<PAGE>
DISCOVERY SELECT-SM-
-----------------------------------------
VARIABLE ANNUITY
SEMIANNUAL REPORT TO CONTRACT OWNERS
JUNE 30, 1997
[GRAPHIC]
AS INDIVIDUAL AS YOU
Prudential -- AIM Advisors -- Janus -- MFS -- OpCap Advisors
-- T. Rowe Price -- Warburg Pincus
[LOGO] PRUDENTIAL
DISCOVERY SELECT-SM- Variable Annuity is issued by Pruco Life Insurance Company,
except in New York where the issuer is Pruco Life Insurance Company of New
Jersey. DISCOVERY SELECT is offered through Pruco Securities Corporation and
Prudential Securities, Inc. All are subsidiaries of The Prudential Insurance
Company of America.
<PAGE>
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This Semiannual Report includes the financial statements of the variable
investment options in the DISCOVERY SELECT-SM- Variable Annuity. It does
not include the financial statements for your separate account. DISCOVERY SELECT
Variable Annuity was first offered to the public on October 7, 1996.
- --------------------------------------------------------------------------------
IMPORTANT NOTE
This Report may be used with the public only when preceded or accompanied by
current prospectuses for the DISCOVERY SELECT-SM- Variable Annuity and the
current Quarterly Performance Updates. The Quarterly Performance Updates reflect
the reinvestment of all dividends and capital gains, and the deduction of
investment management fees, expenses and product-related insurance charges. It
also provides returns that are net of all contract charges, including applicable
surrender or withdrawal charges.
The prospectus contains complete details on risks, charges and expenses for the
DISCOVERY SELECT Variable Annuity and the Variable Investment Options. Read the
prospectuses carefully prior to investing or sending money. Annuities have
limitations. For costs and complete details of coverage, call your Prudential
Securities Financial Advisor or Pruco Securities Registered Representative.
All data from the outside companies was provided to Prudential from the fund
directly. Prudential does not guarantee the accuracy or completeness thereof.
DISCOVERY SELECT-SM- Variable Annuity is issued by Pruco Life Insurance Company
(in New York, issued by Pruco Life Insurance Company of New Jersey) and is
offered through Prudential Securities Inc. and Pruco Securities Corp. All are
subsidiaries of The Prudential Insurance Company of America, 751 Broad Street,
Newark, NJ 07102-3777.
<PAGE>
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TABLE OF CONTENTS
LETTER TO CONTRACT OWNERS. . . . . . . . . . . . . . . . . . . . . . . . 2
1997 Six Month Market Review
1997 Prudential's Outlook
THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS. . . . . . . . . . . . . . . 10
Money Market Portfolio
Diversified Bond Portfolio
High Yield Bond Portfolio
Stock Index Portfolio
Equity Income Portfolio
Equity Portfolio
Prudential Jennison Portfolio
Global Portfolio
THE PRUDENTIAL SERIES FUND, INC. . . . . . . . . . . . . . . . . . . . . 26
Financial Statements
Schedule of Investments
Notes to Financial Statements
Financial Highlights
Board of Directors
AIM MANAGEMENT GROUP, INC. . . . . . . . . . . . . . . . . . . . . . . . 73
AIM V.I. Growth and Income Fund
AIM V.I. Value
JANUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Janus Aspen Series - Growth Portfolio
Janus Aspen Series - International Growth Portfolio
MFS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
MFS Emerging Growth Series
MFS Research Series
OPCAP ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
OCC Accumulation Trust - Managed Portfolio
OCC Accumulation Trust - Small Cap Portfolio
T. ROWE PRICE ASSOCIATES, INC. . . . . . . . . . . . . . . . . . . . . . 183
Equity Income Portfolio
International Stock Portfolio
WARBURG, PINCUS COUNSELLORS, INC.. . . . . . . . . . . . . . . . . . . . 215
Warburg Pincus Trust Post-Venture Capital Portfolio
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GREAT NEWS!
The following enhancements have been added to the DISCOVERY SELECT-SM-
Variable Annuity contract as of May 1, 1997:
- - The Automated Withdrawal minimum is now $250, down from $500.(1)
- - The Charge-Free Withdrawal amount in each year has been changed to equal
10% of the total gross purchase payments (as opposed to net), plus any
charge-free amount still available from the preceding contract year.(1)
Please call your Pruco Securities Registered Representative or your Prudential
Securities Financial Advisor if you have any questions regarding these product
enhancements.
(1) WITHDRAWALS OF EARNINGS ARE TAXABLE AND, IF MADE PRIOR TO AGE 59 1/2, MAY BE
SUBJECT TO A 10% PENALTY TAX.
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997
LETTER TO CONTRACT OWNERS
[PHOTO]
E. MICHAEL CAULFIELD
CHIEF EXECUTIVE OFFICER
PRUDENTIAL INVESTMENTS
DEAR CONTRACT OWNER:
We are pleased to provide our Semiannual Report to you on the investment
performance of the Portfolios that underlie your DISCOVERY SELECT-SM- Variable
Annuity contract.
Once again, the news is outstanding. In the first half of this year, stock
prices surged nearly 21%, about two times the typical average in a full year. In
fact, the Dow Jones Industrial Average broke through 8000 on July 16, two weeks
after the end of the first half. This certainly was not what most Wall Street
experts had predicted.
Bonds, too, performed favorably in the first half of 1997. Bonds returned 3.1%
over the last six months, as measured by the Lehman Brothers Aggregate Index.
Corporate high yield bonds in general were the strongest, returning 5.8% for the
period.
What led to such excellent performance? Conditions were idyllic for most
investors in the first half -- economic growth was strong and interest rates
were relatively stable, so corporate profits rose. Unemployment fell to a
23-year low and consumer confidence hit a 28-year high.
IT'S LONG-TERM PERFORMANCE THAT COUNTS.
Although in this report we're focusing primarily on performance for the first
half of this year, remember that it's long-term performance that counts. Review
your Portfolio's performance so far in 1997, but also be sure to note its
longer-term record. You'll note that over the past three, five and 10 years many
of our Portfolios have delivered excellent performance, both on an absolute
basis and in comparison with funds having similar objectives.
Our goal is to achieve this kind of above-average investment performance over
time. Such consistency is important, because most people buy variable annuities
to finance long-term goals. So when you consider how to allocate either new or
existing assets among these Portfolios, please look closely at their performance
over five and 10 years as well.
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"Conditions were idyllic for most investors in the first half --
economic growth was strong and interest rates were relatively stable, so
corporate profits rose."
2
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COULD THE THIRD TIME BE A CHARM?
When the U.S. stock market rose 37% in 1995, we doubted it would be repeated any
time soon. Then stocks advanced 23% in 1996. We thought it unlikely that this
kind of performance would be duplicated again. And now, through the first half
of 1997, stocks are already up nearly 21%.
It's clear that we -- and, we venture, most other investors -- cannot predict
the stock market. Nevertheless, it's even more important now to remember that
the U.S. stock market now sits at valuations beyond all historic boundaries.
Now, more than ever, your asset allocations should be based on reasonable
expectations for those asset classes, not the most recent performance. What's
reasonable? Well, over the last 70 years the average annual return of U.S.
stocks is 10.7% as measured by the Standard & Poor's 500 Composite Stock Price
Index.
With this in mind, you may want to reevaluate how you allocate your money among
the DISCOVERY SELECT investment options. While stocks ought to remain the
investment of choice for most investors looking for long-term wealth
accumulation, now might be a good time to consider diversifying a portion of
your holdings. If you wish, contact your Prudential Securities Financial
Advisor/Pruco Securities Registered Representative for assistance in structuring
a program to help meet your needs.
All of us at Prudential thank you for your business and look forward to helping
you plan for your future financial security.
/s/ E. Michael Caulfield
E. Michael Caulfield
Chief Executive Officer
Prudential Investments
July 23, 1997
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IMPORTANT NOTE
The rates of return quoted on the following pages reflect the deduction of
investment management fees and investment-related expenses, but not product
charges. They reflect the reinvestment of dividend and capital gains
distributions. They are not an estimate or a guarantee of future performance.
Contract unit values increase or decrease based on the performance of the
Portfolio and, when redeemed, may be worth more or less than their original
cost. Changes in contract values depend not only on the investment performance
of the Portfolio but also on the insurance and administrative charges,
applicable sales charges, and the mortality and expense risk charge applicable
under the contract. These contract charges effectively reduce the dollar amount
of any net gains and increase the dollar amount of any net losses.
Your Prudential Securities Financial Advisor/Pruco Securities Registered
Representative can provide you with actual rates of return for your DISCOVERY
SELECT-SM- Variable Annuity and show you a personalized illustration of how
charges affect the returns you experience.
3
<PAGE>
1997 MARKET REVIEW
U.S. STOCKS
THE DOW: 6600, 6800, 7000, 7200, 7400, 7600 . . .
After rising 37% in 1995 and 23% in 1996, stock prices rose another 21% in the
first six months of 1997. This stunning performance prompted analysts and
economists alike to reach for superlatives.
The wonder was the economy. The current U.S. economic expansion is now in its
seventh year, the third longest in history. Unemployment is at its lowest since
1973. Inflation seems like a distant memory. All of this means higher corporate
revenues and stable corporate borrowing costs -- and as a result, higher
corporate profits. It's a nearly idyllic investment environment.
To be sure, the stock market did not rocket straight up in the first half of the
year. Stocks actually fell nearly 10% in the spring, amid short-lived fears of
higher interest rates. Back in March, the Federal Reserve increased short-term
interest rates (by a quarter of a percentage point), for the first time in two
years. The nation's central bankers feared that first-quarter economic growth
would set off a new round of inflation. Stocks recovered in April amid evidence
the growth rate was moderating.
LARGE STOCKS WERE THE LEADERS, AGAIN.
In the first half of the year, the biggest stocks were the best performers. The
five biggest companies in the S&P 500 gained 34% in the first half of the year,
while the top 25 companies gained 28%. Of the largest companies, the drug stocks
seemed to do the best as a group, with Warner Lambert up 67%, Eli Lilly rising
51%, Bristol-Myers Squibb climbing 49% and Pfizer advancing 45% during the
period.
Small company stocks trailed larger companies, as they have for several years
now, rising 10% in the first half of 1997 as measured by the Russell 2000*.
(These companies are generally defined as those whose outstanding stock is
valued at less than $1 billion.) Still, performance of these stocks has been
improving in recent months. Consumer growth stocks (powered by the
pharmaceutical companies) led the market, followed by financial and consumer
cyclical stocks (auto, retail and housing stocks whose fortunes tend to mirror
the ups and downs of the economy).
HOW THE MARKETS COMPARED.(1)
[GRAPH]
Average Return Over
Year-to-Date 1997 Past 20 Years (Annualized)
----------------- --------------------------
Money Market 2.5% 7.7%
Bonds 3.1 9.5
Foreign Stocks 15.6 15.1
U.S. Stocks 20.6 15.9
THIS CHART COMPARES THE 6-MONTH RETURN AS OF 6/30/97 FOR VARIOUS CATEGORIES OF
INVESTMENTS WITH THE AVERAGE ANNUAL TOTAL RETURN OVER 20 YEARS FOR THE SAME
INVESTMENT. AS YOU CAN SEE, STOCK AND BOND MARKET RETURNS CAN VARY CONSIDERABLY
FROM YEAR TO YEAR. UNLIKE STOCKS, BONDS GENERALLY OFFER A FIXED RATE OF RETURN
AND PRINCIPAL IF HELD TO MATURITY. AN INVESTMENT'S PAST PERFORMANCE SHOULD NEVER
BE USED TO PREDICT FUTURE RESULTS. THERE ARE DIFFERENT RISKS ASSOCIATED WITH
EACH INVESTMENT SECTOR, WHICH SHOULD BE CAREFULLY CONSIDERED BEFORE INVESTING.
(1) SOURCE: PRUDENTIAL. FOR PURPOSES OF COMPARISON ONLY. U.S. MONEY MARKETS AS
MEASURED BY LIPPER MONEY MARKET AVERAGE. BONDS AS MEASURED BY THE LEHMAN
BROTHERS AGGREGATE INDEX. FOREIGN STOCKS AS MEASURED BY THE MORGAN STANLEY
CAPITAL INTERNATIONAL WORLD INDEX. U.S. STOCKS AS MEASURED BY THE S&P 500 INDEX.
4
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U.S. STOCKS: CONSUMER GROWTH TOPS.
Y-T-D
6/30/97
-------
Consumer Growth 24.5%
Finance 23.6%
Consumer Cyclical 21.1%
Technology 21.0%
Industrials 19.4%
Energy 18.6%
Utilities 7.8%
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SOURCE: PRUDENTIAL.
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LARGE STOCKS OUTPERFORMED SMALL STOCKS.
Y-T-D 20-YEAR
6/30/97 AVERAGE
------- -------
S&P 500* 20.6% 15.9%
NASDAQ* 11.7% 14.3%
Russell 2000* 10.2% 15.7%
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* THE STANDARD & POOR'S 500, NASDAQ, AND RUSSELL 2000 ARE UNMANAGED INDICES THAT
ARE CONSIDERED TO BE GENERALLY REPRESENTATIVE OF U.S. STOCK MARKETS. INVESTORS
CANNOT INVEST DIRECTLY IN INDICES OR MARKET AVERAGES. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
CONSUMER GROWTH stocks rose almost 25% during the first half of 1997, powered
primarily by drug companies, beverages and household products. As stock prices
rose higher and higher, investors seemed to favor the very largest companies
that produce the most steadily predictable earnings and therefore stocks that
can be traded most easily. Widely owned Coca-Cola rose 30%. Another household
name, Gillette, rose 22%. Drug companies also did well, as previously
mentioned.
FINANCIAL stocks climbed nearly 24% for the period. Mergers and acquisitions
among financial companies continued to dominate (such as Morgan Stanley and Dean
Witter), helping to fuel interest in this area. A feeling that the Federal
Reserve would not raise short-term interest rates any further helped power bank
stocks higher.
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THE DOW IN THE PAST TWELVE MONTHS.
[GRAPH]
Jul 5473.06
5679.83
5681.31
5689.45
5722.74
Aug 5616.21
5659.86
5838.52
5888.46
Sep 5872.92
5992.86
5969.38
6094.23
Oct 6007.02
6021.93
6219.82
6348.03
6471.76
Nov 6521.7
6381.94
6304.87
6484.4
Dec 6560.91
6544.09
6703.79
6833.1
6696.48
Jan 6813.09
6855.8
6988.96
6931.62
Feb 6877.74
7000.89
6935.46
6804.79
Mar 6740.59
6526.07
6391.69
6703.55
Apr 6738.87
7071.2
7169.53
7194.67
7345.91
May 7331.04
7435.78
7782.04
7796.51
Jun 7687.72
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WEEKLY CLOSE OF THE DOW JONES INDUSTRIAL AVERAGE FOR THE PAST TWELVE MONTHS.
THE DOW MARCHED FROM 5500 TO 7000 IN 8 MONTHS.
IN MARCH AND APRIL, FEARS OF HIGHER INTEREST RATES SHOOK THE MARKET.
THE DOW ROSE 20% IN 11 WEEKS, CLOSING AT 7688.
CONSUMER CYCLICAL stocks ranked third, rising 21% during the period, as the U.S.
economy grew at 4.9% in the first quarter, and unemployment was at its lowest
since 1973. Retailers led, powered by major gainers Nordstrom, up 39%; Home
Depot, advancing 38%; and Dayton Hudson, climbing 37%.
5
<PAGE>
1997 MARKET REVIEW CONTINUED
U.S. BONDS
INTEREST RATES: SOMEWHAT STABLE.
Long-term interest rates rose, then fell, in the first half of the year, ending
slightly higher at midyear. The Federal Reserve raised short-term interest rates
for the first time in two years, lifting the overnight bank lending rate by a
quarter of a percentage point in March to 5.5% as a precaution against
too-strong economic growth. In response, long-term interest rates at first rose.
Rates later eased as inflation worries subsided, along with concerns of further
action by the Federal Reserve.
Bonds returned 3.1% over the first six months of 1997 as measured by the Lehman
Brothers Aggregate Index. The yield on the bellwether 30-year U.S. Treasury bond
rose to 6.78% on June 30, 1997, from 6.64% on December 31, 1996. Short-term
rates, as measured by the three-month U.S. Treasury bill, actually fell
slightly, to 5.17% on June 30, 1997.
Corporate high yield bonds in general were the strongest, returning 5.8% for the
period. High yield corporate bonds fared well on solid economic growth, rising
corporate profits, minimal defaults and powerful demand as a broadening base of
institutional investors seeking higher yields became interested in this sector.
A large number of new issues were sold in the first half -- $55 billion -- only
$8 billion less than in all of last year. Better-rated high yield securities, as
a group, outperformed those with poorer credit ratings.
Solid economic growth, stable inflation and steady governments also helped
emerging markets' bonds to a strong first half. Argentina led all of Latin
America, rising 11% as financial stability in the region improved generally.
Brazil, Mexico and Venezuela followed, as reported by Morgan Stanley.
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30-YEAR U.S. TREASURY YIELDS.
[GRAPH]
Jul 6.97
Aug 7.12
Sep 6.92
Oct 6.64
Nov 6.35
Dec 6.64
Jan 6.79
Feb 6.8
Mar 7.1
Apr 6.96
May 6.91
Jun 6.78
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MONTHLY CLOSING YIELDS FOR THE PAST TWELVE MONTHS. SOURCE: LEHMAN BROTHERS, AS
OF 6/30/97.
YIELDS BOTTOMED AT 6.35% ON NOV. 29.
INFLATION FEARS DROVE YIELDS UP TO 7.17% ON APRIL 14.
SLOWER ECONOMIC GROWTH PUSHED YIELDS DOWN TO 6.78% ON JUNE 30.
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HIGH YIELD BONDS PERFORMED BEST.
High Yield Bonds 5.8%
Mortgage Bonds 3.9%
AGGREGATE INDEX 3.1%
Corporate Bonds 3.1%
Government Bonds 2.6%
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SOURCE: LEHMAN BROTHERS, AS OF 6/30/97.
6
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FOREIGN STOCKS
EUROPE STRONG; JAPAN AND PACIFIC REGION REBOUND.
Although stock markets in Europe and the Pacific couldn't match the
torrid performance of the U.S. market in the first half of 1997, European stocks
were strong and Pacific stock markets -- especially Japan, which represents
two-thirds of the region -- came alive in the second quarter.
In the Pacific, returns for the full first six months of the year were
comparatively subdued: Pacific stocks rose 7% and Japanese stocks climbed 9%.
But these returns masked a 24% gain by Japanese stocks for U.S. investors in the
second quarter, because the yen strengthened significantly against the U.S.
dollar.
LET'S DO EUROPE.
Europe was the best region outside the United States in the first six months (as
measured in dollars), as stocks of many more-efficient export-oriented companies
led markets higher. European stocks in general have benefited from the movement
toward monetary unity in 1999, which has forced governments to economize,
reducing interest rates. Export-oriented companies fared best, rising in the
second quarter.
JAPAN RISES.
A strengthening yen powered Japanese stocks to their highest levels since
December, igniting gains throughout the Pacific region. The U.S. dollar lost 12%
against the yen in just five weeks in May and June. This helped Japanese stocks
rise 24% for U.S. investors in the second quarter. But because Japanese stocks
had lost ground in the first quarter of 1997, they were ahead only 9% in U.S.
dollars for the first half of the year.
Hong Kong stocks also performed well, as investors overcame their fear of
turning over the British colony to China after more than 150 years.
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U.S. TOPS FOREIGN MARKETS.
Y-T-D
6/30/97
-------
MSCI World Index 15.6%
MSCI Europe Index 14.5%
MSCI EAFE Index 11.4%
MSCI Japan Index 9.2%
MSCI Pacific Index 7.3%
S&P 500 INDEX 20.6%
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SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS A WEIGHTED,
UNMANAGED INDEX OF PERFORMANCE OF 1,472 SECURITIES LISTED ON THE STOCK EXCHANGES
OF THE U.S., EUROPE, CANADA, AUSTRALIA, NEW ZEALAND AND THE FAR EAST. INVESTORS
CANNOT INVEST DIRECTLY IN AN INDEX.
MORGAN STANLEY COUNTRY INDICES [EUROPE, ASIA, FAR EAST (EAFE), PACIFIC AND
JAPAN] ARE UNMANAGED INDICES THAT INCLUDE THOSE STOCKS MAKING UP THE LARGEST
TWO-THIRDS OF EACH COUNTRY'S TOTAL STOCK MARKET CAPITALIZATION. THIS CHART IS
FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT INDICATIVE OF THE PAST, PRESENT OR
FUTURE PERFORMANCE OF ANY SPECIFIC INVESTMENT. INVESTORS CANNOT INVEST DIRECTLY
IN STOCK INDICES.
THE STANDARD & POOR'S 500 IS A WEIGHTED, UNMANAGED INDEX COMPRISED OF 500
STOCKS, WHICH PROVIDES A BROAD INDICATOR OF STOCK PRICE MOVEMENTS.
7
<PAGE>
1997 PRUDENTIAL'S OUTLOOK
THE ECONOMY.
Our economists at Prudential suspect that growth will remain relatively subdued
for the rest of the year. Economic growth slowed sharply in the second quarter.
They also expect inflation will remain benign, below 3%. As a result, the
Federal Reserve will likely refrain from raising short-term interest rates any
further this year, and the central bankers may ultimately lower rates by early
next year, our economists predict.
U.S. STOCKS: WHAT'S AFTER 8000?
Now that the Dow Jones Industrial Average has hurdled 8000, with some analysts
now predicting a Dow of 10,000, it's only natural to wonder how long all this
good news can continue. After all, stock prices have doubled in the last two and
a half years.
At these high price levels, stock selection is even more crucial. So, too, is
understanding the objective, strategy and risks of the portfolio in which your
contract values are invested. Some stocks now sell at very high prices --
particularly those of large, well-known companies. But other stocks remain
attractive. Some of our managers like industrial companies, real estate
investment trusts and securities brokerages, because they believe they have room
to appreciate. Others like insurance, paper and retailing, thinking they are
undervalued. Our growth stock managers who have done very well with the
pharmaceuticals, also think that technology is due for an upswing after hitting
what seemed like a bottom in April.
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ECONOMIC OUTLOOK.
Est.
1997
----
GDP 2.7%
Inflation 2.2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL ECONOMICS.
8
<PAGE>
BONDS: WE'RE SEARCHING FOR YIELD.
We suspect that prices in the bond market will remain relatively stable through
the rest of the year, depending on the relative weakness or strength that
investors see in the economy.
We are focusing now on finding bonds that provide more yield than U.S. Treasurys
while offering comparatively little additional risk.
We are particularly interested in crossover bonds -- those with split ratings of
investment grade (BBB) by one rating agency and just below investment grade (BB)
by another. Frequently, we can buy these bonds at more attractive prices than
bonds rated below investment grade (high yield bonds), because of the
uncertainty over their credit strength.
We are also interested in emerging markets. Relative stability in governments,
economic growth and low inflation made emerging markets' bonds the
best-performing bonds in the world in the first half of the year. We've added
Russian, South African, Panamanian and Polish bonds, among others, to our
portfolios.
FOREIGN STOCKS: LOOK FOR THE JAPANESE SURPRISE.
The Japanese stock market may be a pleasant surprise this year. We've
purchased stocks of domestically oriented Japanese companies that sell their
products and services within the country; they are more attractively priced than
export-oriented multinational companies.
In Europe, we see the opposite. We are invested in multinational stocks,
particularly those that are restructuring to increase efficiency. We believe
that the movement toward a common European currency will continue to constrain
economic growth rates within Europe, so we are most interested in companies
listed on European stock exchanges but that derive most of their revenues from
outside Europe.
In Hong Kong, we suspect that the new Chinese control will limit the escalation
of real estate prices. Since property-related stocks are about a third of the
market index, prices in general will have to struggle to move higher.
- --------------------------------------------------------------------------------
A REALITY CHECK.
Stock prices in general have nearly doubled in the last two and a half years.
We're quite pleased with the unusually high returns that stocks have provided
for our Contract Owners over the past few years, and we are certain that you
are, too. Those types of returns bring you closer to your goals of financial
security faster than you might have expected.
Since 1926, the U.S. stock market's average return has been 10.7%, as measured
by the S&P 500. Yet, in recent years, returns have been much higher, as the
chart below shows.
- --------------------------------------------------------------------------------
RETURNS OF THE U.S. STOCK MARKET.
Average
Annual
Return
-------
LAST 70 YEARS
1926-1996 10.7%
LAST TWO YEARS
1995 37.4%
1996 23.0%
LAST SIX MONTHS
1997 20.6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL.
As much as we would like this tremendous performance to continue year after
year, we know it cannot. It's simply the law of averages.
- --------------------------------------------------------------------------------
INVESTMENTS IN FOREIGN SECURITIES MAY BE SUBJECT TO RISKS NOT NORMALLY
ASSOCIATED WITH DOMESTIC STOCKS, INCLUDING CURRENCY FLUCTUATIONS AND THE IMPACT
OF SOCIAL, POLITICAL AND ECONOMIC CHANGE.
9
<PAGE>
PRUDENTIAL MONEY MARKET PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio got off to a solid start in 1997. On June 30, 1997, your
Portfolio's 7-day yield was 5.36%, up from 5.15% on December 31, 1996. Its
return of 2.61% for the first six months exceeded the 2.47% return of the
average money market fund tracked by Lipper Analytical Services.
Interest rates started to rise late in the first quarter when economic activity
accelerated. In March, the Federal Reserve increased the overnight bank lending
rate. Since then, yields have fallen amid signs of moderating U.S. economic
growth and a belief that the Federal Reserve will not raise interest rates again
for some time. Indeed, the central bank voted to hold rates steady at its
meetings on May 20 and July 2.
During this period of fluctuating interest rates, the Portfolio's performance
benefited from a decision to hold a mixture of very short term securities to
take advantage of rising interest rates and longer term money market securities
to lock in higher interest rates.
An investment in the Money Market Portfolio is neither insured nor guaranteed by
the U.S. government. There is no guarantee that the Portfolio will be able to
maintain a stable share value of $10.00.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO(1) 2.61% 5.30% 5.36% 4.46% 5.87%
- --------------------------------------------------------------------------------
LIPPER (VIP) MONEY MARKET AVG.(2) 2.47% 5.04% 5.06% 4.21% 5.59%
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO INCEPTION DATE: 5/13/83.
- --------------------------------------------------------------------------------
SHORT-TERM INTEREST RATES DURING THE PAST 12 MONTHS
[GRAPH]
Money Market Portfolio Average Money Market Fund
Jul 5.05 4.82
5.02 4.87
5.05 4.79
5.05 4.82
Aug 5.06 4.79
5.01 4.83
5.05 4.82
5.04 4.83
Sep 5.06 4.81
5.09 4.86
5.09 4.81
5.12 4.82
5.12 4.8
Oct 5.11 4.82
5.06 4.85
5.11 4.82
5.11 4.86
Nov 5.11 4.82
5.12 4.88
5.11 4.82
5.1 4.82
5.11 4.83
Dec 5.15 4.9
5.23 4.89
5.18 4.82
5.13 4.82
Jan 5.13 4.82
5.1 4.87
5.11 4.81
5.11 4.81
Feb 5.08 4.8
5.21 4.84
5.08 4.8
5.17 4.81
Mar 5.14 4.83
5.16 4.96
5.21 4.91
5.22 4.93
5.18 4.94
Apr 5.18 4.96
5.19 4.96
5.17 4.98
5.28 4.98
May 5.31 4.99
5.28 5.02
5.33 5
5.33 5.03
Jun 5.34 5
- --------------------------------------------------------------------------------
WEEKLY 7-DAY CURRENT YIELDS OF THE MONEY MARKET PORTFOLIO AND THE IBC FINANCIAL
DATA, INC., MONEY MARKET FUND AVERAGE.
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT
PRODUCT CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) MONEY MARKET AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE
INVESTMENT RETURNS OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND
ANNUITY PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND
EXPENSES BUT NOT PRODUCT CHARGES.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Current income, stability of capital and maintenance of liquidity.
TYPES OF INVESTMENTS
Short-term money market securities that generally mature in 13 months or less.
These securities primarily consist of Certificates of Deposit (CDs); Commercial
Paper and Bankers' Acceptances, U.S. Treasury bills (T-bills) and other
instruments issued by or guaranteed by the U.S. government or its agencies.
PERFORMANCE REVIEW.
READY FOR THE RATE RISE. Late in the first quarter, Federal Reserve officials
began hinting that the central bank might act preemptively to slow economic
growth and keep inflation in check.
We heeded the warnings and began preparing your Portfolio for the possibility of
a rate increase by investing in very short-term securities. At the same time, we
purchased one-year corporate obligations in order to take advantage of the
recent rise in yields on these securities.
As expected, the central bank raised the rate banks pay to borrow funds by a
quarter of a percentage point, to 5.5%, on March 25. This was the first interest
rate rise in two years.
10
<PAGE>
STRATEGY SESSION.
A TWO-PRONGED APPROACH. Expecting a Federal Reserve interest rate increase in
March, we focused on one-month and one-year money market securities as well as
securities whose coupons adjust periodically with changes in the London
Interbank Offered Rate (LIBOR).
Investing in the one-month sector allowed the Portfolio to reinvest those assets
in higher-yielding securities once the Federal Reserve increased shortterm
interest rates. Meanwhile, we also invested in higher-yielding corporate
obligations such as bank notes and CDs that mature in a year.
Although the U.S. economy grew rapidly in the first quarter, later reports on
retail sales, housing starts, producer and consumer prices indicated economic
growth eased in the second quarter and inflation remained tame.
The retail sales data are especially important, because consumer spending
accounts for two-thirds of gross domestic product in the United States. With the
U.S. economy apparently growing more slowly, interest rates edged lower in the
second quarter. As a result, the one-year corporate obligations we purchased
have appreciated in value.
OUTLOOK
PORTFOLIO MANAGER
MANOLITA BRASIL
GUARDEDLY OPTIMISTIC.
"I remain cautious. Unemployment is near historic lows, and although economic
growth appears to have slowed in the second quarter, the economy continues to
operate at a high capacity.
"So if consumers start buying again and demand rises, I believe the Federal
Reserve will feel compelled to raise interest rates. I think in the third
quarter, if demand picks up and job growth remains high, the Fed will raise
interest rates by another 25 basis points. If demand does not pick up and
inflation continues to be favorable, as it has been, then the Federal Reserve
will most likely keep interest rates where they are now."
[PHOTO]
PORTFOLIO MANAGER
MANOLITA BRASIL
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Comm. Paper 54% 47%
Floating/Adj. Rate 18% 20%
Yankee Comm. Paper 12% 6%
Other Corp. Oblg. 10% 5%
Foreign Bank Oblg. 3% 17%
U.S. Bank Oblg. 2% 4%
Bank Holding Co. CP. 1% 1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
A WORD ABOUT QUALITY.
