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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 811-05451
---------------------------------------------
USLICO Series Fund
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
7337 E. Doubletree Ranch Rd., Scottsdale, AZ 85258
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(Address of principal executive offices) (Zip code)
CT Corporation System, 101 Federal Street, Boston, MA 02110
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-992-0180
----------------------------
Date of fiscal year end: December 31
--------------------------
Date of reporting period: December 31, 2003
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Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1):
<Page>
ANNUAL REPORT
ANNUAL REPORT
DECEMBER 31, 2003
USLICO SERIES FUND
STOCK PORTFOLIO
MONEY MARKET PORTFOLIO
BOND PORTFOLIO
ASSET ALLOCATION PORTFOLIO
[GRAPHIC]
[ING FUNDS LOGO]
<Page>
TABLE OF CONTENTS
<Table>
Market Perspective 1
Portfolio Managers' Reports 3
Index Descriptions 10
Independent Auditors' Report 11
Statements of Assets and Liabilities 12
Portfolios of Investments 13
Statements of Operations 33
Statements of Changes in Net Assets 34
Notes to Financial Statements 35
Financial Highlights 40
Shareholder Meeting Information 43
Tax Information 44
Trustee and Officer Information 45
</Table>
<Page>
MARKET PERSPECTIVE
YEAR ENDED DECEMBER 31, 2003
In 2003 GLOBAL EQUITIES recorded their first year of positive returns since
1999. As measured by the Morgan Stanley Capital International ("MSCI") World
Index, global stocks rose 33.8% for the year. For the second half of 2003,
global stocks returned 19.8%. In both figures about three quarters of the return
was due to stock market movements and the rest to dollar weakness. The dollar
occupied the financial spotlight for much of the second six months. Japanese and
particularly Chinese government intervention to keep their currencies low
against the dollar underscored frustration in the U.S. that signs of an
improving economy were not being accompanied by job growth. However, the dollar
weakened against the freely floating euro and other European currencies as even
increasingly impressive economic reports from the U.S. could not banish fears
about its large trade and budget deficits. For the second six months of the
period, the euro appreciated 9.8% against the dollar, 20.2% for all of 2003. At
year-end, the Bank of Japan announced that it had spent an astonishing $187
billion in 2003 to stem the rise in the yen.
Most U.S. FIXED INCOME classes had a much more subdued second six months as one
might expect in a strong environment for equities. Bond prices were supported by
the apparent absence of any inflationary pressures and the belief that until
they appear, the Federal Reserve ("Fed") will not raise interest rates. For the
six-month period, the Lehman Brothers Aggregate Bond Index of investment grade
bonds returned 0.17%, much less than the average coupon. For the year, the total
return was 4.10%. Within this the Lehman Brothers U.S. Corporate Investment
Grade Index returned 0.49% for the second six months and the U.S. Treasury Index
lost 1.45%. For 2003, these indices returned 8.24% and 2.24%, respectively.
There was a pronounced steepening of the yield curve as ten-year Treasury yields
rose from 3.53% at the end of June to 4.26% at year end while the 90-day
Treasury Bill yield rose just 7 basis points to 91 basis points, never spending
a day above 100 basis points. By contrast, 2003 was the year in which the high
yield market redeemed itself after several years of disappointing performance.
The rally that began late in October of 2002 continued throughout 2003, leading
to the best high yield market performance since 1991. For the year, the high
yield market returned 28.97%. While 2002 was a year that was marred by fraud and
corporate malfeasance, 2003 was a year of balance sheet repair. Many troubled
issuers resorted to creative financing techniques to take out bank debt and to
refinance and extend maturities. Bond prices for most issuers rose as this
future refinancing risk was far outweighed by the immediate benefit of a
significantly diminished near- to medium- term risk of default. The declining
default risk was manifested throughout the year by a fall in the default rate
from a peak of 11.7% in February 2002 to 5.26% in December 2003.
THE U.S. EQUITIES market returned 15.2% in the second half of 2003 based on the
Standard & Poor's ("S&P") 500 Index including dividends and returned 28.71% for
the whole year. At current price-to-earnings levels, 18 times 2004 earnings,
many are worried about valuations after the tremendous rebound from the lows in
early March. Much of the recent acceleration in gross domestic product ("GDP"),
to 8.2% growth in the third quarter and the strength in consumer demand, has
come from the effect of large tax cuts, the mortgage refinancing boom as
interest rates declined and an accommodative monetary policy by which the Fed
has kept real short term interest rates negative, even with very tame inflation.
Corporate profits have improved and balance sheets have been repaired, without
question, but this in large measure has been based on cost cutting and a lack of
hiring. Only from about the middle of the last quarter did the level of new
unemployment claims break convincingly below the 400,000 level. This has
restrained employment costs both because the number of employees has been kept
down and because their wage bargaining power has accordingly remained low. Some
commentators argue that these bullish forces are surely unsustainable. The bulls
say this is just the "wall of worry" that markets tend to climb, that employment
growth will reinvigorate demand and that major indices are still well off their
all time highs. True, the advance in 2003 was powered by smaller, lower quality
stocks but this is natural as sentiment improves after a bear market. By the end
of 2003, the recovery was becoming more broadly based and there is still plenty
of appreciation left in the bigger companies, say the optimists.
In INTERNATIONAL MARKETS, Japan soared 32.1% in dollar terms in the second half
of 2003 based on the MSCI Japan Index, slightly more than half of this due to
the strength of the yen despite the efforts of the Bank of Japan, as noted
earlier, to hold it down. For the year, Japanese stocks returned 35.9%. By the
end of the year the broad market was trading at just over 18 times earnings for
2004, similar to the S&P 500.
Since the semi-annual report, the news has been mixed for Japanese business. The
good news of the seventh consecutive quarter of economic growth, rising
machinery orders and industrial production was soured by the realization that it
was entirely driven by exports, with domestic demand weak. Japan's twin
problems: chronic deflation and a banking system paralyzed by non-performing
loans remain to be solved. Much of the strength of the Japanese market seems to
have been fueled by foreign money, with the local investor still not convinced.
European excluding United Kingdom ("ex UK") markets advanced 26.7% in dollars in
the last six months of 2003, including nearly 10% currency appreciation,
according to the MSCI Europe ex UK Index. By the end of 2003, dollar investors
had a gain of 42.6% for the year and markets in this region were still trading
on average at just 14.6 times 2004 earnings. Third quarter GDP managed a 0.4%
increase after a decline in the second quarter. As in Japan, this was entirely
sourced from exports despite the strengthening euro, since consumer spending was
stagnant and business investment down.
Nonetheless industrial production in France and Germany, over half of the
Eurozone's economy, was rising smartly by the end of the year and unemployment
edging down. German business confidence rose to the highest in three years. Many
commentators believe that regional stocks are cheap in relation to earnings
growth projected to be more than 20% in 2004 and that the rally is not over. The
UK market gained 22.3% in dollars in the
1
<Page>
MARKET PERSPECTIVE
YEAR ENDED DECEMBER 31, 2003
second half of 2003, nearly half of this due to currency, according to the MSCI
UK Index. For the whole year, the dollar return was 32.1%. At those levels the
UK market was trading at about 18 times 2004 earnings, again similar to the S&P
500. As in other regions, UK business and economic prospects improved during the
six months. But there was more to this than exports. Services, manufacturing and
construction were all accelerating by year-end. Third quarter GDP growth was
revised up to 0.8% over the second quarter, while the unemployment rate fell to
5%, the lowest in decades. In November, the Bank of England became the first of
the world's major central banks to raise interest rates.
See accompanying index descriptions on page 10.
2
<Page>
USLICO SERIES FUND
PORTFOLIO MANAGER'S REPORT FOR THE STOCK PORTFOLIO
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by James A.
Vail, CFA, Aeltus Investment Management, Inc. -- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Stock Portfolio (the "Portfolio") seeks
intermediate and long-term growth of capital. Its secondary investment objective
is to receive a reasonable level of income.
PERFORMANCE: For the year ended December 31, the Portfolio, excluding any
charges, returned 36.49% compared to the S&P 500 Index, which returned 28.71%
for the same period.
PORTFOLIO SPECIFICS: Our holdings in the information technology, health care,
and consumer discretionary sectors were the primary contributors to the
Portfolio's good performance. Within the information technology segment, the
strongest performers were communications equipment, internet software and
services stocks. Health care, biotechnology and equipment and supplies stocks
were the best performers. The outperformance in the consumer discretionary
sector was due mainly to our internet and catalog retail holdings. The financial
sector had the most disappointing results, especially commercial banks.
MARKET OUTLOOK: Macroeconomic data suggests that the domestic economy is
gathering momentum. Interest rates remain low and should stay at current levels
provided there is no immediate threat of inflation. The continuing benefit of
reduced income tax rates should keep the consumer relatively active. Export
industries could see renewed overseas interest fostered by the weaker dollar.
Lastly, we cannot dismiss the positive impact on equity markets from a
presidential election year. As these variables continue to mesh, we believe job
creation should follow.
The last several years forced companies to rethink business models, reduce cost
and focus on inherent strengths. In our opinion, this sets the stage for
positive earnings surprises going forward. We believe stock prices can move
higher in 2004 as the economy recovers and corporate earnings exceed
expectations. We expect the industrial and broad-based technology sectors, among
others, to outperform as business investment accelerates. Other areas expected
to be attractive are selected consumer discretionary companies and generic
pharmaceuticals as the pressure for lower priced drugs continues unabated.
See accompanying index descriptions on page 10.
3
<Page>
USLICO SERIES FUND
PORTFOLIO MANAGER'S REPORT FOR THE STOCK PORTFOLIO
[CHART]
<Table>
<Caption>
USLICO SERIES FUND - S&P 500
STOCK PORTFOLIO INDEX
12/31/1993 $ 10,000 $ 10,000
12/31/1994 $ 10,276 $ 10,133
12/31/1995 $ 13,556 $ 13,933
12/31/1996 $ 16,660 $ 17,172
12/31/1997 $ 20,836 $ 22,903
12/31/1998 $ 22,086 $ 29,489
12/31/1999 $ 28,729 $ 35,722
12/31/2000 $ 23,000 $ 32,440
12/31/2001 $ 13,556 $ 28,588
12/31/2002 $ 9,186 $ 22,270
12/31/2003 $ 12,538 $ 28,664
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2003
--------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
USLICO Series Fund -- Stock Portfolio 36.49% -9.79% 2.64%
S&P 500 Index 28.71% -0.57% 11.10%
</Table>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of USLICO Series Fund -- Stock Portfolio against the S&P 500 Index.
The Index is unmanaged and has no cash in its portfolio, imposes no sales
charges and incurs no operating expenses. An investor cannot invest directly in
an index. The Portfolio's performance is shown without the imposition of any
expenses or charges which are, or may be, imposed under your life insurance
policy. Total returns would have been lower if such expenses or charges were
included.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. The value of securities of smaller issuers can be more
volatile than that of larger issuers. Derivatives are subject to the risk of
changes in the market price of a security, credit risk with respect to the
counterparty to the derivative instrument, and the risk of loss due to changes
in interest rates. Certain derivatives may also have a leveraging effect, which
may increase the volatility of the portfolio.
See accompanying index descriptions on page 10.
4
<Page>
USLICO SERIES FUND
PORTFOLIO MANAGER'S REPORT FOR THE MONEY MARKET PORTFOLIO
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by Jennifer
J. Thompson, CFA, Aeltus Investment Management, Inc.-- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Money Market Portfolio (the "Portfolio") seeks
maximum current income consistent with preservation of capital and liquidity.
The Portfolio may achieve this objective by investing in short-term U.S.
Government Securities and U.S. dollar denominated high quality money market
instruments. Money market securities are considered high quality if rated A-1 or
better by Standard & Poor's Ratings Group or P-1 by Moody's Investor Services,
Inc. These securities are determined to present minimal credit risk. The
Portfolio may also invest in repurchase agreements.
PORTFOLIO SPECIFICS: Looking back, 2003 was a very eventful and volatile year.
The economy and the financial markets began the year virtually paralyzed by the
uncertainty associated with the impending war in Iraq. In the second quarter,
the specter of deflation, or a substantial fall in inflation, was raised by the
Federal Reserve Board's Federal Open Market Committee ("FOMC") and discussed at
length by chairman Greenspan and market participants. In June, the FOMC
responded to an economy that was failing to exhibit sustainable growth by
lowering its Fed Funds target rate for the 13th time in this cycle from 1.25% to
1.00%.
The resulting highly accommodative monetary stance finally began to work its way
through the economy by year-end. The change in non-farm payrolls turned positive
in August and weekly jobless claims dropped below the significant 400,000 level
in the fourth quarter. Third-quarter gross domestic product ("GDP") was an
astounding 8.2%, and fourth-quarter GDP is also expected to be strong. Consumer
confidence increased, as did corporate profits and business investment. In all,
it appears that economists will be able to confidently state the economy turned
the corner in 2003.
The London InterBank Offered Rate ("LIBOR") curve was flat and, at times,
inverted throughout the first half. As we entered the second half of the year
and market participants became more optimistic about our economic outlook, the
curve steepened. The 12-month LIBOR ended the year at approximately 1.46%, only
about 2 basis points higher than where it began the year, although it fluctuated
to as low as 0.99% in June. One-month LIBOR declined from 1.38% to 1.12%, which
is attributed to the Fed ease in June. By year-end, the spread between one-month
LIBOR and 12-month LIBOR was 34 basis points, up from 6 basis points at the
beginning of the year.
Throughout the year, we utilized a number of strategies to add yield to the
portfolio. The percentage of floating rate notes was increased because of their
potential for outperformance in a rising rate environment and because they
generally reset at rates higher than short-term commercial paper, certificates
of deposit, and bank notes. In addition, in the fourth quarter, we began
purchasing longer maturity paper to take advantage of the volatility in 12-month
LIBOR. Purchases were made whenever rates backed up in an attempt to somewhat
barbell the portfolio. (The term "barbell" describes a portfolio with holdings
heavily concentrated in both very short-term and extremely long-term
maturities.) Using such strategies, the Portfolio's weighted average maturity
gradually lengthened, particularly during the fourth quarter, and was 65 days at
year-end versus 55 days on average for competitors'.
MARKET OUTLOOK: The FOMC has been very clear about its ability and desire to be
patient when considering increases in its Fed Funds target rate. With inflation
at historically low levels, continued strong productivity, a still
soft-yet-strengthening labor market, and a significant resources gap, the Fed
will wait for repeated and strong signs of improvements in the pace of economic
expansion before ending its highly accommodative monetary stance. More
specifically, we believe the Fed will be patient until at least mid-year before
increasing the Fed Funds target rate.
Nevertheless, the markets may begin to price in an increase in rates well before
the Fed is inclined to move, particularly if labor markets improve dramatically
and the dollar declines precipitously. We will continue to utilize the barbell
strategy as long as long rates make sense given reasonable Fed Funds rate
increase expectations. Currently, the Portfolio's weighted average maturity is
expected to remain longer than competitors'.
PRINCIPAL RISK FACTOR(S): Investments in the Portfolio are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER'S ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE PORTFOLIO MANAGER'S
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD LOOKING"
STATEMENTS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
See accompanying index descriptions on page 10.
5
<Page>
USLICO SERIES FUND PORTFOLIO
MANAGER'S REPORT FOR THE BOND PORTFOLIO
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by James
Kauffmann, Aeltus Investment Management, Inc.-- the Sub-Adviser.
GOAL: The USLICO Series Fund -- Bond Portfolio (the "Portfolio") seeks a high
level of income consistent with prudent risk and the preservation of capital. As
a secondary objective, the Portfolio seeks capital appreciation when consistent
with its principal objective.
PERFORMANCE: For the year ended December 31, 2003, the Portfolio, excluding any
charges, returned 4.57% compared to the Lehman Brothers Aggregate Bond Index,
which returned 4.10% for the same period.
PORTFOLIO SPECIFICS: While reports in the financial press hyperventilated about
the "2003 Bond Market Rout," the Lehman Aggregate Bond Index posted a 4.10% of
total return during the period. High yield tallied 28.97% of total return second
only to the rally in 1991. But emerging markets trumped all bond sectors with
30.13% of total return. Investment-grade corporates rallied throughout the first
quarter of 2003; yet, more conservative names and industries lagged the riskier
in March. As the quarter progressed, we saw diminished value in these safer
high-grade names and reduced them. Our overweight to riskier sectors, including
cable, telecom, electric, and retail, was a clear winner, and security selection
within those sectors was particularly beneficial. Overall the Portfolio was
overweight three of the five best performing industries and underweight autos,
which performed poorly. An overweight versus commercial mortgages at the expense
of agencies was a drag, while an overweight in asset-backed securities was a
small boost. The Portfolio also reaped the rewards of a robust high yield
market. High yield was, indeed, the asset class of choice for investors in the
first quarter of 2003. High yield market performance was driven by large rallies
in the market's most volatile sectors.
Credit sectors continued to post positive excess returns during the second
quarter. Industrials performed best for the period with 2.48% of excess return;
utilities returned 2.15%; and financials returned 2.07%. An overweight to the
credit sectors boosted relative returns. Other positives also included an
underweight in mortgages and an overall yield advantage to the benchmark.
Commitments to high yield and emerging market debt enhanced our performance
versus the benchmark as the emerging market sector produced 8.41% of excess
return and the high yield sector posted 7.73% of excess return for the second
quarter.
During the third quarter, hedging in the mortgage market, miscues from the Fed,
and positive economic releases resulted in one of the worst bond routs in
history. Overall, lower risk issues benefited as buyers scrambled to add yield
and became more comfortable with the macro economic outlook. The Portfolio
benefited from an overweight to credit -- especially lower rated issues, high
yield, and emerging market debt and some deft trading in mortgages and agencies
during the period. However, our short duration posture did not entirely offset
the damage resulting from the major market sell-off in July.
The chief sources of the Portfolio's outperformance during the fourth quarter
continued to include an overweight in longer-dated and lower quality credits.
This has been a theme for most of the year, and our short duration posture also
proved beneficial. Despite the fact that yields on Treasuries rose across the
maturity spectrum, the magnitude of the increases appeared low given the
economic picture. Three- and five-year maturities performed the worst; yet,
Treasury bills were virtually unchanged in the face of the Fed's accommodative
stance. Sectors key to our position outperformed. Industrials posted 1.45% of
excess return, and utilities outperformed by 1.38%. Securitized sectors --
including asset-backed and commercial mortgage-backed securities - tallied
0.64%, while home mortgages provided 0.66% of excess returns. High yield trumped
all bond sectors with 6.37% of excess returns, and emerging markets tallied a
hefty 5.04% of excess returns during the fourth quarter.
MARKET OUTLOOK: We believe that the economy is on the mend, and the process --
so far -- has produced only upside surprises. The consumer has not been shy
about spending 80% of the proceeds of the recent tax cuts, which now means that
consumption has expanded for the last 46 quarters. Yet, market pundits wonder
what will carry the spendthrift shopper in months to come. The next big surge in
tax reductions will hit the economy with next year's tax refund season. Given
that consumption represents 70% of the economy, concerns remain that the
outsized strength of the third quarter may sap some vigor from first quarter of
2004. However, late in 2004 the expiring accelerated depreciation allowance
should provide a boost in business capital expenditures.
Employment and resource utilization remain soft for this stage of a recovery,
but the picture is improving. The near-term prospects for inflationary problems
remain slight as the U.S. imports disinflation from abroad; productivity is
gaining; labor costs are contained; and pricing power is still transitory.
Ultimately, job creation and income growth are the keys to a sustainable
recovery. The twin deficits -- federal and current account -- will remain
challenges in the near term; and we are not optimistic on the dollar. Treasury
yields do not yet, in our opinion, reflect the pace of the quickening economy.
The Fed has been unusually aggressive in jawboning interest rates down, and our
current account deficit with Asian economies has been recycled back into the U.
S. debt markets. Tactically, we are short in duration in the face of improving
global economic fundamentals. We are overweight home and commercial mortgages,
asset-backed securities, and longer-dated corporate bonds. Valuations are
stretched in credit and mortgage markets; yet alternatives are few as bond
managers seek to add incremental yield in the face of a rising rate environment.
We maintain a significant overweight in both the high yield and emerging
markets.
See accompanying index descriptions on page 10.
