibility consult with other officers and employees of the Advantus Funds and Advantus Capital with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Advantus Funds file with, or submit to, the SEC and in other public communications made by the Advantus Funds; and - It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (or thereafter as applicable, upon becoming Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code; - annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; - not retaliate against any other Covered Officer or any affiliated person of the Advantus Funds for reports of potential violations that are made in good faith; - notify the Advantus Capital Chief Compliance Officer ("Advantus Capital CCO") and the Advantus Funds Chief Compliance Officer ("Advantus Funds CCO") and the Audit Committee of the Advantus Funds Board promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code; and - report at least annually the following categories of affiliations or other relationships related to conflicts of interest: - service as a director on the board of any public or private company - family relationship with any other director on the board of a public or private company - any ownership interest in, or any consulting or employment relationship with, any of the Advantus Funds' service providers (other than Advantus Capital or Minnesota Life Insurance Company, or any affiliated persons thereof) - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Advantus Funds for effecting portfolio transactions - a material pending legal proceeding that would have a material adverse affect on the Advantus Funds. The CCO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the President of the Advantus Funds will be considered by the Audit Committee of the Advantus Funds' Board. The Advantus Funds will follow these procedures in investigating and enforcing this Code: - the CCO will take appropriate action to investigate any potential violations reported to him or her; - if, after such investigation, the Advantus Capital CCO and the Advantus Funds CCO believe that no violation has occurred, then no further action is required; - any matter that the Advantus Capital CCO or the Advantus Funds CCO believe is a violation will be reported to the Audit Committee of the Advantus Funds Board; - if the Audit Committee of the Advantus Funds Board concurs that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Advantus Capital; or a recommendation to dismiss the Covered Officer; - the Audit Committee of the Advantus Funds Board will be responsible for granting waivers, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Advantus Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies and procedures of the Advantus Funds, Advantus Capital - the Funds' adviser, Securian Financial Services, Inc. - principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Advantus Funds', Advantus Capital's and Securian Financial Services code of ethics under Rule17j-1 under the Investment Company Act and the adviser's more detailed policies and procedures set forth in the Code of Ethics for Advantus Capital Management, Inc. and Affiliates are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Advantus Funds' Board. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Advantus Funds' Board, appropriate Fund Counsel, appropriate Minnesota Life associates, and appropriate Advantus Capital associates. VIII. INTERNAL USE The Code is intended solely for the internal use by the Advantus Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Date: July 28, 2005 EXHIBIT A PERSONS COVERED BY THIS CODE OF ETHICS Dianne M. Orbison, President of the Advantus Funds (Principal Executive Officer) Gary M. Kleist, Vice President and Treasurer of the Advantus Funds (Principal Financial Officer) Kathleen A. Radcliffe, Assistant Secretary of the Advantus Funds (Principal Accounting Officer) EX-99.CERT 3 a2162487zex-99_cert.txt EX-99.CERT EX-99.CERT Advantus Series Fund, Inc. Exhibit 12(a)(2) to Form N-CSR CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Dianne M. Orbison, certify that: 1. I have reviewed this report on Form N-CSR of the Advantus Series Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Dianne M. Orbison ----------------------------------- Date: September 5, 2005 Dianne M. Orbison President (Principal Executive Officer) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gary M. Kleist, certify that: 1. I have reviewed this report on Form N-CSR of the Advantus Series Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/Gary M. Kleist ----------------------------------- Date: September 5, 2005 Gary M. Kleist Vice President and Treasurer (Principal Financial Officer) EX-99.906CERT 4 a2162487zex-99_906cert.txt EX-99.906CERT EX-99.906 CERT Advantus Series Fund, Inc. Exhibit 12(b) to Form N-CSR CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 We, Dianne M. Orbison, President and principal executive officer, and Gary M. Kleist, Treasurer and principal financial officer, of Advantus Series Fund, Inc. (the "Fund"), hereby certify as follows with respect to the Report of the Fund on Form N-CSR for the period ended June 30, 2005, (the "Report") filed herewith: 1. We have reviewed the Report; 2. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 3. The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Fund. Executed this 31st day of August, 2005 In St. Paul, Minnesota /s/ Dianne M. Orbison ---------------------------------------- Dianne M. Orbison, President (Principal Executive Officer) /s/ Gary M. Kleist ---------------------------------------- Gary M. Kleist, Treasurer (Principal Financial Officer) A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----