AS OF JUNE 30, 1997, ALL OF THE PORTFOLIO'S INVESTMENTS WERE RATED IN THE
HIGHEST CATEGORY BY AT LEAST TWO MAJOR, INDEPENDENT RATING AGENCIES OR, IF
UNRATED, WERE DEEMED TO BE OF EQUIVALENT QUALITY BY OUR CREDIT RESEARCH STAFF.
INVESTMENTS DEEMED TO BE OF EQUIVALENT QUALITY THAT WERE NOT RATED WERE SUBJECT
TO RATIFICATION BY THE BOARD OF DIRECTORS.
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
11
<PAGE>
PRUDENTIAL DIVERSIFIED BOND PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio performed better than its benchmarks in the first six months of
1997. With a six-month return of 4.11%, your Portfolio easily beat the 3.07%
total return on the average Lipper (VIP) Corporate Debt portfolio and the 3.09%
return of the Lehman Aggregate Index.
We were helped by our sizable holdings in corporate bonds, including those from
the media and cable industry. We also held higher-yielding U.S.
dollar-denominated bonds issued by foreign governments such as Mexico,
Argentina, Panama, Venezuela and South Africa.
Your Portfolio has performed better than the average corporate debt fund in
variable life and annuity products over the past one, three, five and 10 years.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
DIVERSIFIED BOND PORTFOLIO(1) 4.11% 10.38% 9.70% 7.85% 8.92%
- --------------------------------------------------------------------------------
LIPPER (VIP) CORP. BBB AVG.(2) 3.07% 8.59% 8.74% 7.45% 8.55%
- --------------------------------------------------------------------------------
LEHMAN AGGREGATE INDEX(3) 3.09% 8.15% 8.53% 7.12% 8.82%
- --------------------------------------------------------------------------------
DIVERSIFIED BOND PORTFOLIO INCEPTION DATE: 5/13/83.
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
$23,497 Diversified Bond Portfolio(1)
$23,284 Lehman Aggregate Index(3)
$22,946 Lipper (VIP) Corp. BBB Avg.(2)
87 10000 10000 10000
10122.3 10156.1 10292.7
88 10638.3 10660.7 10805.3
10951.7 10984.4 11104.3
89 11934 11909.2 12125.4
12428.5 12400.6 12717.8
90 12702.1 12707.6 13077.6
13463 13327.6 13857.3
91 14068.5 14028.7 14476.9
15676.4 15593.4 16074.9
92 16100.4 16030.3 16509.7
16802.3 16711.8 17264.7
93 18018.3 18017.5 18455.1
18504.4 18609.4 18947.9
94 17799.5 17754.4 18215
17906.7 17875 18395.3
95 20070.1 20072.2 20500.5
21619.1 21454.5 21793.7
96 21287.1 21059.2 21528.9
22569.6 22185.7 22584.9
97 23496.7 22945.8 23283.5
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT
PRODUCT CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) CORPORATE BBB AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE
INVESTMENT RETURNS OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND
ANNUITY PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND
EXPENSES BUT NOT PRODUCT CHARGES.
(3) THE LEHMAN AGGREGATE INDEX (LAI) IS COMPRISED OF OVER 5,000 GOVERNMENT
AND CORPORATE BONDS. THE LAI IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL INTEREST BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN
THE PORTFOLIO. THE SECURITIES THAT COMPRISE THE LAI MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE LAI IS NOT THE
ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF INCOME FUNDS,
AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
High level of income over the long term while providing reasonable
safety of capital.
TYPES OF INVESTMENTS
U.S. government securities, mortgage backed bonds, both investment-grade and
high yield ("junk bond") corporate debt, and foreign securities (dollar and
non-dollar denominated).
INVESTMENT STYLE
This Portfolio seeks the highest yield while maintaining safety of capital, by
strategically allocating Portfolio assets among the above classes of bonds.
PERFORMANCE REVIEW.
WINNING CHOICES. Bond prices fell and interest rates rose both before and after
the Federal Reserve raised the overnight bank lending rate by a quarter of a
percentage point to 5.5% on March 25 to keep the economy from fueling higher
inflation. (Prices on older bonds typically fall as interest rates rise, because
newly issued bonds will carry higher coupons.)
Still, your Portfolio achieved exceptional results, primarily because we
carefully selected corporate bonds that performed well even though interest
rates rose somewhat. These bonds responded more to solid corporate earnings and
a lower-than-expected volume of new bond issues. With fewer bonds from which to
choose, prices on those available tended to gain.
12
<PAGE>
STRATEGY SESSION.
SPOTLIGHT ON MEDIA AND CABLE BONDS. We focused on bonds issued by companies in
the media and cable industry. Our holdings in Time Warner Inc. and
Telecommunications Inc. appreciated markedly as their financial positions
improved. For example, Time Warner reported that its cash flow surged a hefty
16% during the first quarter of 1997. Telecommunications, Inc. is reducing debt
on its balance sheets and increasing cash flow by reducing capital expenditures
and expenses.
A new type of preferred security called a preferred trust security was first
sold in the market in November 1996 by some banks and insurance companies. These
were priced inexpensively to attract investors, so we bought them. We were not
disappointed, because prices have risen markedly since they were first issued.
KNOWING WHEN TO STAY PUT. Your Portfolio also performed well because we did not
try to predict the course of interest rates, which proved very volatile in the
first half of the year. We kept duration, a measure of the Portfolio's
sensitivity to changes in interest rates, in a tight range of 5.1 years to 5.3
years during the period.
The shorter the duration, the more the Portfolio's value is protected when
interest rates climb. So your Portfolio suffered only minimally when the Federal
Reserve raised the overnight bank lending rate, but its value improved as bond
prices rose in June.
OUTLOOK
PORTFOLIO MANAGER
BARBARA KENWORTHY
CROSSOVER CREDITS.
"Corporate bond issuance has been heavy, and given the positive performance in
the stock market and the reduced supply of government bonds, we've held more
corporate bonds than usual and have tried to pick the more attractive
opportunities in the market.
"Many of these companies are known as crossover credits, because at least one
rating agency considers them investment grade while another rater does not. By
investing in these bonds, we have kept both the yield and the quality of the
Portfolio relatively high. At the same time, we've been able to avoid holding
too many higher-yielding bonds that are of lower quality."
[PHOTO]
PORTFOLIO MANAGER
BARBARA KENWORTHY
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
U.S. Corporates 59% 61%
Foreign (US$) 29% 17%
Mortgages 4% 4%
U.S. Treasurys 3% 13%
Other 3% 4%
U.S. Gov't. Agencies 2% 1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
CREDIT QUALITY
6/30/97
-------
U.S. Gov't. Agencies 5%
AAA 5%
AA 2%
A 19%
BBB 52%
BB 16%
B 1%
Avg. Credit Quality BBB
Duration 5.27 Years
Avg. Maturity 16.2 Years
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
13
<PAGE>
PRUDENTIAL HIGH YIELD BOND PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 5.88% for the first six months of 1997, slightly lagging
behind the 6.10% return on the average high yield bond fund tracked by Lipper
Analytical Services. Although market conditions were generally favorable for
high yield bonds, the Portfolio's performance trailed our benchmark because we
focused on the telecommunications and cable industries, which did not perform as
well as other industries.
In addition, high yield bonds slumped along with other bonds as interest rates
rose in March and April, then rebounded later as the bond market recovered.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO(1) 5.88% 12.55% 10.89% 11.29% 9.27%
- --------------------------------------------------------------------------------
LIPPER (VIP) HIGH CURRENT
YIELD AVG.(2) 6.10% 15.40% 12.27% 11.44% 10.73%
- --------------------------------------------------------------------------------
LEHMAN HIGH YIELD INDEX(3) 5.82% 13.89% 12.45% 11.29% 10.90%
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO INCEPTION DATE: 2/23/87.
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
$28,135 Lehman High Yield Index(3)
$27,898 Lipper (VIP) High Current Yield Avg.(2)
$24,264 High Yield Bond Portfolio(1)
87 10000 10000 10000
9447.05 9869.65 9957.87
88 10245.1 10739 10764.6
10691.5 11195.2 11205.8
89 11171.8 11850.1 11751.8
10472 11511.7 11299.2
90 10592.2 11727.6 11581
9231.67 10897.3 10215.8
91 11579.4 13141.9 13240
12846.6 14649.4 14933.7
92 14226.8 16122.3 16479.4
15100.6 16996.4 17286.1
93 16815.9 18929.3 19107.9
18009.2 20212.1 20244.8
94 17792.4 19671.9 19785.9
17500.2 19494.3 20036.4
95 19168.7 21661 22523.2
20573.9 23149.3 23878.2
96 21558.3 24314.4 24703.7
22917.2 26328.3 26588.7
97 24263.6 27898.4 28135.5
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT
PRODUCT CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) HIGH CURRENT YIELD AVERAGE
IS CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE
INVESTMENT RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND
ANNUITY PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND
EXPENSES BUT NOT PRODUCT CHARGES.
(3) THE LEHMAN HIGH YIELD INDEX (LHYI) IS COMPRISED OF OVER 700
NONINVESTMENT-GRADE BONDS. THE LHYI IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL INTEREST BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE LHYI MAY DIFFER SUBSTANTIALLY
FROM THE SECURITIES IN THE PORTFOLIO. THE LHYI IS NOT THE ONLY INDEX THAT
MAY BE USED TO CHARACTERIZE PERFORMANCE OF INCOME FUNDS, AND OTHER INDICES
MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
High total return.
TYPES OF INVESTMENTS
Primarily noninvestment-grade bonds. These bonds have speculative
characteristics and are subject to greater credit and market risk than
higher-quality securities.
INVESTMENT STYLE
Concentrates primarily on junk bonds that appear to offer an attractive
combination of high current income and attractive total return.
PERFORMANCE REVIEW.
AN INCREASE IN RATES AND NEW BONDS. Investors pushed interest rates higher and
bond prices lower both before and after March 25, when the Federal Reserve
increased the overnight bank lending rate by a quarter percentage point to 5.5%
to prevent a pickup in inflation. As a result, prices of high yield bonds fell.
The Portfolio's performance was constrained by its holdings in
telecommunications and cable bonds. A large new supply of these bonds issued in
the first quarter depressed prices, because supply exceeded demand from
investors. Still, high yield bonds improved in the second quarter as the bond
market bounced back when interest rates fell as inflation fears subsided.
14
<PAGE>
STRATEGY SESSION.
SOME GOOD NEWS. We continued to emphasize bonds of large companies, particularly
those that may become involved in mergers and acquisitions or could become
candidates for a credit upgrade. In the second quarter, a flurry of good news
enabled two of our holdings -- Cablevision Systems and Comcast -- to fare
particularly well.
Cablevision Systems bonds appreciated in value after an announcement that News
Corp. and Telecommunications, Inc. will pay $850 million for a 40% stake in the
sports television business of Cablevision Systems to create a national chain of
cable television sports channels.
Comcast bonds benefited from a $1 billion investment by Microsoft to speed up
development of a two-way, broadband fiber-optic network. In fact, a credit
rating agency upgraded Comcast senior subordinated debentures and convertible
subordinated debentures in June, citing its improved financial flexibility.
OUTLOOK
PORTFOLIO MANAGER
GEORGE W. EDWARDS, CFA
CUTTING HERE, ADDING THERE.
"We are taking advantage of the recent rally in cable and telecommunications
bonds to sell some of our holdings to reduce our emphasis on those sectors to a
level that is closer to the market indices.
"We like the outlook for the bond market and particularly the high yield market
for the remainder of the year. As a result, we are reducing the Portfolio's cash
position by investing in new issues and attractive secondary offerings."
[PHOTO]
PORTFOLIO MANAGER
GEORGE W. EDWARDS, CFA
We are happy to announce that George W. Edwards, effective May 1997, has assumed
responsibility of The Prudential Series Fund High Yield Bond Portfolio. George
was awarded an M.B.A. from Temple University and holds a B.A. in history from
Hamilton College. George is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
TOP INDUSTRIES
6/30/97
-------
Communications 14.6%
Cable 8.2%
Consumer Cyclical 8.1%
Energy 6.9%
Media 6.3%
TOP ISSUERS 6/30/97
-----------
Tenet Healthcare Corp. 1.7%
Cablevision Systems 1.4%
Gaylord Container Corp. 1.3%
HMH Properties, Inc. 1.2%
Ionica PLC 1.1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
CREDIT QUALITY
6/30/97
-------
Ba 17%
B 49%
Caa 8%
Nonrated 18%
Equity/Other 5%
Cash 3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
15
<PAGE>
PRUDENTIAL STOCK INDEX PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio finished the first half of 1997 with a return of 20.32%, an
upward sweep similar to the climb in the preceding two years, except for a
decline in March. The S&P 500 Index returned 20.6%.
Foreign investors and individual investors using mutual funds have poured cash
into the U.S. stock market, helping to power its prolonged climb. The demand for
S&P 500 stocks has driven up their prices even faster than earnings have risen.
The result is a market that has performed so well for so long that many
investment professionals doubt it can continue. For example, the S&P 500 Index
has become increasingly volatile recently and is particularly vulnerable to
earnings disappointments.
Standard & Poor's neither sponsors nor endorses the Stock Index Portfolio.
Investors cannot directly invest in any index, including the S&P 500.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE SINCE
MONTHS YEAR YEARS YEARS INCEPTION*
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO(1) 20.32% 34.12% 28.38% 19.34% 17.72%
- --------------------------------------------------------------------------------
LIPPER (VIP) S&P 500 INDEX AVG.(2) 20.20% 34.14% 28.33% 19.20% 16.74%
- --------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 17.32%
- --------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO INCEPTION DATE: 10/19/87.
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
$48,654 Stock Index Portfolio(1)
$46,833 S&P 500(3)
$44,482 Lipper (VIP) S&P 500 Index Avg.(2)
87 10000 10000 10000
10735.8 9895.59 9873.68
88 11980.3 11108.1 11127.3
12393.1 11455.8 11509
89 14395.2 13257.6 13410.5
16226.3 14940.1 15149.5
90 16661.1 15350.8 15615.9
15636.4 14402.5 14678.5
91 17816.8 16432.7 16767
20283.8 18693.5 19140.8
92 20104.5 18544.6 19012.2
21731.1 20039.4 20597.1
93 22740.4 20994.5 21599
23831.9 21996.1 22668.5
94 22989.2 21212.2 21901.5
24072.1 22220.7 22966.2
95 28878.6 26654.5 27602.2
32993.9 30423.5 31586.3
96 36275.8 33437.7 34773.1
40439.1 37203.2 38833.8
97 48654.4 44482.4 46832.5
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 10/31/87.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) S&P 500 INDEX AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS.
THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE S&P 500 IS NOT THE ONLY INDEX THAT MAY BE USED TO
CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO, AND OTHER INDICES MAY PORTRAY
DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Seeks results that correspond to the price and yield performance of the S&P 500
Index.(3)
TYPES OF INVESTMENTS
Primarily stocks in the S&P 500 Index.
INVESTMENT STYLE
This Portfolio attempts to hold the same stocks as the S&P 500 Index in
approximately the same proportions. As such, this Portfolio tends to reflect the
general trends of the overall U.S. equity market.
- --------------------------------------------------------------------------------
S&P 500 INDEX -- TOTAL RETURN BY SECTOR
Y-T-D
6/30/97
-------
Consumer Growth/Staples 24.5%
Finance 23.6%
Consumer Cyclical 21.1%
Technology 21.0%
Industrials 19.4%
Energy 18.6%
Utility 7.8%
S&P 500 Index 20.6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL.
16
<PAGE>
PERFORMANCE REVIEW.
The Stock Index Portfolio attempts to duplicate the performance of the S&P 500
Index by holding all 500 stocks in the index. Portfolio Manager John W.
Moschberger manages the Portfolio by investing funds received, while trying to
minimize commissions and transaction costs.
A GALA OF GOOD NEWS DROVE UP PRICES. The market for large-capitalization stocks
resumed its steep climb at the end of April, after slowing in anticipation of
higher interest rates and an economic slowdown. Fears that interest rates would
rise abated when the economy showed only moderate growth rates, obviating any
action by the Federal Reserve to cool it down. This good news was accompanied by
first-quarter earnings reports that averaged about 18% higher than a year
earlier. With consumer confidence at a 28-year high and unemployment at its
lowest since 1973, the investment environment seemed idyllic.
FINANCIALS AND TECHNOLOGY JOINED BY CONSUMER GROWTH. The rise in the second
quarter was powered by the rebound of the technology sector from its
stutter-step earlier in the year, with energy and industrials also doing well.
For the year-to-date, consumer growth and staples, finance and consumer
cyclicals were the leading sectors. Savings and loans as a group led the market.
Computer software and services, drugs and medical supplies, and the trucking and
shipping industry all rose by more than a third in just the half year.
UTILITIES STILL UNDERPERFORMING. Stocks for all sectors except utilities
averaged double-digit gains for the half year. Utilities are facing competition
and dramatic restructuring. Investors have not been enthusiastic about the
uncertainties.
A few scattered industries turned down, on average: gold, lodging, gaming and
energy exploration.
[PHOTO]
PORTFOLIO MANAGER
JOHN W. MOSCHBERGER
- --------------------------------------------------------------------------------
S&P 500 INDEX COMPOSITION
6/30/97
-------
Consumer Growth/Staple 30%
Technology 15%
Finance 15%
Industrials 15%
Utility 9%
Energy 9%
Consumer Cyclical 7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
General Electric Co. 3.1%
Coca-Cola Co. 2.5%
Exxon Corp. 2.2%
Microsoft Corp. 2.2%
Merck & Co. 1.8%
Royal Dutch Petroleum 1.7%
Intel Corp. 1.7%
Philip Morris Co. 1.6%
Procter & Gamble Co. 1.4%
IBM Inc. 1.3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
17
<PAGE>
PRUDENTIAL EQUITY INCOME PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 17.47% over the past six months, above the Lipper (VIP)
Equity Income Average of 16.83%. Performance for the past 12 months, 33.59%,
also exceeded the average of comparable portfolios.
We use a bottom-up investment style and, in some cases, the performance of one
or two companies in a sector made significant contributions to performance this
half. Stock selection within the energy, technology and utility sectors
accounted for the good results.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE SINCE
MONTHS YEAR YEARS YEARS INCEPTION*
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO(1) 17.47% 33.59% 21.27% 18.60% 15.92%
- --------------------------------------------------------------------------------
LIPPER (VIP) EQUITY INCOME AVG.(2) 16.83% 29.45% 23.84% 18.57% 15.06%
- --------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 17.06%
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO INCEPTION DATE: 2/19/88.
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
$43,500 S&P 500(3)
$39,039 Equity Income Portfolio(1)
$37,070 Lipper (VIP) Equity Income Avg.(2)
10000 10000 10000
88 10469.1 10462.9 10335.5
10903.9 10790.5 10690
89 12484.1 12437.6 12456.2
13375.8 13259 14071.5
90 13290.6 13184.8 14504.7
12877.4 12166.1 13634
91 14644.5 13825.2 15573.9
16417.8 15516.8 17778.8
92 16636.4 15856.8 17659.3
18084 17173 19131.4
93 20902.4 18811.5 20062
22113.4 19892.6 21055.4
94 21885.8 19759.6 20343
22430.7 20346.6 21332
95 25596.5 23558.6 25638
27299 26482.5 29338.7
96 29223.5 28273.8 32298.7
33233.2 31423.8 36070.4
97 39039.4 37070.3 43499.9
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 2/29/88.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) EQUITY INCOME AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE
INVESTMENT RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND
ANNUITY PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND
EXPENSES BUT NOT PRODUCT CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE
MARKET VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE
NEW YORK STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES
THE REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT
THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS
PORTFOLIO, AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Current income and capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks and convertible securities with prospects for income returns
above those of the S&P 500.(3)
INVESTMENT STYLE
The Portfolio uses a "value" investment approach to companies that are
attractively priced relative to book value, earnings, discretionary cash flow,
sales and other measures of value.
PERFORMANCE REVIEW.
AN OIL SERVICE COMPANY IS LIKELY TO RESTRUCTURE. We expected McDermott
International to improve earnings by restructuring. A change in management made
this more likely, and also more apparent to investors, who pushed its stock
price higher.
TWO PRIVATIZED UTILITIES MOVED UP. We enjoyed excellent gains from a privatized
Latin American telephone company that had been undervalued by the market and is
now moving closer in price to similar companies. A British private utility faces
a friendlier rate structure that rose almost 40% in the half year.
We also took gains on semiconductor stocks in the first quarter.
18
<PAGE>
STRATEGY SESSION.
REITs OFFER STEADY DIVIDEND GROWTH. REITs (real estate investment trusts) buy
real estate and issue shares to the public, making it easier for individuals to
invest in the burgeoning real estate market. Ease of ownership increases the
pool of buyers and should push prices up. In addition, REITs have high dividend
yields at current prices and also offer the prospect of predictable dividend
growth. We believe that the market currently undervalues this attractive
feature.
SECURITIES BROKERAGES ARE IN PLAY. Thanks to changes in the regulatory
environment, securities brokerages have become takeover targets. We expected
consolidation and still do. Lehman Brothers, among our largest holdings, rose
almost 30% in the past half year. We bought our securities company holdings
cheaply and have seen nice gains. Nonetheless, they are still inexpensive in
comparison to their current earnings.
CONSUMER DEMAND MOVES UP THE CHAIN. We think pricing power is swinging from
consumer companies back toward the industrial companies that service them. So
far this has kept us from participating fully in the gains of the consumer
growth sector, but we expect it to pay off down the road.
OUTLOOK
PORTFOLIO MANAGER
WARREN E. SPITZ
SECURITIES FIRMS ATTRACTIVELY PRICED.
"Although the market prices of securities firms already have risen, we still
find them attractively priced compared with other financial firms. A dollar of
investment buys a relatively large amount of current earnings and also offers
solid exposure to the stock market.
"The market seems to be undervaluing these firms out of fear that their earnings
will fall if a long-term bear market occurs. With economic growth steady and
corporate earnings exceptionally high, that doesn't seem imminent. Moreover, the
industry is likely to consolidate before the stock market turns.
"The synergism of brokerages with other financial services makes them very
attractive as acquisition or merger candidates. There are many financial
services companies looking to buy securities firms and relatively few large
brokerages to buy. They have scarcity value. Right now, we think that makes an
attractive package."
[PHOTO]
PORTFOLIO MANAGER
WARREN E. SPITZ
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Finance 32% 33%
Industry 18% 14%
Technology 11% 15%
Consumer Growth 10% 11%
Energy 10% 8%
Consumer Cyclical 9% 9%
Utility 4% 4%
Cash 4% 4%
U.S. Treasurys 2% 2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Lehman Bros. 4.4%
Equity Residential 4.2%
IBM 4.2%
Westinghouse Electric 3.6%
McDermott International 3.3%
RJR Nabisco 3.1%
AMR Corp. 3.0%
Crescent Real Estate 3.0%
Elf Aquitaine 2.9%
USX U.S. Steel Group 2.7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
19
<PAGE>
PRUDENTIAL EQUITY PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 13.26% in the first half of 1997, slightly below the
Lipper (VIP) Growth Fund Average of 13.57%. Historically, your Portfolio has
outperformed similar funds over the past one, five and ten years, as reported by
Lipper Analytical Services, Inc.
During the first half, we held about 25% of your Portfolio in cash. While this
dampened our recent returns, our value discipline demands that we only purchase
demonstrably "cheap" securities. There are very few of these in today's market.
Our cushion also provided some protection when the market took a stutter-step at
the end of the first quarter.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO(1) 13.26% 25.09% 22.69% 18.78% 13.95%
- --------------------------------------------------------------------------------
LIPPER (VIP) GROWTH AVG.(2) 13.57% 23.63% 23.74% 17.87% 13.23%
- --------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 14.63%
- --------------------------------------------------------------------------------
EQUITY PORTFOLIO INCEPTION DATE: 5/13/83.
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
$39,172 S&P 500(3)
$36,906 Equity Portfolio(1)
$34,683 Lipper (VIP) Growth Avg.(2)
87 10000 10000 10000
8074.68 8305.76 8258.57
88 9473.72 9434.12 9307.13
9451.62 9520.65 9626.4
89 10909.8 11103.4 11216.8
12261.1 12215.5 12671.4
90 12313.4 12718.1 13061.5
11622.4 11643.1 12277.4
91 14014.4 13490.1 14024.3
14645.5 15883.5 16009.8
92 15612.4 15290.6 15902.2
16718.2 17037.5 17227.9
93 18836.5 17987.9 18065.9
20374.4 19441.5 18960.4
94 19981.5 18242.5 18318.9
20940.2 19032.6 19209.5
95 24413.1 22441.4 23087.1
27492.5 25214.5 26419.5
96 29503.1 27722.1 29085
32584 30417.8 32481.5
97 36905.9 34683 39171.8
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GROWTH AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN
OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT
THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS
PORTFOLIO, AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks of major, established companies.
INVESTMENT STYLE
This Portfolio uses a "deep value" investment approach to invest in stocks
believed to be temporarily undervalued relative to the companies' sales,
earnings, book value and cash flow.
PERFORMANCE REVIEW.
INSURANCE COSTS. Currently, share prices are very broadly high, and these prices
have been sustained by first-quarter earnings reports up about 18%, on average,
over a year earlier. Nonetheless, since mid-1994 stock prices have risen
substantially faster than their underlying earnings. Rarely have stocks been
this richly valued compared to bonds.
To make matters worse, the "cheap" stocks are currently not particularly
inexpensive compared to the average stock. Our time-tested investment discipline
tells us not to buy when prices are high.
The likelihood of above-average returns is limited and the risk of a price
decline is comparatively high. We're ready to buy as soon as some patches of
inexpensively priced companies appear.
20
<PAGE>
STRATEGY SESSION.
We've cut back our holdings in financial services, modestly reducing our
exposure to the banking industry. After severe lending problems in the early
1990s, the banking industry has come surging back to record profitability. While
the stocks remain relatively inexpensive compared to the overall market, they
would likely prove vulnerable to any change in the very favorable operating
environment they have been enjoying for the last several years.
We also cut back our holdings in American Express. The turnaround at the company
has been impressive and it has been accompanied by a sharp increase in the
market's assessment of its value. Although the stock still is slightly cheaper
in relation to earnings than the average company, the higher price argues
against maintaining as large a position as we have had.
Some of the proceeds from these sales were invested in health stocks and in food
and restaurant companies.
OUTLOOK
PORTFOLIO MANAGER
THOMAS R. JACKSON
DISCIPLINE COUNTS.
"Research shows that two basic investment styles, value investing and growth
investing, alternate in relative advantage, often for a few years at a time. For
the last couple of years, large-capitalization growth stocks such as Microsoft,
Intel, Coca-Cola, Cisco Systems, Merck and General Electric have been leading
the market. As the economic cycle has aged, high earnings growth has become
scarce and investors have concentrated on a relatively limited universe of
companies. As a result, these companies have been bid to very high levels, in
many cases levels that have not been seen since the early seventies. Even if
their earnings continue to grow, investors are paying a very high price for
those prospects.
"Value investors look for companies that sell at large discounts from the
average company, either because their strengths aren't appreciated or because
they are in a temporary earnings depression. We look for companies that sell at
low price/earnings ratios, price/book value ratios and price/cash flow ratios.
However, the long bull market has pushed up prices of almost all companies with
reasonable earnings prospects, leaving little for the disciplined value manager
to purchase.
"Research also shows that historically it has been wise to stick to one
investment style. Disciplined investors do better in the long run, whatever
their style. We believe that it is better to have exposure to both the growth
and value investment styles over the long run, rather than trying to switch
between the two. With this in mind, we are sticking to our discipline: not
buying expensive companies just because they are the only companies for sale and
keeping a cash supply to invest when good values appear."
[PHOTO]
PORTFOLIO MANAGER
THOMAS R. JACKSON
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Finance 27% 28%
Cash 25% 24%
Industry 13% 12%
Consumer Cyclical 12% 12%
Consumer Growth 8% 6%
Energy 6% 6%
Utility 5% 5%
Technology 4% 7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Loews Corp. 2.9%
Chubb Corp. 2.7%
Morgan Stanley/Dean Witter 2.5%
Elf Aquitane S.A. 2.4%
Travelers Group 2.1%
Digital Equipment Corp. 2.0%
Dillard's Inc. 1.9%
RJR Nabisco 1.9%
Tenet Healthcare Corp. 1.8%
Chrysler Corp. 1.7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
21
<PAGE>
PRUDENTIAL PRUDENTIAL JENNISON PORTFOLIO
PERFORMANCE SUMMARY.
During the first six months of 1997, the Portfolio returned 16.98%. This
compares with an increase of 13.57% for the Lipper (VIP) Growth Average. Your
Portfolio has outperformed similar funds since its inception in 1995.
The period was especially volatile, as the S&P 500 declined early in the year,
only to recover to new highs by the end of June. Many of the technology stocks
that turned in disappointing performances during the first quarter rebounded in
the second, resulting in strong six-month numbers from this sector. Health care
stocks were also significant contributors to performance during the period.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE SINCE
MONTHS YEAR INCEPTION*
- --------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO(1) 16.98% 24.50% 27.07%
- --------------------------------------------------------------------------------
LIPPER (VIP) GROWTH AVG.(2) 13.57% 23.63% 25.88%
- --------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 31.34%
- --------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO INCEPTION DATE: 5/1/95.
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
$18,053 S&P 500(3)
$16,651 Prudential Jennison Portfolio(1)
$16,507 Lipper (VIP) Growth Avg.(2)
10000 10000 10000
95 11175.2 10757 10640.2
12441.1 12038.6 12176
96 13374 13301.2 13404.5
14233.7 14523.4 14969.8
97 16651.2 16507 18053.2
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/95.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GROWTH AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN OF
CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT THE
ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO,
AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stocks of established companies with above-average growth
prospects.
INVESTMENT STYLE
This Portfolio uses a "growth" investment style to invest in the common stocks
of both mid-sized and large companies.
PERFORMANCE REVIEW.
The Portfolio invests in medium to large companies whose earnings we expect to
grow faster than the market average. Historically, this has been a favorable
investment strategy. Investors in the current market environment have put a high
premium on consistency, as shown by the performance of the large-cap S&P 500
Index versus the broader Wilshire 5000 Index.
WINNERS: The Portfolio benefited from its positions in rapidly growing
technology companies such as Dell Computer and Microsoft Corp. and global
pharmaceutical companies such as Bristol-Myers Squibb Co. and Eli Lilly & Co.
LOSERS: Technology also hurt the Portfolio performance, as networking companies
3 Com and Ascend Communications declined in value, reflecting the intense
competition and consolidation in that industry. In contrast, networking stocks
provided some of the best rates of return in the technology sector during 1996.
22
<PAGE>
STRATEGY SESSION.
As evidenced by our high weighting in the technology sector, we remain convinced
of the potential returns available in this area. Technology is one of the
fastest-growing parts of the economy, as demand for personal computers,
software, cellular phones, pagers, etc. remains high.
Technology also benefits from the tendency of the prices of these products to
fall over time, causing an expansion in the size of their potential markets.