6
<Page>
USLICO SERIES FUND PORTFOLIO
MANAGER'S REPORT FOR THE BOND PORTFOLIO
[CHART]
<Table>
<Caption>
USLICO SERIES FUND- LEHMAN BROTHERS AGGREGATE
BOND PORTFOLIO BOND INDEX
12/31/1993 $ 10,000 $ 10,000
12/31/1994 $ 9,628 $ 9,708
12/31/1995 $ 11,368 $ 11,502
12/31/1996 $ 11,675 $ 11,920
12/31/1997 $ 12,502 $ 13,070
12/31/1998 $ 13,040 $ 14,206
12/31/1999 $ 12,666 $ 14,089
12/31/2000 $ 13,519 $ 15,727
12/31/2001 $ 14,394 $ 17,055
12/31/2002 $ 15,556 $ 18,804
12/31/2003 $ 16,267 $ 19,576
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2003
--------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
USLICO Series Fund -- Bond Portfolio 4.57% 4.16% 5.39%
Lehman Brothers Aggregate Bond Index 4.10% 6.62% 6.95%
</Table>
Based on a $10,000 initial investment, the graph and table above illustrate the
total return of USLICO Series Fund Bond Portfolio against the Lehman Brothers
Aggregate Bond Index. The Index is unmanaged and has no cash in its portfolio,
imposes no sales charges and incurs no operating expenses. An investor cannot
invest directly in an index. The Portfolio's performance is shown without the
imposition of any expenses or charges which are, or may be, imposed under your
life insurance policy. Total returns would have been lower if such expenses or
charges were included.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
PRINCIPAL RISK FACTOR(S): Credit, interest rate and other risks that accompany
debt instruments. Debt securities are subject to loss due to default in payment
of principal and/or interest by an issuer. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause greater
price volatility if interest rates change and less income is received due to
prepayment in a lower interest rate environment.
See accompanying index descriptions on page 10.
7
<Page>
USLICO SERIES FUND
PORTFOLIO MANAGERS' REPORT FOR THE ASSET ALLOCATION PORTFOLIO
PORTFOLIO MANAGEMENT TEAM: A team of investment professionals led by James A.
Vail, CFA manages the Equity Portfolio, a team of investment professionals led
by James B. Kauffmann manages the Bond Portfolio and a team of investment
professionals led by Jennifer J. Thompson, CFA manages the Money Market
Portfolio. They are all with Aeltus Investment Management, Inc.-- the
Sub-Adviser.
GOAL: The USLICO Series Fund -- Asset Allocation Portfolio (the "Portfolio")
seeks to obtain high total return with reduced risk over the long term by
allocating its assets among stocks, bonds and short-term instruments.
PERFORMANCE: For the year ended December 31, 2003, the Portfolio, excluding any
charges, returned 18.54% compared to the S&P 500 Index which returned 28.71% and
the Lehman Brothers Aggregate Bond Index, which returned 4.10% for the same
period.
PORTFOLIO SPECIFICS: The equity portion of the USLICO Asset Allocation Portfolio
outperformed the S&P 500 Index for 2003 due to strong performance from our
information technology, consumer discretionary, and health care holdings.
Holdings in the information technology sector that had the best results were
communications equipment and internet software and services stocks. The best
performing consumer discretionary stocks were internet and catalog retail
selections. Within the health care sector, our biotechnology and equipment and
supplies stocks contributed most to performance. The consumer staples sector,
particularly in the food and staples retailing segment, had the most
disappointing results.
Investment-grade corporates rallied throughout the first quarter of 2003; yet,
more conservative names and industries lagged the riskier in March. As the
quarter progressed, we saw diminished value in these safer high-grade names and
reduced them. Our overweight to riskier sectors, including cable, telecom,
electric, and retail, was a clear winner, and security selection within those
sectors was particularly beneficial. Overall the Portfolio was overweight three
of the five best performing industries and underweight autos, which performed
poorly. The Portfolio also reaped the rewards of a robust high yield market.
High yield was, indeed, the asset class of choice for investors in the first
quarter of 2003. Credit sectors continued to post positive excess returns during
the second quarter. Our overweight in the credit sectors boosted relative
return. Other positives included an underweight in mortgages and an overall
yield advantage to the benchmark. During the third quarter, hedging in the
mortgage market, miscues from the Fed, and positive economic releases resulted
in one of the worst bond routs in history. The Portfolio benefited from an
overweight to credit -- especially lower rated issues, high yield, and emerging
market debt. The chief sources of the Portfolio's outperformance during the
fourth quarter continued to include an overweight in longer-dated and lower
quality credits. Sectors key to our position outperformed. High yield trumped
all bond sectors with 6.37% of excess return, and emerging markets tallied a
hefty 5.04% of excess return during the fourth quarter.
MARKET OUTLOOK: Macroeconomic data suggests the domestic economy is gathering
momentum. Interest rates remain low and should stay at current levels provided
there is no immediate threat of inflation. The continuing benefit of reduced
income tax rates should keep the consumer relatively active. Export industries
could see renewed overseas interest fostered by the weaker dollar. Lastly, we
cannot dismiss the positive impact on equity markets from a presidential
election year. As these variables continue to mesh, we believe job creation
should follow. Generally the outlook for equity markets is, in our opinion,
positive for the intermediate term. We believe stock prices can move higher in
2004 as the economy recovers and corporate earnings exceed expectations. We
expect the industrial and broad-based technology sectors, among others, to
outperform as business investment accelerates. Other areas expected to be
attractive are selected consumer discretionary companies and generic
pharmaceuticals as the pressure for lower priced drugs continues unabated.
Employment and resource utilization remain soft for this stage of a recovery,
but the picture is improving. The near-term prospects for inflationary problems
remain slight as the U.S. imports disinflation from abroad; productivity is
gaining; labor costs are contained; and pricing power is still transitory.
Ultimately, job creation and income growth are the keys to a sustainable
recovery. The twin deficits -- federal and current account -- will remain
challenges in the near term; and we are not optimistic on the dollar. Treasury
yields do not yet, in our opinion, reflect the pace of the quickening economy.
The Fed has been unusually aggressive in jawboning interest rates down, and our
current account deficit with Asian economies has been recycled back into the U.
S. debt markets. Tactically, we are short in duration in the face of improving
global economic fundamentals. We are overweight home and commercial mortgages,
asset-backed securities, and longer-dated corporate bonds. Valuations are
stretched in credit and mortgage markets; yet alternatives are few as bond
managers seek to add incremental yield in the face of a rising rate environment.
We maintain a significant overweight in both the high yield and emerging
markets.
See accompanying index descriptions on page 10.
8
<Page>
USLICO SERIES FUND
PORTFOLIO MANAGER'S REPORT FOR THE ASSET ALLOCATION PORTFOLIO
<Table>
<Caption>
USLICO SERIES FUND- S&P 500 LEHMAN BROTHERS AGGREGATE
ASSET ALLOCATION PORTFOLIO INDEX BOND INDEX
12/31/1993 $ 10,000 $ 10,000 $ 10,000
12/31/1994 $ 9,867 $ 10,133 $ 9,708
12/31/1995 $ 12,349 $ 13,933 $ 11,502
12/31/1996 $ 13,885 $ 17,172 $ 11,920
12/31/1997 $ 16,192 $ 22,903 $ 13,070
12/31/1998 $ 17,085 $ 29,489 $ 14,206
12/31/1999 $ 19,664 $ 35,722 $ 14,089
12/31/2000 $ 17,737 $ 32,440 $ 15,727
12/31/2001 $ 14,174 $ 28,588 $ 17,055
12/31/2002 $ 12,938 $ 22,270 $ 18,804
12/31/2003 $ 15,337 $ 28,664 $ 19,576
</Table>
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2003
--------------------------------------------------------------------
` 1 YEAR 5 YEAR 10 YEAR
------ ------ -------
USLICO Series Fund -- Asset Allocation Portfolio 18.54% -1.87% 4.75%
S&P 500 Index 28.71% -0.57% 11.10%
Lehman Brothers Aggregate Bond Index 4.10% 6.62% 6.95%
</Table>
Based on a $10,000 initial investment, the graph and table illustrate the total
return of USLICO Series Fund-- Asset Allocation Portfolio against both the S&P
500 Index and the Lehman Brothers Aggregate Bond Index. The Indices are
unmanaged and have no cash in their portfolios, impose no sales charges and
incur no operating expenses. An investor cannot invest directly in an index. The
Portfolio's performance is shown without the imposition of any expenses or
charges which are, or may be, imposed under your life insurance policy. Total
returns would have been lower if such expenses or charges were included.
TOTAL RETURNS REFLECT THE FACT THAT THE INVESTMENT MANAGER HAS WAIVED CERTAIN
FEES AND OPERATING EXPENSES OTHERWISE PAYABLE BY THE PORTFOLIO, SUBJECT TO
POSSIBLE LATER REIMBURSEMENT DURING A THREE-YEAR PERIOD. TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD THERE BEEN NO WAIVER TO THE PORTFOLIO.
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE AND IS NO ASSURANCE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE PORTFOLIO
WILL FLUCTUATE. SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
THIS REPORT CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING" STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING"
STATEMENTS.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS, ONLY
THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE DAILY.
PRINCIPAL RISK FACTOR(S): Exposure to financial and market risks that accompany
investments in equities. Credit, interest rate and other risks that accompany
debt instruments. The value of securities of smaller issuers can be more
volatile than that of larger issuers. Derivatives are subject to the risk of
changes in the market price of a security, credit risk with respect to the
counterparty to the derivative instrument, and the risk of loss due to changes
in interest rates. Certain derivatives may also have a leveraging effect, which
may increase the volatility of the portfolio. The ability of an issuer of a debt
security to repay principal prior to a security's maturity can cause greater
price volatility if interest rates change and less income is received due to
prepayment in a lower interest rate environment.
See accompanying index descriptions on page 10.
9
<Page>
INDEX DESCRIPTIONS
THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index composed of
securities from the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total
return comprises price appreciation/depreciation and income as a percentage of
the original investment. Indices are rebalanced monthly by market
capitalization.
THE LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index that includes
all fixed income securities having a maximum quality rating of Ba1, a minimum
amount outstanding of $100m, and at least 1 year to maturity.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, EX UK, INDEX is a free
float-adjusted market capitalization index that is designed to measure developed
market equity performance in Europe, excluding the UK.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX is a free
float-adjusted market capitalization index that is designed to measure developed
market equity performance in Japan.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) UK INDEX is a free
float-adjusted market capitalization index that is designed to measure developed
market equity performance in the UK.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX is an unmanaged
index that reflects the stock markets of 22 countries, including the United
States, Europe, Canada, Australia, New Zealand and the Far East -- comprising
approximately 1,500 securities -- with values expressed in U.S. dollars.
THE STANDARD AND POOR'S (S&P) 500 INDEX is an unmanaged capitalization-weighted
index of 500 stocks designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries.
All indices are unmanaged.
An investor cannot invest directly in an index.
10
<Page>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and
Shareholders of USLICO Series Fund
We have audited the accompanying statements of assets and liabilities of Stock
Portfolio, Money Market Portfolio, Bond Portfolio, and Asset Allocation
Portfolio, each a series of USLICO Series Fund, including the portfolios of
investments, as of December 31, 2003, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
aforementioned portfolios as of December 31, 2003, the results of their
operations, the changes in their net assets, and the financial highlights for
the periods specified in the first paragraph above, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
February 16, 2004
11
<Page>
USLICO SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2003
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- --------------- ---------------
ASSETS:
Investments in securities at value* $ 13,919,630 $ -- $ 2,851,903 $ 12,805,367
Short-term investments at amortized cost 438,000 6,187,558 713,000 1,420,000
Cash 5,139 395 4,356 14,265
Receivable for investment securities sold -- -- 29,519 60,078
Receivable for dividends and interest 5,027 20,264 24,682 52,965
Prepaid expenses 84 126 175 85
Reimbursement due from manager 522 4,029 8,400 1,322
--------------- --------------- --------------- ---------------
Total assets 14,368,402 6,212,372 3,632,035 14,354,082
--------------- --------------- --------------- ---------------
LIABILITIES:
Payable for investment securities purchased
on a when-issued basis -- -- 615,784 1,144,239
Payable for call options, written at value** 400 -- -- 200
Payable to affiliates 4,134 1,838 886 3,843
Payable for trustee fees 15,757 2,014 3,691 8,625
Other accrued expenses and liabilities 65,590 23,568 20,529 46,539
--------------- --------------- --------------- ---------------
Total liabilities 85,881 27,420 640,890 1,203,446
--------------- --------------- --------------- ---------------
NET ASSETS $ 14,282,521 $ 6,184,952 $ 2,991,145 $ 13,150,636
=============== =============== =============== ===============
NET ASSET VALUE PER SHARE $ 6.77 $ 1.00 $ 9.84 $ 8.90
SHARES OUTSTANDING (UNLIMITED AUTHORIZED) 2,108,339 6,185,021 304,055 1,477,416
NET ASSETS WERE COMPRISED OF:
Paid-in capital ($0.001 par value) $ 28,527,843 $ 6,184,952 $ 3,084,993 $ 17,566,607
Undistributed net investment income -- -- 4,036 5,820
Accumulated net realized loss on investments and
foreign currencies (17,089,439) -- (134,084) (5,877,002)
Net unrealized appreciation of investments and options 2,844,117 -- 36,200 1,455,211
--------------- --------------- --------------- ---------------
NET ASSETS $ 14,282,521 $ 6,184,952 $ 2,991,145 $ 13,150,636
=============== =============== =============== ===============
* Cost of investments in securities $ 11,080,393 $ -- $ 2,815,703 $ 11,352,596
** Premiums received for written options $ 5,280 $ -- $ -- $ 2,640
</Table>
See accompanying notes to financial statements.
12
<Page>
USLICO STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ -----
COMMON STOCK: 97.1%
AEROSPACE/DEFENSE: 3.7%
5,415 @ Alliant Techsystems, Inc. $ 312,770
2,400 General Dynamics Corp. 216,936
---------------
529,706
---------------
APPAREL: 2.2%
8,200 @ Coach, Inc. 309,550
---------------
309,550
---------------
BANKS: 3.4%
1,800 Bank of America Corp. 144,774
4,500 Investors Financial Services Corp. 172,845
2,800 Wells Fargo & Co. 164,892
---------------
482,511
---------------
BIOTECHNOLOGY: 5.7%
3,300 @ Amgen, Inc. 203,940
5,945 @ Biogen IDEC, Inc. 218,657
5,850 @ Celgene Corp. 263,367
4,800 @ Medimmune, Inc. 121,920
---------------
807,884
---------------
COMPUTERS: 3.4%
9,910 @ EMC Corp. 128,037
6,600 Hewlett-Packard Co. 151,602
2,150 International Business Machines Corp. 199,262
---------------
478,901
---------------
DIVERSIFIED FINANCIAL SERVICES: 8.5%
8,500 Citigroup, Inc. 412,590
18,250 @ E*TRADE Group, Inc. 230,863
2,300 Fannie Mae 172,638
5,000 JP Morgan Chase & Co. 183,650
2,900 Lehman Brothers Holdings, Inc. 223,938
---------------
1,223,679
---------------
ELECTRONICS: 1.8%
4,400 Parker Hannifin Corp. 261,800
---------------
261,800
ENTERTAINMENT: 1.3%
10,455 @ Metro-Goldwyn-Mayer, Inc. 178,676
---------------
178,676
---------------
ENVIRONMENTAL CONTROL: 1.5%
4,500 @ Stericycle, Inc. 210,150
---------------
210,150
---------------
HEALTHCARE-PRODUCTS: 2.4%
4,100 @ Boston Scientific Corp. 150,716
2,700 @ Zimmer Holdings, Inc. 190,080
---------------
340,796
---------------
HEALTHCARE-SERVICES: 1.0%
2,100 Aetna, Inc. 141,918
---------------
141,918
---------------
HOME FURNISHINGS: 0.9%
8,500 @ Tempur-Pedic International Inc $ 131,750
---------------
131,750
---------------
INSURANCE: 3.2%
4,200 American Intl. Group 278,376
6,150 Platinum Underwriters Holdings Ltd. 184,500
---------------
462,876
---------------
INTERNET: 6.1%
3,600 @ Amazon.Com, Inc. 189,504
3,600 @ eBay, Inc. 232,524
9,800 @ Yahoo!, Inc. 442,666
---------------
864,694
---------------
LEISURE TIME: 2.0%
3,500 Carnival Corp. 139,055
3,000 Harley-Davidson, Inc. 142,590
---------------
281,645
---------------
MEDIA: 3.8%
9,300 @ Cablevision Systems Corp. 217,527
10,701 @ Hughes Electronics Corp. 177,102
8,300 @ Time Warner, Inc. 149,317
---------------
543,946
---------------
MISCELLANEOUS MANUFACTURING: 6.1%
1,250 3M Co. 106,288
2,300 Eaton Corp. 248,354
5,850 General Electric Co. 181,233
12,700 @@ Tyco Intl. Ltd. 336,550
---------------
872,425
---------------
OIL AND GAS: 6.1%
7,500 @, @@ Nabors Industries Ltd. 311,250
6,800 @ Patterson-UTI Energy, Inc. 223,856
3,500 @ Precision Drilling Corp. 152,880
6,500 XTO Energy, Inc. 183,950
---------------
871,936
---------------
PHARMACEUTICALS: 11.1%
4,200 @ AdvancePCS 221,171
4,200 @ American Pharmaceutical Partners, Inc. 141,120
6,500 @ Andrx Corp 156,260
1,600 @ Barr Laboratories, Inc. 123,120
1,250 Eli Lilly & Co. 87,913
3,700 @ Gilead Sciences, Inc. 215,118
2,535 Merck & Co., Inc. 117,117
8,800 Pfizer, Inc. 310,903
2,350 Teva Pharmaceutical Industries ADR 133,269
2,300 Wyeth 97,635
---------------
1,603,626
---------------
RETAIL: 8.3%
3,600 Best Buy Co., Inc. 188,064
6,150 @ Chico's FAS, Inc. 227,243
</Table>
See accompanying notes to financial statements.
13
<Page>
USLICO STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ -----
RETAIL: (CONTINUED)
13,700 Gap, Inc. $ 317,977
4,400 Home Depot, Inc. 156,156
5,800 Wal-Mart Stores, Inc. 307,690
---------------
1,197,130
---------------
SEMICONDUCTORS: 5.4%
5,600 Intel Corp. 180,320
8,500 @ National Semiconductor Corp. 334,985
11,100 @ Nvidia Corp. 258,075
---------------
773,380
---------------
SOFTWARE: 4.3%
3,100 @ Electronic Arts, Inc. 148,118
8,500 Microsoft Corp. 234,090
6,250 @ Veritas Software Corp. 232,250
---------------
614,458
---------------
TELECOMMUNICATIONS: 4.9%
4,850 @ Cisco Systems, Inc. 117,807
16,050 @ Corning, Inc. 167,402
18,400 Motorola, Inc. 258,887
5,300 @ Nextel Communications, Inc. 148,718
---------------
692,814
---------------
Total Common Stock
(Cost $11,037,460) 13,876,251
---------------
PREFERRED STOCK: 0.3%
MEDIA: 0.3%
1,196 News Corp. Ltd. 36,179
---------------
Total Preferred Stock
(Cost $34,813) 36,179
---------------
<Caption>
NUMBER OF
CONTRACTS
---------
OPTIONS: 0.1%
SEMICONDUCTORS: 0.1%
40 National Semiconductor Put, $40
strike price, expires 01/17/04 7,200
---------------
Total Options
(Cost $8,120) 7,200
---------------
Total Long-Term Investments
(Cost $11,080,393) 13,919,630
---------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
SHORT-TERM INVESTMENTS: 3.0%
REPURCHASE AGREEMENT: 3.0%
$ 438,000 Goldman Sachs Repurchase Agreement
dated 12/31/03, 0.990%, due 01/02/04,
$438,024 to be received upon repurchase
(Collateralized by $448,000 Federal Home
Loan Mortgage Corporation, 2.500%,
Market Value $447,021 due 12/04/06) $ 438,000
---------------
Total Repurchase Agreement
(Cost $438,000) 438,000
---------------
TOTAL INVESTMENTS IN SECURITIES
(COST $11,518,393)* 100.5% $ 14,357,630
OTHER ASSETS AND LIABILITIES-NET (0.5) (75,109)
----- ---------------
NET ASSETS 100.0% $ 14,282,521
===== ===============
</Table>
@ Non-income producing security
@@ Foreign Issuer
ADR American Depositary Receipt
* Cost for federal income tax purposes is $11,539,994. Net
unrealized appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 2,893,211
Gross Unrealized Depreciation (75,575)
---------------
Net Unrealized Appreciation $ 2,817,636
===============
</Table>
CALL OPTIONS WRITTEN:
<Table>
<Caption>
SHARES
COMMON EXPIRATION STRIKE SUBJECT TO
STOCK DATE PRICE CALL VALUE
------ ---------- ------ ---------- -----
National
Semi-Conductor 1/17/04 $ 50 4,000 $ 400
</Table>
See accompanying notes to financial statements.
14
<Page>
USLICO MONEY MARKET PORTFOLIO(1)
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE NOTES: 32.3%
$ 100,000 Associates Corp Of North America,
5.800%, due 04/20/04 $ 101,388
250,000 Bank of America Corp., 1.413%,
due 05/03/04 250,250
40,000 Bank of America Corp., 5.750%,
due 03/01/04 40,289
150,000 Bank One Corp., 5.625%, due
02/17/04 150,825
150,000 Bank One NA Illinois, 1.200%,
due 02/23/04 150,030
100,000 Chase Manhattan Bank USA, 1.100%,
due 06/30/04 100,000
200,000 Citigroup Global Markets Holdings,
Inc., 1.269%, due 02/20/04 200,046
200,000 First Union National
1.350%, due 06/08/04 200,232
100,000 First Union National
1.450%, due 07/30/04 100,204
100,000 JP Morgan Chase & Co., 1.285%,
due 02/05/04 100,017
300,000 @@ Royal Bank of Canada, 1.030%, due
03/15/04 299,988
100,000 US Bank National Association,
1.300%, due 04/13/04 100,054
200,000 Wal-Mart Stores, Inc., 7.500%, due
05/15/04 204,528
---------------
Total Corporate Notes
(Cost $1,997,851) 1,997,851
---------------
COMMERCIAL PAPER: 22.6%
200,000 ABM Amro, 1.100%, due 02/03/04 199,798
100,000 GE Capital, 1.050%, due 01/27/04 99,924
100,000 GE Capital, 1.080%, due 01/15/04 99,958
200,000 HBOS Treasury Services, 0.000%,
due 01/23/04 199,863
100,000 Household Finance Corp., 0.000%,
due 01/06/04 99,985
200,000 Merrill Lynch, 1.060%, due 01/20/04 199,888
200,000 Morgan Stanley Dean Witter, 1.080%,
due 02/04/04 199,796
200,000 @@ Royal Bank of Scotland, 1.410%, due
10/21/04 199,984
100,000 UBS, 1.010%, due 01/21/04 99,939
---------------
Total Commercial Paper
(Cost $1,399,135) 1,399,135
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 34.6%
FEDERAL HOME LOAN BANK: 15.0%
$ 100,000 1.040%, due 01/22/04 $ 99,938
100,000 1.077%, due 01/30/04 99,915
175,000 1.150%, due 06/06/04 174,059
100,000 1.510%, due 12/08/04 100,000
250,000 3.625%, due 10/15/04 254,107
200,000 5.375%, due 01/05/04 200,092
---------------
928,111
---------------
FEDERAL HOME LOAN MORTGAGE CORPORATION: 8.1%
100,000 1.040%, due 01/29/04 99,916
100,000 1.065%, due 02/11/04 99,879
200,000 1.080%, due 01/08/04 199,958
100,000 3.250%, due 01/15/04 100,075
---------------
499,828
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 11.5%
110,000 1.020%, due 01/21/04 109,935
200,000 1.070%, due 01/07/04 199,964
300,000 1.130%, due 04/07/04 299,083
100,000 5.125%, due 02/13/04 100,447
---------------
709,429
---------------
Total U.S. Government Agency
Obligations (Cost $2,137,368) 2,137,368
---------------
U.S. TREASURY OBLIGATIONS: 4.8%
300,000 United States Treasury Bill, 0.996%,
due 04/08/04 299,204
---------------
Total U.S. Treasury Obligations
(Cost $299,204) 299,204
---------------
</Table>
See accompanying notes to financial statements.
15
<Page>
USLICO MONEY MARKET PORTFOLIO(1)
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
REPURCHASE AGREEMENT: 5.7%
$ 354,000 Goldman Sachs Repurchase
Agreement dated 12/31/03, 0.990%, due
01/02/04, $354,019 to be received upon
repurchase (Collateralized by $362,000
Federal Home Loan Mortgage Corporation,
2.500%, Market Value $361,209 due
12/04/06) $ 354,000
---------------
Total Repurchase Agreement
(Cost $354,000) 354,000
TOTAL INVESTMENTS IN SECURITIES
(COST $6,187,558) 100.0% $ 6,187,558
OTHER ASSETS AND LIABILITIES-NET (0.0) (2,606)
----- ---------------
NET ASSETS 100.0% $ 6,184,952
===== ===============
</Table>
@@ Foreign Issuer
(1) All securities with a maturity date greater than one year have either a
variable rate, a demand feature, are prerefunded, a optional or mandatory
put resulting in an effective maturity of one year or less. Rate shown
reflects current rate.
<Table>
<Caption>
PERCENTAGE OF
INDUSTRY NET ASSETS
- -------- -------------
Commercial Banks Non-U.S. 4.9%
Commercial Banks-Central U.S. 4.0
Commercial Banks-Eastern U.S. 1.6
Commercial Banks-Southern U.S. 4.9
Diversified Financial Services 4.9
Finance-consumer loans 1.6
Finance-Investment Banker/Broker 11.3
Money Center Banks 11.3
Retail-Discount 3.3
Sovereign 4.8
Sovereign Agency 34.6
Super-Regional Banks-U.S. 7.1
Repurchase Agreement 5.7
Other Assets and Liabilities, Net 0.0
-----
NET ASSETS 100.0%
=====
</Table>
See accompanying notes to financial statements.
16
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
CORPORATE BONDS: 30.4%
AIRLINES: 2.0%
$ 6,000 American Airlines, Inc., 6.817%,
due 05/23/11 $ 5,407
20,000 American Airlines, Inc., 7.024%,
due 10/15/09 19,973
11,000 American Airlines, Inc., 7.324%,
due 10/15/09 9,520
4,340 Continental Airlines, Inc., 6.545%,
due 08/02/20 4,292
3,371 Continental Airlines, Inc., 6.900%,
due 07/02/19 3,329
6,000 Continental Airlines, Inc., 7.875%,
due 07/02/18 6,039
2,000 Delta Air Lines, Inc., 7.299%, due
09/18/06 1,806
3,000 Delta Air Lines, Inc., 7.779%, due
11/18/05 2,762
7,024 US Airways Pass Through Trust,
6.850%, due 01/30/18 6,725
---------------
59,853
---------------
AUTO MANUFACTURERS: 0.9%
10,000 Ford Motor Co., 6.375%, due
02/01/29 8,947
2,000 Ford Motor Co., 6.625%, due
10/01/28 1,845
13,000 General Motors Corp., 8.375%, due
07/15/33 15,136
---------------
25,928
---------------
BANKS: 5.5%
8,000 #,@@ Banco Bradesco SA, 8.750%, due
10/24/13 8,400
5,000 Bank of America Corp., 6.375%,
due 02/15/08 5,545
2,000 # BankAmerica Institutional, Class B,
7.700%, due 12/31/26 2,245
3,000 BankBoston Capital Trust III,
1.920%, due 06/15/27 2,873
2,000 BankBoston Corp., 1.780%, due
06/08/28 1,874
5,000 Barnett Capital I, 8.060%, due
12/01/26 5,724
2,000 Barnett Capital II, 7.950%, due
12/01/26 2,277
3,000 Chase Capital VI, 1.788%, due
08/01/28 2,836
$ 4,000 # Corestates Capital Trust II, 1.800%,
due 01/15/27 $ 3,789
21,000 # Dresdner Funding Trust I, 8.151%,
due 06/30/31 24,041
5,000 FBS Capital I, 8.090%, due 11/15/26 5,741
11,000 First Union Institutional Capital II,
7.850%, due 01/01/27 12,470
8,000 #,@@ HBOS PLC, 5.375%, due 11/29/49 8,016
9,000 @@ HSBC Holdings PLC, 7.500%, due
07/15/09 10,535
5,000 M & T Bank Corp., 3.850%, due
04/01/13 4,972
10,000 Mellon Capital I, 7.720%, due
12/01/26 11,246
7,000 #,@@ Rabobank Capital Funding II,
5.260%, due 12/29/49 7,026
4,000 RBS Capital Trust I, 4.709%, due
12/29/49 3,833
10,000 @@,C Societe Generale, 1.309%, due
11/29/49 8,115
10,000 @@,C Standard Chartered PLC, 1.400%,
due 12/29/49 7,512
20,000 @@,C Standard Chartered PLC, 1.500%,
due 11/29/49 14,991
2,000 Wachovia Capital Trust II, 1.650%,
due 01/15/27 1,893
6,000 Wells Fargo & Co., 3.120%, due
08/15/08 5,934
---------------
161,888
BEVERAGES: 0.7%
10,000 #,@@ Cia Brasileira de Bebidas, 8.750%,
due 09/15/13 10,650
2,000 Constellation Brands, Inc., 8.000%,
due 02/15/08 2,230
9,000 # Miller Brewing Co., 4.250%, due
08/15/08 9,129
---------------
22,009
---------------
CHEMICALS: 0.1%
2,000 Dow Chemical Co., 5.750%, due
11/15/09 2,144
---------------
2,144
---------------
COMMERCIAL SERVICES: 0.3%
1,000 @@ Quebecor Media, Inc., 11.125%,
due 07/15/11 1,163
</Table>
See accompanying notes to financial statements.
17
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
COMMERCIAL SERVICES: (CONTINUED)
$ 100,000 #,X,I United Cos. Financial Corp.,
0.000%, due 11/02/99 $ --
6,000 United Rentals North America, Inc.,
10.750%, due 04/15/08 6,780
---------------
7,943
---------------
DIVERSIFIED FINANCIAL SERVICES: 2.9%
8,000 Boeing Capital Corp., 7.375%, due
09/27/10 9,208
12,000 #,@@ Brazilian Merchant Voucher
Receivables Ltd., 5.911%, due
06/15/11 11,760
1,000 Citigroup Capital II, 7.750%, due
12/01/36 1,131
9,000 Countrywide Home Loans, Inc.,
4.250%, due 12/19/07 9,290
7,000 # Farmers Exchange Capital, 7.050%,
due 07/15/28 6,570
4,000 Ford Motor Credit Co, 7.375%, due
02/01/11 4,366
1,000 Ford Motor Credit Co., 5.625%, due
10/01/08 1,028
12,000 XX,# Mangrove Bay Pass-Through Trust,
6.102%, due 07/15/33 11,829
3,000 Nexstar Finance, Inc., 12.000%, due
04/01/08 3,398
6,000 # OneAmerica Financial Partners, Inc.,
7.000%, due 10/15/33 5,958
6,000 #,@@ PF Export Receivables Master Trust,
3.748%, due 06/01/13 5,852
5,695 #,@@ PF Export Receivables Master Trust,
6.436%, due 06/01/15 5,809
4,000 # Takefuji Corp, 9.200%, due 04/15/11 4,438
1,000 Technical Olympic USA, Inc.,
9.000%, due 07/01/10 1,080
5,000 # Wachovia Capital Trust V, 7.965%,
due 06/01/27 5,773
---------------
87,490
---------------
ELECTRIC: 3.0%
10,000 # Consumers Energy Co., 4.800%, due
02/17/09 10,233
3,000 @@ Empresa Nacional de Electricidad
SA/Chile, 7.750%, due 07/15/08 3,278
18,000 @@ Empresa Nacional de Electricidad
SA/Chile, 8.350%, due 08/01/13 20,276
1,000 Enserch Capital I, 2.510%, due
07/01/28 872
$ 11,000 Firstenergy Corp., 7.375%, due
11/15/31 $ 11,294
9,000 # Indianapolis Power & Light, 6.300%,
due 07/01/13 9,301
4,000 Nisource Finance Corp., 7.625%,
due 11/15/05 4,372
8,000 # Ohio Edison Co., 4.000%, due
05/01/08 7,831
11,000 Ohio Power Co., 6.375%, due
07/15/33 11,036
6,000 # PG&E Corp., 6.875%, due 07/15/08 6,525
2,000 # Power Contract Financing LLC,
5.200%, due 02/01/06 2,031
2,000 # Power Contract Financing LLC,
6.256%, due 02/01/10 2,112
---------------
89,161
---------------
ENTERTAINMENT: 0.2%
2,000 Cinemark USA, Inc., 9.000%, due
02/01/13 2,260
3,000 Six Flags, Inc., 9.750%, due
06/15/07 3,146
---------------
5,406
---------------
ENVIRONMENTAL CONTROL: 0.2%
7,000 Allied Waste North America,
7.625%, due 01/01/06 7,403
---------------
7,403
---------------
FOOD: 1.2%
2,000 Kroger Co., 5.500%, due 02/01/13 2,038
4,000 Kroger Co., 7.250%, due 06/01/09 4,562
7,000 Safeway, Inc., 4.800%, due 07/16/07 7,271
10,000 Supervalu, Inc., 7.875%, due
08/01/09 11,678
10,000 Tyson Foods, Inc., 7.250%, due
10/01/06 10,965
---------------
36,514
---------------
FOREST PRODUCTS & PAPER: 0.8%
6,000 @@ Abitibi-Consolidated, Inc., 6.950%,
due 12/15/06 6,287
3,000 @@ Abitibi-Consolidated, Inc.,
6.950%, due 04/01/08 3,146
5,000 Georgia-Pacific Corp., 8.875%, due
02/01/10 5,725
7,000 Weyerhaeuser Co., 7.375%, due
03/15/32 7,635
---------------
22,793
---------------
</Table>
See accompanying notes to financial statements.
18
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
INSURANCE: 0.8%
$ 9,000 # Farmers Insurance Exchange,
8.625%, due 05/01/24 $ 9,433
6,000 # Monumental Global Funding II,
3.850%, due 03/03/08 6,059
8,000 # Zurich Capital Trust I, 8.376%, due
06/01/37 9,214
---------------
24,706
---------------
LEISURE TIME: 0.1%
4,000 @@ Royal Caribbean Cruises Ltd.,
7.000%, due 10/15/07 4,260
---------------
4,260
---------------
LODGING: 0.7%
4,000 Mandalay Resort Group, 10.250%,
due 08/01/07 4,620
6,000 MGM Mirage, 6.000%,
due 10/01/09 6,195
6,000 Park Place Entertainment Corp.,
9.375%, due 02/15/07 6,810
4,000 Starwood Hotels & Resorts
Worldwide, Inc., 7.375%, due
05/01/07 4,340
---------------
21,965
---------------
MEDIA: 1.1%
3,000 AOL Time Warner, Inc., 6.875%,
due 05/01/12 3,382
4,000 # CCO Holdings Capital Corp.,
8.750%, due 11/15/13 4,090
3,000 CSC Holdings, Inc., 10.500%, due
05/15/16 3,450
4,000 # Dex Media, Inc., 8.000%, due
11/15/13 4,220
2,000 DirecTV Holdings LLC, 8.375%,
due 03/15/13 2,330
3,000 # Echostar DBS Corp., 4.410%, due
10/01/08 3,139
4,000 # Echostar DBS Corp., 5.750%, due
10/01/08 4,065
2,000 Spanish Broadcasting System,
9.625%, due 11/01/09 2,145
4,000 Time Warner, Inc., 6.950%, due
01/15/28 4,288
2,000 Young Broadcasting, Inc., 8.500%,
due 12/15/08 2,160
---------------
33,269
---------------
MISCELLANEOUS MANUFACTURING: 0.3%
$ 10,000 General Electric Co., 5.000%, due
02/01/13 $ 10,132
---------------
10,132
---------------
MULTI-NATIONAL: 0.6%
9,000 @@ Corp Andina de Fomento CAF,
5.200%, due 05/21/13 8,978
9,000 @@ Corp Andina de Fomento CAF,
6.875%, due 03/15/12 10,005
---------------
18,983
---------------
OIL AND GAS: 2.1%
4,000 Chesapeake Energy Corp., 9.000%,
due 08/15/12 4,620
8,000 Enterprise Products Partners LP,
6.875%, due 03/01/33 8,019
23,000 @@ Husky Oil Co., 8.900%, due
08/15/28 26,680
11,000 Pemex Project Funding Master Trust,
7.375%, due 12/15/14 11,798
5,000 Valero Energy Corp., 7.500%, due
04/15/32 5,590
4,000 Valero Energy Corp., 8.750%, due
06/15/30 5,006
---------------
61,713
---------------
PACKAGING AND CONTAINERS: 1.0%
3,000 @@ Crown European Holdings SA,
10.875%, due 03/01/13 3,544
7,000 Owens-Brockway, 8.875%, due
02/15/09 7,709
8,000 # Sealed Air Corp., 5.625%, due
07/15/13 8,201
9,000 # Sealed Air Corp., 6.950%, due
05/15/09 10,126
---------------
29,580
---------------
PIPELINES: 1.0%
10,000 CenterPoint Energy Resources Corp.,
8.125%, due 07/15/05 10,684
18,000 # Plains All American Pipeline LP/PAA
Finance Corp, 5.625%,
due 12/15/13 18,248
---------------
28,932
---------------
REAL ESTATE: 1.3%
8,000 EOP Operating LP, 7.750%, due
11/15/07 9,179
</Table>
See accompanying notes to financial statements.
19
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
REAL ESTATE: (CONTINUED)
$ 9,000 Liberty Property LP, 7.750%, due
04/15/09 $ 10,525
---------------
1,000 Liberty Property Trust, 6.375%, due
08/15/12 1,078
6,000 Simon Property Group LP, 4.875%,
due 03/18/10 6,124
11,000 Simon Property Group LP, 6.375%,
due 11/15/07 12,141
---------------
39,047
---------------
SAVINGS AND LOANS: 0.3%
9,000 Washington Mutual, Inc., 4.375%,
due 01/15/08 9,261
---------------
9,261
---------------
TELECOMMUNICATIONS: 3.3%
1,000 # ACC Escrow Corp., 10.000%, due
08/01/11 1,120
3,000 American Tower Corp., 9.375%, due
02/01/09 3,210
1,000 # American Towers, Inc., 7.250%, due
12/01/11 1,023
18,000 AT&T Corp., 8.050%, due 11/15/11 20,754
8,000 AT&T Wireless Services, Inc.,
8.125%, due 05/01/12 9,425
2,000 @ MCI Communications Corp.,
.000%, due 08/15/06 1,620
2,000 Nextel Communications, Inc.,
7.375%, due 08/01/15 2,160
2,000 Nextel Communications, Inc.,
9.375%, due 11/15/09 2,190
2,000 # Qwest Corp., 9.125%, due 03/15/12 2,305
3,000 # Qwest Services Corp., 13.500%, due
12/15/10 3,660
8,000 Sprint Capital Corp., 6.000%, due
01/15/07 8,551
9,000 Sprint Capital Corp., 6.875%, due
11/15/28 8,813
9,000 TCI Communications Finance,
9.650%, due 03/31/27 10,890
4,000 Verizon Florida, Inc., 6.125%, due
01/15/13 4,290
$ 18,000 Verizon Virginia, Inc., 4.625%, due
03/15/13 $ 17,387
---------------
97,398
---------------
Total Corporate Bonds
(Cost $885,691) 907,778
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET
BACKED SECURITIES: 12.4%
AUTOMOBILE: 0.7%
20,000 USAA Auto Owner Trust, 2.040%,
due 02/16/10 19,770
---------------
19,770
---------------
COMMERCIAL: 6.4%
30,000 CS First Boston Mortgage Securities
Corp., 3.382%, due 05/15/38 28,672
17,000 CS First Boston Mortgage Securities
Corp., 3.861%, due 03/15/36 17,099
4,000 CS First Boston Mortgage Securities
Corp., 7.808%, due 04/14/62 4,718
22,000 DLJ Commercial Mortgage Corp.,
6.240%, due 11/12/31 24,324
63,000 DLJ Commercial Mortgage Corp.,
7.300%, due 06/10/32 72,952
10,000 Capital Commercial Mortgage
Corp., 5.994%, due 12/10/35 10,925
9,000 GMAC Commercial Mortgage
Securities, Inc., 6.700%, due
04/15/34 10,186
7,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
5.161%, due 10/12/37 7,208
15,000 Wachovia Bank Commercial
Mortgage Trust, 3.989%, due
06/15/35 14,133
---------------
190,217
---------------
CREDIT CARD: 1.4%
6,000 Bank One Issuance Trust, 4.540%,
due 09/15/10 6,137
6,000 Capital One Master Trust, 4.900%,
due 03/15/10 6,337
19,000 Citibank Credit Card Issuance Trust,
5.650%, due 06/16/08 20,418
8,000 MBNA Credit Card Master Note
Trust, 4.950%, due 06/15/09 8,531
---------------
41,423
---------------
</Table>
See accompanying notes to financial statements.