However, investing in technology can be unsettling in the short term, as the
expectations of investors can change rapidly. In addition to technology, both
consumer companies and financial firms appear to offer high potential earnings
gains over the intermediate term of 12 to 18 months.
As the S&P 500 has increased more than 100% since early 1995, volatility will
remain high. However, we believe we have constructed a high-quality portfolio of
rapidly growing companies whose stocks offer significant return potential over
the next one to two years, especially in this environment of surprisingly low
inflation and steady, but slow, growth.
OUTLOOK
PORTFOLIO MANAGER
DAVID T. POIESZ
SOLID GROWTH PROSPECTS.
"The equity markets continue to be buoyed by the moderating growth in the
economy, which has given the Federal Reserve room to breathe easier and has
allowed long-term interest rates to move lower. The Federal budget balancing
agreement and tax cuts bode well for a continued solid equity market with the
best performing stocks likely being those which exhibit solid earnings growth
prospects. We are finding many attractively valued stocks with solid or
improving earnings growth prospects, despite the market's high valuation."
[PHOTO]
PORTFOLIO MANAGER
DAVID T. POIESZ
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Technology 33% 33%
Health Care 16% 14%
Financial Services 15% 10%
Consumer Staples 13% 19%
Goods and Services 11% 14%
Capital Spending 5% 4%
Energy 4% 3%
Cash 3% 3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Cisco Systems, Inc. 2.8%
Pfizer, Inc. 2.8%
Boeing Co. 2.7%
Hewlett-Packard Co. 2.5%
Eli Lilly & Co. 2.5%
Walt Disney Co. 2.5%
SmithKline Beecham 2.5%
Schlumberger Ltd. 2.4%
Intel Corp. 2.4%
Bristol-Myers Squibb Co. 2.2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
23
<PAGE>
PRUDENTIAL GLOBAL PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio got off to a good start in 1997, returning 12.48% for the first
six months, in line with the Lipper (VIP) Global Average of 12.50%. It
outperformed the Lipper (VIP) Global Average over the past twelve months and
five years. The world's major stock markets all posted handsome gains during
this period, particularly in the second quarter.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE SINCE
MONTHS YEAR YEARS YEARS INCEPTION*
- --------------------------------------------------------------------------------
GLOBAL PORTFOLIO(1) 12.48% 22.12% 15.57% 15.48% 11.34%
- --------------------------------------------------------------------------------
LIPPER (VIP) GLOBAL AVG.(2) 12.50% 18.46% 16.14% 13.96% 11.96%
- --------------------------------------------------------------------------------
MORGAN STANLEY WORLD INDEX(3) 15.62% 22.81% 17.57% 16.15% 11.39%
- --------------------------------------------------------------------------------
GLOBAL PORTFOLIO INCEPTION DATE: 9/19/88.
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
$27,282 Lipper (VIP) Global Avg.(2)
$25,703 Morgan Stanley World Index(3)
$25,669 Global Portfolio(1)
88 10000 10000 10000
10857 10333.9 11142.4
89 11376.7 10968 11259.2
12900.4 12488.3 13058.2
90 12426.4 12864.3 12121.3
11235.3 11748.3 10901.2
91 11715.5 12368.1 11598.7
12515.1 13710.7 12968.9
92 12503.5 13903.2 12158.7
12086.2 13758 12364.6
93 13740.4 15616.3 14276.9
17301.8 18172 15224.4
94 16629.7 17761.3 15814.4
16455.9 17962.4 16074.2
95 18011.1 19098.3 17588.6
19068.7 20575.1 19500.7
96 21023 22301.4 20929.8
22823.8 23948.3 22230
97 25668.8 27281.6 25703.2
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 9/30/88.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GLOBAL AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN OF
CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE MORGAN STANLEY INDEX IS A WEIGHTED INDEX COMPRISED OF APPROXIMATELY
1,500 COMPANIES LISTED ON THE STOCK EXCHANGES OF THE U.S.A., EUROPE,
CANADA, AUSTRALIA, NEW ZEALAND AND THE FAR EAST. THE COMBINED MARKET
CAPITALIZATION OF THESE COMPANIES REPRESENTS APPROXIMATELY 60% OF THE
AGGREGATE MARKET VALUE OF THE STOCK EXCHANGES IN THE COUNTRIES COMPRISING
THE WORLD INDEX. THE WORLD INDEX IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE WORLD INDEX MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE WORLD INDEX IS NOT
THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF GLOBAL
FUNDS, AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
[GRAPH]
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stock and common stock equivalents of U.S. and foreign
corporations.
INVESTMENT STYLE
This Portfolio uses a "growth" investment approach, coupled with a
theme-oriented view of the markets, to identify companies that seem best
positioned to take advantage of global changes.
PERFORMANCE REVIEW.
THE U.S. AND EUROPEAN STOCK MARKETS WERE BUOYANT. In Europe, we emphasized
companies that have strong international revenues and companies that can
leverage large earnings gains from small increases in sales. Our relatively
light holdings in the U.S. were concentrated in technology stocks, which took a
stutter-step in the first quarter but finished the half on an upswing.
JAPAN CHANGES COURSE. We had de-emphasized Japan, where stocks fell sharply in
the first quarter. We avoided the financial sector, where the worst damage
occurred, and were adding domestically-oriented stocks when the Japanese market
rebounded. We did exceptionally well in Japan this period, and in the smaller
Pacific countries as well.
THE MEXICAN MARKET ROSE SHARPLY. Our investments there also served us well, as
its free-market economy strengthened.
24
<PAGE>
STRATEGY SESSION.
GOOD FOR PRODUCTION, NOT FOR SALES. In Europe, we focused on well-managed
companies, many of which had recently reorganized to improve productivity. We
preferred companies that were selling into the world market, where they could
profit from economic acceleration anywhere. European growth has been slow for
some time, resulting in high unemployment, which restrained labor costs and
domestic sales revenues. So we own companies that produce in Europe and sell
primarily elsewhere.
We also look for companies where small increases in sales can produce
disproportionate increases in earnings. For example, we like software companies,
firms that have been through productivity-increasing reorganizations and
manufacturers of telecommunications equipment.
JAPAN'S DOMESTIC MARKET LOOKS UP. We began 1997 underrepresented in Japan, with
a strategy there much like our European strategy. But now we expect more
domestic economic activity in Japan, where the government appears to be
committed to encouraging greater productivity in industries that historically
have been protected from competition. Moreover, in part because the yen has
declined substantially from its highs, Japanese consumers have been spending
less abroad. What's more, Japanese interest rates remain low. These factors all
portend greater economic activity. In response, we have shifted our investment
focus in Japan to companies that service their domestic market.
PROSPECTING IN LATIN AMERICA. Latin American countries finally are allowing
market forces to push their economies ahead. We are currently focusing on
Mexico.
OUTLOOK
PORTFOLIO MANAGER
DANIEL J. DUANE
DIFFERENT PATHS FOR JAPAN AND EUROPE.
"Japan's legendary high productivity has historically been concentrated in
export-oriented companies, leaving products for the home market quite expensive.
The yen has fallen, but the Japanese -- especially those who have traveled --
have gotten a taste of low-priced consumer items. They are ready to spend
heavily on domestic goods if the prices are right. New government policies will
encourage restructuring of firms that sell to this domestic market. We have seen
the benefits of this process elsewhere, and we expect it to provide good
opportunities for our growth strategy.
"The European domestic markets are likely to be weakened by resistance to more
competitive economic practices. Investors who had been anticipating the benefits
of a single large market and a strong single European currency have been shocked
by the Socialist election victory in France. We will continue to focus on
efficient companies that are not dependent on domestic market growth."
[PHOTO]
PORTFOLIO MANAGER
DANIEL J. DUANE
- --------------------------------------------------------------------------------
GEOGRAPHIC ALLOCATION
6/30/97 12/31/96
------- --------
Continental Europe 32% 26%
United States 22% 21%
Japan 19% 14%
United Kingdom 10% 13%
Asia (Ex-Japan) 7% 13%
Mexico 4% 2%
Australia 4% 4%
Other 1% 1%
Cash 1% 6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Hennes & Mauritz 2.4%
Microsoft Corp. 2.2%
Carrefour Supermarche 2.1%
Oracle Corp. 2.0%
Telecom Italia Mobile 1.9%
Daibiru Corp. 1.9%
Nokia 1.9%
Vodafone Group 1.8%
Mattel Inc. 1.8%
Mobil Corp. 1.8%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
25
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments (amortized cost:
$669,335,272)............................ $ 669,335,272
Cash....................................... 381,784
Interest receivable........................ 3,360,098
--------------
Total Assets............................. 673,077,154
--------------
LIABILITIES
Payable to investment adviser.............. 694,105
Accrued expenses........................... 174,067
--------------
Total Liabilities........................ 868,172
--------------
NET ASSETS................................... $ 672,208,982
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 672,209
Paid-in capital, in excess of par........ 671,536,773
--------------
Net assets, June 30, 1997.................. $ 672,208,982
--------------
--------------
Net asset value and redemption price per
share, 67,220,898 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 10.00
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 18,951,300
---------------
EXPENSES
Investment advisory fee.................... 1,345,133
Shareholders' reports...................... 57,000
Accounting fees............................ 35,000
Custodian expense.......................... 31,000
Audit fees................................. 6,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 367
---------------
Total expenses........................... 1,475,500
Less: custodian fee credit................. (13,367)
---------------
Net expenses............................. 1,462,133
---------------
NET INVESTMENT INCOME........................ 17,489,167
---------------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on investments........... 5,235
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 17,494,402
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 17,489,167 $ 31,843,235
Net realized gain on investments....................................................... 5,235 1,246
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 17,494,402 31,844,481
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (17,489,167) (31,843,235)
Distributions from net realized capital gains.......................................... (5,235) (1,246)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (17,494,402) (31,844,481)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [10,926,600 and 18,464,000 shares, respectively].................... 109,266,000 184,644,000
Capital stock issued in reinvestment of dividends and distributions [1,749,386 and
3,184,448 shares, respectively]....................................................... 17,493,861 31,844,481
Capital stock repurchased [(12,331,900) and (16,104,000) shares, respectively]......... (123,319,000) (161,040,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 3,440,861 55,448,481
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 3,440,861 55,448,481
NET ASSETS:
Beginning of period.................................................................... 668,768,121 613,319,640
------------------ -------------------
End of period.......................................................................... $ 672,208,982 $ 668,768,121
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$725,599,146)............................ $ 737,275,021
Cash....................................... 6,037,643
Receivable for investments sold............ 12,476,830
Interest receivable........................ 13,565,437
Receivable for investments sold short (Note
2)....................................... 12,645,897
Due from broker -- variation margin........ 370,344
--------------
Total Assets............................. 782,371,172
--------------
LIABILITIES
Payable for investments purchased.......... 28,789,283
Payable to investment adviser.............. 742,316
Accrued expenses........................... 168,503
Payable for capital stock repurchased...... 185,305
Investments sold short at value (proceeds
$12,645,897 including accrued interest)
(Note 2)................................. 12,633,936
--------------
Total Liabilities........................ 42,519,343
--------------
NET ASSETS................................... $ 739,851,829
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 659,259
Paid-in capital, in excess of par........ 709,038,810
--------------
709,698,069
Undistributed net investment income........ 13,270,064
Accumulated net realized gains on
investments.............................. 6,720,485
Net unrealized appreciation on
investments.............................. 10,163,211
--------------
Net assets, June 30, 1997.................. $ 739,851,829
--------------
--------------
Net asset value and redemption price per
share, 65,925,849 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 11.22
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 27,716,633
---------------
EXPENSES
Investment advisory fee.................... 1,426,411
Shareholders' reports...................... 57,000
Accounting fees............................ 46,000
Custodian expense.......................... 34,000
Audit fees................................. 6,000
Miscellaneous expenses..................... 2,134
Directors' fees............................ 1,000
Legal fees................................. 200
---------------
Total expenses........................... 1,572,745
Less: custodian fee credit................. (16,120)
---------------
Net expenses............................. 1,556,625
---------------
NET INVESTMENT INCOME........................ 26,160,008
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 5,842,458
Futures.................................. 900,140
---------------
6,742,598
Net change in unrealized appreciation on:
Investments.............................. (2,502,107)
Futures.................................. (1,524,625)
Short sales.............................. (223,969)
---------------
(4,250,701)
---------------
NET GAIN ON INVESTMENTS...................... 2,491,897
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 28,651,905
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 26,160,008 $ 46,726,825
Net realized gain on investments....................................................... 6,742,598 3,227,785
Net change in unrealized depreciation on investments................................... (4,250,701) (18,849,028)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 28,651,905 31,105,582
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (14,947,137) (44,766,756)
Distributions from net realized capital gains.......................................... (3,152,774) --
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (18,099,911) (44,766,756)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,258,442 and 78,594,183 shares, respectively]..................... 35,403,359 78,594,183
Capital stock issued in reinvestment of dividends and distributions [44,766,756 and
3,793,654 shares, respectively]....................................................... 18,099,911 44,766,756
Capital stock repurchased [(1,233,092) and (3,376,822) shares, respectively]........... (44,420,016) (45,319,610)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 9,083,254 78,041,329
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 19,635,248 64,380,155
NET ASSETS:
Beginning of period.................................................................... 720,216,581 655,836,426
------------------ -------------------
End of period.......................................................................... $ 739,851,829 $ 720,216,581
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$467,809,560)............................ $ 483,759,468
Cash....................................... 542,940
Interest and dividends receivable.......... 9,012,963
--------------
Total Assets............................. 493,315,371
--------------
LIABILITIES
Payable for investments purchased.......... 11,301,815
Payable to investment adviser.............. 670,519
Accrued expenses........................... 104,754
--------------
Total Liabilities........................ 12,077,088
--------------
NET ASSETS................................... $ 481,238,283
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 591,644
Paid-in capital, in excess of par........ 475,334,869
--------------
475,926,513
Undistributed net investment income........ 11,755,861
Accumulated net realized loss on
investments.............................. (22,424,456)
Net unrealized appreciation on
investments.............................. 15,980,365
--------------
Net assets, June 30, 1997.................. $ 481,238,283
--------------
--------------
Net asset value and redemption price per
share, 59,164,363 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 8.13
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 22,393,786
Dividends.................................. 1,017,891
---------------
23,411,677
---------------
EXPENSES
Investment advisory fee.................... 1,228,898
Accounting fees............................ 62,000
Shareholders' reports...................... 35,500
Custodian expense.......................... 19,000
Audit fees................................. 4,000
Directors' fees............................ 1,400
Miscellaneous expenses..................... 542
---------------
Total expenses........................... 1,351,340
Less: custodian fee credit................. (9,627)
---------------
Net expenses............................. 1,341,713
---------------
NET INVESTMENT INCOME........................ 22,069,964
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (679,137)
Net change in unrealized appreciation on
investments.............................. 4,907,581
---------------
NET GAIN ON INVESTMENTS...................... 4,228,444
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 26,298,408
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 22,069,964 $ 39,424,947
Net realized loss on investments....................................................... (679,137) (1,288,395)
Net change in unrealized appreciation on investments................................... 4,907,581 4,580,936
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 26,298,408 42,717,488
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (10,651,431) (39,126,995)
Dividends in excess of net investment income........................................... -- (495,859)
------------------ -------------------
TOTAL DIVIDENDS........................................................................ (10,651,431) (39,622,854)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,116,289 and 5,685,336 shares, respectively]...................... 56,714,000 45,754,000
Capital stock issued in reinvestment of dividends and distributions [1,371,101 and
5,088,084 shares, respectively]....................................................... 10,651,431 39,622,854
Capital stock repurchased [(4,342,720) and (2,919,156) shares, respectively]........... (34,641,000) (23,514,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 32,724,431 61,862,854
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 48,371,408 64,957,488
NET ASSETS:
Beginning of period.................................................................... 432,866,875 367,909,387
------------------ -------------------
End of period.......................................................................... $ 481,238,283 $ 432,866,875
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,268,708,983).......................... $2,113,744,622
Cash....................................... 3,107,295
Interest and dividends receivable.......... 2,402,793
Receivable for investments sold............ 444,885
--------------
Total Assets............................. 2,119,699,595
--------------
LIABILITIES
Payable for investments purchased.......... 6,910,378
Payable to investment adviser.............. 1,653,442
Due to broker -- variation margin.......... 594,675
Accrued expenses........................... 355,248
Payable for capital stock repurchased...... 28,300
--------------
Total Liabilities........................ 9,542,043
--------------
NET ASSETS................................... $2,110,157,552
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 741,409
Paid-in capital, in excess of par........ 1,244,398,338
--------------
1,245,139,747
Undistributed net investment income........ 7,742,696
Accumulated net realized gains on
investments.............................. 12,980,945
Net unrealized appreciation on
investments.............................. 844,294,164
--------------
Net assets, June 30, 1997.................. $2,110,157,552
--------------
--------------
Net asset value and redemption price per
share, 74,140,959 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 28.46
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $136,260 foreign
withholding tax)......................... $ 16,113,847
Interest................................... 1,804,994
---------------
17,918,841
---------------
EXPENSES
Investment advisory fee.................... 3,117,991
Shareholders' reports...................... 146,000
Accounting fees............................ 45,000
Custodian expense.......................... 20,000
Audit fees................................. 15,000
Directors' fees............................ 1,000
Legal fees................................. 500
Miscellaneous expenses..................... 308
---------------
Total expenses............................. 3,345,799
---------------
NET INVESTMENT INCOME........................ 14,573,042
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 2,389,643
Futures.................................. 11,348,745
---------------
13,738,388
---------------
Net change in unrealized appreciation on:
Investments.............................. 311,858,680
Futures.................................. (1,457,675)
---------------
310,401,005
---------------
NET GAIN ON INVESTMENTS...................... 324,139,393
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 338,712,435
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 14,573,042 $ 24,969,455
Net realized gain on investments....................................................... 13,738,388 12,465,185
Net change in unrealized appreciation on investments................................... 310,401,005 226,522,837
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 338,712,435 263,957,477
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (6,830,346) (25,100,782)
Distributions from net realized capital gains.......................................... -- (17,273,757)
Distributions in excess of net realized capital gains.................................. -- (196,333)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (6,830,346) (42,570,872)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,610,505 and 14,156,009 shares, respectively]..................... 223,936,307 310,087,550
Capital stock issued in reinvestment of dividends and distributions [265,759 and
1,875,670 shares, respectively]....................................................... 6,830,346 42,570,872
Capital stock repurchased [(1,334,717) and (1,109,676) shares, respectively]........... (33,871,497) (23,942,788)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 196,895,156 328,715,634
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 528,777,245 550,102,239
NET ASSETS:
Beginning of period.................................................................... 1,581,380,307 1,031,278,068
------------------ -------------------
End of period.......................................................................... $ 2,110,157,552 $ 1,581,380,307
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,187,577,407).......................... $1,617,948,092
Cash....................................... 219,792
Interest and dividends receivable.......... 9,225,734
--------------
Total Assets............................. 1,627,393,618
--------------
LIABILITIES
Payable to investment adviser.............. 1,484,304
Payable for investments purchased.......... 453,942
Accrued expenses........................... 302,854
--------------
Total Liabilities........................ 2,241,100
--------------
NET ASSETS................................... $1,625,152,518
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 756,269
Paid-in capital, in excess of par........ 1,147,080,906
--------------
1,147,837,175
Undistributed net investment income........ 12,133,848
Accumulated net realized gains on
investments.............................. 34,810,810
Net unrealized appreciation on
investments.............................. 430,370,685
--------------
Net assets, June 30, 1997.................. $1,625,152,518
--------------
--------------
Net asset value and redemption price per
share, 75,626,899 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 21.49
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $216,981 foreign
withholding tax)......................... $ 22,830,853
Interest................................... 2,882,586
---------------
25,713,439
---------------
EXPENSES
Investment advisory fee.................... 2,858,841
Shareholders' reports...................... 116,000
Accounting fees............................ 44,000
Custodian expense.......................... 21,000
Audit fees................................. 12,000
Miscellaneous expenses..................... 1,849
Directors' fees............................ 1,000
---------------
Total expenses........................... 3,054,690
Less: custodian fee credit................. (14,324)
---------------
Net expenses............................. 3,040,366
---------------
NET INVESTMENT INCOME........................ 22,673,073
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 35,096,343
Net change in unrealized appreciation on
investments.............................. 182,243,487
---------------
NET GAIN ON INVESTMENTS...................... 217,339,830
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 240,012,903
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 22,673,073 $ 40,888,718
Net realized gain on investments....................................................... 35,096,343 35,305,154
Net change in unrealized appreciation on investments................................... 182,243,487 167,448,548
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 240,012,903 243,642,420
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (10,675,085) (49,702,706)
Distributions from net realized capital gains.......................................... (6,001,320) (35,958,853)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (16,676,405) (85,661,559)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,042,189 and 3,768,657 shares, respectively]...................... 59,734,000 65,526,000
Capital stock issued in reinvestment of dividends and distributions [878,273 and
4,848,028 shares, respectively]....................................................... 16,676,405 85,661,559
Capital stock repurchased [(1,955,785) and (3,172,162) shares, respectively]........... (38,069,000) (55,657,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 38,341,405 95,530,559
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 261,677,903 253,511,420
NET ASSETS:
Beginning of period.................................................................... 1,363,474,615 1,109,963,195
------------------ -------------------
End of period.......................................................................... $ 1,625,152,518 $ 1,363,474,615
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,019,334,597).......................... $5,475,604,129
Cash....................................... 43,403
Interest and dividends receivable.......... 16,929,818
Receivable for investments sold............ 1,265,084
--------------
Total Assets............................. 5,493,842,434
--------------
LIABILITIES
Payable to investment adviser.............. 5,848,344
Payable for investments purchased.......... 1,999,419
Accrued expenses........................... 1,503,636
Payable for capital stock repurchased...... 132,677
--------------
Total Liabilities........................ 9,484,076
--------------
NET ASSETS................................... $5,484,358,358
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,818,344
Paid-in capital, in excess of par........ 3,788,111,645
--------------
3,789,929,989
Undistributed net investment income........ 36,433,895
Accumulated net realized gains on
investments.............................. 201,724,710
Net unrealized appreciation on investments
and foreign currencies................... 1,456,269,764
--------------
Net assets, June 30, 1997.................. $5,484,358,358
--------------
--------------
Net asset value and redemption price per
share, 181,834,408 outstanding shares of
common stock (authorized 250,000,000
shares).................................. $ 30.16
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C>
INVESTMENT INCOME
Dividends (net of $875,560 foreign
withholding tax)......................... $ 42,293,442
Interest................................... 32,868,910
---------------
75,162,352
---------------
EXPENSES
Investment advisory fee.................... 11,330,858
Shareholders' reports...................... 408,000
Custodian expense.......................... 60,000
Accounting fees............................ 44,000
Audit fees................................. 43,000
Legal fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 855
---------------
Total expenses........................... 11,889,713
Less: custodian fee credit................. (48,908)
---------------
Net expenses............................. 11,840,805
---------------
NET INVESTMENT INCOME........................ 63,321,547
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on:
Investments.............................. 201,724,710
Foreign currencies....................... 81,727
---------------
201,806,437
---------------
Net change in unrealized appreciation on:
Investments.............................. 374,264,366
Foreign currencies....................... 233
---------------
374,264,599
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 576,071,036
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 639,392,583
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 63,321,547 $ 108,378,560
Net realized gain on investments and foreign currencies................................ 201,806,437 344,149,867
Net change in unrealized appreciation on investments and foreign currencies............ 374,264,599 282,410,872
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 639,392,583 734,939,299
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (30,209,733) (107,745,221)
Distributions from net realized capital gains.......................................... (32,529,334) (422,203,368)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (62,739,067) (529,948,589)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,382,381 and 13,547,538 shares, respectively]..................... 153,065,406 368,210,773
Capital stock issued in reinvestment of dividends and distributions [2,253,344 and
20,011,095 shares, respectively]...................................................... 62,739,067 529,948,589
Capital stock repurchased [(4,328,618) and (3,776,507) shares, respectively]........... (122,068,707) (102,985,123)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 93,735,766 795,174,239
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 670,389,282 1,000,164,949
NET ASSETS:
Beginning of period.................................................................... 4,813,969,076 3,813,804,127
------------------ -------------------
End of period.......................................................................... $ 5,484,358,358 $ 4,813,969,076
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
PRUDENTIAL JENNISON PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$270,422,944)............................ $ 333,722,142
Cash....................................... 975
Receivable for investments sold............ 2,345,051
Interest and dividends receivable.......... 228,584
--------------
Total Assets............................. 336,296,752
--------------
LIABILITIES
Payable for investments purchased.......... 3,748,039
Payable to investment adviser.............. 436,713
Accrued expenses........................... 52,156
--------------
Total Liabilities........................ 4,236,908
--------------
NET ASSETS................................... $ 332,059,844
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 198,412
Paid-in capital, in excess of par........ 265,267,991
--------------
265,466,403
Undistributed net investment income........ 225,423
Accumulated net realized gains on
investments.............................. 3,068,820
Net unrealized appreciation on
investments.............................. 63,299,198
--------------
Net assets, June 30, 1997.................. $ 332,059,844
--------------
--------------
Net asset value and redemption price per
share, 19,841,223 outstanding shares of
common stock (authorized 40,000,000
shares).................................. $ 16.74
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $45,970 foreign
withholding tax)......................... $ 1,108,513
Interest................................... 242,474
---------------
1,350,987
---------------
EXPENSES
Investment advisory fee.................... 802,523
Accounting fees............................ 26,000
Shareholders' reports...................... 22,000
Custodian expense.......................... 9,000
Audit fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 976
Legal fees................................. 100
---------------
Total expenses........................... 863,599
Less: custodian fee credit................. (2,623)
---------------
Net expenses............................. 860,976
---------------
NET INVESTMENT INCOME........................ 490,011
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 6,161,331
Net change in unrealized appreciation on
investments.............................. 37,641,354
---------------
NET GAIN ON INVESTMENTS...................... 43,802,685
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 44,292,696