20
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
HOME EQUITY: 0.4%
$ 13,354 I Amresco Residential Securities
Mortgage Loan Trust, 1.760%,
due 01/25/28 $ 13,368
---------------
13,368
---------------
OTHER ASSET BACKED SECURITIES: 0.6%
6,000 Chase Funding Mortgage Loan,
2.734%, due 09/25/24 5,963
4,000 Chase Funding Mortgage Loan,
4.045%, due 05/25/33 3,966
7,000 Residential Asset Mortgage Products,
Inc., 2.140%, due 02/25/30 6,844
---------------
16,773
---------------
WHOLE LOAN COLLATERALIZED MORTGAGE: 1.4%
2,984 Bank of America Mortgage Securities,
5.500%, due 11/25/33 2,967
31,000 CS First Boston Mortgage Securities
Corp., 4.187%, due 10/25/33 30,973
7,878 MASTR Asset Securitization Trust,
8.000%, due 06/25/33 8,476
---------------
42,416
---------------
WHOLE LOAN COLLATERALIZED PLANNED
AMORTIZATION CLASS: 1.5%
20,649 MASTR Alternative Loans Trust,
8.500%, due 05/25/33 21,463
18,000 Residential Funding Securities Corp.,
4.750%, due 02/25/33 18,091
5,863 Residential Funding Securities Corp.,
8.500%, due 05/25/33 6,601
---------------
46,155
---------------
Total Collateralized Mortgage
Obligations (Cost $377,374) 370,122
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 38.5%
FEDERAL HOME LOAN MORTGAGE
CORPORATION: 6.5%
15,000 2.875%, due 09/15/05 15,281
17,060 I 4.458%, due 12/01/26 17,084
15,000 5.875%, due 03/21/11 16,283
19,000 6.000%, due 01/15/28 19,937
121,000 6.500%, due 01/15/34 126,747
---------------
195,332
---------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION: 32.0%
$ 31,000 2.375%, due 04/13/06 $ 31,003
30,000 2.875%, due 05/19/08 29,298
1,455 I 3.454%, due 07/01/27 1,507
11,317 I 3.555%, due 07/01/27 11,725
12,000 4.000%, due 09/02/08 12,165
14,000 4.750%, due 12/25/42 14,477
150,000 W 5.000%, due 01/01/17 153,000
156,000 W 5.000%, due 01/15/34 154,391
40,000 5.250%, due 04/15/07 43,087
24,185 5.500%, due 04/01/18 25,098
101,000 W 5.500%, due 01/01/33 102,326
20,601 6.000%, due 07/25/24 21,547
19,636 6.000%, due 07/25/29 20,378
9,164 6.000%, due 07/25/29 9,509
22,599 6.000%, due 10/01/32 23,377
54,000 W 6.000%, due 01/15/34 55,823
39,056 W 6.500%, due 11/01/29 41,761
81,936 7.000%, due 09/01/32 86,788
24,901 7.000%, due 11/01/32 26,375
84,199 7.500%, due 07/01/21 90,052
---------------
953,687
---------------
Total U.S. Government Agency
Obligations (Cost $1,133,636) 1,149,019
---------------
U.S. TREASURY OBLIGATIONS: 8.8%
U.S. TREASURY BONDS: 1.6%
14,000 5.375%, due 02/15/31 14,604
30,000 6.250%, due 08/15/23 34,204
---------------
48,808
---------------
U.S. TREASURY NOTES: 6.1%
10,000 1.875%, due 11/30/05 10,022
10,000 1.875%, due 12/31/05 10,010
75,000 2.250%, due 07/31/04 75,542
55,000 3.375%, due 12/15/08 55,391
32,000 4.250%, due 11/15/13 31,975
---------------
182,940
---------------
U.S. TREASURY STRIP PRINCIPAL: 1.1%
60,000 5.060%, due 05/15/16 32,568
---------------
32,568
---------------
Total U.S. Treasury Obligations
(Cost $264,710) 264,316
---------------
</Table>
See accompanying notes to financial statements.
21
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
OTHER BONDS: 4.2%
SOVEREIGN: 4.2%
$ 5,000 @@,** ARG Boden, 0.000%, due 08/03/12 $ 3,139
7,000 @@ Brazilian Government Intl. Bond,
2.188%, due 04/15/12 6,330
6,000 @@ Brazilian Government Intl. Bond,
10.000%, due 08/07/11 6,660
5,000 @@ Brazilian Government Intl. Bond,
11.000%, due 08/17/40 5,525
9,000 @@,XX Central Bank of Nigeria, 0.000%, due
01/05/10 3,420
6,000 @@ Colombia Government Intl. Bond,
10.000%, due 01/23/12 6,600
2,000 @@ Colombia Government Intl. Bond,
11.750%, due 02/25/20 2,420
5,000 @@ Dominican Republic Intl. Bond,
9.040%, due 01/23/13 3,821
5,000 @@ Ecuador Government Intl. Bond,
7.000%, due 08/15/30 3,882
3,000 @@ El Salvador Government Intl. Bond,
7.750%, due 01/24/23 3,190
5,000 @@ Mexico Government Intl. Bond,
4.625%, due 10/08/08 5,075
8,000 @@ Mexico Government Intl. Bond,
6.625%, due 03/03/15 8,300
4,582 @@ Panama Government Intl. Bond,
1.938%, due 07/17/16 4,007
1,000 @@ Panama Government Intl. Bond,
9.375%, due 07/23/12 1,145
2,000 @@ Peru Government Intl. Bond,
4.500%, due 03/07/17 1,797
3,000 @@ Peru Government Intl. Bond, 9.125%,
due 02/21/12 3,360
7,000 @@ Philippine Government Intl. Bond,
9.875%, due 01/15/19 7,438
5,000 @@ Republic of Bulgaria, 8.250%, due
01/15/15 5,922
17,000 @@ Russia Government Intl. Bond,
5.000%, due 03/31/30 16,340
1,000 @@ Turkey Government Intl. Bond,
9.500%, due 01/15/14 1,160
8,000 @@ Turkey Government Intl. Bond,
12.375%, due 06/15/09 10,280
1,000 #, @@ Ukraine Government Intl. Bond,
7.650%, due 06/11/13 1,045
1,307 @@ Ukraine Government Intl. Bond,
11.000%, due 03/15/07 1,456
$ 1,000 @@ Uruguay Government Intl. Bond,
7.250%, due 02/15/11 $ 868
2,000 @@ Uruguay Government Intl. Bond,
7.500%, due 03/15/15 1,610
6,000 @@ Venezuela Government Intl. Bond,
9.250%, due 09/15/27 5,490
6,000 #,@@ Venezuela Government Intl. Bond,
10.750%, due 09/19/13 6,435
---------------
Total Other Bonds
(Cost $121,414) 126,715
---------------
<Caption>
SHARES
------
PREFERRED STOCK: 1.1%
AUTO PARTS AND EQUIPMENT: 0.4%
480 Delphi Trust I 12,643
---------------
12,643
---------------
BANKS: 0.4%
1 # DG Funding Trust 10,850
---------------
10,850
---------------
OIL AND GAS: 0.3%
400 @@ Nexen, Inc. 10,460
---------------
10,460
---------------
Total Preferred Stock
(Cost $32,878) 33,953
---------------
Long Term Investments
(Cost $2,815,703) 2,851,903
---------------
<Caption>
PRINCIPAL
AMOUNT
---------
SHORT-TERM INVESTMENTS: 23.8%
REPURCHASE AGREEMENT: 23.8%
$ 713,000 S Goldman Sachs Repurchase
Agreement dated 12/31/03, 0.990%, due
01/02/04, $713,039 to be received upon
repurchase (Collateralized by $729,000
Federal Home Loan Mortgage Corporation,
2.500%, Market Value $727,407 due
12/04/06) 713,000
---------------
Total Short-Term Investments
(Cost $713,000) 713,000
---------------
</Table>
See accompanying notes to financial statements.
22
<Page>
USLICO BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
VALUE
-----
TOTAL INVESTMENTS IN SECURITIES
(COST $3,528,703)* 119.2% $ 3,564,903
OTHER ASSETS AND LIABILITIES--NET (19.2) (573,758)
----- ---------------
NET ASSETS 100.0% $ 2,991,145
===== ===============
</Table>
@ Non-income producing security
@@ Foreign Issuer
XX Value of securities obtained from one or more dealers making markets in
the securities which have been adjusted based on the Portfolio's
valuation procedures.
X Fair value determined by ING Funds Pricing Committee appointed by the
Portfolio's Board of Trustees.
# Securities with purchases pursuant to Rule 144A, under the securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Portfolio's Board of Trustees.
I Illiquid Security
W When-issued or delayed delivery security
** Defaulted security
S Segregated securities for when-issued or delayed delivery securities held
at December 31, 2003.
C Bond may be called prior to maturity date.
* Cost for federal income tax purposes is the same as for financial
statement purposes. Net unrealized appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 50,537
Gross Unrealized Depreciation (14,337)
---------------
Net Unrealized Appreciation $ 36,200
===============
</Table>
See accompanying notes to financial statements.
23
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ -----
COMMON STOCK: 55.2%
AEROSPACE/DEFENSE: 2.1%
2,825 @ Alliant Techsystems, Inc. $ 163,172
1,250 General Dynamics Corp. 112,988
---------------
276,160
---------------
APPAREL: 0.9%
3,300 @ Coach, Inc. 124,575
---------------
124,575
---------------
BANKS: 3.0%
1,060 Bank of America Corp. 85,256
2,400 Investors Financial Services Corp. 92,184
3,900 US Bancorp 116,141
1,650 Wells Fargo & Co. 97,169
---------------
390,750
---------------
BIOTECHNOLOGY: 2.2%
3,120 @ Biogen IDEC, Inc. 114,754
2,600 @ Celgene Corp. 117,052
2,500 @ Medimmune, Inc. 63,500
---------------
295,306
---------------
COMPUTERS: 2.2%
6,600 @ EMC Corp. 85,272
3,500 Hewlett-Packard Co. 80,395
1,350 International Business
Machines Corp. 125,118
---------------
290,785
---------------
DIVERSIFIED FINANCIAL SERVICES: 6.1%
1,450 American Express Co. 69,934
5,100 Citigroup, Inc. 247,553
9,500 @ E*TRADE Group, Inc. 120,175
1,250 Fannie Mae 93,825
700 Goldman Sachs Group, Inc. 69,111
1,800 JP Morgan Chase & Co. 66,114
1,550 Lehman Brothers Holdings, Inc. 119,691
---------------
786,403
---------------
ELECTRONICS: 1.0%
2,300 Parker Hannifin Corp. 136,850
---------------
136,850
---------------
ENTERTAINMENT: 0.7%
5,485 @ Metro-Goldwyn-Mayer, Inc. 93,739
---------------
93,739
---------------
ENVIRONMENTAL CONTROL: 0.8%
2,300 @ Stericycle, Inc. $ 107,410
---------------
107,410
---------------
HEALTHCARE-PRODUCTS: 2.3%
1,900 @ Boston Scientific Corp. 69,844
2,100 Johnson & Johnson 108,486
1,050 Medtronic, Inc. 51,041
950 @ Zimmer Holdings, Inc. 66,880
---------------
296,251
---------------
HEALTHCARE-SERVICES: 0.4%
800 Aetna, Inc. 54,064
---------------
54,064
---------------
HOME FURNISHINGS: 0.5%
4,300 @ Tempur-Pedic International Inc 66,650
---------------
66,650
---------------
INSURANCE: 2.0%
2,500 American Intl. Group 165,700
3,200 Platinum Underwriters Holdings
Ltd. 96,000
---------------
261,700
---------------
INTERNET: 2.3%
1,250 @ Amazon.Com, Inc. 65,800
1,250 @ eBay, Inc. 80,738
3,400 @ Yahoo!, Inc. 153,578
---------------
300,116
---------------
LEISURE TIME: 1.1%
1,800 Carnival Corp. 71,514
1,650 Harley-Davidson, Inc. 78,425
---------------
149,939
---------------
MACHINERY-DIVERSIFIED: 0.6%
1,150 Deere & Co. 74,808
---------------
74,808
---------------
MEDIA: 1.8%
3,400 @ Cablevision Systems Corp. 79,526
5,597 @ Hughes Electronics Corp. 92,630
2,800 Walt Disney Co. 65,324
---------------
237,480
---------------
MISCELLANEOUS MANUFACTURING: 4.4%
750 3M Co. 63,773
1,250 Eaton Corp. 134,975
4,000 General Electric Co. 123,920
2,000 Honeywell Intl., Inc. 66,860
</Table>
See accompanying notes to financial statements.
24
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
SHARES VALUE
------ -----
MISCELLANEOUS MANUFACTURING (CONTINUED)
7,100 @@ Tyco Intl. Ltd. $ 188,149
---------------
577,677
---------------
OIL AND GAS: 3.2%
1,350 Exxon Mobil Corp. 55,350
3,900 @, @@ Nabors Industries Ltd. 161,850
2,500 @ Patterson-UTI Energy, Inc. 82,300
1,150 @ Precision Drilling Corp. 50,232
2,366 XTO Energy, Inc. 66,958
---------------
416,690
---------------
PHARMACEUTICALS: 5.7%
1,650 @ AdvancePCS 86,889
3,400 @ Andrx Corp 81,736
700 @ Barr Laboratories, Inc. 53,865
750 Eli Lilly & Co. 52,748
1,800 @ Gilead Sciences, Inc. 104,651
1,340 Merck & Co., Inc. 61,908
5,200 Pfizer, Inc. 183,715
1,150 Teva Pharmaceutical
Industries ADR 65,217
1,450 Wyeth 61,553
---------------
752,282
---------------
RETAIL: 3.9%
1,800 Best Buy Co., Inc. 94,032
2,200 @ Chico's FAS, Inc. 81,290
3,700 Gap, Inc. 85,877
2,300 Home Depot, Inc. 81,627
3,100 Wal-Mart Stores, Inc. 164,454
---------------
507,280
---------------
SEMICONDUCTORS: 3.1%
3,000 Intel Corp. 96,600
4,500 @ National Semiconductor Corp. 177,345
5,800 @ Nvidia Corp. 134,850
---------------
408,795
---------------
SOFTWARE: 2.2%
1,550 @ Electronic Arts, Inc. 74,059
4,900 Microsoft Corp. 134,946
2,300 @ Veritas Software Corp. 85,468
---------------
294,473
---------------
TELECOMMUNICATIONS: 1.9%
2,500 @ Cisco Systems, Inc. 60,725
9,600 Motorola, Inc. 135,072
1,800 @ Nextel Communications, Inc. 50,508
---------------
246,305
---------------
TRANSPORTATION: 0.8%
1,350 CSX Corp. $ 48,519
750 Union Pacific Corp. 52,110
---------------
100,629
---------------
Total Common Stock
(Cost $5,867,355) 7,247,117
---------------
PREFERRED STOCK: 0.7%
AUTO PARTS & EQUIPMENT: 0.2%
920 Delphi Trust I 24,233
---------------
24,233
---------------
BANKS: 0.2%
3 # DG Funding Trust 32,549
---------------
32,549
---------------
MEDIA: 0.1%
626 News Corp. Ltd. 18,937
---------------
18,937
---------------
OIL AND GAS: 0.2%
760 @@ Nexen, Inc. 19,874
---------------
19,874
---------------
Total Preferred Stock
(Cost $92,852) 95,593
---------------
<Caption>
NUMBER OF
CONTRACTS
---------
OPTIONS: 0.0%
SEMICONDUCTORS: 0.0%
20 National Semiconductor Put,
$40 strike price, expires
01/17/04 3,600
---------------
Total Options (Cost $4,060) 3,600
---------------
<Caption>
PRINCIPAL
AMOUNT
------
CORPORATE BONDS: 13.1%
AIRLINES: 0.9%
$ 12,000 American Airlines, Inc., 6.817%,
due 05/23/11 10,813
39,000 American Airlines, Inc., 7.024%,
due 10/15/09 38,950
22,000 American Airlines, Inc., 7.324%,
due 10/15/09 19,039
8,680 Continental Airlines, Inc., 6.545%,
due 08/02/20 8,584
6,741 Continental Airlines, Inc., 6.900%,
due 07/02/19 6,658
</Table>
See accompanying notes to financial statements.
25
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
------ -----
AIRLINES: (CONTINUED)
$ 12,000 Continental Airlines, Inc., 7.875%,
due 07/02/18 $ 12,078
4,000 Delta Air Lines, Inc., 7.299%, due
09/18/06 3,612
5,000 Delta Air Lines, Inc., 7.779%, due
11/18/05 4,603
14,047 US Airways Pass Through Trust,
6.850%, due 01/30/18 13,449
---------------
117,786
---------------
AUTO MANUFACTURERS: 0.4%
19,000 Ford Motor Co., 6.375%, due
02/01/29 17,000
4,000 Ford Motor Co., 6.625%, due
10/01/28 3,690
25,000 General Motors Corp., 8.375%, due
07/15/33 29,108
---------------
49,798
---------------
BANKS: 2.4%
15,000 #, @@ Banco Bradesco SA, 8.750%, due
10/24/13 15,750
10,000 Bank of America Corp., 6.375%, due
02/15/08 11,090
4,000 # BankAmerica Institutional, Class B,
7.700%, due 12/31/26 4,490
5,000 BankBoston Capital Trust III,
1.920%, due 06/15/27 4,789
3,000 BankBoston Corp., 1.780%, due
06/08/28 2,811
10,000 Barnett Capital I, 8.060%, due
12/01/26 11,449
4,000 Barnett Capital II, 7.950%, due
12/01/26 4,554
4,000 Chase Capital VI, 1.788%, due
08/01/28 3,781
9,000 # Corestates Capital Trust II, 1.800%,
due 01/15/27 8,524
40,000 # Dresdner Funding Trust I, 8.151%,
due 06/30/31 45,793
10,000 FBS Capital I, 8.090%, due 11/15/26 11,482
21,000 First Union Institutional Capital II,
7.850%, due 01/01/27 23,806
15,000 #, @@ HBOS PLC, 5.375%, due 11/29/49 15,030
$ 5,000 @@, C Hongkong & Shanghai Banking Corp.
Ltd., 1.313%, due 07/29/49 $ 4,086
18,000 @@ HSBC Holdings PLC, 7.500%, due
07/15/09 21,071
10,000 M & T Bank Corp., 3.850%, due
04/01/13 9,944
20,000 Mellon Capital I, 7.720%, due
12/01/26 22,492
12,000 #, @@ Rabobank Capital Funding II,
5.260%, due 12/29/49 12,044
9,000 RBS Capital Trust I, 4.709%, due
12/29/49 8,625
10,000 @@, C Societe Generale, 1.309%, due
11/29/49 8,115
20,000 @@, C Standard Chartered PLC, 1.400%,
due 12/29/49 15,025
40,000 @@, C Standard Chartered PLC, 1.500%,
due 11/29/49 29,982
4,000 Wachovia Capital Trust II, 1.650%,
due 01/15/27 3,785
11,000 Wells Fargo & Co., 3.120%, due
08/15/08 10,878
---------------
309,396
---------------
BEVERAGES: 0.3%
19,000 #,@@ Cia Brasileira de Bebidas, 8.750%,
due 09/15/13 20,235
4,000 Constellation Brands, Inc., 8.000%,
due 02/15/08 4,460
17,000 # Miller Brewing Co., 4.250%, due
08/15/08 17,245
---------------
41,940
---------------
CHEMICALS: 0.0%
4,000 Dow Chemical Co., 5.750%, due
11/15/09 4,288
---------------
4,288
---------------
COMMERCIAL SERVICES: 0.1%
3,000 @@ Quebecor Media, Inc., 11.125%, due
07/15/11 3,488
200,000 #,X,I United Cos. Financial Corp.,
0.000%, due 11/02/99 --
10,000 United Rentals North America, Inc.,
10.750%, due 04/15/08 11,300
---------------
14,788
---------------
</Table>
See accompanying notes to financial statements.
26
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
DIVERSIFIED FINANCIAL SERVICES: 1.2%
$ 14,000 Boeing Capital Corp., 7.375%, due
09/27/10 $ 16,114
22,000 #,@@ Brazilian Merchant Voucher
Receivables Ltd., 5.911%, due
06/15/11 21,560
2,000 Citigroup Capital II, 7.750%, due
12/01/36 2,262
16,000 Countrywide Home Loans, Inc.,
4.250%, due 12/19/07 16,516
13,000 # Farmers Exchange Capital, 7.050%,
due 07/15/28 12,202
8,000 Ford Motor Credit Co, 7.375%, due
02/01/11 8,732
1,000 Ford Motor Credit Co., 5.625%, due
10/01/08 1,028
24,000 XX,# Mangrove Bay Pass-Through Trust,
6.102%, due 07/15/33 23,657
6,000 Nexstar Finance, Inc., 12.000%, due
04/01/08 6,795
11,000 # OneAmerica Financial Partners, Inc.,
7.000%, due 10/15/33 10,923
11,000 #,@@ PF Export Receivables Master Trust,
3.748%, due 06/01/13 10,729
11,389 #,@@ PF Export Receivables Master Trust,
6.436%, due 06/01/15 11,618
8,000 # Takefuji Corp, 9.200%, due 04/15/11 8,877
2,000 Technical Olympic USA, Inc., 9.000%,
due 07/01/10 2,160
1,000 Technical Olympic USA, Inc.,
10.375%, due 07/01/12 1,125
5,000 # Wachovia Capital Trust V, 7.965%,
due 06/01/27 5,773
---------------
160,071
---------------
ELECTRIC: 1.3%
18,000 # Consumers Energy Co., 4.800%, due
02/17/09 18,420
5,000 @@ Empresa Nacional de Electricidad
SA/Chile, 7.750%, due 07/15/08 5,464
35,000 @@ Empresa Nacional de Electricidad
SA/Chile, 8.350%, due 08/01/13 39,424
2,000 Enserch Capital I, 2.510%, due
07/01/28 1,744
20,000 Firstenergy Corp., 7.375%, due
11/15/31 20,533
16,000 # Indianapolis Power & Light, 6.300%,
due 07/01/13 16,536
$ 7,000 Nisource Finance Corp., 7.625%, due
11/15/05 $ 7,651
16,000 # Ohio Edison Co., 4.000%, due
05/01/08 15,663
23,000 Ohio Power Co., 6.375%, due
07/15/33 23,074
12,000 # PG&E Corp., 6.875%, due
07/15/08 13,050
4,000 # Power Contract Financing LLC,
5.200%, due 02/01/06 4,062
3,000 # Power Contract Financing LLC,
6.256%, due 02/01/10 3,168
---------------
168,789
---------------
ENTERTAINMENT: 0.1%
4,000 Cinemark USA, Inc., 9.000%, due
02/01/13 4,520
5,000 Six Flags, Inc., 9.750%, due
06/15/07 5,244
---------------
9,764
---------------
ENVIRONMENTAL CONTROL: 0.1%
13,000 Allied Waste North America, 7.625%,
due 01/01/06 13,748
---------------
13,748
---------------
FOOD: 0.5%
5,000 Kroger Co., 5.500%, due 02/01/13 5,094
7,000 Kroger Co., 7.250%, due 06/01/09 7,984
13,000 Safeway, Inc., 4.800%, due 07/16/07 13,504
20,000 Supervalu, Inc., 7.875%, due
08/01/09 23,356
19,000 Tyson Foods, Inc., 7.250%, due
10/01/06 20,834
---------------
70,772
---------------
FOREST PRODUCTS AND PAPER: 0.3%
11,000 @@ Abitibi-Consolidated, Inc., 6.950%,
due 12/15/06 11,526
6,000 @@ Abitibi-Consolidated, Inc., 6.950%,
due 04/01/08 6,293
9,000 Georgia-Pacific Corp., 8.875%, due
02/01/10 10,305
13,000 Weyerhaeuser Co., 7.375%, due
03/15/32 14,179
---------------
42,303
---------------
</Table>
See accompanying notes to financial statements.
27
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
INSURANCE: 0.4%
$ 17,000 # Farmers Insurance Exchange,
8.625%, due 05/01/24 $ 17,817
11,000 # Monumental Global Funding II,
3.850%, due 03/03/08 11,109
15,000 # Zurich Capital Trust I, 8.376%, due
06/01/37 17,277
---------------
46,203
---------------
LEISURE TIME: 0.1%
7,000 @@ Royal Caribbean Cruises Ltd.,
7.000%, due 10/15/07 7,455
---------------
7,455
---------------
LODGING: 0.3%
7,000 Mandalay Resort Group, 10.250%, due
08/01/07 8,085
12,000 MGM Mirage, 6.000%, due 10/01/09 12,390
12,000 Park Place Entertainment Corp.,
9.375%, due 02/15/07 13,620
7,000 Starwood Hotels & Resorts Worldwide,
Inc., 7.375%, due 05/01/07 7,595
---------------
41,690
---------------
MEDIA: 0.5%
5,000 AOL Time Warner, Inc., 6.875%, due
05/01/12 5,637
7,000 # CCO Holdings Capital Corp., 8.750%,
due 11/15/13 7,158
5,000 CSC Holdings, Inc., 10.500%, due
05/15/16 5,750
9,000 # Dex Media, Inc., 8.000%, due
11/15/13 9,494
4,000 DirecTV Holdings LLC, 8.375%, due
03/15/13 4,660
5,000 # Echostar DBS Corp., 4.410%, due
10/01/08 5,231
7,000 # Echostar DBS Corp., 5.750%, due
10/01/08 7,114
5,000 Spanish Broadcasting System,
9.625%, due 11/01/09 5,363
8,000 Time Warner, Inc., 6.950%, due
01/15/28 8,575
4,000 Young Broadcasting, Inc., 8.500%,
due 12/15/08 4,320
---------------
63,302
---------------
MISCELLANEOUS MANUFACTURING: 0.1%
$ 19,000 General Electric Co., 5.000%, due
02/01/13 $ 19,250
---------------
19,250
---------------
MULTI-NATIONAL: 0.3%
16,000 @@ Corp Andina de Fomento CAF,
5.200%, due 05/21/13 15,960
16,000 @@ Corp Andina de Fomento CAF,
6.875%, due 03/15/12 17,787
---------------
33,747
---------------
OIL AND GAS: 0.9%
7,000 Chesapeake Energy Corp., 9.000%,
due 08/15/12 8,085
16,000 Enterprise Products Partners LP,
6.875%, due 03/01/33 16,038
42,000 @@ Husky Oil Co., 8.900%, due 08/15/28 48,719
21,000 Pemex Project Funding Master Trust,
7.375%, due 12/15/14 22,523
9,000 Valero Energy Corp., 7.500%, due
04/15/32 10,062
8,000 Valero Energy Corp., 8.750%, due
06/15/30 10,013
---------------
115,440
---------------
PACKAGING AND CONTAINERS: 0.4%
5,000 @@ Crown European Holdings SA,
10.875%, due 03/01/13 5,906
13,000 Owens-Brockway, 8.875%, due
02/15/09 14,316
16,000 # Sealed Air Corp., 5.625%, due
07/15/13 16,403
18,000 # Sealed Air Corp., 6.950%, due
05/15/09 20,253
---------------
56,878
---------------
PIPELINES: 0.4%
19,000 CenterPoint Energy Resources Corp.,
8.125%, due 07/15/05 20,300
35,000 # Plains All American Pipeline LP/PAA
Finance Corp, 5.625%, due
12/15/13 35,481
---------------
55,781
---------------
</Table>
See accompanying notes to financial statements.
28
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
REAL ESTATE: 0.6%
$ 15,000 EOP Operating LP, 7.750%, due
11/15/07 $ 17,210
18,000 Liberty Property LP, 7.750%, due
04/15/09 21,050
3,000 Liberty Property Trust, 6.375%, due
08/15/12 3,234
11,000 Simon Property Group LP, 4.875%,
due 03/18/10 11,227
21,000 Simon Property Group LP, 6.375%,
due 11/15/07 23,179
---------------
75,900
---------------
SAVINGS AND LOANS: 0.1%
18,000 Washington Mutual, Inc., 4.375%, due
01/15/08 18,522
---------------
18,522
---------------
TELECOMMUNICATIONS: 1.4%
2,000 # ACC Escrow Corp., 10.000%, due
08/01/11 2,240
5,000 American Tower Corp., 9.375%, due
02/01/09 5,350
2,000 # American Towers, Inc., 7.250%, due
12/01/11 2,045
34,000 AT&T Corp., 8.050%, due 11/15/11 39,203
15,000 AT&T Wireless Services, Inc.,
8.125%, due 05/01/12 17,672
4,000 @ MCI Communications Corp., .000%,
due 08/15/06 3,240
4,000 Nextel Communications, Inc., 7.375%,
due 08/01/15 4,320
4,000 Nextel Communications, Inc., 9.375%,
due 11/15/09 4,380
4,000 # Qwest Corp., 9.125%, due 03/15/12 4,610
6,000 # Qwest Services Corp., 13.500%, due
12/15/10 7,320
16,000 Sprint Capital Corp., 6.000%, due
01/15/07 17,103
19,000 Sprint Capital Corp., 6.875%, due
11/15/28 18,606
18,000 TCI Communications Finance,
9.650%, due 03/31/27 21,780
9,000 Verizon Florida, Inc., 6.125%, due
01/15/13 9,652
$ 32,000 Verizon Virginia, Inc., 4.625%, due
03/15/13 $ 30,909
---------------
188,430
---------------
Total Corporate Bonds
(Cost $1,683,785) 1,726,041
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS AND
ASSET BACKED SECURITIES: 5.1%
AUTOMOBILE: 0.3%
35,000 USAA Auto Owner Trust, 2.040%,
due 02/16/10 34,597
---------------
34,597
---------------
COMMERCIAL: 2.6%
60,000 CS First Boston Mortgage Securities
Corp., 3.382%, due 05/15/38 57,344
32,000 CS First Boston Mortgage Securities
Corp., 3.861%, due 03/15/36 32,186
8,000 CS First Boston Mortgage Securities
Corp., 7.808%, due 04/14/62 9,436
41,000 DLJ Commercial Mortgage Corp.,
6.240%, due 11/12/31 45,331
115,000 DLJ Commercial Mortgage Corp.,
7.300%, due 06/10/32 133,166
19,000 GE Capital Commercial Mortgage
Corp., 5.994%, due 12/10/35 20,758
11,000 GMAC Commercial Mortgage
Securities, Inc., 6.700%,
due 04/15/34 12,450
12,000 JP Morgan Chase Commercial
Mortgage Securities Corp.,
5.161%, due 10/12/37 12,356
25,000 Wachovia Bank Commercial
Mortgage Trust, 3.989%, due
06/15/35 23,555
---------------
346,582
---------------
CREDIT CARD: 0.6%
12,000 Bank One Issuance Trust, 4.540%,
due 09/15/10 12,275
11,000 Capital One Master Trust, 4.900%,
due 03/15/10 11,618
36,000 Citibank Credit Card Issuance Trust,
5.650%, due 06/16/08 38,686
12,000 MBNA Credit Card Master Note
Trust, 4.950%, due 06/15/09 12,796
---------------
75,375
---------------
</Table>
See accompanying notes to financial statements.
29
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
HOME EQUITY: 0.2%
$ 26,708 I Amresco Residential Securities
Mortgage Loan Trust, 1.760%, due
01/25/28 $ 26,736
---------------
26,736
---------------
OTHER ASSET BACKED SECURITIES: 0.2%
10,000 Chase Funding Mortgage Loan,
2.734%, due 09/25/24 9,938
5,000 Chase Funding Mortgage Loan,
4.045%, due 05/25/33 4,958
15,000 Residential Asset Mortgage Products,
Inc., 2.140%, due 02/25/30 14,664
---------------
29,560
---------------
WHOLE LOAN COLLATERALIZED MORTGAGE: 0.6%
6,962 XX Bank of America Mortgage
Securities, 5.500%, due 11/25/33 6,922
54,000 CS First Boston Mortgage Securities
Corp., 4.187%, due 10/25/33 53,953
14,324 MASTR Asset Securitization Trust,
8.000%, due 06/25/33 15,412
---------------
76,287
---------------
WHOLE LOAN COLLATERALIZED PLANNED
AMORTIZATION CLASS: 0.6%
37,783 MASTR Alternative Loans Trust,
8.500%, due 05/25/33 39,273
33,000 Residential Funding Securities
Corp., 4.750%, due 02/25/33 33,168
10,749 Residential Funding Securities
Corp., 8.500%, due 05/25/33 12,101
---------------
84,542
---------------
Total Collateralized Mortgage
Obligations and Asset
Backed Securities
(Cost $687,049) 673,679
---------------
U.S. GOVERNMENT AGENCY OBLIGATIONS: 16.9%
FEDERAL HOME LOAN MORTGAGE
CORPORATION: 4.1%
25,000 2.875%, due 09/15/05 25,468
44,618 I 4.458%, due 12/01/26 44,682
25,000 5.875%, due 03/21/11 27,138
37,000 6.000%, due 01/15/28 38,824
209,140 6.500%, due 12/01/31 219,126
177,000 6.500%, due 01/15/34 TBA 185,408
---------------
540,646
---------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION: 12.8%
$ 55,000 2.375%, due 04/13/06 $ 55,006
60,000 2.875%, due 05/19/08 58,595
7,275 I 3.454%, due 07/01/27 7,534
30,104 I 3.555%, due 07/01/27 31,188
28,000 4.000%, due 09/02/08 28,386
20,000 W 4.500%, due 01/15/19 20,025
25,000 4.750%, due 12/25/42 25,853
338,000 W 5.000%, due 01/15/34 334,515
75,000 5.250%, due 04/15/07 80,789
76,737 5.500%, due 11/01/17 79,628
101,000 W 5.500%, due 01/01/33 102,326
36,297 6.000%, due 07/25/24 37,964
17,018 6.000%, due 07/25/29 17,660
40,582 6.000%, due 07/25/29 42,115
437,000 W 6.000%, due 01/15/34 451,748
39,056 W 6.500%, due 11/01/29 41,761
122,903 7.000%, due 09/01/32 130,180
126,298 7.500%, due 07/01/21 135,077
---------------
1,680,350
---------------
Total U.S. Government
Agency Obligations
(Cost $2,188,809) 2,220,996
---------------
U.S. TREASURY OBLIGATIONS: 4.6%
U.S. TREASURY BONDS: 0.9%
32,000 5.375%, due 02/15/31 33,381
70,000 6.250%, due 08/15/23 79,809
---------------
113,190
---------------
U.S. TREASURY NOTES: 3.2%
22,000 1.875%, due 11/30/05 22,048
22,000 1.875%, due 12/31/05 22,021
200,000 S 2.250%, due 07/31/04 201,445
30,000 2.625%, due 11/15/06 30,274
92,000 3.375%, due 12/15/08 92,654
53,000 4.250%, due 11/15/13 52,959
---------------
421,401
---------------
U.S. TREASURY STRIP PRINCIPAL: 0.5%
120,000 5.060%, due 05/15/16 65,137
---------------
65,137
---------------
Total U.S. Treasury Obligations
(Cost $600,187) 599,728
---------------
</Table>
See accompanying notes to financial statements.
30
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
--------- -----
OTHER BONDS: 1.8%
SOVEREIGN: 1.8%
$ 10,000 @@, ** ARG Boden, .000%, due 08/03/12 $ 6,278
13,000 @@ Brazilian Government Intl. Bond,
2.188%, due 04/15/12 11,755
12,000 @@ Brazilian Government Intl. Bond,
10.000%, due 08/07/11 13,320
9,000 @@ Brazilian Government Intl. Bond,
11.000%, due 08/17/40 9,945
17,000 @@, XX Central Bank of Nigeria, 0.000%, due
01/05/10 6,460
11,000 @@ Colombia Government Intl. Bond,
10.000%, due 01/23/12 12,100
4,000 @@ Colombia Government Intl. Bond,
11.750%, due 02/25/20 4,840
9,000 @@ Dominican Republic Intl. Bond,
9.040%, due 01/23/13 6,878
9,000 @@ Ecuador Government Intl. Bond,
7.000%, due 08/15/30 6,988
5,000 @@ El Salvador Government Intl. Bond,
7.750%, due 01/24/23 5,316
9,000 @@ Mexico Government Intl. Bond,
4.625%, due 10/08/08 9,135
15,000 @@ Mexico Government Intl. Bond,
6.625%, due 03/03/15 15,563
9,163 @@ Panama Government Intl. Bond,
1.938%, due 07/17/16 8,013
1,000 @@ Panama Government Intl. Bond,
9.375%, due 07/23/12 1,145
4,000 @@ Peru Government Intl. Bond, 4.500%,
due 03/07/17 3,593
6,000 @@ Peru Government Intl. Bond, 9.125%,
due 02/21/12 6,720
12,000 @@ Philippine Government Intl. Bond,
9.875%, due 01/15/19 12,750
9,000 @@ Republic of Bulgaria, 8.250%, due
01/15/15 10,660
31,000 @@ Russia Government Intl. Bond,
5.000%, due 03/31/30 29,798
2,000 @@ Turkey Government Intl. Bond,
9.500%, due 01/15/14 2,320
16,000 @@ Turkey Government Intl. Bond,
12.375%, due 06/15/09 20,560
3,000 #, @@ Ukraine Government Intl. Bond,
7.650%, due 06/11/13 3,135
2,613 @@ Ukraine Government Intl. Bond,
11.000%, due 03/15/07 2,913
$ 2,000 @@ Uruguay Government Intl. Bond,
7.250%, due 02/15/11 $ 1,735
6,000 @@ Uruguay Government Intl. Bond,
7.500%, due 03/15/15 4,830
11,000 @@ Venezuela Government Intl. Bond,
9.250%, due 09/15/27 10,065
11,000 #,@@ Venezuela Government Intl. Bond,
10.750%, due 09/19/13 11,798
---------------
Total Other Bonds
(Cost $228,499) 238,613
---------------
Long-Term Investments
(Cost $11,352,596) 12,805,367
---------------
SHORT-TERM INVESTMENTS: 10.8%
REPURCHASE AGREEMENT: 10.8%
1,420,000 S Goldman Sachs Repurchase
Agreement dated 12/31/03,
0.990%, due 01/02/04,
$1,420,078 to be received
upon repurchase (Collateralized
by various U.S. Government
Agency Obligations,
2.500%-4.500%, Market Value
$1,450,482 due
12/04/06-11/15/12) 1,420,000
---------------
Total Short-Term Investments
(Cost $1,420,000) 1,420,000
---------------
TOTAL INVESTMENTS IN SECURITIES
(COST $12,772,596)* 108.2% $ 14,225,367
OTHER ASSETS AND LIABILITIES-NET 8.2 (1,074,731)
----- ---------------
NET ASSETS 100.0% $ 13,150,636
===== ===============
</Table>
@ Non-income producing security
@@ Foreign Issuer
ADR American Depositary Receipt
XX Value of securities obtained from one or more dealers making markets in
the securities which have been adjusted based on the Portfolio's
valuation procedures.
X Fair value determined by ING Funds Pricing Committee appointed by the
Portfolio's Board of Trustees.
# Securities with purchases pursuant to Rule 144A, under the securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers. These securities have been determined to be liquid
under the guidelines established by the Portfolio's Board of Trustees.
I Illiquid Security
W When-issued or delayed delivery security
See accompanying notes to financial statements.
31
<Page>
USLICO ASSET ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 2003
** Defaulted security
S Segregated securities for when-issued or delayed delivery securities held
at December 31, 2003.
C Bond may be called prior to maturity date.
* Cost for federal income tax purposes is $12,785,412. Net unrealized
appreciation consists of:
<Table>
Gross Unrealized Appreciation $ 1,497,878
Gross Unrealized Depreciation (57,923)
---------------
Net Unrealized Appreciation $ 1,439,955
===============
</Table>
CALL OPTIONS WRITTEN:
<Table>
<Caption>
SHARES
COMMON EXPIRATION STRIKE SUBJECT TO
STOCK DATE PRICE CALL VALUE
------ ---------- ------ ---------- -----
National
Semi-Conductor 1/17/04 $ 50 2,000 $ 200
</Table>
See accompanying notes to financial statements.
32
<Page>
USLICO SERIES FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
INVESTMENT INCOME:
Dividends, net of foreign taxes* $ 71,687 $ 3 $ 211 $ 59,177
Interest 6,332 75,376 140,633 275,190
--------------- --------------- --------------- ---------------
Total investment income 78,019 75,379 140,844 334,367
--------------- --------------- --------------- ---------------
EXPENSES:
Investment management fees 29,428 15,959 7,720 30,783
Custody and accounting expense 30,661 5,475 17,360 35,535
Administrative service fees 11,771 6,383 3,088 12,313
Professional fees 34,721 34,766 13,515 35,372
Shareholder reporting expense 8,970 5,562 1,854 9,235
Trustee fees 9,855 2,190 2,920 7,653
Miscellaneous expense 1,478 478 506 1,439
--------------- --------------- --------------- ---------------
Subtotal 126,884 70,813 46,963 132,330
Less expenses waived and/or reimbursed
by affiliates 20,656 13,311 18,852 20,632
--------------- --------------- --------------- ---------------
Net expenses 106,228 57,502 28,111 111,698
--------------- --------------- --------------- ---------------
Net investment income (loss) (28,209) 17,877 112,733 222,669
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FOREIGN CURRENCIES AND OPTIONS:
Net realized gain (loss) on:
Investments and foreign currencies 1,044,281 (69) 41,841 642,380
Options -- -- -- (156)
--------------- --------------- --------------- ---------------
Net realized gain (loss) on investments, foreign
currencies and options 1,044,281 (69) 41,841 642,224
Net change in unrealized appreciation or depreciation
on investments, foreign currencies and options 2,720,022 -- (19,376) 1,258,624
--------------- --------------- --------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currencies and options 3,764,303 (69) 22,465 1,900,848
--------------- --------------- --------------- ---------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,736,094 $ 17,808 $ 135,198 $ 2,123,517
=============== =============== =============== ===============
* Foreign taxes $ 41 $ -- $ -- $ 76
</Table>
See accompanying notes to financial statements.