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 490,011 $ 270,664
Net realized gain (loss) on investments................................................ 6,161,331 (3,092,511)
Net change in unrealized appreciation on investments................................... 37,641,354 21,613,425
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 44,292,696 18,791,578
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (327,375) (373,490)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,494,205 and 11,292,685 shares, respectively]..................... 68,616,000 151,529,000
Capital stock issued in reinvestment of dividends and distributions [21,913 and 27,287
shares, respectively]................................................................. 327,375 373,490
Capital stock repurchased [(491,424) and (531,868) shares, respectively]............... (7,392,000) (6,868,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 61,551,375 145,034,490
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 105,516,696 163,452,578
NET ASSETS:
Beginning of period.................................................................... 226,543,148 63,090,570
------------------ -------------------
End of period.......................................................................... $ 332,059,844 $ 226,543,148
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$507,170,994)............................ $ 671,065,239
Foreign currency, at value (cost:
$20,224,553)............................. 20,126,806
Receivable for investments sold............ 2,131,929
Forward currency contracts -- amount
receivable from counterparties........... 1,203,237
Receivable for capital stock sold.......... 980,462
Dividends and interest receivable.......... 898,858
Other assets............................... 561,757
--------------
Total Assets............................. 696,968,288
--------------
LIABILITIES
Payable for investments purchased.......... 17,354,835
Payable to investment adviser.............. 1,180,769
Bank overdraft............................. 406,525
Accrued expenses........................... 318,650
Payable for capital stock repurchased...... 82,000
--------------
Total Liabilities........................ 19,342,779
--------------
NET ASSETS................................... $ 677,625,509
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 339,602
Paid-in capital, in excess of par........ 492,739,762
--------------
493,079,364
Undistributed net investment income........ 3,621,935
Accumulated net realized gain on
investments.............................. 15,858,079
Net unrealized appreciation on investments
and foreign currencies................... 165,066,131
--------------
Net assets, June 30, 1997.................. $ 677,625,509
--------------
--------------
Net asset value and redemption price per
share of 33,960,199 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 19.95
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $497,908 foreign
withholding tax)......................... $ 4,955,891
Interest................................... 331,992
---------------
5,287,883
---------------
EXPENSES
Investment advisory fee.................... 2,270,416
Custodian expense.......................... 215,000
Accounting fees............................ 106,000
Shareholders' reports...................... 65,000
Audit fees................................. 4,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 996
Legal fees................................. 200
---------------
Total expenses............................. 2,662,612
---------------
NET INVESTMENT INCOME........................ 2,625,271
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES
Net realized gain on:
Investments.............................. 15,860,036
Foreign currencies....................... 659,433
---------------
16,519,469
---------------
Net change in unrealized appreciation on:
Investments.............................. 53,284,579
Foreign currencies....................... 557,953
---------------
53,842,532
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 70,362,001
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 72,987,272
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 2,625,271 $ 3,109,922
Net realized gain on investments and foreign currencies................................ 16,519,469 19,772,496
Net change in unrealized appreciation on investments and foreign currencies............ 53,842,532 65,301,446
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 72,987,272 88,183,864
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (1,190,321) (3,109,922)
Distributions from net realized capital gains.......................................... (1,184,014) (19,019,488)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (2,374,335) (22,129,410)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,999,930 and 7,307,979 shares, respectively]...................... 55,082,123 123,508,873
Capital stock issued in reinvestment of dividends and distributions [131,150 and
1,310,966 shares, respectively]....................................................... 2,374,335 22,129,410
Capital stock repurchased [(1,690,535) and (1,820,909) shares, respectively]........... (31,073,925) (30,587,232)
Initial capitalization repurchased [0 and (36,088) shares, respectively]............... 0 (575,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 26,382,533 114,476,051
------------------ -------------------
TOTAL INCREASE IN NET ASSETS........................................................... 96,995,470 180,530,505
NET ASSETS:
Beginning of period.................................................................... 580,630,039 400,099,534
------------------ -------------------
End of period.......................................................................... $ 677,625,509 $ 580,630,039
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 53.7%
AC Acquisition Holding Co....................... 5.58% 08/19/97 $ 3,217 $ 3,192,567
American Home Products Corp..................... 5.60% 07/14/97 2,000 1,995,956
American Honda Finance Corp..................... 5.63% 07/24/97 4,592 4,575,483
American Honda Finance Corp..................... 5.63% 08/25/97 11,000 10,905,385
American Honda Finance Corp..................... 5.65% 07/28/97 1,395 1,389,089
American Honda Finance Corp..................... 5.65% 08/12/97 3,000 2,980,225
Aristar, Inc.................................... 5.63% 07/01/97 4,354 4,354,000
Aristar, Inc.................................... 5.66% 07/07/97 1,365 1,363,712
Associates Corp. of North America............... 5.55% 07/03/97 6,000 5,998,150
Associates Corp. of North America............... 6.19% 07/01/97 17,000 17,000,000
Bank of Montreal................................ 5.53% 07/07/97 9,000 8,991,705
Barton Capital Corp............................. 5.65% 08/15/97 7,126 7,075,673
Bear, Stearns Cos., Inc......................... 5.57% 07/07/97 8,000 7,992,573
Chrysler Financial Corp......................... 5.70% 08/21/97 20,000 19,838,500
CIT Group Holdings, Inc......................... 5.54% 07/07/97 26,000 25,975,993
Citicorp........................................ 5.70% 07/10/97 10,000 9,985,750
Coca Cola Enterprises, Inc...................... 5.59% 08/04/97 2,000 1,989,441
Coca Cola Enterprises, Inc...................... 5.66% 08/13/97 1,761 1,749,095
Corestates Capital Corp. (a).................... 5.63% 12/19/97 2,000 2,000,000
Countrywide Home Loan, Inc...................... 5.60% 08/07/97 5,000 4,971,222
Eiger Capital Corp.............................. 5.60% 07/22/97 4,018 4,004,874
Falcon Asset Securitization Corp................ 5.60% 07/10/97 3,345 3,340,317
Falcon Asset Securitization Corp................ 5.60% 08/22/97 2,875 2,851,744
Finova Capital Corp. (a)........................ 5.60% 07/09/97 2,000 1,997,511
Finova Capital Corp. (a)........................ 5.65% 07/25/97 5,000 4,981,167
Finova Capital Corp. (a)........................ 5.71% 07/15/97 5,000 4,988,897
Ford Motor Credit Co............................ 5.55% 07/09/97 31,000 30,961,767
General Electric Capital Corp................... 5.75% 10/27/97 20,000 19,623,056
General Motors Acceptance Corp.................. 5.82% 11/07/97 1,320 1,292,471
General Motors Acceptance Corp.................. 5.84% 10/20/97 2,300 2,258,585
GTE Funding, Inc................................ 5.55% 07/07/97 1,122 1,120,962
GTE Funding, Inc................................ 5.59% 07/23/97 1,000 996,584
GTE Corp........................................ 5.61% 07/22/97 4,000 3,986,910
ITT Hartford Group, Inc......................... 5.57% 07/01/97 8,390 8,390,000
John Deere Capital Corp......................... 5.54% 07/09/97 2,000 1,997,538
Johnson Controls, Inc........................... 5.63% 07/14/97 1,000 997,967
Lehman Brothers Holdings, Inc................... 5.75% 07/02/97 9,000 8,998,562
Lehman Brothers Holdings, Inc................... 6.40% 07/01/97 3,055 3,055,000
MCI Communications Corp......................... 5.45% 07/07/97 3,960 3,956,403
MCI Communications Corp......................... 5.54% 07/07/97 6,000 5,994,460
Mitsubishi International Corp................... 5.60% 07/16/97 1,000 997,667
National Bank of Canada......................... 5.41% 07/07/97 8,000 7,992,787
Nationwide Building Society..................... 5.57% 07/07/97 5,000 4,995,358
Newell Co....................................... 5.60% 08/20/97 2,000 1,984,444
NYNEX Credit Co................................. 5.60% 07/21/97 792 789,536
NYNEX Corp...................................... 6.30% 07/01/97 3,238 3,238,000
Preferred Receivables Funding Corp.............. 5.57% 07/08/97 5,000 4,994,585
Sears Roebuck Acceptance Corp................... 6.20% 07/01/97 6,000 6,000,000
Short Term Card Account Trust 1996-1 (a)........ 5.50% 01/15/98 24,000 24,000,000
Short Term Repackaged Asset Trust (a)........... 6.03% 12/15/97 9,000 8,999,119
Smith Barney, Inc............................... 5.55% 07/07/97 5,000 4,995,375
UBS Finance Corp................................ 6.20% 07/01/97 20,000 20,000,000
WCP Funding, Inc................................ 5.60% 07/14/97 12,000 11,975,733
--------------
361,081,898
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS -- 22.6%
Abbey National Treasury Services, PLC........... 5.60% 11/26/97 $ 10,000 $ 9,995,905
American General Finance Corp................... 6.10% 10/01/97 4,250 4,259,018
American General Finance Corp................... 6.32% 03/02/98 2,700 2,720,101
Beneficial Corp., M.T.N. (a).................... 5.50% 08/05/97 9,000 9,000,550
Capital Equipment Receivable Trust.............. 5.58% 10/15/97 944 944,396
Capital Equipment Receivable Trust.............. 5.60% 10/15/97 1,322 1,322,067
Chrysler Financial Corp......................... 6.01% 10/15/97 5,000 4,989,712
CIT Group Holdings, Inc......................... 6.16% 04/15/98 2,000 2,038,869
Countrywide Home Loan, Inc...................... 5.73% 07/08/97 9,475 9,475,000
Ford Motor Credit Co............................ 6.14% 07/21/97 500 500,082
General Motors Acceptance Corp.................. 5.61% 07/10/97 5,000 5,001,385
General Motors Acceptance Corp.................. 5.81% 10/08/97 1,000 999,815
General Motors Acceptance Corp. (a)............. 5.56% 02/02/98 11,000 10,997,621
General Motors Acceptance Corp. (a)............. 5.78% 02/02/98 2,000 2,003,264
Goldman Sachs Group, L.P., M.T.N. (a)........... 5.62% 06/29/98 30,000 30,000,000
Hertz Corp...................................... 6.31% 02/02/98 2,000 2,022,097
Household Finance Corp.......................... 6.10% 10/15/97 1,000 1,000,412
International Lease Finance Corp. (a)........... 5.56% 10/15/97 1,000 1,001,077
International Lease Finance Corp. (a)........... 5.53% 10/15/97 3,000 3,003,447
Merrill Lynch & Co., Inc., M.T.N. (a)........... 5.44% 10/01/97 5,000 4,999,632
Merrill Lynch & Co., Inc., M.T.N. (a)........... 5.44% 10/16/97 3,000 3,000,270
Morgan Stanley Group, Inc. (a).................. 3.41% 07/15/98 4,000 4,000,000
Morgan Stanley Group, Inc. (a).................. 3.53% 06/15/98 5,000 5,000,000
Morgan Stanley Group, Inc. (a).................. 3.59% 06/15/98 2,000 2,000,000
PNC Student Loan Trust 1 1997-2 (a)............. 5.63% 07/20/98 10,000 10,000,000
SMM Trust Notes 1997-Q.......................... 5.68% 01/15/98 20,000 20,000,000
Transamerica Finance Corp....................... 6.14% 08/15/97 1,750 1,751,225
--------------
152,025,945
--------------
TIME DEPOSIT - EURODOLLAR -- 1.0%
First National Bank of Chicago.................. 6.25% 07/01/97 6,762 6,762,000
--------------
BANK NOTES -- 7.0%
American Express Centurion Bank (a)............. 5.37% 10/09/97 1,000 999,973
American Express Centurion Bank (a)............. 5.41% 12/09/97 3,000 3,000,000
American Express Centurion Bank (a)............. 5.52% 10/24/97 2,000 2,000,323
American Express Centurion Bank (a)............. 5.61% 12/22/97 1,000 999,953
Comerica Bank of Detroit (a).................... 5.40% 02/11/98 9,000 8,996,248
Comerica Bank of Detroit (a).................... 5.40% 02/05/98 2,000 1,999,246
First Bank, N.A., Minneapolis (a)............... 5.35% 10/24/97 2,000 1,999,564
First Bank, N.A., Minneapolis (a)............... 5.40% 04/10/98 4,000 3,998,793
First Bank, N.A., Minneapolis (a)............... 5.59% 10/15/97 4,000 4,000,000
Key Bank, N.A. (a).............................. 5.63% 08/21/97 4,000 3,999,881
Morgan Guaranty Trust Co. (a)................... 5.45% 11/14/97 4,000 3,998,913
National Australia Bank, Ltd.................... 5.63% 10/03/97 1,000 1,000,147
Wachovia Bank, N.A.............................. 6.14% 06/01/98 10,000 10,000,000
--------------
46,993,041
--------------
CERTIFICATES OF DEPOSIT-DOMESTIC -- 0.3%
Corestates Bank, N.A. (a)....................... 5.58% 12/18/97 1,000 999,789
Corestates Bank, N.A. (a)....................... 5.53% 01/23/98 1,000 1,000,000
--------------
1,999,789
--------------
CERTIFICATE OF DEPOSIT-EURODOLLAR -- 2.7%
Bayerische Landesbank Girozentrate.............. 5.48% 07/07/97 2,000 2,000,004
Berliner Handels -- UND Frankfurter Bank........ 5.61% 08/11/97 6,000 6,000,067
Berliner Handels -- UND Frankfurter Bank........ 5.71% 07/21/97 1,000 1,000,005
Deutsche Bank................................... 5.54% 07/02/97 8,000 8,000,000
Toronto Dominion Bank........................... 5.48% 07/07/97 1,000 999,996
--------------
18,000,072
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 12.3%
ABN-Amro Bank................................... 5.975% 12/23/97 2,500 2,495,230
Commerzbank..................................... 6.11% 05/27/98 8,000 7,997,583
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
Creditanstalt Bankverein........................ 5.56% 07/07/97 $ 10,000 $ 10,000,008
Deutsche Bank................................... 5.60% 07/08/97 1,000 1,000,042
Landesbank Hessen-Thuringen Girozentrale........ 6.00% 06/19/98 10,000 9,994,454
Landesbank Hessen-Thuringen Girozentrale........ 6.25% 04/01/98 10,000 9,991,333
National Westminister Bank, PLC................. 6.11% 05/26/98 5,000 4,997,850
Royal Bank of Canada............................ 5.97% 06/17/98 5,000 4,997,242
Societe Generale................................ 5.70% 12/22/97 14,000 14,003,220
Societe Generale................................ 6.04% 06/16/98 10,000 9,997,252
Societe Generale................................ 6.25% 05/06/98 2,000 1,998,996
Swiss Bank Corp................................. 6.00% 03/19/98 5,000 4,999,317
--------------
82,472,527
--------------
TOTAL INVESTMENTS -- 99.6%
(amortized cost: $669,335,272; (b))........................................... 669,335,272
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%................................... 2,873,710
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 672,208,982
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (West German Stock Company)
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
(a) Indicates a variable rate security. The maturity date presented for these
instruments is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at June 30, 1997.
(b) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
<TABLE>
<S> <C> <C>
The industry classification of portfolio holdings and other assets in excess of liabilities shown
as a percentage of net assets as of June 30, 1997 was as follows:
Commercial Bank 35.3%
Short Term Business Credit 14.7%
Personal Credit 13.2%
SEC Brokers/Dealers 10.7%
Asset backed 8.1%
Fire Insurance 4.7%
Mortgage Banker 3.3%
Phone Communication 2.9%
Home Loans 2.1%
BHC U.S. 1.7%
Pharmaceutical 0.8%
Equipment Rental & Leasing 0.6%
Chemical & Allied Products 0.6%
Metal Cans 0.3%
Auto Rental & Leasing 0.3%
Regulation Controls 0.2%
Commodity Trading Firms 0.1%
------------
99.6%
Other assets in excess of liabilities 0.4%
------------
100.0%
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
DIVERSIFIED BOND PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 98.6%
<S> <C> <C> <C> <C> <C>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS
<CAPTION>
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 0.3%
Agco Corp.,..................................... Ba1 8.50% 03/15/06 $ 2,250 $ 2,307,803
--------------
AIRLINES -- 5.0%
Boeing Co.,..................................... A1 8.75% 08/15/21 6,250 7,211,938
Delta Air Lines, Inc., M.T.N.................... Baa3 7.79% 12/01/98 1,000 1,019,570
Delta Air Lines, Inc., M.T.N.................... Baa3 8.38% 06/12/98 2,000 2,036,500
Delta Air Lines, Inc.,.......................... Baa3 9.875% 05/15/00 6,000 6,466,560
United Air Lines, Inc.,......................... Baa3 9.75% 08/15/21 4,500 5,372,910
United Air Lines, Inc.,......................... Baa3 10.67% 05/01/04 7,000 8,217,440
United Air Lines, Inc.,......................... Baa3 11.21% 05/01/14 5,000 6,545,950
--------------
36,870,868
--------------
BANKS AND SAVINGS & LOANS -- 6.7%
Banco de Commercio Exterior de Colombia, SA,
M.T.N., (Columbia)............................ Baa3 8.625% 06/02/00 2,000 2,065,000
Banco Ganadero, SA, M.T.N., (Colombia),......... Baa3 9.75% 08/26/99 4,100 4,294,750
Bangkok Bank, (Thailand)........................ A3 8.375% 01/15/27 12,000 11,454,000
Chase Manhattan Corp.,.......................... A1 8.00% 06/05/99 2,000 2,057,960
Chemical Bank,.................................. Aa3 6.625% 08/15/05 2,000 1,934,940
Compass Trust Bank,............................. A3 8.23% 01/15/27 4,500 4,451,872
First Tennessee National Corp., B.A.,........... A3 8.07% 01/06/27 4,500 4,382,887
Kansallis-Osake Pankki, N.Y., (Finland)......... A3 8.65% 12/29/49 5,000 5,187,500
Kansallis-Osake Pankki, N.Y., (Finland)......... A3 10.00% 05/01/02 5,000 5,607,250
Skandinaviska Enskilda Bank, (Sweden)........... Baa1 7.50% 03/29/49 5,000 4,975,000
Svenska Handelsbank, (Sweden)................... A1 7.125% 03/29/49 3,500 3,433,500
--------------
49,844,659
--------------
CABLE & PAY TELEVISION SYSTEMS -- 0.6%
Rogers Cablesystems, Inc........................ Ba3 10.00% 03/15/05 4,000 4,320,000
--------------
COMPUTERS -- 1.0%
Seagate Technology, Inc.,....................... Baa3 7.45% 03/01/37 5,000 5,023,800
Digital Equipment Corp.,........................ Ba1 7.125% 10/15/02 2,800 2,741,788
--------------
7,765,588
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.4%
RJR Nabico, Inc................................. Baa3 8.25% 07/01/04 3,000 2,985,000
--------------
FINANCIAL SERVICES -- 25.0%
Advanta Mortgage Loan Trust, Ser. 1994-3........ Aaa 8.49% 01/25/26 8,500 8,879,844
American General Finance, Inc.,................. A1 8.125% 03/15/46 15,000 15,097,050
Aon Capital Trust,.............................. A3 8.205% 01/01/27 9,000 9,235,980
Aristar, Inc.,.................................. A3 5.75% 07/15/98 2,000 1,992,540
Aristar, Inc.,.................................. Baa1 7.50% 07/01/99 2,000 2,039,240
Arkwright Corp.,................................ Baa3 9.625% 08/15/26 5,000 5,494,500
Chrysler Financial Corp.,....................... A3 9.50% 12/15/99 5,000 5,335,850
Conseco, Inc.,.................................. Ba2 8.70% 11/15/26 1,500 1,535,235
Conseco, Inc.,.................................. Ba2 8.796% 04/01/27 14,000 14,260,120
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa3 7.00% 06/15/00 9,000 9,063,090
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 7.875% 03/15/98 5,000 5,056,450
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 8.75% 12/15/99 3,000 3,143,430
Ford Motor Credit Co.,.......................... A1 5.75% 01/25/01 4,000 3,880,640
Ford Motor Credit Co.,.......................... A1 6.25% 02/26/98 3,000 3,004,230
General Motors Acceptance Corp.,................ A3 8.40% 10/15/99 3,700 3,852,625
Green Tree Financial Corp.,..................... NR 7.90% 03/15/28 7,694 7,827,443
J.P. Morgan & Co., Inc.,........................ Aa2 7.54% 01/15/27 4,000 3,827,080
Liberty Mutual Insurance Co.,................... A2 8.20% 05/04/07 8,250 8,787,982
Lumbermens Mutual Casualty Co.,................. Baa1 9.15% 07/01/26 5,000 5,466,025
Nationwide CSN Trust,........................... A1 9.875% 02/15/25 5,000 5,501,350
Polysindo Int'l. Finance Co., (Netherlands)..... Ba3 11.375% 06/15/06 4,000 4,405,000
PT Alatief Freeport Financial Co.,
(Netherlands)................................. Ba1 9.75% 04/15/01 5,750 6,239,670
Reliastar Financial Corp.,...................... A3 6.625% 09/15/03 5,000 4,901,300
Riggs National Corp.,........................... Baa3 8.875% 03/15/27 2,200 2,233,000
Salomon, Inc.,.................................. Baa1 6.50% 03/01/00 10,000 9,949,600
Salomon, Inc.,.................................. Baa1 6.59% 02/21/01 10,000 9,883,900
Salomon, Inc.,.................................. Baa1 7.25% 05/01/01 2,250 2,276,100
SunAmerica, Inc.,............................... Baa1 6.20% 10/31/99 5,000 4,960,400
Union Planters Corp.,........................... Baa1 8.20% 12/15/26 5,000 4,893,100
Vesta Insurance Group,.......................... Baa3 8.525% 01/15/27 12,000 12,228,000
--------------
185,250,774
--------------
FOREST PRODUCTS -- 0.8%
Westvaco Corp.,................................. A1 9.75% 06/15/20 5,000 6,153,350
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS(CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL -- 0.4%
Compania Sud Americana de Vapores, SA,
(Chile)....................................... NR 7.375% 12/08/03 $ 3,000 $ 2,940,000
--------------
MEDIA -- 15.6%
Grupo Televisa, SA, (Mexico).................... Ba3 Zero 05/15/08 6,500 4,550,000
Impsat Corp..................................... B2 12.125% 07/15/03 3,000 3,217,500
McLeod, Inc..................................... B3 Zero 03/01/07 5,000 3,187,500
News America Holdings, Inc.,.................... Baa3 7.50% 03/01/00 6,000 6,119,160
News America Holdings, Inc.,.................... Baa3 7.75% 12/01/45 7,000 6,552,070
Paramount Communications, Inc.,................. Ba2 7.50% 01/15/02 5,000 5,009,200
TCI Communications, Inc.,....................... Ba1 6.875% 02/15/06 10,000 9,458,300
TCI Communications, Inc.,....................... Ba1 8.75% 08/01/15 15,000 15,721,500
Tele-Communications, Inc.,...................... Ba1 7.875% 08/01/13 800 781,080
Tele-Communications, Inc.,...................... Ba1 10.125% 04/15/22 6,300 7,363,377
Time Warner, Inc.,.............................. Ba1 7.75% 06/15/05 9,800 9,959,250
Time Warner, Inc.,.............................. Ba1 8.18% 08/15/07 4,000 4,164,440
Time Warner, Inc.,.............................. Baa1 8.375% 07/15/33 6,000 6,126,660
Turner Broadcasting System, Inc.,............... Ba1 7.40% 02/01/04 13,500 13,533,750
Viacom, Inc.,................................... Ba2 7.75% 06/01/05 5,000 4,962,150
Total Access Communications, (Thailand)......... Ba1 8.375% 11/04/06 15,000 14,671,050
--------------
115,376,987
--------------
MISCELLANEOUS -- 2.4%
International Bank for Reconstruction and
Development,.................................. Aaa 12.375% 10/15/02 750 939,113
Reliance Industries, Ltd.,...................... Baa3 10.375% 06/24/16 7,000 7,857,500
Reliance Industries, Ltd.,...................... Baa3 10.50% 08/06/46 8,000 9,010,000
--------------
17,806,613
--------------
MISCELLANEOUS CONSUMER GROWTH -- 0.4%
Whitman Corp.,.................................. Baa2 7.50% 08/15/01 3,000 3,051,360
--------------
OFFICE EQUIPMENT -- 0.8%
Xerox Corp.,.................................... A2 8.00% 02/01/27 6,250 6,250,000
--------------
OIL & GAS -- 2.9%
B.J. Services Co.,.............................. Baa3 7.00% 02/01/06 5,000 4,905,000
Occidental Petroleum Corp.,..................... Baa2 10.125% 11/15/01 5,000 5,608,250
Occidental Petroleum Corp.,..................... Baa2 11.125% 08/01/10 5,000 6,572,850
Parker & Parsley Petroleum Co.,................. Baa3 8.25% 08/15/07 4,000 4,192,600
--------------
21,278,700
--------------
RAILROADS -- 1.8%
CSX Corp.,...................................... Baa2 7.95% 05/01/27 3,000 3,099,750
Norfolk Southern Corp.,......................... Baa1 7.80% 05/15/27 10,000 10,295,000
--------------
13,394,750
--------------
RESTAURANTS -- 1.2%
Darden Restaurants, Inc.,....................... Baa1 7.125% 02/01/16 10,000 8,869,900
--------------
RETAIL -- 3.4%
Federated Department Stores, Inc.,.............. Baa2 8.125% 10/15/02 6,250 6,524,500
Federated Department Stores, Inc.,.............. Baa2 8.50% 06/15/03 11,800 12,520,036
Kmart Corp.,.................................... Ba3 9.80% 06/15/98 2,000 2,030,000
Rite Aid Corp.,................................. A3 6.70% 12/15/01 4,000 3,948,500
--------------
25,023,036
--------------
UTILITIES -- 5.0%
Arkla, Inc., M.T.N.............................. Baa3 9.32% 12/18/00 2,000 2,116,940
Cleveland Electric Illuminating Company,........ Ba2 7.67% 07/01/04 5,000 5,018,750
Cleveland Electric Illuminating Company,........ Ba2 7.19% 07/01/00 4,000 4,014,160
Commonwealth Edison Co.,........................ Baa 7.625% 01/15/07 7,525 7,544,113
El Paso Electric Company,....................... Ba3 9.40% 05/01/11 4,000 4,354,840
Pennsylvania Power & Light Co.,................. A3 9.375% 07/01/21 1,150 1,273,694
Quezon Power, (Philippines)..................... Ba1 8.86% 06/15/17 8,000 8,000,000
Transco Energy Co.,............................. Baa2 9.375% 08/15/01 4,000 4,353,360
--------------
36,675,857
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.7%
Federal Farm Credit Bank,....................... 8.65% 10/01/99 150 157,266
Resolution Funding Corp.,....................... Zero 10/15/15 17,100 4,731,741
Resolution Funding Corp.,....................... 8.125% 10/15/19 700 785,750
Resolution Funding Corp.,....................... 8.625% 01/15/21 200 236,500
United States Treasury Notes, (c)............... 6.125% 07/31/00 10,000 9,965,600
United States Treasury Notes,................... 6.25% 01/31/02 2,500 2,486,325
United States Treasury Notes,................... 6.50% 11/15/26 8,400 8,056,104
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS(CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
United States Treasury Notes,................... 6.625% 06/30/01 $ 7,430 $ 7,499,619
United States Treasury Notes,................... 12.50% 08/15/14 5,500 8,087,585
--------------
42,006,490
--------------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES -- 4.3%
Federal National Mortgage Association,.......... Zero 07/24/06 9,000 4,893,750
10/01/16
-
Federal National Mortgage Association,.......... 9.00% 09/01/21 569 601,372
05/20/02
-
Government National Mortgage Association,....... 7.50% 02/15/26 25,641 26,044,941
--------------
31,540,063
--------------
FOREIGN GOVERNMENT BONDS -- 14.9%
City of St. Petersburg, (Russia)................ NR 9.50% 06/18/02 5,000 5,000,000
Republic of Argentina, (Argentina).............. B1 6.75% 03/31/05 10,780 9,318,596
Republic of Colombia, (Columbia)................ Baa3 8.00% 06/14/01 1,600 1,626,432
Republic of Colombia, (Columbia)................ Baa3 8.75% 10/06/99 3,500 3,660,545
Republic of Panama, (Panama).................... Ba1 3.50% (a) 07/17/14 8,000 6,170,000
Republic of Panama, (Panama).................... Ba1 7.875% (a) 02/13/02 11,000 10,931,250
Republic of Philippines, (Philippines).......... Ba1 8.60% 06/15/27 10,000 9,835,200
Republic of Poland, (Poland).................... Baa3 4.00% (a) 10/27/14 11,000 9,391,250
Republic of South Africa, (South Africa)........ Baa3 8.50% 06/23/17 6,500 6,467,500
Republic of Venezuela, (Venezuela).............. Ba2 6.75% (a) 12/18/07 17,000 15,767,500
Rio De Janeiro, (Brazil)........................ B1 10.375% 07/12/99 5,000 5,206,250
Russian Ministry of Finance, (Russia),.......... Ba2 10.00% 06/26/07 9,000 8,968,500
United Mexican States, (Mexico)................. Baa3 7.875% 08/06/01 12,000 12,019,200
United Mexican States, (Mexico)................. Ba2 11.50% 05/15/26 5,000 5,710,000
--------------
110,072,223
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $718,108,146)......................................................................... 729,784,021
--------------
SHORT-TERM INVESTMENT -- 1.0%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account.............. 5.88% 07/01/97 7,491 7,491,000
--------------
(cost $7,491,000; Note 5)
TOTAL INVESTMENTS BEFORE SHORT SALES -- 99.7%
(cost $725,599,146; Note 6)............................................................... 737,275,021
--------------
INVESTMENTS SOLD SHORT -- (1.7)%
United States Treasury Bond,.................... 6.625% 05/15/07 7,950 (8,015,826)
United States Treasury Bond,.................... 6.625% 06,30/02 1,500 (1,491,090)
United States Treasury Bond,.................... 7.25% 05/15/04 3,000 (3,127,020)
--------------
(proceeds $12,645,897; Note 2)............................................................ (12,633,936)
--------------
TOTAL INVESTMENTS, NET OF SHORT SALES -- 97.9%................................................ 724,641,085
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (D) -- 0.1%........................................ 370,344
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES -- 2.0%........................................... 14,840,400
--------------
TOTAL NET ASSETS -- 100.0%.................................................................... $ 739,851,829
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
B.A. Bankers' Acceptances
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Indicates a variable rate security.
(b) Deposited with the custodian to cover on open short sale transaction.
(c) Security segregated as collateral for futures contracts.
(d) Open future contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Long
Positions:
341 U.S. T-Note Sep 97 $36,785,375 $36,310,688 ($474,687)
450 U.S. Bond Sep 97 $49,978,125 $48,928,188 ($1,049,938)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
HIGH YIELD BOND PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 95.6% MOODY'S INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS -- 90.1% RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 1.2%
Fairchild Corp.................................. CA 12.00% 10/15/01 $ 2,571 $ 2,622,420
Talley Manufacturing & Technology, Inc., Sr.
Notes......................................... B2 10.75% 10/15/03 3,000 3,150,000
--------------
5,772,420
--------------
AUTOMOTIVE PARTS -- 1.2%
Foamex, L.P..................................... B3 9.875% 06/15/07 1,450 1,500,750
JPS Automotive Products Corp., L.P., Sr.
Notes......................................... B2 11.125% 06/15/01 4,000 4,380,000
--------------
5,880,750
--------------
BROADCASTING & OTHER MEDIA -- 6.3%
Benedek Broadcasting Corp., Sr. Notes........... B2 11.875% 03/01/05 2,910 3,215,550
Capstar Broadcasting, Zero Coupon (until
2/1/02), 12.750%.............................. NR Zero 02/01/09 1,800 1,143,000
Capstar Broadcasting............................ NR 9.25% 07/01/07 2,000 1,935,000
Globo Communicacoes E Particip., Sr. Notes...... NR 10.50% 12/20/06 2,040 2,162,400
Hollinger Int'l., Inc........................... BA 8.625% 03/15/05 1,100 1,113,750
Hollinger Int'l., Inc........................... B1 9.25% 03/15/07 825 841,500
Multicanal Participacoes S.A.................... NR 10.50% 02/01/07 1,000 1,077,500
Outdoor Systems, Inc., Sr. Sub. Notes........... B1 9.375% 10/15/06 1,500 1,507,500
Paxson Communications Corp., Sr. Sub. Notes..... B3 11.625% 10/01/02 4,500 4,860,000
Plitt Theaters, Inc., Sr. Sub. Notes............ B3 10.875% 06/15/04 4,000 4,240,000
TV Azteca SA DE CV.............................. BA 10.125% 02/15/04 700 714,875
TV Azteca SA DE CV.............................. BA 10.50% 02/15/07 2,850 2,907,000
United Artists Theatre Circuit, Inc............. BA 11.50% 05/01/02 4,000 4,175,000
Von Hoffman Press, Inc.......................... B3 10.375% 05/15/07 500 522,500
--------------
30,415,575
--------------
BUILDING & RELATED INDUSTRIES -- 1.6%
Falcon Building Products, Inc., Zero Coupon
(until 6/15/02), 10.50%....................... B3 Zero 06/15/07 900 531,000
Falcon Building Products, Inc................... B3 9.50% 06/15/07 600 597,000
Nortek, Inc., Sr. Sub. Notes.................... CA 9.875% 03/01/04 3,750 3,843,750
Wickes Lumber Co................................ B3 11.625% 12/15/03 3,000 2,932,500
--------------
7,904,250
--------------
CABLE -- 8.2%
Adelphia Communications......................... NR 9.875% 03/01/07 2,000 1,930,000
Cablevision Systems Corp., Sr. Sub. Notes....... B3 9.875% 02/15/13 3,300 3,415,500
CCA Holdings, Sr. Sub. Notes.................... NR 13.00% 12/31/99 1,000 1,235,000
Comcast Corp., Sr. Sub. Notes................... B1 10.625% 07/15/12 4,000 4,720,000
Comcast UK Cable, Zero Coupon (until 11/15/00),
11.20% (a).................................... B2 Zero 11/15/07 1,225 918,750
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 12/15/00), 11.750%..................... B3 Zero 12/15/05 2,250 1,558,125
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 2/15/02), 10.750%...................... B3 Zero 02/15/07 700 414,750
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 9/30/99), 13.250%...................... B3 13.25% 09/30/04 2,000 1,670,000
Echostar Communications Corp., Sr. Disc. Notes,
Zero Coupon (until 6/1/99), 12.875%........... CA Zero 06/01/04 2,465 2,070,600
Echostar Satellite, Sr. Disc. Notes, Zero Coupon
(until 3/15/00), 13.125%...................... B- Zero 03/15/04 2,965 2,134,800
Falcon Holdings Group, L.P., Series B, Sr. Sub.
Notes, PIK.................................... NR 11.00% 09/15/03 4,020 4,039,954
Intermedia Capital Partners..................... B2 11.25% 08/01/06 3,380 3,641,950
International Cabletel, Inc., Zero Coupon (until
10/15/98), 10.875%............................ B3 Zero 10/15/03 1,500 1,275,000
International Cabletel, Inc., Sr. Disc. Notes,
Zero Coupon (until 4/15/00), 12.750%.......... B3 Zero 04/15/05 4,350 3,349,500
Kabelmedia Holdings, Sr. Disc. Note............. B3 Zero 08/01/06 2,000 1,200,000
Marcus Cable Operating Co., L.P., Sr. Sub. Disc.
Notes......................................... B3 Zero 08/01/04 2,250 1,957,500
Rogers Cablesystems, Inc., Sr. Sec'd. Deb.