33
<Page>
USLICO SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
FROM OPERATIONS:
Net investment income (loss) $ (28,209) $ 17,877 $ 112,733 $ 222,669
Net realized gain (loss) on investments,
foreign currencies and options 1,044,281 (69) 41,841 642,224
Net change in unrealized appreciation or
depreciation on investments,
foreign currencies and options 2,720,022 -- (19,376) 1,258,624
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from
operations 3,736,094 17,808 135,198 2,123,517
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (17,877) (108,697) (216,849)
FROM CAPITAL SHARES TRANSACTIONS:
Net proceeds from sale of shares 412,117 -- -- --
Dividends reinvested -- 17,877 108,697 216,849
Cost of shares redeemed (5,854) (282,842) (230,065) (575,963)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from
capital share transactions 406,263 (264,965) (121,368) (359,114)
--------------- --------------- --------------- ---------------
NET ASSETS, BEGINNING OF YEAR 10,140,164 6,449,986 3,086,012 11,603,082
--------------- --------------- --------------- ---------------
NET ASSETS, END OF YEAR $ 14,282,521 $ 6,184,952 $ 2,991,145 $ 13,150,636
--------------- --------------- --------------- ---------------
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF YEAR $ -- $ -- $ 4,036 $ 5,820
=============== =============== =============== ===============
</Table>
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
FROM OPERATIONS:
Net investment income (loss) $ (71,750) $ 62,181 $ 114,885 $ 281,382
Net realized gain (loss) on investments (3,172,082) -- 63,043 (1,015,881)
Net change in unrealized appreciation or
depreciation on investments (1,575,904) -- 53,152 (378,729)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations (4,819,736) 62,181 231,080 (1,113,228)
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (62,181) (123,927) (377,091)
FROM CAPITAL SHARES TRANSACTIONS:
Net proceeds from sale of shares 47,886 35,800 9,255 54,100
Dividends reinvested -- 62,181 123,927 377,091
Cost of shares redeemed (60,481) (47,727) -- (89,948)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from capital share transactions (12,595) 50,254 133,182 341,243
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets (4,832,331) 50,254 240,335 (1,149,076)
--------------- --------------- --------------- ---------------
NET ASSETS, BEGINNING OF YEAR 14,972,495 6,399,732 2,845,677 12,752,158
--------------- --------------- --------------- ---------------
NET ASSETS, END OF YEAR $ 10,140,164 $ 6,449,986 $ 3,086,012 $ 11,603,082
=============== =============== =============== ===============
UNDISTRIBUTED NET INVESTMENT INCOME AT END OF YEAR $ -- $ -- $ -- $ --
=============== =============== =============== ===============
</Table>
See accompanying notes to financial statements.
34
<Page>
USLICO SERIES FUND -- NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2003
(1) ORGANIZATION -- USLICO Series Fund (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940 and consisting of four separate series (Stock Portfolio, Money Market
Portfolio, Bond Portfolio and Asset Allocation Portfolio), each of which has its
own investment objectives and policies. The Fund was organized as a business
trust under the laws of Massachusetts on January 19, 1988. Shares of the
Portfolios are sold only to separate accounts of ReliaStar Life Insurance
Company (Reliastar Life) and ReliaStar Life Insurance Company of New York
(Reliastar Life of New York, a wholly owned subsidiary of ReliaStar Life) to
serve as the investment medium for variable life insurance policies issued by
these companies. The separate accounts invest in shares of one or more of the
Portfolios, in accordance with allocation instructions received from
policyowners. Each Portfolio share outstanding represents a beneficial interest
in the respective Portfolio.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) SECURITY VALUATION -- Investments in equity securities traded on a
national securities exchange are valued at the last reported sale price.
Portfolio securities reported by NASDAQ will be valued at NASDAQ official
closing price. Portfolio securities traded on an exchange or NASDAQ for which
there has been no sale and equity securities traded in the
over-the-counter-market are valued at the mean between the last reported bid and
ask prices. All investments quoted in foreign currencies will be valued daily in
U.S. dollars on the basis of the foreign currency exchange rates prevailing at
that time. Debt securities are valued at bid prices obtained from independent
services or from one or more dealers making markets in the securities. U.S.
Government obligations are valued by using market quotations or independent
pricing services which use prices provided by market-makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics.
Securities and assets for which market quotations are not readily available
(which may include certain restricted securities which are subject to
limitations as to their sale) are valued at their fair values as determined in
good faith by or under the supervision of the Portfolios' Board of Trustees
("Board"), in accordance with methods that are specifically authorized by the
Board. Securities traded on exchanges, including foreign exchanges, which close
earlier than the time that a Portfolio calculates its net asset value may also
be valued at their fair values as determined in good faith by or under the
supervision of the Portfolio's Board, in accordance with methods that are
specifically authorized by the Board. If a significant event which is likely to
impact the value of one or more foreign securities held by a Portfolio occurs
after the time at which the foreign market for such security(ies) closes but
before the time that the Portfolio's net asset value is calculated on any
business day, such event may be taken into account in determining the fair value
of such security(ies) at the time the Portfolio calculates its net asset value.
For these purposes, significant events after the close of trading on a foreign
market may include, among others, securities trading in the U.S. and other
markets, corporate announcements, natural and other disasters, and political and
other events. Among other elements of analysis, the Board has authorized the use
of one or more research services to assist with the determination of the fair
value of foreign securities in light of significant events. Research services
use statistical analyses and quantitative models to help determine fair value as
of the time a Portfolio calculates its net asset value. Unlike the closing price
of a security on an exchange, fair value determinations employ elements of
judgment, and the fair value assigned to a security may not represent the actual
value that a Portfolio could obtain if it were to sell the security at the time
of the close of the NYSE.
Investments in securities maturing in less than 60 days as well as all
securities in the Money Market Portfolio are valued at amortized cost, which,
when combined with accrued interest, approximates market value.
(b) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
recorded on the trade date. Realized gains or losses on sales of investments are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis except when collection is not expected and dividend income is
recorded on the ex-dividend date. Discounts are accreted and premiums amortized
to par at maturity based on the scientific method.
(c) FEDERAL INCOME TAXES -- It is the policy of the Portfolios to comply with
subchapter M of the Internal Revenue Code and related excise tax provisions
applicable to regulated investment companies and to distribute substantially all
of their net investment income and any net realized capital gains to their
shareholders. Therefore, no federal income tax provision is required. No capital
gain distributions shall be made until any capital loss carryforwards have been
fully utilized or expired.
(d) PURCHASES AND SALES -- Purchases and sales of Portfolio shares are made
on the basis of the net asset value per share prevailing at the close of
business on the preceding business day.
(e) REPURCHASE AGREEMENTS -- Each Portfolio may invest in repurchase
agreements only with government securities dealers recognized by the Board of
Governors of the Federal Reserve System or with member banks of the Federal
Reserve System. Under such agreements, the seller of the security agrees to
repurchase it at a mutually agreed upon time and price. The resale price is in
excess of the purchase price and reflects an agreed upon interest rate for the
period of time the agreement is outstanding. The period of the repurchase
agreements is usually short, from overnight to one week, while the underlying
securities generally have longer maturities. Each Portfolio will receive as
collateral cash or securities whose market value is equal to at least 100% of
the carrying amount of the repurchase agreements, plus accrued interest, being
invested by the Portfolio. The underlying collateral is valued daily on a
mark-to-market basis to assure that the value, including accrued interest is at
least equal to the repurchase price. If the seller defaults,
35
<Page>
USLICO SERIES FUND -- NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2003
(CONTINUED)
a Portfolio might incur a loss or delay in the realization of proceeds if the
value of the collateral securing the repurchase agreement declines, and it might
incur disposition costs in liquidating the collateral.
(f) 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 at the date of financial statements and the
reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
(g) DISTRIBUTION TO SHAREHOLDERS -- Dividends from net investment income are
declared and paid quarterly by the Stock Portfolio, Bond Portfolio and Asset
Allocation Portfolio, and declared daily and paid monthly by the Money Market
Portfolio. Each Portfolio distributes capital gains, if any, annually. The
Portfolios may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code. The characteristics of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America for investment companies. The Portfolios record
distributions to their shareholders on ex-dividend date.
(h) ILLIQUID AND RESTRICTED SECURITIES -- The Portfolios may invest up to 10%
of their net assets in illiquid securities. Illiquid securities are not readily
marketable. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Portfolios to sell them promptly at an acceptable price. The Portfolios may also
invest in restricted securities, which include those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or securities offered pursuant to Section 4(2)
of the 1933 Act, and/or are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Certain restricted securities may be considered liquid pursuant to guidelines
approved by the Board or may be deemed to be illiquid because they may not be
readily marketable. Illiquid and restricted securities are valued using market
quotations when readily available. In the absence of market quotations, the
securities are valued based upon their fair value determined under procedures
approved by the Board.
(i) OPTIONS CONTRACTS -- Stock and Asset Allocation Portfolios may purchase
put and call options and may write (sell) call options on debt or other
securities in standardized contracts traded on national securities exchanges or
boards of trade. Option contracts are valued daily and unrealized gains or
losses are recorded based upon the last sales price on the principal exchange on
which the options are traded. The Portfolios will realize a gain or loss upon
the expiration or closing of the option contract. When an option is exercised,
the proceeds on sales of the underlying security for a written call option, the
purchase cost of the security for a written put option, or the cost of the
security for a purchased put or call option is adjusted by the amount of premium
received or paid. Realized and unrealized gains or losses on option contracts
are reflected in the accompanying financial statements. The risk in writing a
call option is that the Portfolios give up the opportunity for profit if the
market price of the security increases and the option is exercised. The risk in
writing a put option is that the Portfolios may incur a loss if the market price
of the security decreases and the option is exercised. The risk in buying an
option is that the Portfolios pay a premium whether or not the option is
exercised. Risks may also arise from an illiquid secondary market or from the
inability of counterparties to meet the terms of the contract.
(3) AFFILIATIONS AND RELATED PARTY TRANSACTIONS -- Each of the Portfolios has
entered into an Investment Advisory Agreement with ING Investments, LLC (the
"Adviser"), a wholly-owned subsidiary of ING Groep N.V. The advisory agreement
provides that management fees be charged to each of the Portfolios at an annual
percentage rate of 0.50% on the first $100 million of average daily net assets
and 0.45% of average daily net assets in excess thereof. The Adviser has entered
into a sub-advisory agreement with Aeltus Investment Management, Inc. ("ING
Aeltus"). Subject to such policies as the Board or the Adviser may determine,
ING Aeltus manages each Portfolio's assets in accordance with the Portfolios'
investment objectives, policies and limitations. The Adviser has contractually
agreed to waive management fees charged to each of the Portfolios to the extent
they exceed 0.25% of the average daily net assets of each Portfolio. The Adviser
has also agreed to voluntarily limit the annual expenses of each Portfolio,
other than management fees, to 0.65% of the average net assets of each
Portfolio.
The Adviser will, at a later date, recoup from the Portfolios, expenses
reimbursed by the Adviser during the previous 36 months, but only if, after such
recoupment, the Portfolios' expense ratio does not exceed the percentage
described above. Waived and reimbursed fees net of any recoupment by the Adviser
of such waived and reimbursed fees are reflected on the accompanying Statements
of Operations.
As of December 31, 2003, the cumulative amounts of reimbursed fees that are
subject to possible recoupment by the Adviser are as follows:
<Table>
Stock Portfolio $ 108,483
Money Market Portfolio 56,557
Bond Portfolio 74,230
Asset Allocation Portfolio 131,350
</Table>
ING Funds Services, LLC (the "Administrator"), serves as administrator to each
Portfolio. The Portfolios pay the Administrator a fee calculated at an annual
rate of 0.10% of each Portfolio's average daily net assets.
ING Funds Distributor, LLC, a wholly-owned subsidiary of ING Groep N.V., serves
as Distributor of the Fund. The former distributor for the Fund was Washington
Square Securities, Inc. No fees are charged to the Portfolios for distribution
services.
At December 31, 2003, the Portfolios had the following amounts recorded in
payable to affiliates on the accompanying Statements of Assets and Liabilities:
<Table>
<Caption>
ACCRUED ADVISORY FEE ACCRUED ADMINISTRATIVE FEE TOTAL
-------------------- -------------------------- -------
Stock Portfolio $ 2,953 $ 1,181 $ 4,134
Money Market Portfolio 1,313 525 1,838
Bond Portfolio 633 253 886
Asset Allocation Portfolio 2,745 1,098 3,843
</Table>
Each Portfolio has adopted a Retirement Policy covering all independent trustees
of the Portfolio who will have served as an independent trustee for at least
five years at the time of retirement. Benefits under this plan are based on an
annual rate as defined in the plan agreement.
36
<Page>
USLICO SERIES FUND -- NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2003
(CONTINUED)
(4) PURCHASES AND SALES OF INVESTMENT SECURITIES -- The aggregate cost of
purchases and proceeds from sales of investments (excluding U.S. Government and
short-term investments) for the year ended December 31, 2003 were as follows:
<Table>
<Caption>
PURCHASES SALES
------------- -------------
Stock Portfolio $ 20,816,220 $ 20,567,838
Bond Portfolio 8,377,454 7,778,462
Asset Allocation Portfolio 21,006,932 19,936,338
</Table>
U.S. Government securities not included above were as follows:
<Table>
<Caption>
PURCHASES SALES
------------- -------------
Bond Portfolio $ 2,340,199 $ 2,527,081
Asset Allocation Portfolio 4,219,123 4,370,185
</Table>
(5) SUMMARY OF CAPITAL SHARES TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
DOLLARS
Shares sold $ 412,117 $ -- $ -- $ --
Dividends reinvested -- 17,877 108,697 216,849
Shares redeemed (5,854) (282,842) (230,065) (575,963)
------------- ------------- ------------- -------------
Net increase (decrease) $ 406,263 $ (264,965) $ (121,368) $ (359,114)
============= ============= ============= =============
SHARES
Shares sold 65,938 -- -- --
Dividends reinvested -- 17,877 11,049 26,221
Shares redeemed (936) (282,842) (23,500) (67,760)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding 65,002 (264,965) (12,451) (41,539)
============= ============= ============= =============
</Table>
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
DOLLARS
Shares sold $ 47,886 $ 35,800 $ 9,255 $ 54,100
Dividends reinvested -- 62,181 123,927 377,091
Shares redeemed (60,481) (47,727) -- (89,948)
------------- ------------- ------------- -------------
Net increase (decrease) $ (12,595) $ 50,254 $ 133,182 $ 341,243
============= ============= ============= =============
SHARES
Shares sold 7,278 35,800 983 6,502
Dividends reinvested -- 62,181 13,037 47,446
Shares redeemed (9,192) (47,727) -- (10,811)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding (1,914) 50,254 14,020 43,137
============= ============= ============= =============
</Table>
37
<Page>
USLICO SERIES FUND -- NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2003
(CONTINUED)
(6) ILLIQUID SECURITIES
Pursuant to guidelines adopted by the Portfolios' Board, the following
securities have been deemed to be illiquid. The Portfolios currently limit
investment in illiquid securities to 10% of the Portfolios' net assets, at
market value, at time of purchase.
<Table>
<Caption>
INITIAL PERCENT
PRINCIPAL ACQUISITION OF NET
PORTFOLIO SECURITY AMOUNT PORTFOLIO COST VALUE ASSETS
--------- -------- ----------- ----------- ----------- ----------- -------
Bond Amresco Residential Securities Mortgage
Loan Trust, 1.760%, due 01/25/28 $ 13,354 01/29/98 $ 13,354 $ 13,368 0.4%
Federal Home Loan Mortgage Corp.,
4.458%, due 12/01/26 17,060 09/11/97 17,335 17,084 0.6%
Federal National Mortgage Association,
3.454%, due 07/01/27 1,455 10/02/97 1,476 1,507 0.1%
Federal National Mortgage Association,
3.555%, due 07/01/27 11,317 09/11/97 11,507 11,725 0.4%
United Cos. Financial Corp., 0.000%, due
11/02/99 100,000 11/07/01 -- -- 0.0%
----------- ----------- ------
$ 43,672 $ 43,684 1.5%
=========== =========== ======
Asset
Allocation Amresco Residential Securities Mortgage
Loan Trust, 1.760%, due 01/25/28 26,708 01/29/98 26,708 26,736 0.2%
Federal Home Loan Mortgage Corp.,
4.458%, due 12/01/26 44,618 09/11/97 45,184 44,682 0.3%
Federal National Mortgage Association,
3.454%, due 07/01/27 7,275 10/02/97 7,364 7,534 0.1%
Federal National Mortgage Association,
3.555%, due 07/01/27 30,104 09/11/97 30,523 31,188 0.2%
United Cos. Financial Corp., 0.000%, due
11/02/99 200,000 11/07/01 -- -- 0.0%
----------- ----------- ------
$ 109,779 $ 110,140 0.8%
=========== =========== ======
</Table>
(7) CALL OPTIONS WRITTEN:
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED VALUE
----------- ----------- -----------
STOCK
Options written 40 $ 5,280 $ 400
------ ----------- -----------
Options outstanding at December 31, 2003 40 $ 5,280 $ 400
====== =========== ===========
ASSET ALLOCATION
Options written 20 $ 2,640 $ 200
------ ----------- -----------
Options outstanding at December 31, 2003 20 $ 2,640 $ 200
====== =========== ===========
</Table>
(8) LINE OF CREDIT
The Portfolios, in addition to certain other funds managed by the Adviser, have
entered into an unsecured committed revolving line of credit agreement (the
"Credit Agreement") with Bank of New York for an aggregate amount of
$125,000,000. The proceeds may be used to: (1) temporarily finance the purchase
and sale of securities; (2) finance the redemption of shares of an investor in
the funds; and (3) enable the funds to meet other emergency expenses as defined
in the Credit agreement. The funds to which the line of credit is available pay
a commitment fee equal to 0.09% per annum on the daily unused portion of the
committed line amount payable quarterly in arrears. At December 31, 2003 the
Portfolios did not have any loans outstanding.
(9) FEDERAL INCOME TAXES
The amount of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from accounting principles generally accepted in the United States of
America for investment companies. These book/tax differences may be either
temporary or permanent. Permanent differences are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences are not reclassified. Key differences include the treatment of
short-term capital gains, foreign currency transactions, and wash sale
deferrals. Distributions in excess of net investment income and/or net realized
capital gains for tax purposes are reported as distributions of paid-in capital.
38
<Page>
USLICO SERIES FUND -- NOTES TO FINANCIAL STATEMENTS -- DECEMBER 31, 2003
(CONTINUED)
The following permanent tax differences have been reclassified as of December
31, 2003:
<Table>
<Caption>
UNDISTRIBUTED
NET INVESTMENT ACCUMULATED
PAID-IN INCOME ON NET REALIZED
CAPITAL INVESTMENTS GAIN (LOSSES)
------- -------------- -------------
Stock $ (28,209) $ 28,209 $ --
Money Market (69) -- 69
</Table>
The tax composition of dividends and distributions to shareholders was as
follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2003 YEAR ENDED DECEMBER 31, 2002
ORDINARY INCOME ORDINARY INCOME
---------------------------- ----------------------------
Money Market $ 17,877 $ 62,181
Bond 108,697 123,927
Asset Allocation 216,849 377,091
</Table>
The tax-basis components of distributable earnings and the expiration dates of
the capital loss carryforwards which may be used to offset future realized
capital gains for federal income tax purposes as of December 31, 2003 are as
follows:
<Table>
<Caption>
UNREALIZED CAPITAL
UNDISTRIBUTED APPRECIATION/ LOSS EXPIRATION
ORDINARY INCOME (DEPRECIATION) CARRYFORWARDS DATES
--------------- -------------- -------------- ----------
Stock $ -- $ 2,822,516 $ (17,067,838) 2009-2010
Money Market -- -- -- --
Bond 4,058 36,200 (134,084) 2009-2010
Asset Allocation 5,864 1,442,395 (5,864,187) 2009-2010
</Table>
(10) OTHER INFORMATION (UNAUDITED)
As with many financial services companies, ING Investments and affiliates of ING
Investments (collectively, "ING") have received requests for information from
various governmental and self-regulatory agencies in connection with
investigations related to trading in investment company shares. In each case,
full cooperation and responses are being provided. ING is also completing an
internal review of investment company share trading as well as a review of their
policies and procedures in this area. ING will reimburse any ING Portfolio
affected by inappropriate late trading or market timing for any improper profits
that accrued to any person who engaged in improper frequent or late trading for
which ING is responsible.
39
<Page>
USLICO SERIES FUND
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 4.96 $ 1.00 $ 9.75 $ 7.64
Income (loss) from investment operations:
Net investment income (loss) (0.01) 0.00* 0.36 0.15
Net realized and unrealized gain on investments 1.82 -- 0.08 1.25
------------ ------------ ------------ ------------
Total from investment operations 1.81 0.00* 0.44 1.40
Distributions
Distribution of net investment income -- (0.00)* (0.35) (0.14)
------------ ------------ ------------ ------------
Net asset value, end of year $ 6.77 $ 1.00 $ 9.84 $ 8.90
============ ============ ============ ============
TOTAL RETURN(1) 36.49% 0.28% 4.57% 18.54%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 14,283 $ 6,185 $ 2,991 $ 13,151
Ratio of expenses to average net assets after expense reimbursement 0.90% 0.90% 0.91% 0.91%
Ratio of expenses to average net assets prior to expense reimbursement 1.08% 1.11% 1.52% 1.07%
Ratio of net investment income (loss) to average net assets (0.24)% 0.28% 3.65% 1.81%
Portfolio turnover rate 189% N/A 368% 210%
</Table>
(1) Total return is calculated assuming reinvestments of all dividends and
capital gain distributions.
* Amount is less than $0.01 per share.