(Canada)...................................... BA 10.00% 12/01/07 1,000 1,070,000
Rogers Cablesystems, Inc., Sr. Sec'd. Notes,
(Canada)...................................... BA 10.00% 03/15/05 1,750 1,890,000
Telewest Comm., PLC Zero Coupon (until 10/1/00),
11.00% (a).................................... B1 Zero 10/01/07 1,500 1,080,000
--------------
39,571,429
--------------
CASINOS -- 4.8%
Boomtown, Inc. First Mtge. Bonds................ B1 11.50% 11/01/03 3,000 3,232,500
Casino Magic Finance Corp., First Mtge. Bonds... B3 13.00% 08/15/03 1,000 855,000
Empress River Casino, Sr. Notes................. B1 10.75% 04/01/02 4,500 4,792,500
Grand Casinos, Inc.............................. BA 10.125% 12/01/03 4,250 4,420,000
Lady Luck Gaming, First Mtge. Notes............. B3 11.875% 03/01/01 2,000 2,025,000
Louisiana Casino Cruises, Inc................... NR 11.50% 12/01/98 1,500 1,533,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Trump Atlantic City Assoc., First Mtge. Notes... B1 11.25% 05/01/06 $ 3,500 $ 3,421,250
Trump Atlantic City Assoc., First Mtge. Notes... CA 11.75% 11/15/03 3,000 2,670,000
--------------
22,950,000
--------------
CHEMICALS -- 1.6%
Applied Extrusion Technology, Inc., Sr. Notes... B2 11.50% 04/01/02 1,700 1,785,000
Borden Chemicals & Plastics, L.P................ BA 9.50% 05/01/05 1,500 1,578,750
ISP Holdings, Inc............................... BA 9.00% 10/15/03 2,000 2,060,000
Sterling Chemical Holdings, Inc., Sr. Disc.
Notes......................................... CA Zero 08/15/08 1,560 1,029,600
Sterling Chemical Holdings, Inc., Sr. Sub.
Note.......................................... B3 11.75% 08/15/06 1,000 1,080,000
--------------
7,533,350
--------------
CONSUMER PRODUCTS -- 2.9%
Live Entertainment, Inc......................... NR 12.00% 03/23/99 1,500 1,503,750
Sealy Corp., Sr. Sub. Notes..................... B1 9.50% 05/01/98 750 787,500
Syratech Corp................................... B1 11.00% 04/15/07 475 504,688
Tultex Corp..................................... B3 9.625% 04/15/07 3,000 3,183,750
Twin Labs, Inc., Gtd. Notes..................... B3 10.25% 05/15/06 3,400 3,587,000
United Stationer Supply Co., Sr. Sub. Notes..... B3 12.75% 05/01/05 4,000 4,480,000
--------------
14,046,688
--------------
DRUGS & HEALTHCARE -- 4.4%
Fresenius Med Care Capital Trust................ BA 9.00% 12/01/06 1,600 1,624,000
Imed Corp., Sr. Sub. Notes...................... B3 9.75% 12/01/06 4,150 4,274,500
Owens & Minor, Inc., Sr. Sub. Notes............. B1 10.875% 06/01/06 3,450 3,846,750
Paracelsus Health, Sr. Sub. Notes............... B1 10.00% 08/15/06 2,750 2,805,000
Tenet Healthcare Corp., Sr. Sub. Notes.......... BA 8.625% 01/15/07 1,250 1,275,000
Tenet Healthcare Corp., Sr. Sub. Notes.......... BA 10.125% 03/01/05 6,500 7,101,250
--------------
20,926,500
--------------
ENERGY -- 6.9%
Calenergy, Inc., Sr. Notes...................... Ba2 9.50% 09/15/06 1,500 1,598,145
California Energy Co., Inc., Disc. Notes........ BA Zero 01/15/04 2,250 2,419,200
Falcon Drilling Co., Inc., L.P., Series B, Sr.
Sub. Notes.................................... B2 9.75% 01/15/01 500 520,000
Falcon Drilling Co., Inc., L.P., Series B, Sr.
Sub. Notes.................................... B3 12.50% 03/15/05 2,500 2,775,000
KCS Energy, Inc., Sr. Notes..................... B1 11.00% 01/15/03 4,000 4,340,000
Kelly Oil & Gas, Inc............................ B3 10.375% 10/15/06 3,500 3,605,000
Long Island Lighting Co., Deb................... BA 7.05% 03/15/03 1,500 1,475,775
Long Island Lighting Co., Deb................... BA 9.00% 11/01/22 1,500 1,642,530
Maxus Energy Corp., M.T.N....................... B1 10.83% 09/01/04 4,800 5,484,000
Maxus Energy Corp., Sr. Notes................... B1 9.375% 11/01/03 250 268,750
Parker Drilling Co., Gtd. Notes................. B1 9.75% 11/15/06 1,360 1,424,600
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 9.375% 02/01/06 3,000 2,865,000
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 12.25% 02/01/05 813 855,682
Snyder Oil Corp................................. B2 8.75% 06/15/07 900 895,500
Transamerican Energy Corp., Zero Coupon (until
6/15/99), 13.00%.............................. NR Zero 06/15/02 3,300 2,376,000
Transamerican Energy Corp....................... NR 11.50% 06/15/02 900 873,000
--------------
33,418,182
--------------
FINANCIAL SERVICES -- 4.2%
American Banknote Corp.......................... B2 11.625% 08/01/02 1,225 1,212,750
AmeriCredit Corp................................ B+ 9.25% 02/01/04 2,500 2,431,250
APP Int'l. Finance Co........................... BA 11.75% 10/01/05 3,750 4,134,375
Beaver Valley Funding, Inc...................... B1 8.625% 06/01/07 1,453 1,485,286
Coleman Escrow Corp............................. NR Zero 05/15/01 1,000 630,000
Coleman Holdings................................ B3 Zero 05/27/98 1,300 1,212,250
First Nationwide Holdings, Inc., Sr. Notes...... B2 12.50% 04/15/03 2,600 2,899,000
First Nationwide Holdings, Inc., Sr. Sub.
Notes......................................... Ba3 10.625% 10/01/03 1,600 1,752,000
Globalstar Capital Co........................... B3 11.375% 02/15/04 1,200 1,200,000
Polysindo Int'l. Finance Co., Sr. Notes......... BA 11.375% 06/15/06 1,750 1,927,188
PTC Int'l. Finance Co., Zero Coupon (until
7/1/02), 10.750%.............................. NR Zero 07/01/07 2,100 1,273,125
--------------
20,157,224
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
FOOD & BEVERAGE -- 3.9%
American Restaurant, Sr. Sec'd. Notes........... NR 13.00% 09/15/98 $ 700 $ 682,466
Curtis-Burns Foods, Inc......................... B3 12.25% 02/01/05 1,150 1,269,313
Envirodyne Industries, Sr. Disc. Notes.......... B1 12.00% 06/15/00 4,100 4,469,000
Fresh Del Monte Produce, N.V., Sr. Notes........ B3 10.00% 05/01/03 5,500 5,623,750
Pilgrim's Pride Corp............................ B3 10.875% 08/01/03 1,151 1,191,285
Premium Standard Farms, PIK, Sr. Sec'd. Notes... NR 11.00% 09/17/03 256 274,918
Specialty Foods Corp............................ CA 11.25% 08/15/03 1,500 1,290,000
Specialty Foods Corp., Sr. Notes................ B3 11.125% 10/01/02 4,000 3,960,000
--------------
18,760,732
--------------
GAMING -- 0.5%
Colorado Gaming & Entertainment, Sr. Notes,
PIK........................................... NR 12.00% 06/01/03 2,645 2,618,550
--------------
INDUSTRIAL -- 1.4%
Glasstech, Inc.................................. NR 12.75% 07/01/04 3,250 3,282,500
Interlake Corp.................................. B3 12.125% 03/01/02 3,000 3,150,000
Jordan Industries, Inc.......................... B3 10.375% 08/01/03 500 530,000
--------------
6,962,500
--------------
LEISURE & TOURISM -- 2.9%
Bally Total Fitness Holdings, Inc............... CA 13.00% 01/15/03 250 258,750
HMC Acquisition, Sr. Notes...................... BA 9.00% 12/15/07 3,000 3,048,750
HMH Properties, Inc., Sr. Notes................. B1 9.50% 05/15/05 5,550 5,772,000
Host Marriott Travel Plaza, Sr. Notes........... B1 9.50% 05/15/05 4,600 4,818,500
--------------
13,898,000
--------------
MISCELLANEOUS -- 3.9%
Coinstar, Inc., Sr. Sub. Notes.................. NR Zero 10/01/06 900 621,000
Consumers Int'l................................. Ba3 10.25% 04/01/05 2,700 2,895,750
Hedstrom Corp................................... NR Zero 06/01/09 400 238,000
Hedstrom Corp................................... NR 10.00% 06/01/07 900 931,500
Interact Systems Inc., Sr. Disc. Notes.......... NR Zero 08/01/03 4,400 1,980,000
K & F Industries, Inc., Sr. Notes............... B1 11.875% 12/01/03 1,050 1,111,687
KSL Recreation Group, Inc....................... B3 10.25% 05/01/07 400 416,000
Rayovac Corp.................................... B3 10.25% 11/01/06 3,200 3,360,000
Sassco, Inc..................................... NR Zero 05/01/04 3,325 3,541,125
TFM, SA DE...................................... B2 Zero 06/15/09 2,000 1,160,000
TFM, SA DE...................................... B2 10.25% 06/15/07 600 612,000
Viasystems, Inc................................. B3 9.75% 06/01/07 1,750 1,780,625
--------------
18,647,687
--------------
OIL & GAS -- 1.5%
DI Industries, Inc.............................. B1 8.875% 07/01/07 850 837,250
Empire Gas Corp., PIK........................... CA 12.875% 07/15/04 4,000 3,600,000
McDermott J Ray S.A., Sr. Sub. Notes............ BA 9.375% 07/15/06 2,750 2,791,250
--------------
7,228,500
--------------
PAPER & FOREST -- 2.9%
Gaylord Container Corp.......................... NR 9.75% 06/15/07 1,500 1,515,000
Gaylord Container Corp., Sr. Sub. Disc. Notes... CA Zero 05/15/05 4,365 4,779,675
Ivex Packaging Corp., Sr. Sub Notes............. B3 12.50% 12/15/02 740 802,900
Pacific Lumber Co., Sr. Notes................... B3 10.50% 03/01/03 2,750 2,832,500
Repap New Brunswick............................. B2 9.875% 07/15/00 1,247 1,259,470
Silgan Corp..................................... B3 11.75% 06/15/02 1,500 1,597,500
Stone Container................................. B3 12.25% 04/01/02 1,300 1,326,000
--------------
14,113,045
--------------
PUBLISHING -- .9%
Petersen Publishing, Sr. Sub. Notes............. B3 11.125% 11/15/06 2,050 2,270,375
Sullivan Graphics, Inc.......................... CA 12.75% 08/01/05 2,000 2,060,000
--------------
4,330,375
--------------
RESTAURANTS -- .6%
Flagstar Corp................................... B2 10.75% 09/15/01 3,000 3,045,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
RETAIL -- 5.4%
Barry's Jewelers, Inc........................... B3 11.00% 12/22/00 $ 750 $ 450,000
Cole National Group, Inc., Sr. Sub. Notes....... B2 9.875% 12/31/06 1,920 2,011,200
Jitney-Jungle Stores America, Inc............... B2 12.00% 03/01/06 4,000 4,440,000
Kmart Corp., Deb................................ BA 8.25% 01/01/22 3,250 2,973,750
Kmart Corp., Deb................................ BA 8.375% 07/01/22 2,500 2,275,000
Leslie's Poolmart............................... B2 10.375% 07/15/04 750 766,875
Merisel, Inc., Sub. Notes....................... NR 11.50% 01/31/98 996 1,003,514
Merisel, Inc., Sub. Notes....................... NR 11.78% 03/10/00 1,100 1,124,750
Phar-Mor, Inc., Sr. Notes....................... B3 11.72% 09/11/02 3,400 3,536,000
Silgan Holdings, Inc............................ NR 13.25% 07/15/06 3,149 3,558,370
Specialty Retailers, Inc........................ Ba3 8.50% 07/15/05 1,500 1,496,250
Specialty Retailers, Inc........................ B2 9.00% 07/15/07 400 398,000
Speedy Muffler King............................. B1 10.875% 10/01/06 2,200 2,200,000
--------------
26,233,709
--------------
STEEL & METAL -- 3.2%
Algoma Steel, Inc............................... B1 12.375% 07/15/05 2,250 2,486,250
CSN Iron, SA.................................... B1 9.125% 06/01/07 800 778,000
Earle M. Jorgensen Co........................... B2 10.75% 03/01/00 3,250 3,250,000
Ladish Company, Inc., PIK....................... NR 12.00% 12/22/00 491 495,581
Maxxam Group Holdings, Inc...................... NR 12.00% 08/01/03 4,000 4,150,000
WCI Steel, Inc. Sr. Notes....................... B2 10.00% 12/01/04 4,000 4,150,000
--------------
15,309,831
--------------
SUPERMARKETS -- 1.0%
Homeland Stores, Inc............................ NR 10.00% 08/01/03 720 696,600
Shoppers Food Warehouse Corp., Zero Coupon
(until 7/30/97) 10.50%........................ NR 9.75% 06/15/04 1,250 1,251,563
Shoppers Food Warehouse Corp.................... NR 10.00% 02/06/00 3,000 3,007,500
--------------
4,955,663
--------------
TECHNOLOGY -- .9%
Unisys Corp., Sr. Notes......................... B1 11.75% 10/15/04 4,000 4,370,000
--------------
TELECOMMUNICATIONS -- 14.6%
Brooks Fiber Properties, Inc., Sr. Disc. Notes,
Zero Coupon (until 3/01/01), 10.875%.......... NR Zero 03/01/06 2,250 1,530,000
Brooks Fiber Properties, Inc., Sr. Disc. Notes,
Zero Coupon (until 11/01/01), 11.875%......... NR Zero 11/01/06 2,000 1,300,000
Cellnet Data Systems, Zero Coupon (until
6/15/00), 13.00%(cost $2,286,598; purchased
06/06/95 & 11/17/95) (b)...................... NR Zero 06/15/05 4,250 2,911,250
Centennial Cellular Corp., Sr. Notes............ B 10.125% 05/15/05 4,500 4,680,000
Clearnet Communications, Inc., Sr. Disc.
Notes......................................... B3 Zero 12/15/05 7,940 5,260,250
Geotek Communication Inc., Sr. Disc. Notes, Zero
Coupon (until 7/15/05), 15.00%................ CA Zero 07/15/05 5,000 3,050,000
GST Telecommunications, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/15/00), 13.875%
Series H, Conv................................ NR Zero 12/15/05 650 416,000
Series L (a).................................. NR Zero 12/15/05 7,200 4,338,000
Hyperion Telecom, Inc........................... NR Zero 04/15/03 1,000 502,500
ICG Holdings, Inc., Sr. Sub. Notes, Zero Coupon
(until 9/15/00), 13.50%....................... NR Zero 09/15/05 3,800 2,774,000
Impsat Corp., Sr. Notes......................... B2 12.125% 07/15/03 3,500 3,753,750
Int'l Wireless Group, Inc....................... NR Zero 08/15/01 2,600 1,280,500
Int'l Wireless Group, Inc....................... NR 11.75% 06/01/05 2,000 2,180,000
Intermedia Communications of Florida, Inc., Sr.
Notes......................................... B3 13.50% 06/01/05 3,000 3,667,500
Ionica PLC...................................... NR 13.50% 08/15/06 5,000 5,300,000
McCaw Int'l., Zero Coupon (until 4/15/02),
13.00%........................................ NR Zero 04/15/07 3,000 1,440,000
McLeodUSA, Inc., Zero Coupon (until 3/01/02),
10.50%........................................ B3 Zero 03/01/07 4,400 2,805,000
Metrocall, Inc., Sr. Sub. Notes................. B2 10.375% 10/01/07 1,250 1,150,000
Omnipoint Corp.................................. B2 11.625% 08/15/06 500 481,875
Omnipoint Corp.................................. B3 11.625% 08/15/06 2,875 2,716,875
Pagemart, Inc.,
Series H, Zero Coupon (until 11/01/98),
12.25%...................................... NR Zero 11/01/03 2,000 1,730,000
Sr. Disc. Notes, Zero Coupon (until 2/01/00),
15.00% (a).................................. NR Zero 02/01/05 6,500 4,842,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Tele-Communications, Inc.,...................... B2 9.80% 02/01/12 $ 3,000 $ 3,433,770
Telesystem Int'l. Wireless, Inc., Zero Coupon
(until 6/30/02), 13.25%....................... NR Zero 06/30/07 1,500 795,000
Unifi Communications, Inc....................... NR 14.00% 03/01/04 3,250 3,168,750
Winstar Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 10/15/00), 14.00%.......... NR Zero 10/15/05 2,025 1,245,375
Sr. Disc. Notes, Zero Coupon (until 10/15/00),
14.00%........................................ NR Zero 10/15/05 5,850 3,334,500
--------------
70,087,395
--------------
TRANSPORTATION/AIRLINES -- 1.3%
US Air, Inc., Series 89-A2...................... B1 9.82% 01/01/13 4,000 4,120,000
Valuejet, Inc., Sr. Notes....................... B3 10.25% 04/15/01 2,000 1,900,000
--------------
6,020,000
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.7%
Ameritruck Distribution Corp., Sr. Sub. Notes... B3 12.25% 11/15/05 3,090 3,229,050
--------------
WASTE MANAGEMENT -- 1.2%
Allied Waste North America, Inc., Sr. Sub.
Notes, CMO, Zero Coupon (until 6/01/02),
11.30% (a).................................... Caa Zero 06/01/07 3,750 2,343,750
Allied Waste North America, Inc., Sr. Sub.
Notes......................................... B3 10.25% 12/01/06 3,000 3,195,000
--------------
5,538,750
--------------
TOTAL CORPORATE BONDS
(cost $420,814,779)......................................................................... 433,925,155
--------------
CONVERTIBLE BONDS -- 0.4%
TELECOMMUNICATIONS -- 0.4%
Geotek Communications, Inc...................... Caa 12.00% 02/15/01 2,000 1,840,000
--------------
(cost $2,000,000)
VALUE
COMMON STOCKS (A) -- 0.2% SHARES (NOTE 2)
------------- --------------
Cellnet Data Systems, Inc....................... 34,000 422,875
Dr. Pepper Bottling Holdings, Inc., (Class 'B'
Stock)........................................ 5,807 98,719
Hedstrom Holding Co............................. 24,261 0
Loehmann's Holdings, Inc........................ 4,403 28,620
Pagemart Nationwide, Inc........................ 13,125 82,031
PM Holdings Corp................................ 1,103 363,990
--------------
TOTAL COMMON STOCKS
(cost $5,396).................................................. 996,235
--------------
PREFERRED STOCKS -- 4.5%
Alliance Gaming Corp.,.......................... 23,387 2,397,155
Cablevision Systems Corp.,
Series H...................................... 2,907 300,844
Series L, PIK................................. 316 3,173,850
California Federal Bancorp...................... 100,000 2,581,250
Chancellor Radio Broadcast...................... 35,000 3,972,500
ICG Communication, Inc.......................... 10,350 1,071,225
Intermedia Comm., PIK........................... 268,775 2,775,102
Petroleum Heat & Power Co....................... 80,000 1,920,000
SFX Broadcasting, PIK........................... 25,789 2,759,430
Von Hoffman Press, Inc.......................... 20,000 572,000
--------------
TOTAL PREFERRED STOCKS
(cost $20,741,933)............................................. 21,523,356
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
WARRANTS -- 0.4% UNITS (NOTE 2)
------------- --------------
<S> <C> <C>
American Telecasting, Inc., expiring 08/10/00... 6,500 $ 6,500
Cellular Communications Int'l., Inc., expiring
08/15/03...................................... 4,375 65,625
Clearnet Communications, Inc., expiring
09/15/05...................................... 26,202 131,010
Coinstar Inc., expiring 10/01/06................ 900 63,000
Foamex - JPS Automotive, expiring 07/01/99...... 2,000 50,000
Globalstar Capital Co., expiring 02/15/04....... 1,200 0
Hyperion Telecommunications Corp., expiring
04/15/01...................................... 1,000 30,000
ICG Communications, expiring 09/15/05........... 20,790 254,677
Interact Systems, Inc., expiring 08/01/03....... 4,400 550
Intercel, Inc., expiring 02/01/06............... 6,720 26,880
Intermedia Communications of Florida, Inc.,
expiring 06/01/00............................. 3,000 120,000
International Wireless Commerce, expiring
08/15/01...................................... 2,600 130,000
Ionica PLC, expiring 08/15/06................... 3,000 420,000
Nextel Communications
expiring 12/15/98............................. 1,543 15
expiring 04/05/99............................. 2,250 23
Pagemart, Inc., expiring 11/01/03............... 9,200 46,000
Premium Standard Farms, L.P., expiring
01/00/00...................................... 22,025 649,738
President Riverboat Casinos, expiring
09/30/99...................................... 22,075 1,104
Sterling Chemical Holdings, Inc., expiring
08/15/08...................................... 560 19,600
Unifi Communications, expiring 03/01/04......... 3,250 0
--------------
TOTAL WARRANTS
(cost $787,452)................................................ 2,014,722
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $444,349,560)............................................ 460,299,468
--------------
PRINCIPAL
INTEREST MATURITY AMOUNT
SHORT-TERM INVESTMENT -- 4.9% RATE DATE (000)
------ -------- ---------
REPURCHASE AGREEMENTS -- 4.9%
Joint Repurchase Agreement Account.............. 5.883% 07/01/97 $ 23,460 23,460,000
--------------
(cost $23,460,000)
TOTAL INVESTMENTS -- 100.5%
(cost $467,809,560; Note 6)................................................... 483,759,468
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5%)................................. (2,521,185)
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 481,238,283
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
CMO Collateralized Mortgage Obligations
LP Limited Partnership
MTN Medium Term Note
NR Not Rated by Moody's or Standard & Poor's
PIK Payment-In-Kind securities
(a) Non-income producing security.
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $2,286,598. The aggregate value, $2,911,250 is approximately
0.6% of net assets. (See Note 2)
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
STOCK INDEX PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.0%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.0%
Aeroquip-Vickers, Inc........................... 8,200 $ 387,450
AlliedSignal, Inc............................... 84,300 7,081,200
Boeing Co....................................... 214,356 11,374,265
General Dynamics Corp........................... 18,600 1,395,000
Lockheed Martin Corp............................ 56,949 5,897,781
McDonnell Douglas Corp.......................... 62,600 4,288,100
Northrop Grumman Corp........................... 17,600 1,545,500
Parker-Hannifin Corp............................ 22,850 1,386,709
Raytheon Co..................................... 70,000 3,570,000
United Technologies Corp. (a)................... 70,200 5,826,600
--------------
42,752,605
--------------
AIRLINES -- 0.3%
AMR Corp. (a)................................... 26,900 2,488,250
Delta Air Lines, Inc............................ 22,000 1,804,000
Southwest Airlines Co........................... 43,700 1,130,737
USAir Group, Inc. (a)........................... 21,600 756,000
--------------
6,178,987
--------------
AUTOS - CARS & TRUCKS -- 2.0%
Chrysler Corp................................... 207,500 6,808,594
Cummins Engine Co., Inc......................... 12,600 889,087
Dana Corp....................................... 29,300 1,113,400
Echlin, Inc..................................... 19,300 694,800
Ford Motor Co................................... 354,300 13,374,825
General Motors Corp............................. 223,200 12,429,450
Genuine Parts Co................................ 55,125 1,867,359
Johnson Controls, Inc........................... 24,000 985,500
Navistar International Corp. (a)................ 20,500 353,625
PACCAR Inc...................................... 21,660 1,005,836
Safety Kleen Corp............................... 17,450 294,469
TRW, Inc........................................ 38,000 2,158,875
--------------
41,975,820
--------------
BANKS AND SAVINGS & LOANS -- 7.4%
Banc One Corp................................... 149,994 7,265,334
Bank of New York Co., Inc....................... 116,700 5,076,450
BankAmerica Corp................................ 212,096 13,693,448
BankBoston Corp................................. 45,200 3,257,225
Bankers Trust NY Corp........................... 23,900 2,079,300
Barnett Banks, Inc.............................. 60,700 3,186,750
Chase Manhattan Corp............................ 129,747 12,593,568
Citicorp........................................ 137,600 16,589,400
Comerica, Inc................................... 32,200 2,189,600
CoreStates Financial Corp....................... 66,700 3,585,125
First Bank System, Inc.......................... 39,800 3,397,925
First Chicago NBD Corp.......................... 94,315 5,706,057
First Union Corp.,.............................. 85,325 7,892,562
Fleet Financial Group, Inc...................... 76,800 4,857,600
Golden West Financial Corp...................... 16,200 1,134,000
Great Western Financial Corp.................... 39,600 2,128,500
H.F. Ahmanson & Co.............................. 31,600 1,358,800
KeyCorp......................................... 65,800 3,676,575
Mellon Bank Corp................................ 77,200 3,483,650
Morgan (J.P.) & Co., Inc........................ 54,950 5,735,406
National City Corp.............................. 66,600 3,496,500
NationsBank Corp................................ 216,426 13,959,477
Norwest Corp.................................... 111,100 6,249,375
PNC Bank Corp.,................................. 98,900 4,116,712
Providian Financial Corp........................ 27,300 877,012
Republic New York Corp.......................... 15,800 1,698,500
Suntrust Banks, Inc............................. 66,100 3,639,631
U.S. Bancorp.................................... 45,100 2,892,037
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Wachovia Corp................................... 49,100 $ 2,863,144
Wells Fargo & Co................................ 27,266 7,348,187
--------------
156,027,850
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc.................................... 43,000 1,599,062
--------------
CHEMICALS -- 2.2%
Air Products & Chemicals, Inc................... 33,400 2,713,750
Dow Chemical Co................................. 71,800 6,255,575
E.I. du Pont de Nemours & Co.................... 335,300 21,081,987
Eastman Chemical Co............................. 22,100 1,403,350
FMC Corp. (a)................................... 10,600 842,037
Hercules, Inc................................... 30,400 1,455,400
Monsanto Co..................................... 174,900 7,531,631
Nalco Chemical Co............................... 19,700 760,912
Rohm & Haas Co.................................. 19,000 1,711,187
Sigma-Aldrich Corp.............................. 29,200 1,023,825
Union Carbide Corp.............................. 37,800 1,778,962
--------------
46,558,616
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp.................................. 40,675 851,633
Great Lakes Chemical Corp....................... 17,400 911,325
Morton International, Inc....................... 40,500 1,222,594
Praxair, Inc.................................... 45,400 2,542,400
Raychem Corp.................................... 12,800 952,000
W.R. Grace & Co................................. 25,000 1,378,125
--------------
7,858,077
--------------
COMMERCIAL SERVICES -- 0.2%
CUC International, Inc. (a)..................... 121,025 3,123,958
Deluxe Corp..................................... 23,700 808,762
John H. Harland Co.............................. 8,200 187,062
Moore Corp., Ltd................................ 26,800 527,625
--------------
4,647,407
--------------
COMPUTER HARDWARE
Intergraph Corp. (a)............................ 11,300 96,050
--------------
COMPUTER SERVICES -- 5.0%
3Com Corp. (a).................................. 103,600 4,662,000
Adobe Systems, Inc.............................. 21,100 739,819
Autodesk, Inc................................... 13,900 532,544
Automatic Data Processing, Inc.................. 86,500 4,065,500
Bay Networks, Inc. (a).......................... 57,300 1,522,031
Cabletron Systems, Inc. (a)..................... 45,200 1,279,725
Ceridian Corp. (a).............................. 24,400 1,030,900
Cisco Systems, Inc. (a)......................... 197,100 13,230,337
Computer Associates International, Inc.......... 107,762 6,000,996
Computer Sciences Corp. (a)..................... 22,900 1,651,662
EMC Corp. (a)................................... 74,200 2,893,800
First Data Corp................................. 134,200 5,896,412
Microsoft Corp. (a)............................. 357,400 45,166,425
Novell, Inc. (a)................................ 102,500 711,094
Oracle Corp. (a)................................ 199,725 10,061,147
Parametric Technology Corp...................... 37,000 1,574,812
Seagate Technology, Inc. (a).................... 73,600 2,589,800
Silicon Graphics, Inc. (a)...................... 51,600 774,000
Tandem Computers, Inc. (a)...................... 32,900 666,225
--------------
105,049,229
--------------
COMPUTERS -- 3.1%
Amdahl Corp. (a)................................ 33,100 289,625
Apple Computer, Inc............................. 35,900 511,575
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Compaq Computer Corp., (a)...................... 81,500 $ 8,088,875
Dell Computer Corp., (a)........................ 51,600 6,059,775
Digital Equipment Corp. (a)..................... 47,000 1,665,562
Hewlett-Packard Co.,............................ 304,100 17,029,600
International Business Machines Corp.,.......... 298,300 26,902,931
Sun Microsystems, Inc. (a)...................... 109,800 4,086,619
--------------
64,634,562
--------------
CONSTRUCTION -- 0.1%
Fluor Corp...................................... 25,900 1,429,356
Foster Wheeler Corp............................. 12,500 506,250
Kaufman & Broad Home Corp....................... 8,366 146,928
Pulte Corp...................................... 5,900 203,919
--------------
2,286,453
--------------
CONSTRUCTION & HOUSING
Centex Corp..................................... 9,200 373,750
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 8,100 243,506
Bemis Co., Inc.................................. 16,300 704,975
Crown Cork & Seal Co., Inc...................... 37,800 2,019,937
Stone Container Corp............................ 28,566 408,851
--------------
3,377,269
--------------
COSMETICS & SOAPS -- 1.9%
Alberto Culver Co. (Class 'B' Stock)............ 16,400 459,200
Avon Products, Inc.............................. 38,900 2,744,881
Colgate Palmolive Co............................ 87,900 5,735,475
International Flavors & Fragrances, Inc......... 32,000 1,616,000
Procter & Gamble Co............................. 202,352 28,582,220
--------------
39,137,776
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.2%
Loews Corp...................................... 34,100 3,414,262
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
Avery Dennison Corp............................. 31,600 1,267,950
Pitney Bowes, Inc............................... 44,700 3,106,650
Unisys Corp. (a)................................ 50,100 382,012
Xerox Corp...................................... 96,546 7,615,066
--------------
12,371,678
--------------
DIVERSIFIED OPERATIONS -- 3.3%
Cognizant Corp.................................. 51,560 2,088,180
Fortune Brands, Inc............................. 49,900 1,861,894
General Electric Co............................. 978,000 63,936,750
Whitman Corp.................................... 30,300 766,969
--------------
68,653,793
--------------
DRUGS AND MEDICAL SUPPLIES -- 10.1%
Abbott Laboratories............................. 230,700 15,399,225
Allergan, Inc................................... 18,600 591,712
ALZA Corp. (a).................................. 25,500 739,500
American Home Products Corp..................... 191,200 14,626,800
Amgen, Inc. (a)................................. 79,000 4,591,875
Bausch & Lomb, Inc.............................. 15,600 735,150
Baxter International, Inc....................... 83,200 4,347,200
Becton, Dickinson & Co.......................... 36,700 1,857,937
Biomet, Inc..................................... 33,900 631,387
Boston Scientific Corp. (a)..................... 58,200 3,575,662
Bristol-Myers Squibb Co......................... 297,780 24,120,180
C.R. Bard, Inc.................................. 17,400 631,837
Cardinal Health, Inc............................ 32,700 1,872,075
Eli Lilly & Co.................................. 165,800 18,124,012
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Guidant Corp.................................... 22,500 $ 1,912,500
Johnson & Johnson............................... 397,200 25,569,750
Mallinckrodt, Inc............................... 23,100 877,800
Medtronic, Inc.................................. 71,300 5,775,300
Merck & Co., Inc................................ 360,350 37,296,225
Pfizer, Inc.,................................... 192,800 23,039,600
Pharmacia & Upjohn, Inc......................... 150,425 5,227,269
Schering-Plough Corp............................ 219,100 10,489,412
St. Jude Medical, Inc. (a)...................... 27,100 1,056,900
United States Surgical Corp..................... 21,700 808,325
Warner-Lambert Co............................... 81,000 10,064,250
--------------
213,961,883
--------------
ELECTRICAL EQUIPMENT -- 0.3%
W. W. Grainger, Inc............................. 15,700 1,227,544
Westinghouse Electric Corp...................... 189,200 4,375,250
--------------
5,602,794
--------------
ELECTRONICS -- 4.0%
Advanced Micro Devices, Inc. (a)................ 41,500 1,494,000
AMP, Inc........................................ 65,744 2,744,812
Applied Materials, Inc. (a)..................... 53,400 3,781,387
Data General Corp. (a).......................... 11,000 286,000
EG&G, Inc....................................... 13,800 310,500
Emerson Electric Co............................. 132,000 7,268,250
Harris Corp..................................... 11,900 999,600
Honeywell, Inc.................................. 37,100 2,814,962
Intel Corp...................................... 244,300 34,644,794
LSI Logic Corp. (a)............................. 41,900 1,340,800
Micron Technology, Inc.......................... 62,300 2,488,106
Motorola, Inc................................... 177,800 13,512,800
National Semiconductor Corp. (a)................ 42,200 1,292,375
Perkin-Elmer Corp............................... 12,500 994,531
Rockwell International Corp..................... 64,100 3,781,900
Tektronix, Inc.................................. 10,100 606,000
Texas Instruments, Inc.......................... 57,300 4,816,781
Thomas & Betts Corp............................. 16,300 856,769
--------------
84,034,367
--------------
ENERGY EQUIPMENT & SERVICES
NorAm Energy Corp............................... 39,700 605,425
--------------
ENVIRONMENTAL SERVICES -- 0.1%
Laidlaw, Inc. (Class 'B' Stock)................. 90,400 1,248,650
--------------
FINANCIAL SERVICES -- 3.1%
American Express Co............................. 140,300 10,452,350
Beneficial Corp................................. 15,500 1,101,469
Countrywide Credit Industries, Inc.............. 29,000 904,437
Federal Home Loan Mortgage Corp................. 211,400 7,266,875
Federal National Mortgage Association........... 322,900 14,086,512
Fifth Third Bancorp............................. 31,700 2,601,381
Green Tree Financial Corp....................... 41,500 1,478,437
H & R Block, Inc................................ 32,300 1,041,675
Household International, Inc.................... 31,600 3,711,025
MBNA Corp....................................... 98,375 3,602,984
Merrill Lynch & Co., Inc........................ 97,700 5,825,362
Morgan Stanley, Dean Witter, Discover & Co...... 170,205 7,329,453
Salomon, Inc.................................... 32,900 1,830,062
Schwab (Charles) Corp........................... 52,300 2,127,956
Transamerica Corp............................... 19,700 1,843,181
--------------
65,203,159
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 6.2%
Adolph Coors Co. (Class 'B' Stock).............. 11,500 $ 306,187
Anheuser-Busch Companies, Inc................... 147,900 6,202,556
Archer-Daniels-Midland Co....................... 160,998 3,783,453
Brown-Forman Corp. (Class 'B' Stock)............ 21,300 1,039,706
Campbell Soup Co................................ 139,400 6,970,000