FOR THE YEAR ENDED DECEMBER 31, 2002
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 7.32 $ 1.00 $ 9.41 $ 8.64
Income (loss) from investment operations:
Net investment income (loss) (0.04) 0.01 0.39 0.19
Net realized and unrealized gain (loss) on investments (2.32) -- 0.35 (0.94)
------------ ------------ ------------ ------------
Total from investment operations (2.36) 0.01 0.74 (0.75)
Distributions
Distribution of net investment income -- (0.01) (0.40) (0.25)
------------ ------------ ------------ ------------
Net asset value, end of year $ 4.96 $ 1.00 $ 9.75 $ 7.64
============ ============ ============ ============
TOTAL RETURN(1) (32.24)% 0.88% 8.07% (8.72)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 10,140 $ 6,450 $ 3,086 $ 11,603
Ratio of expenses to average net assets after expense reimbursement 0.90% 0.78% 0.89% 0.90%
Ratio of expenses to average net assets prior to expense reimbursement 1.47% 1.03% 1.37% 1.34%
Ratio of net investment income (loss) to average net assets (0.59)% 0.97% 4.20% 2.42%
Portfolio turnover rate 418% N/A 159% 258%
</Table>
(1) Total return is calculated assuming reinvestments of all dividends and
capital gain distributions.
See accompanying notes to financial statements.
40
<Page>
USLICO SERIES FUND
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO(2) PORTFOLIO(2) PORTFOLIO(2) PORTFOLIO(2)
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 12.42 $ 1.00 $ 9.21 $ 11.04
Income (loss) from investment operations:
Net investment income (loss) (0.05) 0.03 0.48 0.22
Net realized and unrealized gain (loss) on investments (5.05) -- 0.11 (2.43)
------------ ------------ ------------ ------------
Total from investment operations (5.10) 0.03 0.59 (2.21)
Distributions
Distribution of net investment income -- (0.03) (0.39) (0.19)
------------ ------------ ------------ ------------
Net asset value, end of year $ 7.32 $ 1.00 $ 9.41 $ 8.64
============ ============ ============ ============
TOTAL RETURN(1) (41.06)% 3.14% 6.47% (20.09)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 14,972 $ 6,400 $ 2,846 $ 12,752
Ratio of expenses to average net assets after expense reimbursement 0.90% 0.90% 0.90% 0.90%
Ratio of expenses to average net assets prior to expense reimbursement 1.42% 1.63% 2.15% 1.76%
Ratio of net investment income (loss) to average net assets (0.61)% 3.13% 5.02%(3) 2.37%(3)
Portfolio turnover rate 510% N/A 215% 354%
</Table>
(1) Total return is calculated assuming reinvestments of all dividends and
capital gain distributions at net asset value.
(2) Effective May 11, 2001, ING Investments, LLC ceased serving as sub-adviser
to all of the Portfolios and began serving as adviser to all of the
Portfolios.
(3) Had the Bond Portfolio and the Asset Allocation Portfolio not amortized
premiums and accreted discounts the ratio of net investment income to
average net assets would have been 4.56% and 2.09%, respectively.
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO(2) PORTFOLIO(2) PORTFOLIO(2)
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 16.06 $ 1.00 $ 9.01 $ 12.68
Income (loss) from investment operations:
Net investment income (loss) (0.02) 0.05 0.40 0.18
Net realized and unrealized gain (loss) on investments (3.18) -- 0.20 (1.41)
------------ ------------ ------------ ------------
Total from investment operations (3.20) 0.05 0.60 (1.23)
Distributions
Distribution of net investment income -- (0.05) (0.40) (0.18)
Distribution of realized capital gains (0.44) -- -- (0.23)
------------ ------------ ------------ ------------
Net asset value, end of year $ 12.42 $ 1.00 $ 9.21 $ 11.04
============ ============ ============ ============
TOTAL RETURN(1) (19.94)% 5.59% 6.74% (9.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 26,513 $ 6,331 $ 2,881 $ 15,591
Ratio of expenses to average net assets after expense reimbursement 0.62% 0.90% 0.90% 0.90%
Ratio of expenses to average net assets prior to expense reimbursement 0.87% 1.34% 1.83% 1.18%
Ratio of net investment income (loss) to average net assets (0.11)% 5.45% 4.30% 1.44%
Portfolio turnover rate 365.49% N/A 49.27% 242.78%
</Table>
(1) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value.
(2) Effective December 1, 2000, ING Pilgrim Investments, LLC became sub-adviser
to the Money Market and Bond Portfolios as well as the bond portion of the
Asset Allocation Portfolio.
See accompanying notes to financial statements.
41
<Page>
USLICO SERIES FUND
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
MONEY ASSET
STOCK MARKET BOND ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 13.64 $ 1.00 $ 9.74 $ 11.92
Income (loss) from investments operations:
Net investment income 0.12 0.04 0.46 0.31
Net realized and unrealized gain (loss) on investments 3.93 -- (0.73) 1.48
------------ ------------ ------------ ------------
Total from investment operations 4.05 0.04 (0.27) 1.79
Distributions:
Distribution of net investment income (0.13) (0.04) (0.46) (0.31)
Distribution of realized capital gains (1.50) -- -- (0.72)
------------ ------------ ------------ ------------
Net asset value, end of year $ 16.06 $ 1.00 $ 9.01 $ 12.68
============ ============ ============ ============
TOTAL RETURN(1) 30.08% 5.00% (2.87)% 15.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $ 34,493 $ 6,058 $ 2,765 $ 18,180
Expenses to average net assets 0.90% 0.90% 0.90% 0.90%
Net investment income to average net assets 0.84% 4.27% 4.88% 2.58%
Portfolio turnover rate 305.87% N/A 45.74% 227.49%
</Table>
(1) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value.
See accompanying notes to financial statements.
42
<Page>
SHAREHOLDER MEETING INFORMATION (UNAUDITED)
A SPECIAL MEETING OF SHAREHOLDERS OF THE ING VARIABLE PRODUCTS AND OTHER
REGISTRANTS WAS HELD JULY 22, 2003, AT THE OFFICES OF ING FUNDS, 7337 EAST
DOUBLETREE RANCH ROAD, SCOTTSDALE, AZ 85258.
A BRIEF DESCRIPTION OF EACH MATTER VOTED UPON AS WELL AS THE RESULTS ARE
OUTLINED BELOW:
1. To approve a Sub-Advisory Agreement between ING Investments, LLC and Aeltus
Investment Management, Inc., with no change in the Adviser, the portfolio
manager(s), or the overall management fee paid by the Fund.
2. Proposal 2 pertains to Portfolios not included in this annual report.
3. To transact such other business, not currently contemplated, that may
properly come before the Special Meeting or any adjournment(s) thereof in the
discretion of the proxies or their substitutes.
<Table>
<Caption>
SHARES VOTED
SHARES VOTED AGAINST OR SHARES BROKER TOTAL SHARES
PROPOSAL FOR WITHHELD ABSTAINED NON-VOTE VOTED
-------- ------------ ------------ --------- -------- ------------
USLICO Stock Portfolio 1 91,206 7,733 3,967 -- 102,906
USLICO Stock Portfolio 3 84,651 10,545 7,710 -- 102,906
USLICO Money Market Portfolio 1 51,641 2,142 1,542 -- 55,325
USLICO Money Market Portfolio 3 33,128 20,034 2,163 -- 55,325
USLICO Bond Portfolio 1 8,374 307 10 -- 8,691
USLICO Bond Portfolio 3 7,749 893 49 -- 8,691
USLICO Asset Allocation Portfolio 1 88,299 3,383 3,792 -- 95,474
USLICO Asset Allocation Portfolio 3 84,352 6,052 5,070 -- 95,474
</Table>
43
<Page>
TAX INFORMATION (UNAUDITED)
Dividends paid during the fiscal year ended December 31, 2003 were as follows:
<Table>
<Caption>
PORTFOLIO NAME TYPE PER SHARE AMOUNT
- -------------- ---- ----------------
Money Market Portfolio NII $ 0.0028
Bond Portfolio NII $ 0.3510
Asset Allocation Portfolio NII $ 0.1449
</Table>
- ----------
NII-Net investment income
Of the ordinary distributions made during the year ended December 31, 2003, the
following percentage qualify for the dividends received deduction to corporate
shareholders: 26.04% for the Asset Allocation Portfolio.
The above figures may differ from those cited elsewhere in this report due to
differences in the calculation of income and gains under accounting principles
generally accepted in the United States of America (book) and Internal Revenue
Service (tax) purposes.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their Investments in the Portfolios. In January 2004,
shareholders, excluding corporate shareholders, received an IRS 1099-DIV
regarding the federal tax status of the dividends and distributions received by
them in calendar 2003.
44
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
The business and affairs of the Trusts are managed under the direction of the
Trust's Board of Trustees. A Trustee who is not an interested person of the
Trusts, as defined in the 1940 Act, is an independent trustee ("Independent
Trustee"). The Trustees and Officers of the Trust are listed below. The
Statement of Additional Information includes additional information about
trustees of the Registrant and is available, without charge, upon request at
1-800-992-0180.
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS HELD TIME DURING THE BY HELD BY
AND AGE WITH TRUST SERVED(1) PAST FIVE YEARS TRUSTEE TRUSTEE
------- ---------- --------- --------------- ------- -------
Independent Trustees:
Paul S. Doherty(2) Trustee September Mr. Doherty is President and 116 --
7337 E. Doubletree Ranch Rd. 1999 - Partner, Doherty, Wallace,
Scottsdale, AZ 85258 Present Pillsbury and Murphy, P.C.,
Born: 1934 Attorneys (1996 - Present);
and Trustee of each
of the funds managed
by Northstar
Investment Management
Corporation (1993 -
1999).
J. Michael Earley(3) Trustee February President and Chief 116 --
7337 E. Doubletree Ranch Rd. 2002 - Executive Officer, Bankers
Scottsdale, AZ 85258 Present Trust Company, N.A.
Born: 1945 (1992 - Present).
R. Barbara Gitenstein(2) Trustee February President, College of New 116 --
7337 E. Doubletree Ranch Rd. 2002 - Jersey (1999 - Present).
Scottsdale, AZ 85258 Present
Born: 1948
Walter H. May(2) Trustee September Retired. Formerly, Managing 116 Best Prep charity 1991 -
7337 E. Doubletree Ranch Rd. 1999 - Director and Director of Present
Scottsdale, AZ 85258 Present Marketing, Piper Jaffray,
Born: 1936 Inc.; Trustee of each of the
funds managed by Northstar
Investment Management
Corporation (1996 - 1999).
Jock Patton(2) Trustee February Private Investor (June 1997 - 116 Director, Hypercom, Inc.
7337 E. Doubletree Ranch Rd. 2002 - Present). Formerly Director (January 1999 - Present);
Scottsdale, AZ 85258 Present and Chief Executive Officer, JDA Software Group, Inc.
Born: 1945 Rainbow Multimedia Group, (January 1999 - Present); and
Inc. (January 1999 - BG Associates, Inc.
December 2001).
</Table>
45
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS HELD TIME DURING THE BY HELD BY
AND AGE WITH TRUST SERVED(1) PAST FIVE YEARS TRUSTEE TRUSTEE
------- ---------- --------- --------------- ------- -------
Independent Trustees:
David W.C. Putnam(3) Trustee September President and Director, F.L. 116 Anchor International Bond
7337 E. Doubletree Ranch Rd. 1999 - Putnam Securities Company, (December 2000 - Present);
Scottsdale, AZ 85258 Present Inc. and its affiliates; Progressive Capital
Born: 1939 President, Secretary and Accumulation Trust
Trustee, The Principled (August 1998 - Present);
Equity Market Fund. Principled Equity Market
Formerly, Trustee, Trust Fund (November 1996 -
Realty Trust (December Present), Mercy Endowment
Corp.; Anchor Investment Foundation (1995 - Present);
Trust; Bow 2000 - Present); Director, F.L. Putnam
Ridge Mining Company and Investment Management
each of the F.L. Putnam funds Company (December 2001 -
managed by Northstar Present); Asian American
Investment Foundation Bank and Trust Company
Management Corporation (June 1992 - Present); and
(1994 - 1999). Notre Dame Health Care
Center (1991 - Present) F.L.
Putnam Securities Company,
Inc. (June 1978 - Present);
and an Honorary Trustee,
Mercy Hospital (1973 -
Present).
Blaine E. Rieke(3) Trustee February General Partner, Huntington 116 Morgan Chase Trust Co.
7337 E. Doubletree Ranch Rd. 2001 - Partners (January 1997 - (January 1998 - Present).
Scottsdale, AZ 85258 Present Present). Chairman of the
Born: 1933 Board and Trustee of each of
the funds managed by ING
Investment Management Co.
LLC (November 1998 -
February 2001).
Roger B. Vincent(3) Trustee February President, Springwell 116 AmeriGas Propane, Inc.
7337 E. Doubletree Ranch Rd. 2002 - Corporation (1989 - (1998 - Present).
Scottsdale, AZ 85258 Present Present). Formerly, Director
Born: 1945 Tatham Offshore, Inc.
(1996 - 2000).
</Table>
46
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS HELD TIME DURING THE BY HELD BY
AND AGE WITH TRUST SERVED(1) PAST FIVE YEARS TRUSTEE TRUSTEE
------- ---------- --------- --------------- ------- -------
Independent Trustees:
Richard A. Wedemeyer(2) Trustee February Retired. Mr. Wedemeyer was 116 Touchstone Consulting
7337 E. Doubletree Ranch Rd. 2001 - formerly Vice President -- Group (1997 - Present).
Scottsdale, AZ 85258 Present Finance and Administration,
Born: 1936 Channel Corporation (June
1996 - April 2002).Trustee,
First Choice Funds (1997 -
2001); and of each of the
funds managed by ING Investment
Management Co. LLC
(1998 - 2001).
</Table>
47
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS HELD TIME DURING THE BY HELD BY
AND AGE WITH TRUST SERVED(1) PAST FIVE YEARS TRUSTEE TRUSTEE
------- ---------- --------- --------------- ------- -------
Trustees who are "Interested
Persons":
Thomas J. McInerney(4) Trustee February Chief Executive Officer, ING 170 Trustee, GCG Trust
7337 E. Doubletree Ranch Rd. 2001 - U.S. Financial Services (February 2002 - Present);
Scottsdale, AZ 85258 Present (September 2001 - Present); Equitable Life Insurance Co.,
Born: 1956 General Manager and Chief Golden American Life
Executive Officer, ING U.S. Insurance Co., Life Insurance
Worksite Financial Services Company of Georgia,
(December 2000 - Present); Midwestern United Life
Member ING Americas Insurance Co., ReliaStar Life
Executive Committee (2001 - Insurance Co., Security Life
Present); President, Chief of Denver, Security
Executive Officer and Connecticut Life Insurance
Director of Northern Life Co., Southland Life
Insurance Company (March Insurance Co., USG Annuity
2001 - October 2002), ING and Life Company, and
Aeltus Holding Company, United Life and Annuity
Inc. (2000 - Present), ING Insurance Co. Inc (March
Retail Holding Company 2001 - Present); Director,
(1998 - Present), ING Life Ameribest Life Insurance Co.,
Insurance and Annuity (March 2001 to January
Company (September 1997 - 2003); Director, First
November 2002) and ING Columbine Life Insurance
Retirement Holdings, Inc. Co. (March 2001 to
(1997 - Present). Formerly, December 2002); Member of
General Manager and Chief the Board, National
Executive Officer, ING Commission on Retirement
Worksite Division Policy, Governor's Council on
(December 2000 - October Economic Competitiveness
2001), President ING-SCI, and Technology of
Inc. (August 1997 - Connecticut, Connecticut
December 2000); President, Business and Industry
Aetna Financial Services Association, Bushnell;
(August 1997 - December Connecticut Forum; Metro
2000). Hartford Chamber of
Commerce; and is Chairman,
Concerned Citizens for
Effective Government.
</Table>
48
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
OFFICE AND PRINCIPAL COMPLEX OTHER
POSITION(S) LENGTH OF OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS HELD TIME DURING THE BY HELD BY
AND AGE WITH TRUST SERVED(1) PAST FIVE YEARS TRUSTEE TRUSTEE
------- ---------- --------- --------------- ------- -------
Trustees who are "Interested
Persons":
John G. Turner(5) Trustee February Chairman, Hillcrest Capital 116 Director, Hormel Foods
7337 E. Doubletree Ranch Rd. 2001 - Partners (May 2002 - Corporation (March 2000 -
Scottsdale, AZ 85258 Present Present); President, Turner Present); Shopko Stores, Inc.
Born: 1939 Investment Company (August 1999 - Present); and
(January 2002 - Present). M.A. Mortenson Company
Mr. Turner was formerly Vice (March 2002 - Present).
Chairman of ING Americas
(2000 - 2002); Chairman
and Chief Executive Officer
of ReliaStar Financial Corp.
and ReliaStar Life Insurance
Company (1993 - 2000);
Chairman of ReliaStar Life
Insurance Company of New
York (1995 - 2001);
Chairman of Northern Life
Insurance Company (1992 -
2001); Chairman and Trustee
of the Northstar affiliated
investment companies
(1993 - 2001) and Director,
Northstar Investment
Management Corporation
and its affiliates (1993 -
1999).
</Table>
(1) Trustees serve until their successors are duly elected and qualified,
subject to the Board's retirement policy.
(2) Valuation Committee member.
(3) Audit Committee member.
(4) Mr. McInerney is an "interested person," as defined by the 1940 Act,
because of his affiliation with ING U.S. Financial Services and ING U.S.
Worksite Financial Services, both affiliates of ING Investments, LLC.
(5) Mr. Turner is an "interested person," as defined underthe 1940 Act, because
of his affiliation with ING Americas, an affiliate of ING Investments, LLC.
49
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
Officers:
James M. Hennessy President and Chief February 2001 - President and Chief Executive Officer of ING
7337 E. Doubletree Ranch Rd. Executive Officer Present Capital Corporation, LLC, ING Funds
Scottsdale, AZ 85258 Services, LLC, ING Advisors, Inc., ING
Born: 1949 Chief Operating Officer June 2000 - Investments, LLC, Lexington Funds
Present Distributor, Inc., Express America T.C. Inc.
and EAMC Liquidation Corp. (since
Senior Executive Vice June 2000 - December 2001); Executive Vice President
President and Secretary February 2001 and Chief Operating Officer of ING Funds
Distributor, LLC (since June 2000). Formerly,
Executive Vice President and Chief Operating
Officer of ING Quantitative Management, Inc.
(October 2001 to September 2002); Senior
Executive Vice President (June 2000 to December
2000) and Secretary (April 1995 to December
2000) of ING Capital Corporation, LLC, ING
Funds Services, LLC, ING Investments, LLC, ING
Advisors, Inc., Express America T.C. Inc., and
EAMC Liquidation Corp.; and Executive Vice
President, ING Capital Corporation, LLC and its
affiliates (May 1998 to June 2000) and Senior
Vice President, ING Capital Corporation, LLC
and its affiliates (April 1995 to April 1998).
Michael J. Roland Executive Vice February 2002 - Executive Vice President, Chief Financial
7337 E. Doubletree Ranch Rd. President and Assistant Present Officer and Treasurer of ING Funds Services,
Scottsdale, AZ 85258 Secretary LLC, ING Funds Distributor, LLC, ING
Born: 1958 Advisors, Inc., ING Investments, LLC
Principal Financial January 2000 - (December 2001 to present), Lexington
Officer Present Funds Distributor, Inc., Express America T.C.
Inc. and EAMC Liquidation Corp. (since
Senior Vice President January 2000 - December 2001). Formerly, Executive Vice
February 2002 President, Chief Financial Officer and
Treasurer of ING Quantitative Management, Inc.
(December 2001 to October 2002); Senior Vice
President, ING Funds Services, LLC, ING
Investments, LLC, and ING Funds Distributor,
LLC (June 1998 to December 2001) and Chief
Financial Officer of Endeavor Group (April 1997
to June 1998).
</Table>
50
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
Officers:
Stanley D. Vyner Executive Vice April 2000 - Executive Vice President of ING Advisors,
7337 E. Doubletree Ranch Rd. President Present Inc. and ING Investments, LLC (July 2000
Scottsdale, Arizona 85258 to present) and Chief Investment Officer of
Born: 1950 the International Portfolios, ING
Investments, LLC (July 1996 to present).
Formerly, President and Chief Executive Officer
of ING Investments, LLC (August 1996 to August
2000).
Robert S. Naka Senior Vice President January 2000 - Senior Vice President and Assistant Secretary
7337 E. Doubletree Ranch Rd. and Assistant Secretary Present of ING Funds Services, LLC, ING Funds
Scottsdale, AZ 85258 Distributor, LLC, ING Advisors, Inc., ING
Born: 1963 Investments, LLC (October 2001 to present)
and Lexington Funds Distributor, Inc. (since
December 2001). Formerly, Senior Vice President
and Assistant Secretary for ING Quantitative
Management, Inc. (October 2001 to October
2002); Vice President, ING Investments, LLC
(April 1997 to October 1999), ING Funds
Services, LLC (February 1997 to August 1999)
and Assistant Vice President, ING Funds
Services, LLC (August 1995 to February 1997).
Kimberly A. Anderson Senior Vice President November 2003 - Vice President and Assistant Secretary of ING
7337 E. Doubletree Ranch Rd. Present Funds Services, LLC, ING Funds Distributor,
Scottsdale, AZ 85258 LLC, ING Advisors, Inc., ING Investments,
Born: 1964 Vice President February 2001 - LLC (since October 2001) and Lexington
November 2003 Funds Distributor, Inc. (since December
2001). Formerly, Vice President for ING
Secretary February 2001 - Quantitative Management, Inc. (October
August 2003 2001 to October 2002); Assistant Vice
President of ING Funds Services, LLC
Assistant Vice President January 2000 - (November 1999 to January 2001) and has held
and Assistant Secretary February 2001 various other positions with ING Funds
Services, LLC for more than the last five
years.
Robyn L. Ichilov Vice President and April 2000 - Vice President of ING Funds Services, LLC
7337 E. Doubletree Ranch Rd. Treasurer Present (since October 2001) and ING Investments,
Scottsdale, AZ 85258 LLC (since August 1997); Accounting
Born: 1967 Manager, ING Investments, LLC (since
November 1995).
J. David Greenwald Vice President August 2003 - Vice President of Mutual Fund Compliance
7337 E. Doubletree Ranch Rd. Present of ING Funds Services, LLC (May 2003 -
Scottsdale, AZ 85258 Present). Formerly Assistant Treasurer and
Born: 1957 Director of Mutual Fund Compliance and
Operations of American Skandia, A Prudential
Financial Company (October 1996 - May 2003).
</Table>
51
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
<Table>
<Caption>
PRINCIPAL
TERM OF OFFICE OCCUPATION(S)
NAME, ADDRESS POSITION(S) AND LENGTH OF DURING THE
AND AGE HELD WITH THE TRUST TIME SERVED(1) PAST FIVE YEARS
------- ------------------- -------------- ---------------
Officers:
Lauren D. Bensinger Vice President February 2003 - Vice President and Chief Compliance Officer,
7337 E. Doubletree Ranch Rd. Present ING Funds Distributor, LLC. (July 1995 -
Scottsdale, Arizona 85258 Present); Vice President (February 1996 -
Born: 1954 Present) and Chief Compliance Officer
(October 2001 - Present) ING Investments, LLC;
Vice President and Chief Compliance Officer,
ING Advisors, Inc. (July 2000 - Present), Vice
President and Chief Compliance Officer, ING
Quantitative Management, Inc. (July 2000 -
September 2002), and Vice President, ING Fund
Services, LLC (July 1995 - Present).
Todd Modic Vice President August 2003 - Vice-President of Financial Reporting Fund
7337 E. Doubletree Ranch Rd. Present Accounting of ING Funds Services, LLC
Scottsdale, AZ 85258 (September 2002 to present). Director of
Born: 1967 Assistant Vice President August 2001 - Financial Reporting of ING Investments,
August 2003 LLC (March 2001 to September 2002). Director of
Financial Reporting, Axient Communications,
Inc. (May 2000 to January 2001) and Director of
Finance, Rural/Metro Corporation (March 1995 to
May 2000).
Huey P. Falgout, Jr. Secretary August 2003 - Counsel, ING U.S. Financial Services
7337 E. Doubletree Ranch Rd. Present (November 2002 - Present). Formerly,
Scottsdale, AZ 85258 Associate General Counsel of AIG American
Born: 1963 General (January 1999 - November 2002)
and Associate General Counsel of Van
Kampen, Inc. (April 1992 - January 1999).
Susan P. Kinens Assistant Vice President February 2003 - Assistant Vice President and Assistant
7337 E. Doubletree Ranch Rd. and Assistant Secretary Present Secretary, ING Funds Services, LLC Secretary
Scottsdale, AZ 85258 (December 2002 - Present); and has held
Born: 1976 various other positions with ING Funds
Services, LLC for the last five years.
Maria M. Anderson Assistant Vice President August 2001 - Assistant Vice President of ING Funds
7337 E. Doubletree Ranch Rd. Present Services, LLC (since October 2001).
Scottsdale, AZ 85258 Formerly, Manager of Fund Accounting and
Born: 1958 Fund Compliance, ING Investments, LLC
(September 1999 to November 2001); Section
Manager of Fund Accounting, Stein Roe Mutual
Funds (July 1998 to August 1999); and Financial
Reporting Analyst, Stein Roe Mutual Funds
(August 1997 to July 1998).
Theresa Kelety Assistant Secretary August 2003 - Counsel, ING U.S. Financial Services
7337 E. Doubletree Ranch Rd. Present (April 2003 - Present). Formerly, Senior
Scottsdale, AZ 85258 Associate with Shearman & Sterling
Born: 1963 (February 2000 - April 2003) and Associate
with Sutherland Asbill & Brennan (1996 -
February 2000).
</Table>
(1) The officers hold office until the next annual meeting of the Trustees and
until their successors are duly elected and qualified.
52
<Page>
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
ADMINISTRATOR
ING Funds Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
1-800-334-3444
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
CUSTODIAN
Bank of New York
100 Colonial Center Parkway, Suite 300
Lake Mary, FL 32746
LEGAL COUNSEL
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, MA 02110
A prospectus containing more complete information regarding the Fund, including
charges and expenses, may be obtained by calling ING Variable Annuities'
Customer Service Desk at 1-800-366-0066. Please read the prospectus carefully
before you invest or send money. The Fund's proxy voting record will be
available without charge on or about August 31, 2004 on the Fund's website at
www.ingfunds.com and on the SEC's website at www.sec.gov.
[ING FUNDS LOGO] USLICOAR1203-021804
<Page>
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, Registrant had adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to the
Registrant's principal executive officer and principal financial officer. There
were no amendments to the Code during the period covered by the report. The
Registrant did not grant any waivers, including implicit waivers, from any
provisions of the Code during the period covered by this report. The code of
ethics is filed herewith pursuant to Item 10(a)(1), Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that David Putnam is an audit committee
financial expert, as defined in Item 3 of Form N-CSR. Mr. Putnam is
"independent" for purposes of Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES: The aggregate fees billed for each of the last two fiscal
years for professional services rendered by KPMG LLP ("KPMG"), the
principal accountant, for the audit of the registrant's annual financial
statements and for services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for
those fiscal years were $49,500 for the year ended December 31, 2003 and
$48,800 for the year ended December 31, 2002.
(b) AUDIT-RELATED FEES: The aggregate fees billed in each of the last two
fiscal years for assurance and related services by KPMG that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item.
None
(c) TAX FEES: The aggregate fees billed in each of the last two fiscal years
for professional services rendered by KPMG for tax compliance, tax
advice, and tax planning were $14,000 in the year ended December 31,
2003 and $22,200 in the year ended December 31, 2002. Such services
included review of excise distribution calculations (if applicable),
preparation of the Funds' federal, state and excise tax returns, tax
services related to mergers and routine consulting.
(d) ALL OTHER FEES: The aggregate fees billed in each of the last two fiscal
years for products and services provided by KPMG, other than the
services reported in paragraphs (a) through (c) of this Item.
None
(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
MODEL AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY
I. STATEMENT OF PRINCIPLES
Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee of the
Board of Directors or Trustees (the "Committee") of the ING Funds (each a
"Fund," collectively, the "Funds") set out under Paragraph I on EXHIBIT A to
this Audit and Non-Audit Services Pre-Approval Policy ("Policy") is responsible
for the oversight of the work of the Funds' independent auditors. As part of its
responsibilities, the Committee must pre-approve the audit and non-audit
services performed by the auditors in order to assure that the provision of
these services does not impair the auditors' independence from the Funds. The
Committee has adopted, and the Board has ratified, this Policy, which sets out
the procedures and conditions under which the services of the independent
auditors may be pre-approved.
Under Securities and Exchange Commission ("SEC") rules promulgated in accordance
with the Act, the Funds' may establish two different approaches to pre-approving
audit and non-audit services. The Committee may approve services without
consideration of specific case-by-case services ("general pre-approval") or it
may pre-approve specific services ("specific pre-approval"). The Committee
believes that the combination of these approaches contemplated in this Policy
results in an effective and efficient method for pre-approving audit and
non-audit services to be performed by the Funds' independent auditors. Under
this Policy, services that are not of a type that may receive general
pre-approval require specific pre-approval by the Committee. Any proposed
services that exceed pre-approved cost levels or budgeted amounts will also
require the Committee's specific pre-approval.
For both types of approval, the Committee considers whether the subject services
are consistent with the SEC's rules on auditor independence and that such
services are compatible with maintaining the auditors independence. The
Committee also considers whether a particular audit firm is in the best position
to provide effective and efficient services to the Funds. Reasons that the
auditors are in the best position include the auditors' familiarity with the
Funds' business, personnel, culture, accounting systems, risk profile, and other
factors, and whether the services will enhance the Funds' ability to manage and
control risk or improve audit quality. Such factors will be considered as a
whole, with no one factor being determinative.
The appendices attached to this Policy describe the audit, audit-related,
tax-related, and other services that have the Committee's general
pre-approval. For any service that has been approved through general
pre-approval, the general pre-approval will remain in place for a period 12
months from the date of pre-approval, unless the Committee determines that a
different period is appropriate. The Committee will annually review and
pre-approve the services that may be provided by the independent auditors
without specific pre-approval. The Committee will revise the list of services
subject to general pre-approval as appropriate. This Policy does not serve as
a delegation to Fund management of the Committee's duty to pre-approve
services performed by the Funds' independent auditors.
II. AUDIT SERVICES
The annual audit services engagement terms and fees are subject to the
Committee's specific pre-approval. Audit services are those services that are
normally provided by auditors in connection with statutory and regulatory
filings or engagements or those that generally only independent auditors can
reasonably provide. They include the Funds' annual financial statement audit and
procedures that the independent auditors must perform in order to form an
opinion on the Funds' financial statements (E.G., information systems and
procedural reviews and testing). The Committee will monitor the audit services
engagement and approve any changes in terms, conditions or fees deemed by the
Committee to be necessary or appropriate.
The Committee may grant general pre-approval to other audit services, such as
statutory audits and services associated with SEC registration statements,
periodic reports and other documents filed with the SEC or issued in connection
with securities offerings.
The Committee has pre-approved the audit services listed on Appendix A. The
Committee must specifically approve all audit services not listed on Appendix A.
III. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or the review of the Funds' financial
statements or are traditionally performed by the independent auditors. The
Committee believes that the provision of audit-related services will not impair
the independent auditors' independence, and therefore may grant pre-approval to
audit-related services. Audit-related services include accounting consultations
related to accounting, financial reporting or disclosure matters not classified
as "audit services;" assistance with understanding and implementing new
accounting and financial reporting guidance from rulemaking authorities;
agreed-upon or expanded audit procedures relating to accounting and/or billing
records required to respond to or comply with financial, accounting or
regulatory reporting matters; and assistance with internal control reporting
requirements under Form N-SAR or Form N-CSR.
The Committee has pre-approved the audit-related services listed on Appendix B.
The Committee must specifically approve all audit-related services not listed on
Appendix B.
IV. TAX SERVICES
The Committee believes the independent auditors can provide tax services to
the Funds, including tax compliance, tax planning, and tax advice, without
compromising the auditors' independence. Therefore, the Committee may grant
general pre-approval with respect to tax services historically provided by
the Funds' independent auditors that do not, in the Committee's view, impair
auditor independence and that are consistent with the SEC's rules on auditor
independence.
The Committee will not grant pre-approval if the independent auditors initially
recommends a transaction the sole business purpose of which is tax avoidance and
the tax treatment of which may not be supported in the Internal Revenue Code and
related regulations. The Committee may consult outside counsel to determine that
tax planning and reporting positions are consistent with this Policy.
The Committee has pre-approved the tax-related services listed on Appendix C.
The Committee must specifically approve all tax-related services not listed on
Appendix C.
V. OTHER SERVICES
The Committee believes it may grant approval of non-audit services that are
permissible services for independent auditors to a Fund. The Committee has
determined to grant general pre-approval to other services that it believes are
routine and recurring, do not impair auditor independence, and are consistent
with SEC rules on auditor independence.
The Committee has pre-approved the non-audit services listed on Appendix D. The
Committee must specifically approve all non-audit services not listed on
Appendix D.
A list of the SEC's prohibited non-audit services is attached to this Policy as
Appendix E. The SEC's rules and relevant guidance should be consulted to
determine the precise definitions of these impermissible services and the
applicability of exceptions to certain of the SEC's prohibitions.
VI. PRE-APPROVAL OF FEE LEVELS AND BUDGETED AMOUNTS
The Committee will annually establish pre-approval fee levels or budgeted
amounts for audit, audit-related, tax and non-audit services to be provided to
the Funds by the independent auditors. Any proposed services exceeding these
levels or amounts require the Committee's specific pre-approval. The Committee
considers fees for audit and non-audit services when deciding whether to
pre-approve services. The Committee may determine, for a pre-approval period of
12 months, the appropriate ratio between the total amount of fees for the Fund's
audit, audit-related, and tax services (including fees for services provided to
Fund affiliates that are subject to pre-approval), and the total amount of fees
for certain permissible non-audit services for the Fund classified as other
services (including any such services provided to Fund affiliates that are
subject to pre-approval).
VII. PROCEDURES
Requests or applications for services to be provided by the independent auditors
will be submitted to management. If management determines that the services do
not fall within those services generally pre-approved by the Committee and set
out in the appendices to these procedures, management will submit the services
to the Committee or its delagee. Any such submission will include a detailed
description of the services to be rendered. Notwithstanding this paragraph, the
Committee will, on an annual basis, receive from the independent auditors a list
of services provided by the auditors during the prior 12-month period.
VIII. DELEGATION
The Committee may delegate pre-approval authority to one or more of the
Committee's members. Any member or members to whom such pre-approval authority
is delegated must report any pre-approval decisions, including any pre-approved
services, to the Committee at its next scheduled meeting. The Committee will
identify any member to whom pre-approval authority is delegated in writing. The
member will retain such authority for a period of 12 months from the date of
pre-approval unless the Committee determines that a different period is
appropriate. The period of delegated authority may be terminated by the
Committee or at the option of the member.
IX. ADDITIONAL REQUIREMENTS
The Committee will take any measures the Committee deems necessary or
appropriate to oversee the work of the independent auditors and to assure the
auditors' independence from the Funds. This may include reviewing a formal
written statement from the independent auditors delineating all relationships
between the auditors and the Funds, consistent with Independence Standards Board
No. 1, and discussing with the auditors their methods and procedures for
ensuring independence.
Appendix A
Pre-Approved Audit Services for the Pre-Approval Period June 1, 2003 through May
31, 2004
Service
<Table>
<Caption>
THE FUND(S) FEE RANGE
- --------------------------------------------------------------- --------------- ------------------
Statutory audits or financial audits (including tax services /X/ As presented to
associated with non-audit services) Audit Committee
Services associated with SEC registration statements, periodic /X/ Not to exceed
reports and other documents filed with the SEC or other $8,500 per filing
documents issued in connection with securities offerings
(E.G., consents), and assistance in responding to SEC comment
letters.
Consultations by Fund management with respect to accounting or /X/ Not to exceed
disclosure treatment of transactions or events and/or the $8,000 during
actual or potential effect of final or proposed rules, the Pre-Approval
standards or interpretations by the SEC, Financial Accounting Period
Standards Board, or other regulatory or standard setting
bodies.
</Table>
Appendix B
Pre-Approved Audit-Related Services for the Pre-Approval Period June 1, 2003
through May 31, 2004
Service
<Table>
<Caption>
FUND
THE FUND(S) AFFILIATES FEE RANGE
- ---------------------------------------------- --------------- ----------------- -------------------
Services related to Fund mergers /X/ /X/ Not to exceed
$10,000 per merger
Consultations by Fund management with /X/ Not to exceed
respect to accounting or disclosure $5,000 per
treatment of transactions or events and/or occurrence during
the actual or potential effect of final or the Pre-Approval
proposed rules, standards or interpretations Period
by the SEC, Financial Accounting Standards
Board, or other regulatory or standard
setting bodies. [NOTE: Under SEC rules
some consultations may be "audit" services
and others may be "audit-related" services.]
Review of the Funds' semi-annual financial /X/ Not to exceed
statements $5,000 for each set
of financial
statements
Reports to regulatory or government agencies /X/ Up to $5,000 per
related to the annual engagement occurrence during
the Pre-Approval
Period
Regulatory compliance assistance /X/ /X/ Not to exceed
$5,000 per quarter
Training courses /X/ Not to exceed
$2,000 per course
For Prime Rate Trust, agreed upon procedures /X/ Not to exceed
for quarterly reports to rating agencies $9,000 per quarter
</Table>
Appendix C
Pre-Approved Tax Services for the Pre-Approval Period June 1, 2003 through
May 31, 2004
Service
<Table>
<Caption>
FUND
THE FUND(S) AFFILIATES FEE RANGE
- ---------------------------------------------- --------------- ----------------- -------------------
Preparation of federal and state income tax /X/ Not to exceed
returns and federal excise tax returns for the $6,000 per Fund
Funds including assistance and review with during the
excise tax distributions. Pre-Approval
Period
Review of IRC Sections 851(b) and 817(h) /X/ Not to exceed
diversification testing on a real-time basis $2,000 per Fund
during the
Pre-Approval
Period
Review of year-end reporting for 1099's /X/ Not to exceed
$800 per Fund
during the
Pre-Approval
Period
Tax assistance and advice regarding statutory, /X/ /X/ Not to exceed
regulatory or administrative developments $5,000 for the
Funds or for the
Funds' investment
adviser during
the Pre-Approval
Period
International tax services (e.g., Taiwan and /X/ Not to exceed
India) $5,000 per Fund
during the
Pre-Approval
Period
Tax training courses /X/ Not to exceed
$2,000 per course
during the
Pre-Approval
Period
</Table>
Service
<Table>
<Caption>
FUND
THE FUND(S) AFFILIATES FEE RANGE
- ---------------------------------------------- --------------- ----------------- -------------------
Tax services associated with Fund mergers /X/ Not to exceed
$8,000 per merger
during the
Pre-Approval
Period
Tax services related to the preparation of annual /X/ Not to exceed
PFIC statements and annual Form 5471(Controlled $18,000 during
Foreign Corporation) for structured finance the Pre-Approval
vehicles Period
Tax services related to CLOs and CBOs /X/ Not to exceed
$15,000 per
quarter
</Table>
Appendix D
Pre-Approved Other Services for the Pre-Approval Period June 1, 2003 through May
31, 2004
Service
<Table>
<Caption>
THE FUND(S) FUND AFFILIATES FEE RANGE
- ---------------------------------------------- --------------- ----------------- -------------------
Agreed-upon procedures for Class B share /X/ Not to exceed
12b-1 programs $25,000 during
the
Pre-Approval
Period
AIMR assistance, and/or verification of /X/ Not to exceed
composites $25,000 during
the
Pre-Approval
Period
Security counts performed pursuant to Rule /X/ Not to exceed
17f-2 of the 1940 Act (I.E., counts for $5,000 per Fund
Funds holding securities with affiliated during the
sub-custodians) Pre-Approval
Period
</Table>
Appendix E
Prohibited Non-Audit Services
Dated: 200X
- Bookkeeping or other services related to the accounting records or
financial statements of the Funds
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser, or investment banking services
- Legal services
- Expert services unrelated to the audit
- Any other service that the Public Company Accounting Oversight Board
determines, by regulation, is impermissible
(e)(2) PERCENTAGE OF SERVICES REFERRED TO IN 4(b) - (4)(d) THAT WERE APPROVED
BY THE AUDIT COMMITTEE
100% of the services were approved by the audit committee.
<Page>
(f) PERCENTAGE OF HOURS EXPENDED ATTRIBUTABLE TO WORK PERFORMED BY OTHER
THAN FULL TIME EMPLOYEES OF KPMG IF GREATER THAN 50%.
Not applicable.
(g) NON-AUDIT FEES: The non-audit fees billed by the registrant's accountant
for services rendered to the registrant, and rendered to the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of the
registrant were $354,873 for the year ended December 31, 2003 and
$392,968 for the year ended December 31, 2002.
(h) PRINCIPAL ACCOUNTANTS INDEPENDENCE: The Registrant's Audit Committee has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser and any entity
controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the registrant that were not
pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is
compatible with maintaining KPMG's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. RESERVED.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. RESERVED.
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on our evaluation conducted within 90 days of the filing date,
hereof, the design and operation of the registrant's disclosure controls
and procedures are effective to ensure that material information
relating to the registrant is made known to the certifying officers by
others within the appropriate entities, particularly during the period
in which Forms N-CSR are being prepared, and the registrant's disclosure
controls and procedures allow timely preparation and review of the
information for the registrant's Form N-CSR and the officer
certifications of such Form N-CSR.
(b) There were no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2) is attached hereto as EX-99.CERT.
(b) The officer certifications required by Section 906 of the Sarbanes-Oxley
Act of 2002 are attached hereto as EX-99.906CERT
<Page>
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): USLICO SERIES FUND
By /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date March 5, 2004
- ------------------
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 /s/ James M. Hennessy
---------------------
James M. Hennessy
President and Chief Executive Officer
Date March 5, 2004
- ------------------
By /s/ Michael J. Roland
---------------------
Michael J. Roland
Executive Vice President and Chief Financial Officer
Date March 5, 2004
- ------------------