Coca-Cola Co.................................... 739,700 49,929,750
ConAgra, Inc.................................... 71,300 4,572,112
CPC International, Inc.......................... 42,200 3,895,587
Fleming Companies, Inc.......................... 9,400 169,200
General Mills, Inc.............................. 47,300 3,080,412
Giant Food, Inc. (Class 'A' Stock).............. 16,500 538,312
H.J. Heinz & Co................................. 109,850 5,066,831
Hershey Foods Corp.............................. 45,700 2,527,781
Kellogg Co...................................... 62,800 5,377,250
PepsiCo, Inc.................................... 459,500 17,259,969
Pioneer Hi-Bred International, Inc.............. 23,700 1,896,000
Quaker Oats Co.................................. 39,300 1,763,587
Ralston-Ralston Purina Group.................... 31,440 2,583,975
Sara Lee Corp................................... 142,900 5,948,212
Seagram Co., Ltd................................ 109,200 4,395,300
Sysco Corp...................................... 53,100 1,938,150
W. M. Wrigley, Jr. Co........................... 34,000 2,278,000
--------------
131,522,330
--------------
FOREST PRODUCTS -- 0.9%
Boise Cascade Corp.............................. 13,986 493,881
Champion International Corp..................... 28,400 1,569,100
Georgia-Pacific Corp............................ 26,800 2,288,050
International Paper Co.......................... 89,234 4,333,426
James River Corp. of Virginia................... 25,500 943,500
Louisiana-Pacific Corp.......................... 31,800 671,775
Mead Corp....................................... 15,000 933,750
Potlatch Corp................................... 8,700 393,675
Temple-Inland Inc............................... 15,800 853,200
Union Camp Corp................................. 20,600 1,030,000
Westvaco Corp................................... 30,200 949,412
Weyerhaeuser Co................................. 59,500 3,094,000
Willamette Industries, Inc...................... 16,300 1,141,000
--------------
18,694,769
--------------
GAS PIPELINES -- 0.4%
Columbia Gas System, Inc........................ 16,000 1,044,000
Consolidated Natural Gas Co..................... 29,300 1,576,706
Enron Corp...................................... 75,300 3,073,181
Peoples Energy Corp............................. 9,700 363,144
Sonat, Inc...................................... 25,500 1,306,875
Williams Companies, Inc......................... 46,400 2,030,000
--------------
9,393,906
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.8%
Beverly Enterprises, Inc. (a)................... 28,200 458,250
Columbia/HCA Healthcare Corp.................... 198,598 7,807,384
Healthsouth Corp................................ 101,900 2,541,131
Humana, Inc. (a)................................ 48,500 1,121,563
Manor Care, Inc................................. 19,050 621,506
Service Corp. International..................... 71,500 2,350,563
Shared Medical Systems Corp..................... 7,100 383,400
Tenet Healthcare Corp. (a)...................... 87,800 2,595,588
--------------
17,879,385
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 1.2%
Clorox Co....................................... 15,300 $ 2,019,600
Gillette Co..................................... 166,500 15,775,875
Kimberly-Clark Corp............................. 167,688 8,342,478
--------------
26,137,953
--------------
HOUSING RELATED -- 0.4%
Armstrong World Industries, Inc................. 12,000 880,500
Fleetwood Enterprises, Inc...................... 9,500 283,219
Lowe's Companies, Inc........................... 52,400 1,945,350
Masco Corp...................................... 48,700 2,033,225
Maytag Corp..................................... 28,300 739,338
Owens Corning................................... 14,900 642,563
Stanley Works................................... 25,600 1,024,000
Tupperware Corp................................. 17,800 649,700
Whirlpool Corp.................................. 22,000 1,200,375
--------------
9,398,270
--------------
INSURANCE -- 4.3%
Aegon N.V., ARS................................. 11,859 830,871
Aetna, Inc...................................... 45,012 4,608,104
Allstate Corp................................... 131,194 9,577,162
American General Corp........................... 71,486 3,413,457
American International Group, Inc............... 140,237 20,947,902
Aon Corp........................................ 48,550 2,512,463
Chubb Corp...................................... 52,400 3,504,250
CIGNA Corp...................................... 22,000 3,905,000
Conseco, Inc.................................... 56,000 2,072,000
General Re Corp................................. 24,150 4,395,300
Hartford Financial Services Group, Inc.......... 34,600 2,863,150
Jefferson-Pilot Corp............................ 21,475 1,500,566
Lincoln National Corp........................... 30,600 1,969,875
Marsh & McLennan Companies, Inc................. 48,800 3,483,100
MBIA, Inc....................................... 12,500 1,410,156
MGIC Investment Corp............................ 34,800 1,668,225
SAFECO Corp..................................... 37,800 1,764,788
St. Paul Companies, Inc......................... 24,600 1,875,750
Torchmark Corp.................................. 21,500 1,531,875
Travelers Group Inc............................. 190,494 12,013,028
United Healthcare Corp.......................... 55,800 2,901,600
UNUM Corp....................................... 44,500 1,869,000
USF&G Corp...................................... 32,400 777,600
--------------
91,395,222
--------------
LEISURE -- 0.9%
Brunswick Corp.................................. 28,100 878,125
Harrah's Entertainment, Inc. (a)................ 30,650 559,363
Hilton Hotels Corp.............................. 74,700 1,984,219
King World Productions, Inc. (a)................ 10,550 369,250
Walt Disney Co.................................. 200,467 16,087,477
--------------
19,878,434
--------------
LODGING -- 0.3%
HFS, Inc. (a)................................... 47,300 2,743,400
ITT Corp. (a)................................... 34,100 2,082,231
Marriott International, Inc..................... 38,400 2,356,800
--------------
7,182,431
--------------
MACHINERY -- 1.1%
Briggs & Stratton Corp.......................... 6,300 315,000
Case Corp.,..................................... 21,500 1,480,813
Caterpillar, Inc................................ 56,300 6,045,213
Cincinnati Milacron, Inc........................ 11,000 285,313
Cooper Industries, Inc.......................... 34,200 1,701,450
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Deere & Co...................................... 76,600 $ 4,203,425
Dover Corp...................................... 34,100 2,097,150
Eaton Corp...................................... 22,500 1,964,531
Giddings & Lewis, Inc........................... 8,900 185,788
Harnischfeger Industries, Inc................... 14,700 610,050
Ingersoll-Rand Co............................... 33,300 2,056,275
Snap-On, Inc.................................... 17,500 689,063
Timken Co....................................... 18,200 647,238
--------------
22,281,309
--------------
MANUFACTURING -- 0.3%
Illinois Tool Works, Inc........................ 74,200 3,705,363
Tyco International, Ltd......................... 50,500 3,512,906
--------------
7,218,269
--------------
MEDIA -- 1.8%
Comcast Corp. (Special Class 'A' Stock)......... 95,900 2,049,863
Dow Jones & Co., Inc............................ 28,600 1,149,363
Dun & Bradstreet Corp........................... 49,460 1,298,325
Gannett Co., Inc................................ 42,000 4,147,500
Interpublic Group of Companies, Inc............. 25,200 1,545,075
Knight-Ridder, Inc.............................. 28,000 1,373,750
McGraw-Hill, Inc................................ 28,800 1,693,800
Meredith Corp................................... 15,800 458,200
New York Times Co. (Class 'A' Stock)............ 28,800 1,425,600
R. R. Donnelley & Sons Co....................... 46,200 1,692,075
Tele-Communications, Inc. (Series 'A'
Stock) (a).................................... 194,800 2,897,650
Time Warner, Inc................................ 168,040 8,107,930
Times Mirror Co. (Class 'A' Stock).............. 28,200 1,558,050
Tribune Co...................................... 35,900 1,725,444
US West Media Group (a)......................... 183,500 3,715,875
Viacom, Inc. (Class 'B' Stock) (a).............. 105,567 3,167,010
--------------
38,005,510
--------------
METALS-FERROUS -- 0.2%
Allegheny Teledyne, Inc......................... 51,380 1,387,260
Armco, Inc. (a)................................. 26,700 103,463
Bethlehem Steel Corp. (a)....................... 33,300 347,569
Inland Steel Industries, Inc.................... 14,000 365,750
Nucor Corp...................................... 25,700 1,452,050
USX-U.S. Steel Group............................ 25,740 902,509
Worthington Industries, Inc..................... 28,600 523,738
--------------
5,082,339
--------------
METALS-NON FERROUS -- 0.5%
Alcan Aluminum, Ltd............................. 66,450 2,304,984
Aluminum Company of America..................... 51,200 3,859,200
Cyprus Minerals Co.............................. 29,100 712,950
Inco Ltd........................................ 50,500 1,518,156
Reynolds Metals Co.............................. 21,900 1,560,375
--------------
9,955,665
--------------
MINERAL RESOURCES -- 0.2%
ASARCO, Inc..................................... 12,200 373,625
Burlington Resources, Inc....................... 36,300 1,601,738
Echo Bay Mines, Ltd............................. 37,200 213,900
Homestake Mining Co............................. 42,000 548,625
Phelps Dodge Corp............................... 19,500 1,661,156
--------------
4,399,044
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
Browning-Ferris Industries, Inc................. 64,700 $ 2,151,275
Crane Co........................................ 13,850 579,103
Ecolab, Inc..................................... 19,300 921,575
General Instrument Corp. (a).................... 40,900 1,022,500
General Signal Corp............................. 13,962 609,092
ITT Industries, Inc............................. 33,900 872,925
Millipore Corp.................................. 12,900 567,600
NACCO Industries, Inc. (Class 'A' Stock)........ 2,500 141,094
Pall Corp....................................... 36,500 848,625
PPG Industries Inc.............................. 54,800 3,185,250
Textron, Inc.................................... 49,200 3,265,650
Thermo Electron Corp. (a)....................... 45,600 1,550,400
--------------
15,715,089
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.8%
American Greetings Corp. (Class 'A' Stock)...... 23,300 865,013
Black & Decker Corp............................. 28,600 1,063,563
Corning, Inc.................................... 68,000 3,782,500
Eastman Kodak Co................................ 98,800 7,582,900
Jostens, Inc.................................... 10,900 291,575
Minnesota Mining & Manufacturing Co............. 123,700 12,617,400
Polaroid Corp................................... 13,500 749,250
Rubbermaid, Inc................................. 44,900 1,335,775
Unilever N.V., ADR, (United Kingdom)............ 47,600 10,376,800
--------------
38,664,776
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.1%
Tenneco, Inc.................................... 51,900 2,345,231
--------------
OIL & GAS -- 7.7%
Amerada Hess Corp............................... 28,300 1,572,419
Amoco Corp...................................... 146,630 12,747,646
Ashland, Inc.................................... 21,400 992,425
Atlantic Richfield Co........................... 95,570 6,737,685
Chevron Corp.................................... 194,400 14,373,450
Coastal Corp.................................... 31,400 1,670,088
Eastern Enterprises............................. 5,100 176,906
ENSERCH Corp.................................... 21,000 467,250
Exxon Corp...................................... 739,500 45,479,250
Kerr-McGee Corp................................. 14,600 925,275
Louisiana Land & Exploration Co................. 11,000 628,375
McDermott International, Inc.................... 16,700 487,431
Mobil Corp...................................... 234,600 16,392,675
NICOR, Inc...................................... 14,100 505,838
Occidental Petroleum Corp....................... 97,600 2,446,100
ONEOK, Inc...................................... 7,400 238,188
Pennzoil Co..................................... 14,200 1,089,850
Phillips Petroleum Co........................... 78,200 3,421,250
Royal Dutch Petroleum Co., ADR.................. 638,100 34,696,688
Santa Fe Energy Resources, Inc. (a)............. 27,970 410,809
Sun Co., Inc.................................... 22,000 682,000
Texaco, Inc..................................... 78,700 8,558,625
Union Pacific Resources Group, Inc.............. 72,656 1,807,318
Unocal Corp..................................... 73,600 2,856,600
USX-Marathon Group.............................. 86,500 2,497,688
--------------
161,861,829
--------------
OIL & GAS SERVICES -- 0.9%
Baker Hughes, Inc............................... 43,000 1,663,563
Dresser Industries, Inc......................... 53,200 1,981,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Halliburton Co.................................. 37,700 $ 2,987,725
Helmerich & Payne, Inc.......................... 7,600 437,950
Oryx Energy Co. (a)............................. 29,100 614,738
Rowan Companies, Inc. (a)....................... 25,400 715,963
Schlumberger Ltd................................ 73,100 9,137,500
Western Atlas, Inc. (a)......................... 15,500 1,135,375
--------------
18,674,514
--------------
PRECIOUS METALS -- 0.4%
Barrick Gold Corp............................... 107,900 2,373,800
Battle Mountain Gold Corp....................... 67,000 381,063
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 57,200 1,780,350
Newmont Mining Corp............................. 47,603 1,856,517
Placer Dome, Inc................................ 69,200 1,133,150
--------------
7,524,880
--------------
RAILROADS -- 0.8%
Burlington Northern, Inc........................ 46,342 4,164,987
CSX Corp........................................ 63,812 3,541,566
Norfolk Southern Corp........................... 37,400 3,768,050
Union Pacific Corp.............................. 72,900 5,139,450
--------------
16,614,053
--------------
REMARKET/LEASING OFFICE EQUIPMENT
IKON Office Solutions, Inc...................... 41,076 1,024,333
--------------
RESTAURANTS -- 0.5%
Darden Restaurants Inc.......................... 44,000 398,750
McDonald's Corp................................. 206,200 9,962,038
Wendy's International, Inc...................... 39,700 1,029,719
--------------
11,390,507
--------------
RETAIL -- 4.9%
Albertson's, Inc................................ 73,700 2,690,050
American Stores Co.............................. 44,000 2,172,500
AutoZone, Inc. (a).............................. 44,400 1,046,175
Charming Shoppes, Inc........................... 23,300 121,597
Circuit City Stores, Inc........................ 29,000 1,031,313
Costco Companies, Inc. (a)...................... 63,166 2,076,582
CVS Corp........................................ 49,500 2,536,875
Dayton-Hudson Corp.............................. 65,242 3,470,059
Dillards, Inc. (Class 'A' Stock)................ 33,850 1,172,056
Federated Department Stores, Inc. (a)........... 62,200 2,161,450
Great Atlantic & Pacific Tea Co., Inc........... 10,100 274,594
Harcourt General, Inc........................... 20,506 976,598
Home Depot, Inc................................. 144,449 9,957,953
J.C. Penney Co., Inc............................ 72,700 3,794,031
K mart Corp..................................... 142,900 1,750,525
Kroger Co. (a).................................. 75,200 2,180,800
Liz Claiborne, Inc.............................. 22,300 1,039,738
Longs Drug Stores, Inc.......................... 12,400 324,725
May Department Stores Co........................ 71,800 3,392,550
Mercantile Stores Co., Inc...................... 11,700 736,369
Newell Co....................................... 47,300 1,874,263
Nike, Inc. (Class 'B' Stock).................... 85,900 5,014,413
Nordstrom, Inc.................................. 23,200 1,138,250
Pep Boys-Manny, Moe & Jack...................... 18,100 616,531
Reebok International, Ltd....................... 16,300 762,025
Rite Aid Corp................................... 37,200 1,855,350
Sears, Roebuck & Co............................. 117,400 6,310,250
Sherwin-Williams Co............................. 49,800 1,537,575
Stride Rite Corp................................ 14,400 185,400
Supervalu, Inc.................................. 20,700 714,150
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Tandy Corp...................................... 16,665 $ 933,240
The Gap, Inc.................................... 82,300 3,199,413
The Limited, Inc................................ 79,448 1,608,822
TJX Companies, Inc.............................. 45,600 1,202,700
Toys 'R' Us, Inc. (a)........................... 84,850 2,969,750
Wal-Mart Stores, Inc............................ 680,000 22,992,500
Walgreen Co..................................... 73,500 3,941,438
Winn Dixie Stores, Inc.......................... 43,600 1,624,100
Woolworth Corp.................................. 38,900 933,600
--------------
102,320,310
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 15,800 684,338
Cooper Tire & Rubber Co......................... 23,200 510,400
Goodyear Tire & Rubber Co....................... 47,100 2,982,019
--------------
4,176,757
--------------
TELECOMMUNICATIONS -- 7.1%
Airtouch Communications, Inc. (a)............... 149,200 4,084,350
Alltel Corp..................................... 55,400 1,852,438
Ameritech Corp.................................. 163,900 11,134,956
Andrew Corp. (a)................................ 26,212 737,213
AT&T Corp....................................... 485,573 17,025,403
Bell Atlantic Corp.............................. 130,500 9,901,688
BellSouth Corp.................................. 295,800 13,717,725
DSC Communications Corp. (a).................... 34,000 756,500
Frontier Corp................................... 46,500 927,094
GTE Corp........................................ 285,120 12,509,640
Lucent Technologies, Inc........................ 191,460 13,797,086
MCI Communications Corp......................... 205,700 7,874,453
Northern Telecom, Ltd........................... 77,300 7,034,300
NYNEX Corp...................................... 130,300 7,508,538
SBC Communications, Inc......................... 271,793 16,817,192
Scientific-Atlanta, Inc......................... 21,500 470,313
Sprint Corp..................................... 128,200 6,746,525
Tellabs, Inc. (a)............................... 54,000 3,017,250
U S West Communications, Inc.................... 143,000 5,389,313
Worldcom Inc. (a)............................... 265,900 8,508,800
--------------
149,810,777
--------------
TEXTILES -- 0.2%
Fruit of the Loom, Inc. (Class 'A' Stock) (a)... 22,200 688,200
National Service Industries, Inc................ 12,500 608,594
Russell Corp.................................... 10,600 314,025
Springs Industries, Inc......................... 6,400 337,600
V.F. Corp....................................... 19,118 1,627,420
--------------
3,575,839
--------------
TOBACCO -- 1.6%
Gallaher Group, PLC, ADR........................ 25,900 477,531
Phillip Morris Co. Inc.,........................ 723,500 32,105,313
UST, Inc........................................ 55,300 1,534,575
--------------
34,117,419
--------------
TOYS -- 0.2%
Hasbro Inc...................................... 39,000 1,106,625
Mattel Inc...................................... 84,581 2,865,181
--------------
3,971,806
--------------
TRUCKING/SHIPPING -- 0.2%
Caliber System Inc.............................. 11,600 432,100
Federal Express Corp. (a)....................... 34,100 1,969,275
Ryder System, Inc............................... 24,300 801,900
--------------
3,203,275
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC -- 2.4%
American Electric Power Co. Inc................. 57,600 $ 2,419,200
Baltimore Gas & Electric Co..................... 44,150 1,178,253
Carolina Power & Light Co....................... 46,500 1,668,188
Central & South West Corp....................... 61,300 1,302,625
CINergy Corp.................................... 46,339 1,613,176
Consolidated Edison Co. of NY, Inc.............. 70,000 2,060,625
Dominion Resources, Inc......................... 53,950 1,975,919
DTE Energy Company.............................. 43,000 1,187,875
Duke Power Co................................... 106,831 5,121,211
Edison International............................ 127,200 3,164,100
Entergy Corp.................................... 69,500 1,902,563
FPL Group, Inc.................................. 55,000 2,533,438
GPU, Inc........................................ 36,600 1,313,025
Houston Industries, Inc......................... 71,500 1,532,781
Niagara Mohawk Power Corp....................... 39,700 339,931
Northern States Power Co........................ 20,000 1,035,000
Ohio Edison Co.................................. 44,200 964,113
P P & L Resources, Inc.......................... 47,800 953,013
Pacific Enterprises............................. 26,600 894,425
PacifiCorp...................................... 87,700 1,929,400
PECO Energy Co.................................. 64,800 1,360,800
PG&E, Corp...................................... 120,900 2,931,825
Public Service Enterprise Group, Inc............ 70,500 1,762,500
Southern Co..................................... 202,600 4,431,875
Texas Utilities Co.............................. 67,129 2,311,755
Unicom Corp..................................... 64,500 1,435,125
Union Electric Company.......................... 29,900 1,126,856
--------------
50,449,597
--------------
WASTE MANAGEMENT -- 0.2%
Waste Management, Inc........................... 137,200 4,407,550
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,180,886,147).......................................... 2,025,922,902
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 4.2% (000)
-------------
REPURCHASE AGREEMENTS -- 4.0%
Joint Repurchase Agreement Account,
5.88%, 7/1/97 Note 5.......................... $ 84,707 84,707,000
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (000) (NOTE 2)
------------- --------------
<S> <C> <C>
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bill,
4.935%, 09/18/97 (b).......................... $ 2,950 $ 2,916,960
5.05%, 09/18/97 (b)........................... 200 197,760
--------------
3,114,720
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $87,822,836)............................................. 87,821,720
--------------
TOTAL INVESTMENTS -- 100.2%
(cost $1,268,708,983; Note 6).................................. 2,113,744,622
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C)...................
(594,675)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%)..................
(2,992,395)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $2,110,157,552
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
ARS American Regulatory Shares
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Open futures contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Long
Positions:
S&P 500
183 Index Sep 97 $82,199,350 $81,457,875 ($741,475)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
EQUITY INCOME PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.5%
VALUE
COMMON STOCKS -- 89.8% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE/DEFENSE -- 4.0%
Newport News Shipbuilding, Inc. (a)............. 50,260 $ 976,929
Northrop Grumman Corp........................... 388,600 34,123,937
Thiokol Corp.................................... 422,000 29,540,000
United Industrial Corp.......................... 31,700 283,319
--------------
64,924,185
--------------
AIRLINES -- 3.0%
AMR Corp. (a)................................... 534,200 49,413,500
--------------
AUTOS - CARS & TRUCKS -- 2.8%
Chrysler Corp................................... 1,248,034 40,951,116
Ford Motor Co................................... 130,000 4,907,500
--------------
45,858,616
--------------
CANADIAN OIL & GAS -- 0.2%
Crestar Energy, Inc. (a)........................ 200,000 3,635,442
--------------
CHEMICALS -- 3.0%
Dow Chemical Co................................. 378,800 33,002,950
Millennium Chemicals, Inc. (a).................. 724,998 16,493,704
--------------
49,496,654
--------------
COMMERCIAL SERVICES -- 0.2%
IMO Industries, Inc. (a)........................ 434,600 2,553,275
--------------
COMPUTER HARDWARE -- 1.7%
Intergraph Corp. (a)............................ 607,700 5,165,450
Digital Equipment Corp. (a)..................... 639,100 22,648,106
--------------
27,813,556
--------------
COMPUTER SYSTEMS -- 4.2%
International Business Machines Corp.,.......... 748,200 67,478,288
--------------
CONSTRUCTION -- 0.5%
Kaufman & Broad Home Corp....................... 462,700 8,126,169
--------------
CONSUMER SERVICES
Petroleum Heat and Power, Inc. (Class 'A'
Stock)........................................ 47,300 127,119
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 4.2%
Gibson Greetings Inc. (a)....................... 778,600 17,518,500
RJR Nabisco Holdings Corp....................... 1,548,880 51,113,040
--------------
68,631,540
--------------
DIVERSIFIED OPERATIONS -- 0.7%
Energy Group, PLC, ADR, (United Kingdom)........ 253,750 10,752,656
--------------
DRUGS AND MEDICAL SUPPLIES -- 0.5%
United States Surgical Corp..................... 198,509 7,394,460
--------------
ELECTRICAL EQUIPMENT -- 4.9%
Kuhlman Corp.................................... 560,000 18,060,000
Pacific Scientific Co........................... 185,700 2,460,525
Westinghouse Electric Corp...................... 2,558,945 59,175,603
--------------
79,696,128
--------------
ELECTRONICS -- 0.9%
Esterline Technologies Corp. (a)................ 275,700 9,701,194
Instron Corp.................................... 153,000 2,180,250
Newport Corp.................................... 306,900 3,452,625
--------------
15,334,069
--------------
FINANCIAL SERVICES -- 10.8%
A.G. Edwards, Inc............................... 211,000 9,020,250
Bear Stearns Companies, Inc..................... 928,251 31,734,581
Lehman Brothers Holdings, Inc.,................. 1,762,500 71,381,250
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Painewebber Group, Inc.......................... 904,000 $ 31,640,000
Salomon, Inc.................................... 560,000 31,150,000
--------------
174,926,081
--------------
FOREST PRODUCTS -- 0.7%
Fletcher Challenge Ltd., ADR, (Canada).......... 62,400 900,900
Louisiana-Pacific Corp.,........................ 71,700 1,514,662
Potlatch Corp................................... 81,500 3,687,875
Rayonier, Inc................................... 149,900 6,305,169
--------------
12,408,606
--------------
GAS DISTRIBUTION -- 1.9%
British Gas PLC, ADR, (United Kingdom).......... 610,600 22,515,875
TransCanada Pipelines, Ltd...................... 389,600 7,840,700
Yankee Energy System, Inc....................... 30,400 744,800
--------------
31,101,375
--------------
GAS PIPELINES -- 0.7%
Sonat, Inc...................................... 206,300 10,572,875
--------------
HOUSING RELATED -- 1.0%
Hanson, PLC, ADR, (United Kingdom).............. 253,750 6,343,750
Ryland Group, Inc............................... 750,000 10,593,750
--------------
16,937,500
--------------
INSURANCE -- 4.0%
Marsh & McLennan Companies, Inc................. 537,600 38,371,200
Ohio Casualty Corp.............................. 379,900 16,715,600
Selective Insurance Group, Inc.................. 198,800 9,629,375
--------------
64,716,175
--------------
LODGING -- 0.1%
Homestead Village, Inc.......................... 66,245 1,175,849
--------------
MEDIA -- 1.0%
Dun & Bradstreet Corp........................... 195,600 5,134,500
Gannett Co., Inc................................ 120,000 11,850,000
--------------
16,984,500
--------------
METALS-FERROUS -- 2.8%
LTV Corp........................................ 90,000 1,282,500
USX-U.S. Steel Group............................ 1,259,400 44,157,712
--------------
45,440,212
--------------
METALS-NON FERROUS -- 3.1%
Aluminum Company of America..................... 420,000 31,657,500
Reynolds Metals Co.............................. 271,586 19,350,502
--------------
51,008,002
--------------
MINERAL RESOURCES -- 0.3%
Coeur D'Alene Mines Corp........................ 194,678 2,518,647
Echo Bay Mines, Ltd............................. 298,499 1,716,369
--------------
4,235,016
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.6%
Tenneco, Inc.................................... 227,700 10,289,194
--------------
OIL & GAS -- 0.7%
Mesa, Inc., (a)................................. 800,000 4,600,000
Mobil Corp...................................... 1,200 83,850
USX-Marathon Group.............................. 230,600 6,658,575
--------------
11,342,425
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 2.9%
Elf Aquitaine SA, ADR, (France)................. 880,000 47,905,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS SERVICES -- 5.5%
KN Energy, Inc.................................. 261,900 $ 11,032,537
McDermott International, Inc.................... 1,861,300 54,326,694
Parker & Parsley Petroleum Co................... 662,400 23,432,400
--------------
88,791,631
--------------
REAL ESTATE DEVELOPMENT -- 16.3%
Alexander Haagen Properties, Inc................ 420,000 6,825,000
Amli Residential Properties Trust............... 208,300 4,895,050
Beacon Properties Corp.......................... 184,800 6,167,700
Boston Properties, Inc.......................... 250,000 6,875,000
Bradley Real Estate, Inc........................ 240,000 4,620,000
Crescent Operating, Inc......................... 152,150 1,825,800
Crescent Real Estate Equities, Inc.............. 1,521,500 48,307,625
Crown American Realty Trust..................... 1,139,500 10,540,375
Equity Residential Properties Trust............. 1,422,700 67,578,250
Gables Residential Trust........................ 435,800 11,003,950
Glimcher Realty Trust........................... 565,000 11,653,125
Irvine Apartment Communities, Inc............... 392,000 11,564,000
JDN Realty Corp................................. 293,200 9,162,500
JP Realty, Inc.................................. 84,000 2,278,500
Kimco Realty Corp............................... 56,250 1,785,937
Malan Realty Investors, Inc..................... 140,000 2,485,000
Manufactured Home Communities, Inc.............. 532,000 12,269,250
Pennsylvania Real Estate Investment Trust....... 50,100 1,124,119
Security Capital Pacific Trust.................. 527,034 12,055,903
Simon Debartolo Group, Inc...................... 214,300 6,857,600
Sunstone Hotel Investors, Inc................... 240,000 3,480,000
TriNet Corporate Realty Trust, Inc.............. 166,700 5,511,519
Vornado Realty Trust............................ 228,800 16,502,200
Walden Residential Properties, Inc.............. 5,000 128,125
--------------
265,496,528
--------------
RETAIL -- 2.6%
J.C. Penney Co., Inc............................ 669,800 34,955,187
Tandy Corp...................................... 140,000 7,840,000
--------------
42,795,187
--------------
TELECOMMUNICATIONS -- 0.6%
Telefonos de Mexico SA (Class 'L' Stock), ADR,
(Mexico)...................................... 198,000 9,454,500
--------------
TEXTILES -- 0.9%
Garan, Inc...................................... 2,900 58,362
Kellwood Co..................................... 518,900 14,399,475
Oxford Industries, Inc.......................... 34,500 978,938
--------------
15,436,775
--------------
TOBACCO -- 1.0%
Bat Industries, PLC, ADR, (United Kingdom)...... 606,500 11,106,531
UST, Inc........................................ 202,100 5,608,275
--------------
16,714,806
--------------
TRUCKING/SHIPPING -- 0.8%
Alexander & Baldwin, Inc........................ 287,750 7,517,469
Yellow Corp..................................... 259,700 5,810,788
--------------
13,328,257
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC -- 0.4%
Centerior Energy Corp........................... 46,600 $ 521,338
Central Louisiana Electric Co................... 6,100 171,563
Pacific Gas & Electric, Co...................... 240,000 5,820,000
--------------
6,512,901
--------------
TOTAL COMMON STOCKS
(cost $1,027,989,798).......................................... 1,458,809,052
--------------
PREFERRED STOCKS -- 3.7%
EXPLORATION & PRODUCTION -- 0.5%
Parker & Parsley Capital, LLC (Cum. Conv.)...... 118,800 7,603,200
--------------
INTEGRATED PRODUCERS -- 0.1%
Unocal Corp. (Conv.) Series 6.25%............... 34,372 1,946,315
--------------
METALS-FERROUS -- 1.3%
Bethlehem Steel Corp. (Cum. Conv.).............. 264,000 10,626,000
Rouge Steel..................................... 262,500 4,167,188
USX Capital Trust 6/7 (Cum. Conv.).............. 114,600 5,507,962
--------------
20,301,150
--------------
METALS-NON FERROUS -- 0.4%
Hecla Mining Co. (Cum. Conv.), Series B......... 60,000 2,801,250
Kaiser Aluminum Corp. (Cum. Conv.).............. 319,900 3,598,875
--------------
6,400,125
--------------
OIL SERVICES -- 0.3%
McDermott International, Inc. (Cum. Conv.),
Series C...................................... 88,000 4,334,000
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Security Capital Pacific Trust (Cum. Conv.),
Series A...................................... 54,500 1,662,250
--------------
RETAIL -- 0.8%
Kmart Corp. (Cum. Conv.)........................ 247,300 13,570,587
--------------
TEXTILES/APPAREL -- 0.2%
Fieldcrest Cannon, Inc. (Cum. Conv.), Series
A............................................. 85,000 3,910,000
--------------
TOTAL PREFERRED STOCKS
(cost $61,980,377)............................................. 59,727,627
--------------
WARRANTS UNITS
-------------
CONSTRUCTION
Morrison Knudsen Corp........................... 5,689 35,556
--------------
LODGING
Homestead Village, Inc.......................... 44,442 377,757
--------------
TOTAL WARRANTS
(cost $191,545)................................................ 413,313
--------------
PRINCIPAL
CONVERTIBLE AMOUNT
BONDS -- 1.2% (000)
-------------
EXPLORATION & PRODUCTION -- 0.1%
Oryx Energy Co.
7.50%, 05/15/14............................... $ 1,760 1,733,600
--------------
OIL & GAS SERVICES -- 0.3%
Baker Hughes, Inc.
0.00%, 05/05/08............................... 5,940 4,573,800
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
CONVERTIBLE AMOUNT VALUE
BONDS (CONTINUED) (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REAL ESTATE DEVELOPMENT -- 0.3%
Alexander Haagen Properties, Inc., Series A
7.50%, 01/15/01............................... $ 600 $ 582,000
7.50%, 01/15/01............................... 1,000 965,000
Malan Realty Investors, Inc.
9.50%, 07/15/04............................... 3,000 3,090,000
--------------
4,637,000
--------------
RETAIL -- 0.5%
Charming Shoppes, Inc.
7.50%, 07/15/06............................... 8,000 7,940,000
--------------
TOTAL CONVERTIBLE BONDS
(cost $17,976,268)............................................. 18,884,400
--------------
LONG-TERM BONDS -- 1.8%
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.8%
United States Treasury Note,
6.75%, 08/15/26............................... 30,000 29,690,700
--------------
(cost $29,016,419)
TOTAL LONG-TERM INVESTMENTS
(cost $1,137,154,407).......................................... 1,567,525,092
--------------
SHORT-TERM INVESTMENT -- 3.1%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.88%, 07/01/97............................... 50,423 50,423,000
--------------
(cost $50,423,000; Note 5)
TOTAL INVESTMENTS -- 99.6%
(cost $1,187,577,407; Note 6).................................. 1,617,948,092
--------------
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.4%............................................ 7,204,426
--------------
TOTAL NET ASSETS -- 100.0%....................................... $1,625,152,518
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
LLC Limited Liability Company
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corportion) or Societe Anonyme (French
Corporation)
(a) Non-income producing Security.
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
EQUITY PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 75.0%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AUTOS - CARS & TRUCKS -- 3.5%
Chrysler Corp................................... 2,862,120 $ 93,913,312
General Motors Corp............................. 700,000 38,981,250
Navistar International Corp. (a)................ 395,200 6,817,200
PACCAR Inc...................................... 279,400 12,974,637
TRW, Inc........................................ 694,400 39,450,600
--------------
192,136,999
--------------
BANKS & FINANCIAL SERVICES -- 6.0%
Bank of New York Co., Inc....................... 1,200,000 52,200,000
BankAmerica Corp................................ 1,100,000 71,018,750
Chase Manhattan Corp............................ 475,600 46,162,925
First America Bank Corp......................... 280,500 12,832,875
Great Western Financial Corp.................... 653,800 35,141,750
Mellon Bank Corp................................ 552,796 24,944,920
Mercantile Bankshares Corp...................... 279,600 11,184,000
NationsBank Corp................................ 800,000 51,600,000
Republic New York Corp.......................... 225,000 24,187,500
--------------
329,272,720
--------------
CHEMICALS -- 1.8%
BOC Group, PLC ADR (United Kingdom)............. 800,000 28,400,000
Eastman Chemical Co............................. 691,650 43,919,775
Wellman, Inc.................................... 798,200 13,868,725
Witco Corp...................................... 268,800 10,197,600
--------------
96,386,100
--------------
COMPUTERS -- 3.8%
Amdahl Corp. (a)................................ 4,000,000 35,000,000
Digital Equipment Corp. (a)..................... 3,050,000 108,084,375
Gerber Scientific, Inc.......................... 419,800 8,291,050
International Business Machines Corp............ 600,000 54,112,500
NCR Corp........................................ 100,000 2,975,000
--------------
208,462,925
--------------
CONSTRUCTION & HOUSING -- 1.3%
American Standard Co., Inc. (a)................. 1,050,000 46,987,500
Centex Corp..................................... 600,000 24,375,000
--------------
71,362,500
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 5.6%
Gibson Greeting Inc. (a)........................ 750,000 16,875,000
Kimberly-Clark Corp............................. 500,000 24,875,000
Loews Corp...................................... 1,600,000 160,200,000
RJR Nabisco Holdings Corp....................... 3,100,000 102,300,000
--------------
304,250,000
--------------
ELECTRICAL EQUIPMENT
Rexel, Inc. (a)................................. 107,199 1,983,181
--------------
ELECTRONICS -- 0.5%
Harris Corp..................................... 300,000 25,200,000
--------------
ENERGY EQUIPMENT & SERVICES -- 0.4%
NorAm Energy Corp............................... 1,300,000 19,825,000
--------------
FINANCIAL SERVICES -- 6.1%
American Express Co............................. 1,100,000 81,950,000
Lehman Brothers Holdings, Inc.,................. 900,000 36,450,000
Morgan (J.P.) & Co., Inc........................ 395,400 41,269,875
Morgan Stanley, Dean Witter, Discover & Co...... 3,200,000 137,800,000
Salomon, Inc.................................... 700,000 38,937,500
--------------
336,407,375
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 0.5%
Guiness PLC (United Kingdom).................... 3,000,000 $ 29,357,388
--------------
FOREST PRODUCTS -- 8.4%
Georgia-Pacific Corp............................ 900,000 76,837,500
International Paper Co.......................... 1,350,000 65,559,375
James River Corp. of Virginia................... 560,000 20,720,000
Mead Corp....................................... 900,000 56,025,000
Rayonier Inc.................................... 830,400 34,928,700
Temple-Inland Inc............................... 850,000 45,900,000
Weyerhaeuser Co................................. 1,450,000 75,400,000
Willamette Industries, Inc...................... 1,250,000 87,500,000
--------------
462,870,575
--------------
HEALTHCARE -- 3.8%
Foundation Health Corp. (a)..................... 1,859,910 56,378,522
Tenet Healthcare Corp. (a)...................... 3,237,832 95,718,408
Wellpoint Health Networks Inc................... 1,194,600 54,802,275
--------------
206,899,205
--------------
INSURANCE -- 11.9%
American Financial Group Inc.................... 552,700 23,455,206
American General Corp........................... 1,000,000 47,750,000
Chubb Corp...................................... 2,206,400 147,553,000
Citizens Corp................................... 700,000 19,337,500
Equitable Companies, Inc. (The)................. 1,800,000 59,850,000
Old Republic International Corp................. 1,950,885 59,136,202
SAFECO Corp..................................... 1,600,000 74,700,000
St. Paul Companies, Inc......................... 826,900 63,051,125
Travelers Group Inc............................. 1,800,000 113,512,500
Western National Corp........................... 1,624,300 43,551,544
--------------
651,897,077
--------------
METALS-FERROUS -- 0.6%
Bethlehem Steel Corp. (a)....................... 500,000 5,218,750
Birmingham Steel Corp........................... 1,527,400 23,674,700
Carpenter Technology Corp....................... 100,000 4,575,000
--------------
33,468,450
--------------
METALS-NON FERROUS -- 1.5%
Aluminum Company of America..................... 600,000 45,225,000
AMAX Gold Inc. (a).............................. 131,342 804,470
Cyprus Amax Minerals Co......................... 1,533,200 37,563,400
Nord Resources Corp. (a)........................ 130,500 407,813
--------------
84,000,683
--------------
OIL & GAS -- 2.0%
Amerada Hess Corp............................... 325,000 18,057,813
Atlantic Richfield Co........................... 800,000 56,400,000
Total SA, ADR (France).......................... 738,365 37,379,728
--------------
111,837,541
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 3.7%
Elf Aquitaine SA, ADR (France).................. 2,424,433 131,980,071
Occidental Petroleum Corp....................... 1,100,000 27,568,750
Oryx Energy Co. (a)............................. 1,600,000 33,800,000
Union Texas Petroleum Holdings, Inc............. 504,500 10,562,969
--------------
203,911,790
--------------
RESTAURANTS -- 1.3%
Darden Restaurants Inc.......................... 7,922,700 71,799,469
--------------
RETAIL -- 7.1%
Dayton-Hudson Corp.............................. 358,800 19,083,675
Dillards Department Stores, Inc. (a)............ 3,000,000 103,875,000
K-Mart Corp. (a)................................ 6,500,000 79,625,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Petrie Stores Corp. (a)......................... 540,000 $ 1,704,375
Tandy Corp...................................... 1,382,900 77,442,400
Toys 'R' Us, Inc. (a)........................... 1,800,000 63,000,000
Waban, Inc. (a)................................. 1,300,000 41,843,750
--------------
386,574,200
--------------
TELECOMMUNICATIONS -- 3.2%
360 Communication Co. (a)....................... 1,396,066 23,907,630
AT&T Corp....................................... 1,600,000 56,100,000
Loral Corp...................................... 1,800,000 27,000,000
Telefonica de Espana, SA, ADR (Spain)........... 800,000 69,000,000
--------------
176,007,630
--------------
TEXTILES
Worldtex, Inc. (a).............................. 107,199 857,592
--------------
TRANSPORTATION -- 0.4%
OMI Corp. (a)................................... 1,000,000 9,562,500
Overseas Shipholding Group, Inc................. 600,000 11,775,000
--------------
21,337,500
--------------
UTILITY - ELECTRIC -- 1.5%
American Electric Power Company, Inc............ 180,000 7,560,000
GPU, Inc........................................ 500,000 17,937,500
Long Island Lighting Co......................... 1,541,400 35,452,200
Unicom Corp..................................... 991,800 22,067,550
--------------
83,017,250
--------------
UTILITY - WATER -- 0.1%
American Water Works Co., Inc................... 270,000 5,771,250
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,658,631,715).................................................... 4,114,894,400
--------------
PRINCIPAL
MOODY'S AMOUNT
SHORT-TERM INVESTMENTS -- 24.8% RATING (000)
------------ ---------
CERTIFICATES OF DEPOSIT-YANKEE -- 6.1%
Bank of Montreal, (Canada),
6.375%, 07/01/97.............................. P1 $ 55,177 55,177,000
Berliner Handels, (Germany),
5.72%, 07/21/97............................... NR 13,000 13,000,072
Canadian Imperial Bank, (Canada),
5.60%, 08/25/97............................... P3 1,000 1,000,000
6.25%, 07/01/97............................... P3 47,104 47,104,000
Commerzbank, (Germany),
5.58%, 07/01/97............................... P1 12,000 12,000,000
Credit Agricole Indosuez, (France),
5.63%, 08/11/97............................... NR 25,000 25,000,699
Deutsche Bank, (Germany),
6.25%, 07/01/97............................... P1 55,177 55,177,000
Republic National Bank of NY, (Canada)
6.25%, 07/01/97............................... P1 55,177 55,177,000
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Societe Generale, (France),
6.375%, 07/01/97.............................. P1 $ 55,177 $ 55,177,000
Svenska Handelsbanken, (Sweden),
5.66%, 07/14/97............................... P1 13,000 13,000,089
--------------
331,812,860
--------------
COMMERCIAL PAPER -- 8.8%
American Honda Finance Corp.,
5.65%, 07/28/97............................... P2 9,000 8,961,862
Aristar, Inc.,
5.67%, 07/14/97............................... P3 3,000 2,993,857
5.70%, 07/24/97............................... P3 1,000 996,358
5.70%, 07/28/97............................... P3 960 955,896
Associates Corp. of North America,
5.55%, 07/03/97............................... P3 10,000 9,996,917
6.188%, 07/01/97.............................. P3 28,000 28,000,000
Bear, Stearns & Co.,
5.57%, 07/07/97............................... P2 7,000 6,993,502
Citicorp,
5.70%, 07/10/97............................... P3 45,000 44,935,875
Countrywide Home Loan, Inc.,
5.55%, 07/02/97............................... P3 12,000 11,998,150
5.60%, 08/07/97............................... P3 12,000 11,930,933
Creditanstalt Finance Inc.,
5.55%, 07/03/97............................... NR 4,000 3,998,767
Finova Capital Corp.,
5.60%, 07/07/97............................... NR 9,000 8,991,600
5.70%, 07/07/97............................... NR 1,450 1,448,622
5.71%, 07/15/97............................... NR 3,000 2,993,338
Ford Motor Credit Corp.,
5.55%, 07/09/97............................... P1 49,000 48,939,567
General Electric Capital Corp.,
6.30%, 07/01/97............................... P1 55,177 55,177,000
General Motors Acceptance Corp.,
5.59%, 07/07/97............................... P3 52,000 51,951,553
GTE Corp.,
5.60%, 07/23/97............................... P3 10,000 9,965,778
Hertz Corp.,
5.55%, 07/08/97............................... P3 3,500 3,496,223
John Deere Capital Corp.,
5.54%, 07/09/97............................... P2 3,000 2,996,307
Lehman Brothers Holdings, Inc.,
5.75%, 07/02/97............................... NR 18,000 17,997,125
6.40%, 07/01/97............................... NR 15,000 15,000,000
Merrill Lynch & Co. Inc.,
5.57%, 08/18/97............................... P3 6,000 5,955,440
Mitsubishi International Corp.,
5.65%, 07/09/97............................... NR 39,000 38,951,033
5.75%, 07/08/97............................... NR 16,220 16,201,865
NYNEX Corp.,
5.55%, 07/07/97............................... P2 2,900 2,897,317
5.60%, 08/05/97............................... P2 7,100 7,061,344
PHH Corp.,
5.67%, 07/07/97............................... NR 7,000 6,993,385
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Preferred Receivables Funding Corp.,
5.55%, 07/10/97............................... P1 $ 2,000 $ 1,997,225
Rank Xerox Capital, PLC, (Europe),
5.60%, 07/21/97............................... NR 4,105 4,092,229
Sears Roebuck Acceptance Corp.,
6.20%, 07/01/97............................... P2 13,000 13,000,000
Smith Barney, Inc.,
5.55%, 07/07/97............................... P2 10,000 9,990,750
Xerox Corp.,
5.60%, 07/11/97............................... P2 26,000 25,959,556
--------------
483,819,374
--------------
REPURCHASE AGREEMENTS -- 7.7%
First National Bank of Chicago,
6.25%, 07/01/97............................... 53,220 53,220,000
Joint Repurchase Agreement Account,
5.883%, 07/01/97 (Note 5)..................... 371,391 371,391,000
--------------
424,611,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 2.2%
Federal Home Loan Bank,
5.23%, 07/10/97............................... 21,200 21,170,956
Federal Home Loan Mortgage Corp.,
5.17%, 08/14/97............................... 9,360 9,297,101
5.53%, 08/07/97 (b)........................... 10,000 9,943,164
5.53%, 08/14/97............................... 5,000 4,966,206
Federal National Mortgage Association,
5.40%, 12/05/97............................... 10,000 9,989,100
5.53%, 10/29/97............................... 8,000 7,997,520
5.54%, 08/05/97............................... 900 895,122
5.89%, 05/21/98............................... 10,000 10,007,800
8.95%, 07/10/97............................... 4,300 4,302,666
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
United States Treasury Notes,
5.125%, 02/28/98.............................. $ 30,000 $ 29,887,500
5.75%, 09/30/97............................... 12,000 12,009,360
--------------
120,466,495
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,360,702,882).................................................... 1,360,709,729
--------------
TOTAL INVESTMENTS -- 99.8%
(cost $4,019,334,597; Note 6)............................................ 5,475,604,129
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..............................
8,754,229
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,484,358,358
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a variable rate security.
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 97.1%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.5%
Boeing Co....................................... 171,500 $ 9,100,219
Gartner Group Inc.,............................. 67,700 2,432,969
--------------
11,533,188
--------------
BANKS AND SAVINGS & LOANS -- 1.9%
Chase Manhattan Corp............................ 63,100 6,124,644
--------------
BUSINESS SERVICES -- 4.8%
Eagle River Interactive, Inc. (a)............... 84,600 676,800
Manpower, Inc................................... 66,800 2,972,600
Omnicom Group, Inc.............................. 95,800 5,903,675
Reuters Holdings PLC, ADR (United Kingdom),..... 103,400 6,514,200
--------------
16,067,275
--------------
COMMERCIAL SERVICES -- 1.7%
CUC International, Inc. (a)..................... 212,100 5,474,831
--------------
COMPUTER SERVICES -- 5.9%
3Com Corp. (a).................................. 130,100 5,854,500
Cisco Systems, Inc. (a)......................... 139,800 9,384,075
SAP AG, ADR (Germany)........................... 60,800 4,210,400
--------------
19,448,975
--------------
COMPUTER SYSTEMS -- 8.6%
COMPAQ Computer Corp., (a)...................... 67,300 6,679,525
Dell Computer Corp., (a)........................ 51,800 6,083,263
Diebold, Inc.................................... 83,900 3,272,100
Hewlett-Packard Co.,............................ 150,700 8,439,200
International Business Machines Corp.,.......... 45,600 4,112,550
--------------
28,586,638
--------------
DRUGS AND MEDICAL SUPPLIES -- 12.4%
Boston Scientific Corp. (a)..................... 65,600 4,030,300
Bristol-Myers Squibb Co......................... 88,500 7,168,500
Eli Lilly & Co.................................. 76,500 8,362,406
Merck & Co., Inc................................ 40,300 4,171,050
Pfizer, Inc.,................................... 78,500 9,380,750
Smithkline Beecham, PLC, UTS, ADR (United
Kingdom)...................................... 90,000 8,246,250
--------------
41,359,256
--------------
ELECTRONICS -- 10.9%
Applied Materials, Inc. (a)..................... 64,500 4,567,406
Intel Corp...................................... 56,100 7,955,681
International Rectifier Corp. (a)............... 189,700 3,533,162
KLA Instruments Corp. (a)....................... 105,500 5,143,125
LSI Logic Corp. (a)............................. 157,700 5,046,400
Symbol Technologies, Inc. (a)................... 123,550 4,154,369
Texas Instruments, Inc.......................... 68,700 5,775,094
--------------
36,175,237
--------------
FINANCIAL SERVICES -- 5.5%
MBNA Corp....................................... 90,250 3,305,406
Morgan Stanley, Dean Witter, Discover & Co...... 129,520 5,577,455
Schwab (Charles) Corp.,......................... 93,100 3,788,006
Washington Mutual Inc........................... 92,400 5,520,900
--------------
18,191,767
--------------
FOOD & BEVERAGES -- 1.0%
PepsiCo, Inc.................................... 86,800 3,260,425
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOSPITAL MANAGEMENT -- 3.1%
Healthsouth Corp., (a).......................... 207,300 $ 5,169,544
PhyCor, Inc., (a)............................... 147,500 5,079,531
--------------
10,249,075
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 2.1%
Gillette Co..................................... 72,300 6,850,425
--------------
INSURANCE -- 7.7%
CIGNA Corp...................................... 29,800 5,289,500
MGIC Investment Corp............................ 133,100 6,380,481
Mutual Risk Management, Ltd..................... 99,866 4,581,353
Provident Companies, Inc........................ 75,400 4,033,900
UNUM Corp....................................... 128,800 5,409,600
--------------
25,694,834
--------------
LEISURE -- 2.5%
Walt Disney Co.................................. 103,800 8,329,950
--------------
LODGING -- 1.7%
Hilton Hotels Corp.............................. 214,600 5,700,312
--------------
MACHINERY -- 1.4%
Case Corp....................................... 66,800 4,600,850
--------------
MEDIA -- 1.9%
Clear Channel Communications, Inc. (a).......... 100,300 6,168,450
--------------
OIL & GAS -- 1.5%
Union Pacific Resources Group, Inc.............. 192,700 4,793,412
--------------
OIL & GAS SERVICES -- 2.4%
Schlumberger Ltd................................ 64,800 8,100,000
--------------
RESTAURANTS -- 0.7%
McDonald's Corp................................. 50,800 2,454,275
--------------
RETAIL -- 5.2%
Corporate Express, Inc. (a)..................... 241,750 3,490,266
Dollar General Corporation...................... 43,100 1,616,250
Kohl's Corp. (a)................................ 89,200 4,722,025
Sears, Roebuck & Co............................. 49,700 2,671,375
The Gap, Inc.................................... 125,800 4,890,475
--------------
17,390,391
--------------
TELECOMMUNICATIONS -- 7.0%
Ascend Communications, Inc. (a)................. 62,800 2,472,750
L.M. Ericsson Telephone Co. (Class 'B' Stock),
ADR (Sweden).................................. 132,300 5,209,313
Nokia AB Corp., ADR (Japan)..................... 89,100 6,571,125
Tellabs, Inc. (a)............................... 102,400 5,721,600
Vodafone Group PLC, ADR (United Kingdom)........ 68,700 3,327,656
--------------
23,302,444
--------------
TRUCKING/SHIPPING -- 1.2%
Federal Express Corp. (a)....................... 71,300 4,117,575
--------------
SOFTWARE -- 2.5%
Intuit, Inc. (a)................................ 120,000 2,752,500
Microsoft Corp., (a)............................ 44,300 5,598,413
--------------
8,350,913
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $259,025,944)............................................ 322,325,142
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT -- 3.4% (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account,
5.88%, 07/01/97 (Note 5)...................... $ 11,397 $ 11,397,000
--------------
(cost $11,397,000)
TOTAL INVESTMENTS -- 100.5%
(cost $270,422,944 ; Note 6)................................... 333,722,142
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5%)..................
(1,662,298)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 332,059,844
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
UTS Unit Trust Shares
(a) Non-income producing security
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
GLOBAL PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 98.3%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
ARGENTINA -- 0.8%
Banco Frances Del Rio De La Plata (Banks and
Savings & Loans).............................. 485,395 $ 5,257,590
--------------
AUSTRALIA -- 3.5%
Brambles Industries, Ltd. (Miscellaneous - Basic
Industry)..................................... 585,900 11,578,801
Broken Hill Proprietary Co., Ltd. (Metals -
Diversified).................................. 500,731 7,361,195
Publishing and Broadcasting, Ltd. (Media)....... 224,600 1,293,071
Woolworth Ltd. (Retail)......................... 1,005,600 3,300,673
--------------
23,533,740
--------------
BRAZIL -- 0.8%
Basil De Distrub., ADR (Retail) (a)(b).......... 235,000 5,346,250
--------------
FEDERAL REPUBLIC OF GERMANY -- 4.5%
Hoechst, AG (Chemicals) (a)..................... 96,000 4,072,294
Linde, AG (Machinery) (a)....................... 12,040 9,216,399
SAP, AG (Computer Services) (a)................. 43,300 8,689,794
Volkswagen, AG (Autos -- Cars & Trucks)......... 11,100 8,509,576
--------------
30,488,063
--------------
FINLAND -- 1.9%
Nokia Corp. (Class 'A' Stock)
(Telecommunications).......................... 168,900 12,756,638
--------------
FRANCE -- 7.2%
Carrefour Supermarche, SA (Retail).............. 19,300 14,015,943
Imetal (Steel).................................. 27,136 3,596,863
Legrand, SA (Electrical Equipment).............. 40,500 7,132,405
SGS Thomson Microelectronics, N.V.,
(Electronics) (a)............................. 114,240 9,133,494
Total SA (Class 'B' Stock) (Petroleum).......... 66,100 6,680,801
Valeo, SA (Autos - Cars & Trucks)............... 137,785 8,557,274
--------------
49,116,780
--------------
HONG KONG -- 3.9%
CDL Hotels International, Ltd. (Real Estate
Development).................................. 7,294,145 2,965,674
Guoco Group, Ltd. (Financial Services).......... 1,944,000 10,237,522
Hutchison Whampoa, Ltd. (Miscellaneous - Basic
Industry)..................................... 786,000 6,822,652
New World Development Co., Ltd. (Real Estate
Development).................................. 1,123,000 6,740,174
--------------
26,766,022
--------------
ITALY -- 4.0%
Credito Italiano (Financial Services) (a)....... 3,150,000 5,768,094
Gucci Group, ADR (Textiles)..................... 124,700 8,027,562
Telecom Italia Mobile SpA
(Telecommunications).......................... 4,060,000 13,147,711
--------------
26,943,367
--------------
JAPAN -- 18.5%
Aoki International, Co., Ltd. (Retail) (a)...... 419,000 7,463,849
Aoyama Trading, Co., Ltd. (Retail).............. 254,000 8,162,068
Daibiru Corp. (Real Estate Development)......... 1,070,000 12,893,818
Daito Trust Construction Co. (Construction)..... 661,000 7,792,089
Daiwa Securities Co., Ltd. (Financial
Services) (a)................................. 836,000 6,599,232
Makita Corp. (Machinery)........................ 426,000 6,249,389
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Mikuni Coca Cola Bottling (Containers &
Packaging).................................... 254,000 $ 3,770,520
Mitsui Fudosan (Real Estate Development)........ 449,000 6,194,726
Mycal Corp. (Retail) (a)........................ 265,000 3,818,110
Namco, Ltd. (Leisure)........................... 154,500 5,963,063
Nichiei Co., Ltd. (Financial Services).......... 84,400 9,801,956
Nippon Shokubai Co. (Chemicals)................. 539,000 4,283,007
Nomura Securities Co., Ltd. (Financial
Services) (a)................................. 513,000 7,077,716
Seino Transportation (Trucking/ Shipping)....... 325,000 3,519,036
Sekisui Housing, Ltd. (Real Estate) (a)......... 682,000 6,908,138
Senshukai (Retail).............................. 411,000 4,199,005
Shiseido Co., Ltd. (Cosmetics & Soaps).......... 504,000 8,317,848
Sumitomo Marine & Fire Insurance (Insurance).... 553,000 4,539,120
Tokio Marine & Fire Insurance (Insurance)....... 320,000 4,191,408
Yodogawa Steel Works (Steel).................... 553,000 3,380,196
--------------
125,124,294
--------------
MEXICO -- 3.7%
Apasco, SA de CV (Steel)........................ 706,100 5,073,453
Cifra, SA de CV (Class 'B' Stock)
(Retail) (a).................................. 4,291,507 7,999,266
Fomento Economico Mexicano, SA de CV (Class 'B'
Stock) (Food & Beverages) (a)................. 1,314,100 7,835,236
Kimberly Clark (Series A) (Paper Products)...... 1,097,500 4,427,077
--------------
25,335,032
--------------
NETHERLANDS -- 2.9%
Heineken, N.V. (Food & Beverages)............... 22,725 3,877,834
Nutricia Verenigde Bedrijven (Healthcare)....... 40,000 6,316,292
Royal Dutch Petroleum (Petroleum) (a)........... 177,200 9,215,734
--------------
19,409,860
--------------
NEW ZEALAND -- 0.1%
Fletcher Challenge Forestry Division (Forest
Products)..................................... 293,204 427,016
--------------
THE PHILIPPINES -- 1.3%
Philippine Long Distance Telephone, ADR
(Telecommunications).......................... 131,600 8,455,300
--------------
SINGAPORE -- 2.2%
Overseas Chinese Banking Corp., Ltd. (Banks and
Savings & Loans) (a).......................... 594,400 6,153,123
Overseas Union Bank, Ltd. (Banks and Savings &
Loans) (a).................................... 1,010,800 6,292,313
Sembawang Maritime, Ltd. (Trucking/Shipping).... 883,500 2,768,469
--------------
15,213,905
--------------
SPAIN -- 3.0%
Banco Central Hispanoamericano, ADR (Banks &
Financial Services)........................... 225,806 8,260,344
Centros Commerciales Pryca, SA (Retail)......... 207,362 4,489,456
Telefonica De Espana (Telecommunications)....... 271,700 7,855,487
--------------
20,605,287
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
GLOBAL PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
SWEDEN -- 6.3%
Allgon Corp. (Miscellaneous - Basic Industry)... 344,400 $ 5,465,026
Astra AB (Series 'B' Free) (Drugs and Hospital
Supplies)..................................... 462,213 8,172,743
Hennes & Mauritz (Series 'B' Free) (Retail)..... 460,900 16,239,349
Mo Och Domsjo, AB (Series'B' Free) (Forest
Products)..................................... 168,100 5,530,883
Skandinaviska Enskilda Bank (Series A) (Banks
and Savings & Loans).......................... 701,700 7,589,811
--------------
42,997,812
--------------
UNITED KINGDOM -- 12.1%
Bank Of Ireland (Banks and Savings & Loans)..... 1,052,500 11,560,713
Barclays, PLC (Banks and Savings & Loans)....... 336,400 6,673,456
British Sky Broadcasting Group, PLC (Media)..... 1,058,100 7,748,149
Dixons Group, PLC (Retail)...................... 844,000 6,559,608
Guest Kean & Nettlefolds, PLC (Autos - Cars &
Trucks) (a)(b)................................ 479,040 8,247,472
Hays, PLC (Commercial Services)................. 556,600 5,280,033
Reed International PLC (Miscellaneous - Basic
Industry)..................................... 638,400 6,162,252
Siebe, PLC (Machinery).......................... 459,240 7,780,474
Standard Chartered, PLC (Banks and Savings &
Loans)........................................ 621,300 9,471,426
Vodafone Group, PLC (Telecommunications)........ 2,564,400 12,504,662
--------------
81,988,245
--------------
UNITED STATES -- 21.6%
Adaptec, Inc. (Computer Services) (b)........... 189,000 6,567,750
Baker Hughes, Inc. (Oil Services)............... 175,500 6,789,656
Circus Circus Enterprises, Inc. (Leisure)....... 309,300 7,616,512
Cisco Systems, Inc. (Computer Services) (a)..... 165,800 11,129,325
Electronic Arts, Inc. (Computer Services)....... 207,400 6,973,825
Mattel Inc. (Toys).............................. 359,258 12,169,865
Mcafee Associates Inc (Software) (a)............ 111,300 7,025,812
Microsoft Corp. (Computer Services) (a)......... 118,500 14,975,438
Mirage Resorts, Inc. (Leisure) (a).............. 226,500 5,719,125
Mobil Corp. (Oil & Gas)......................... 174,000 12,158,250
Motorola, Inc. (Electronics).................... 72,200 5,487,200
Oracle Corp. (Computer Services) (a)............ 270,600 13,631,475
Texas Instruments, Inc. (Electronics)........... 75,600 6,355,125
Tiffany & Co. (Retail).......................... 141,900 6,554,006
Time Warner, Inc. (Media)....................... 185,700 8,960,025
Transocean Offshore, Inc. (Petroleum
Services)..................................... 85,500 6,209,438
Walt Disney Co. (Leisure)....................... 99,000 7,944,750
--------------
146,267,577
--------------
TOTAL COMMON STOCKS
(cost $502,457,643)............................................ 666,032,778
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
WARRANTS UNITS (NOTE 2)
------------- --------------
<S> <C> <C>
MALAYSIA
Renong Berhad, Expire 11/21/00, (Miscellaneous -
Basic Industry)............................... 185,625 $ 97,813
--------------
(cost $49,861)
TOTAL LONG-TERM INVESTMENTS
(cost $502,507,504)............................................ 666,130,591
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 0.7% (000)
-------------
COMMERCIAL PAPER -- 0.6%
UNITED STATES
Federal Farm Credit
5.44%, 07/01/97............................... $ 4,064 4,063,325
--------------
(cost $4,063,325)
PURCHASED CALL OPTIONS -- 0.1% CONTRACTS
-------------
JAPAN
Tokyo Option Index, Expiring 11/21/97 @ 1,480... 941 871,323
--------------
(cost $600,165; Note 2)
TOTAL SHORT-TERM INVESTMENTS
(cost $4,663,490).............................................. 4,934,648
--------------
TOTAL INVESTMENTS -- 99.0%
(cost $507,170,994 ; Note 6)................................... 671,065,239
--------------
FORWARD CURRENCY CONTRACTS -- AMOUNT
RECEIVABLE FROM COUNTERPARTIES -- 0.2% (C)....................... 1,203,237
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8%.................... 5,357,033
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 677,625,509
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
AB Akiteboing (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $9,139,669. The aggregate value, $13,593,722, is
approximately 2% of net assets. (See Note 2)
(c) Outstanding forward currency contracts at June 30, 1997 were as follows:
<TABLE>
<S> <C> <C> <C>
FOREIGN VALUE AT
CURRENCY SETTLEMENT CURRENT
CONTRACTS DATE VALUE APPRECIATION
Purchase:
Japanese Yen,
expiring
07/17/97 $14,900,000 $15,676,273 $776,273
Sale:
Japanese Yen,
expiring
07/17/97 $87,496,764 $87,069,800 $426,964
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
CERTAIN PORTFOLIOS OF
THE PRUDENTIAL SERIES FUND, INC.
(UNAUDITED)
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ('Series Fund'), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of fifteen Portfolios ('Portfolio' or 'Portfolios'),
each with a separate series of capital stock. The information presented in these
financial statements pertains to only the eight Portfolios available for
investment by Discovery Select: Money Market Portfolio, Diversified Bond
Portfolio, High Yield Bond Portfolio, Stock Index Portfolio, Equity Income
Portfolio, Equity Portfolio, Prudential Jennison Portfolio and Global Portfolio.
Shares in the Series Fund are currently sold only to certain separate accounts
of The Prudential Insurance Company of America ('The Prudential'), Pruco Life
Insurance Company and Pruco Life Insurance Company of New Jersey (together
referred to as the 'Companies') to fund benefits under certain variable life
insurance and variable annuity contracts ('contracts') issued by the Companies.
The accounts invest in shares of the Series Fund through subaccounts that
correspond to the portfolios. The accounts will redeem shares of the Series Fund
to the extent necessary to provide benefits under the contracts or for such
other purposes as may be consistent with the contracts.
NOTE 2: ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Series Fund in preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
SECURITIES VALUATION: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Convertible debt securities are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. High yield
bonds are valued either by quotes received from principal market makers or by an
independent pricing service which determine prices by analysis of quality,
coupon, maturity and other factors. Any security for which a reliable market
quotation is unavailable is valued at fair value as determined in good faith by
or under the direction of the Series Fund's Board of Directors.
The Money Market Portfolio uses amortized cost to value short-term securities.
Short-term securities that are held in the other Portfolios which mature in more
than 60 days are valued at current market quotations and those short-term
securities which mature in 60 days or less are valued at amortized cost.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Series Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction
including accrued interest. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Series Fund may
by delayed or limited. (See Note 5).
FOREIGN CURRENCY TRANSLATION: The books and records of the Series Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investments securities, other assets and liabilities - at
the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses -at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market prices of securities held at the end of the period. Similarly, the
Series Fund does not isolate the effect of
62
<PAGE>
changes in foreign exchange rates from the fluctuations arising from changes in
the market prices of long-term portfolio securities sold during the period.
Accordingly, these realized foreign currency gains (losses) are included in the
reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at period end exchange rates are reflected as a component of net
unrealized appreciation (depreciation) on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
SHORT SALES: Certain portfolios of the Series Fund may sell a security it does
not own in anticipation of a decline in the market value of that security (short
sale). When the Portfolio makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short sale
as collateral for its obligation to deliver the security upon conclusion of the
sale. The Portfolio may have to pay a fee to borrow the particular security and
may be obligated to remit any interest or dividends received on such borrowed
securities. A gain, limited to the price at which the Portfolio sold the
security short, or a loss, unlimited in magnitude, will be recognized upon the
termination of a short sale if the market price at termination is less than or
greater than, respectively, the proceeds originally received.
OPTIONS: The Series Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value with respect to
securities which the Series Fund currently owns or intends to purchase. The
Series Fund's principal reason for writing options is to realize, through
receipts of premiums, a greater current return than would be realized on the
underlying security alone. When the Series Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Series Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or
paid is an adjustment to the proceeds from the sales or the cost of the purchase
in determining whether the Series Fund has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.
The Series Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series Fund bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
FINANCIAL FUTURES CONTRACTS: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the 'initial margin'. Subsequent payments, known as 'variation
margin', are made or received by the Series Fund each day, depending on the
daily fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.
The Series Fund invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series Fund intends to purchase,
against fluctuations in value. Under a variety of circumstances, the Series Fund
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts and the
underlying assets.
63
<PAGE>
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of three elements: stated
coupon, original issue discount and market discount, is recorded on the accrual
basis. Certain portfolios own shares of real estate investment trusts ('REITs')
which report information on the source of their distributions annually. A
portion of distributions received from REITs during the period is estimated to
be a return of capital and is recorded as a reduction of their costs. Expenses
are recorded on the accrual basis which may require the use of certain estimates
by management. The Series Fund expenses are allocated to the respective
portfolios on the basis of relative net assets.
CUSTODY FEE CREDITS: The Series Fund, exclusive of the Global Portfolio, has an
arrangement with its custodian bank, whereby uninvested monies earn credits
which reduce the fees charged by the custodian. Such custody fee credits are
presented as a reduction of gross expenses in the accompanying Statement of
Operations.
TAXES: For federal income tax purposes, each portfolio in the Series Fund is
treated as a separate taxpaying entity. It is the intent of the Series Fund to
continue to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net income to
shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends, interest and capital gains have been
provided for in accordance with the Series Fund's understanding of the
applicable country's tax rules and regulations.
DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions of each Portfolio are
declared in cash and automatically reinvested in additional shares of the Fund.
The Money Market Portfolio will declare and reinvest dividends from net
investment income and net realized capital gain (loss) daily. Each other
Portfolio will declare and distribute dividends from net investment income,if
any, quarterly and net capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
RECLASSIFICATION OF CAPITAL ACCOUNTS: The Series Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gains, and
Return of Capital Distributions by Investment Companies. As a result of this
statement, the Series Fund changed the classification of distributions to
shareholders to disclose the amounts of undistributed net investment income and
accumulated net realized gain (loss) on investments available for distributions
determined in accordance with income tax regulations. For the six months ended
June 30, 1997, the application of this statement increased (decreased) net
unrealized appreciation on investments (APP), paid-in capital in excess of par
(PC), undistributed net investment income ('UNI') and accumulated net realized
gains (losses) on investments ('GL') by the following amounts:
<TABLE>
<CAPTION>
APP PC UNI G/L
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
High Yield Bond Portfolio.............. $ (227,243) -- $ 337,328 $ (110,085)
Equity Portfolio....................... -- 81,727 (81,727)
Global Portfolio....................... $ (903,000) 869,655 33,345
</TABLE>
Net investment income, net realized gains and net assets were not affected by
these reclassifications.
NOTE 3: AGREEMENTS
The Series Fund has an investment advisory agreement with The Prudential.
Pursuant to this agreement The Prudential has responsibility for all investment
advisory services and supervises the subadvisers' performance of such services.
The Prudential has entered into a service agreement with The Prudential
Investment Corporation ('PIC'), which provides that PIC will furnish to The
Prudential such services as The Prudential may require in connection with the
performance of its obligations under the investment advisory agreement with the
Series Fund. In addition, The Prudential has entered into a subadvisory
agreement with Jennison Capital Corp. ('Jennison'), under which Jennison
furnishes investment advisory services in connection with the management of the
Prudential Jennison Portfolio. The Prudential compensates Jennison for its
services as follows: 0.75% on the first $10 million of that Portfolio's average
daily net assets, 0.50% on the next $30 million, 0.35% on the next $25 million,
0.25% on the next $335 million, 0.22% on the next $600 million and 0.20%
thereafter. The Prudential pays for the cost of PIC's services, compensation of
officers of the
64
<PAGE>
Series Fund, occupancy and certain clerical and administrative expenses of the
Series Fund. The Series Fund bears all other costs and expenses.
The investment advisory fee paid The Prudential is computed daily and payable
quarterly, at the annual rates specified below of the value of each of the
Portfolio's average daily net assets.
<TABLE>
<CAPTION>
Fund Investment Advisory Fee
- --------------------------------------- ------------------------
<S> <C>
Money Market Portfolio................. 0.40%
Diversified Bond Portfolio............. 0.40
High Yield Bond Portfolio.............. 0.55
Stock Index Portfolio.................. 0.35
Equity Income Portfolio................ 0.40
Equity Portfolio....................... 0.45
Prudential Jennison Portfolio.......... 0.60
Global Portfolio....................... 0.75
</TABLE>
The Prudential has agreed to refund to a Portfolio (other than the Global
Portfolio), the portion of the investment advisory fee for that Portfolio equal
to the amount that the aggregate annual ordinary operating expenses (excluding
interest, taxes and brokerage commissions) exceeds 0.75% of the Portfolio's
average daily net assets. No refund was required for the six months ended June
30, 1997.
PIC and Jennison are indirect, wholly-owned subsidiaries of The Prudential.
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended June 30, 1997, Prudential Securities Incorporated, an
indirect, wholly-owned subsidiary of The Prudential, earned $250,558 in
brokerage commissions from transactions executed on behalf of the following
Portfolios:
<TABLE>
<CAPTION>
Fund Commission
- --------------------------------------- -----------
<S> <C>
Equity Income Portfolio................ $ 115,394
Equity Portfolio....................... 131,211
Global Portfolio....................... 3,953
-----------
$ 250,558
</TABLE>
As of June 30, 1997, The Prudential had an investment of $16,801,047 in the
Prudential Jennison Portfolio.
NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT
The Portfolios of the Series Fund (excluding Global Portfolio) may transfer
uninvested cash balances into a single joint repurchase agreement account, the
daily aggregate balance of which is invested in one or more repurchase
agreements collateralized by U.S. Government obligations. The Series Fund's
undivided interest in the joint repurchase agreement account represented
$695,194,000 as of June 30, 1997. The Portfolios of the Series Fund with cash
invested in the joint accounts had the following principal amounts and
percentage participation in the account:
<TABLE>
<CAPTION>
Principal Percentage
Amount Interest
------------- ----------
<S> <C> <C>
Diversified Bond Portfolio............. $ 7,491,000 1.08%
High Yield Bond Portfolio.............. 23,460,000 3.37
Stock Index Portfolio.................. 84,707,000 12.19
Equity Income Portfolio................ 50,423,000 7.25
Equity Portfolio....................... 371,391,000 53.42
Prudential Jennison Portfolio.......... 11,397,000 1.64
All other portfolios (currently not
available to Discovery Select)....... 146,325,000 21.05
------------- ----------
$ 695,194,000 100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
Chase Securities, Inc., 5.80%, in the principal amount of $230,000,000,
repurchase price $230,037,056, due 7/1/97. The value of the collateral including
accrued interest was $234,039,088.
65
<PAGE>
J. P. Morgan Securities, Inc., 5.95%, in the principal amount of $230,000,000,
repurchase price $230,038,014, due 7/1/97. The value of the collateral including
accrued interest was $236,789,590.
SBC Warburg, Ltd., 5.85%, in the principal amount of $5,194,000, repurchase
price $5,194,844, due 7/1/97. The value of the collateral including accrued
interest was $5,308,986.
UBS Securities Corp., 5.90%, in the principal amount of $230,000,000, repurchase
price $230,037,694, due 7/1/97. The value of the collateral including accrued
interest was $234,671,875.
The weighted average interest rate of these repurchase agreements was 5.88%.
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the six months ended June 30, 1997 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
HIGH
DIVERSIFIED YIELD STOCK EQUITY PRUDENTIAL
BOND BOND INDEX INCOME EQUITY JENNISON
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ $964,547,717 $244,098,573 0 0 0 0
Equity Securities...................... 0 $ 16,471,900 $187,746,264 $236,876,578 $242,397,488 $145,713,888
<CAPTION>
GLOBAL
------------
<S> <C>
Debt Securities........................ $ 3,332,500
Equity Securities...................... $211,915,651
</TABLE>
Proceeds from Sales:
<TABLE>
<CAPTION>
HIGH
DIVERSIFIED YIELD STOCK EQUITY PRUDENTIAL
BOND BOND INDEX INCOME EQUITY JENNISON
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ $965,614,445 $195,605,394 0 $ 1,300,898 0 0
Equity Securities...................... 0 $ 6,957,399 $ 7,435,517 $201,483,922 $357,163,217 $ 80,769,502
<CAPTION>
GLOBAL
------------
<S> <C>
Debt Securities........................ $ 3,334,000
Equity Securities...................... $159,846,263
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of June 30, 1997 were as follows:
<TABLE>
<CAPTION>
HIGH
DIVERSIFIED YIELD STOCK EQUITY PRUDENTIAL
BOND BOND INDEX INCOME EQUITY JENNISON
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation.......... $ 14,879,194 $ 20,323,257 $858,497,827 $443,841,941 $1,525,443,014 $ 68,348,804
Gross Unrealized Depreciation.......... 3,455,447 4,174,767 13,503,432 13,471,256 69,173,483 5,609,074
Total Net Unrealized................... 11,423,747 16,148,490 844,994,395 430,370,685 1,456,269,531 62,739,730
Tax Basis.............................. 725,851,274 467,809,560 1,268,750,226 1,187,577,407 4,019,334,597 259,585,412
<CAPTION>
GLOBAL
------------
<S> <C>
Gross Unrealized Appreciation.......... $166,808,443
Gross Unrealized Depreciation.......... 2,914,198
Total Net Unrealized................... 163,894,245
Tax Basis.............................. 507,170,994
</TABLE>
For federal income tax purposes, the following Portfolios had post-October
losses deferred and capital loss carryforwards as of December 31, 1996.
Accordingly no capital gain distributions are expected to be paid to
shareholders until net gains have been realized in excess of such amounts:
<TABLE>
<CAPTION>
CAPITAL LOSSES
POST OCTOBER CARRYFORWARDS
LOSSES DEFERRED AVAILABLE EXPIRATION DATE
---------------- -------------- ----------------
<S> <C> <C> <C>
High Yield Bond Portfolio.............. $ 2,303,758 $ 972,998 12/31/1999
3,273,984 12/31/2002
15,084,494 12/31/2003
--------------
19,331,476
Prudential Jennison Portfolio.......... 31,622 -- --
</TABLE>
66
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income and realized and
unrealized gains..................... 0.26 0.51 0.56 0.40 0.29 0.37
Dividends and distributions............ (0.26) (0.51) (0.56) (0.40) (0.29) (0.37)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RATE OF RETURN(b)..... 2.61% 5.22% 5.80% 4.05% 2.95% 3.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $672.2 $668.8 $613.3 $583.3 $474.7 $528.7
Ratios to average net assets:
Expenses............................. 0.43%(c) 0.44% 0.44% 0.47% 0.45% 0.47%
Net investment income................ 5.17%(c) 5.10% 5.64% 4.02% 2.90% 3.72%
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED BOND
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 11.07 $ 11.31 $ 10.04 $ 11.10 $ 10.83 $ 11.00
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.40 0.76 0.76 0.68 0.68 0.76
Net realized and unrealized gains
(losses) on investments.............. 0.03 (0.27) 1.29 (1.04) 0.40 0.01
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.43 0.49 2.05 (0.36) 1.08 0.77
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.23) (0.73) (0.75) (0.68) (0.66) (0.72)
Distributions from net realized
gains................................ (0.05) -- (0.03) (0.02) (0.15) (0.22)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.28) (0.73) (0.78) (0.70) (0.81) (0.94)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 11.22 $ 11.07 $ 11.31 $ 10.04 $ 11.10 $ 10.83
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 4.11% 4.40% 20.73% (3.23)% 10.13% 7.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $739.9 $720.2 $655.8 $541.6 $576.2 $428.8
Ratios to average net assets:
Expenses............................. 0.44%(c) 0.45% 0.44% 0.45% 0.46% 0.47%
Net investment income................ 7.29%(c) 6.89% 7.00% 6.41% 6.05% 6.89%
Portfolio turnover rate................ 134% 210% 199% 32% 41% 61%
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
HIGH YIELD BOND
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 7.87 $ 7.80 $ 7.37 $ 8.41 $ 7.72 $ 7.21
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.40 0.80 0.81 0.87 0.82 0.82
Net realized and unrealized gains
(losses) on investments.............. 0.06 0.06 0.46 (1.10) 0.63 0.42
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.46 0.86 1.27 (0.23) 1.45 1.24
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.20) (0.78) (0.84) (0.81) (0.76) (0.73)
Distributions from net realized
gains................................ -- (0.01) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.20) (0.79) (0.84) (0.81) (0.76) (0.73)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 8.13 $ 7.87 $ 7.80 $ 7.37 $ 8.41 $ 7.72
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 5.88% 11.39% 17.56% (2.72)% 19.27% 17.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $481.2 $432.9 $367.9 $306.2 $282.9 $153.7
Ratios to average net assets:
Expenses............................. 0.60%(c) 0.63% 0.61% 0.65% 0.65% 0.70%
Net investment income................ 9.84%(c) 9.89% 10.34% 9.88% 9.91% 10.67%
Portfolio turnover rate................ 47% 88% 139% 69% 96% 75%
Average commission rate paid per
share................................ N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
STOCK INDEX
---------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, -------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 23.74 $ 19.96 $ 14.96 $ 15.20 $ 14.22 $ 13.61
----------- ----------- ----------- ----------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.20 0.40 0.40 0.38 0.36 0.35
Net realized and unrealized gains
(losses) on investments.............. 4.62 4.06 5.13 (0.23) 1.00 0.60
----------- ----------- ----------- ----------- ---------- ----------
Total from investment operations... 4.82 4.46 5.53 0.15 1.36 0.95
----------- ----------- ----------- ----------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.10) (0.40) (0.38) (0.37) (0.35) (0.33)
Distributions from net realized
gains................................ -- (0.28) (0.15) (0.02) (0.03) (0.01)
----------- ----------- ----------- ----------- ---------- ----------
Total distributions................ (0.10) (0.68) (0.53) (0.39) (0.38) (0.34)
----------- ----------- ----------- ----------- ---------- ----------
Net Asset Value, end of period......... $ 28.46 $ 23.74 $ 19.96 $ 14.96 $ 15.20 $ 14.22
----------- ----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ----------- ---------- ----------
TOTAL INVESTMENT RETURN(b)............. 20.32% 22.57% 37.06% 1.01% 9.66% 7.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $2,110.2 $1,581.4 $1,031.3 $664.5 $615.1 $433.5
Ratios to average net assets:
Expenses............................. 0.37%(c) 0.40% 0.38% 0.42% 0.42% 0.46%
Net investment income................ 1.62%(c) 1.95% 2.27% 2.50% 2.43% 2.56%
Portfolio turnover rate................ 1% 1% 1% 2% 1% 1%
Average commission rate paid per
share................................ $0.0250 $0.0250 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY INCOME
--------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 18.51 $ 16.27 $ 14.48 $ 15.66 $ 13.67 $ 13.21
----------- ----------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.33 0.58 0.64 0.67 0.55 0.58
Net realized and unrealized gains
(losses) on investments.............. 2.87 2.88 2.50 (0.45) 2.46 0.72
----------- ----------- ----------- ---------- ---------- ----------
Total from investment operations... 3.20 3.46 3.14 0.22 3.01 1.30
----------- ----------- ----------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.14) (0.71) (0.62) (0.56) (0.50) (0.52)
Distributions from net realized
gains................................ (0.08) (0.51) (0.73) (0.82) (0.52) (0.32)
----------- ----------- ----------- ---------- ---------- ----------
Total distributions................ (0.22) (1.22) (1.35) (1.38) (1.02) (0.84)
----------- ----------- ----------- ---------- ---------- ----------
Net Asset Value, end of period......... $ 21.49 $ 18.51 $ 16.27 $ 14.50 $ 15.66 $ 13.67
----------- ----------- ----------- ---------- ---------- ----------
----------- ----------- ----------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN(b)............. 17.47% 21.74% 21.70% 1.44% 22.28% 10.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $1,625.2 $1,363.5 $1,110.0 $859.7 $602.8 $234.4
Ratios to average net assets:
Expenses............................. 0.45%(c) 0.45% 0.43% 0.52% 0.54% 0.57%
Net investment income................ 3.14%(c) 3.36% 4.00% 3.92% 3.56% 4.32%
Portfolio turnover rate................ 15% 21% 64% 63% 41% 40%
Average commission rate paid per
share................................ $0.0554 $0.0553 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY
----------------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, --------------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 26.96 $ 25.64 $ 20.66 $ 21.49 $ 18.90 $ 17.91
----------- ------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.35 0.71 0.55 0.51 0.42 0.44
Net realized and unrealized gains on
investments.......................... 3.20 3.88 5.89 0.05 3.67 2.05
----------- ------------ ------------ ------------ ------------ ------------
Total from investment operations... 3.55 4.59 6.44 0.56 4.09 2.49
----------- ------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.17) (0.67) (0.52) (0.49) (0.40) (0.44)
Distributions from net realized
gains................................ (0.18) (2.60) (0.94) (0.90) (1.10) (1.06)
----------- ------------ ------------ ------------ ------------ ------------
Total distributions................ (0.35) (3.27) (1.46) (1.39) (1.50) (1.50)
----------- ------------ ------------ ------------ ------------ ------------
Net Asset Value, end of period......... $ 30.16 $ 26.96 $ 25.64 $ 20.66 $ 21.49 $ 18.90
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN(b)............. 13.26% 18.52% 31.29% 2.78% 21.87% 14.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $5,484.4 $4,814.0 $3,813.8 $2,617.8 $2,186.5 $1,416.6
Ratios to average net assets:
Expenses............................. 0.47%(c) 0.50% 0.48% 0.55% 0.53% 0.53%
Net investment income................ 2.50%(c) 2.54% 2.28% 2.39% 1.99% 2.33%
Portfolio turnover rate................ 6% 20% 18% 7% 13% 16%
Average commission rate paid per
share................................ $0.0506 $0.0524 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
Prudential Jennison
----------------------------------------------------------
SIX MONTHS YEAR APRIL 25, 1995(d)
ENDED ENDED to
JUNE 30, 1997 DECEMBER 31, 1996 December 31, 1995(a)
-------------- ----------------- ---------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 14.32 $ 12.55 $ 10.00
-------------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.03 0.02 0.02
Net realized and unrealized gains on
investments.......................... 2.41 1.78 2.54
-------------- -------- --------
Total from investment operations... 2.44 1.80 2.56
-------------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.02) (0.03) (0.01)
Distributions from net realized
gains................................ -- -- --
-------------- -------- --------
Total distributions................ (0.02) (0.03) (0.01)
-------------- -------- --------
Net Asset Value, end of period......... $ 16.74 $ 14.32 $ 12.55
-------------- -------- --------
-------------- -------- --------
TOTAL INVESTMENT RETURN(b)............. 16.98% 14.41% 24.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $332.1 $226.5 $63.1
Ratios to average net assets:
Expenses............................. 0.63%(c) 0.66% 0.79%
Net investment income................ 0.36%(c) 0.20% 0.15%
Portfolio turnover rate................ 33% 46% 37%
Average commission rate paid per
share................................ $0.0592 $0.0603 N/A
</TABLE>
<TABLE>
<CAPTION>
GLOBAL
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 17.85 $ 15.53 $ 13.88 $ 14.64 $ 10.37 $ 10.79
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.08 0.11 0.06 0.02 0.02 0.05
Net realized and unrealized gains
(losses) on investments.............. 2.09 2.94 2.14 (0.74) 4.44 (0.42)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 2.17 3.05 2.20 (0.72) 4.46 (0.37)
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.04) (0.11) (0.24) (0.02) (0.08) (0.05)
Distributions from net realized
gains................................ (0.03) (0.62) (0.31) (0.02) (0.11) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.07) (0.73) (0.55) (0.04) (0.19) (0.05)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 19.95 $ 17.85 $ 15.53 $ 13.88 $ 14.64 $ 10.37
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 12.48% 19.97% 15.88% (4.89)% 43.14% (3.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $677.6 $580.6 $400.1 $345.7 $129.1 $34.0
Ratios to average net assets:
Expenses............................. 0.88%(c) 0.92% 1.06% 1.23% 1.44% 1.87%
Net investment income................ 0.87%(c) 0.64% 0.44% 0.20% 0.18% 0.49%
Portfolio turnover rate................ 27% 41% 59% 37% 55% 78%
Average commission rate paid per
share................................ $0.0243 $0.0358 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
(d) Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, PhD. CEO,
THE PRUDENTIAL SERIES VICE PRESIDENT, PRUDENTIAL INVESTMENTS
FUND, INC. KALUDIS CONSULTING PRESIDENT, THE
GROUP PRUDENTIAL SERIES FUND,
INC.
SAUL K. FENSTER, PhD. JOSEPH WEBER, PhD.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
71
<PAGE>
We hereby incorporate by reference the following semi-annual reports for
the underlying funds:
1. Filer/Entity: AIM V.I. Growth and Income Fund and AIM V.I. Value Fund
Registration No.: 811-07452
CIK No.: 0000896435
Accession No.: 0000899243-97-001768
Date of Filing: 09/05/97
2. Filer/Entity: Janus Aspen Series -- Growth Portfolio and
International Growth Portfolio
Registration No.: 811-07736
CIK No.: 0000906185
Accession No.: 0001012709-97-000120
Date of Filing: 08/22/97
3. Filer/Entity: MFS Emerging Growth Series
Registration No.: 811-08326
CIK No.: 0000918571
Accession No.: 0000950156-97-000681
Date of Filing: 08/28/97
4. Filer/Entity: MFS Research Series
Registration No.: 811-08326
CIK No.: 0000918571
Accession No.: 0000950156-97-000683
Date of Filing: 08/28/97
5. Filer/Entity: OCC Accumulation Trust -- Managed Portfolio and Small
Cap Portfolio
Registration No.: 811-08512
CIK No.: 0000923185
Accession No.: 0000950123-97-007342
Date of Filing: 08/27/97
6. Filer/Entity: T. Rowe Price Equity Income Portfolio
Registration No.: 811-07143
CIK No.: 0000918294
Accession No.: 0000730200-97-000009
Date of Filing: 08/14/97
7. Filer/Entity: T. Rowe Price International Stock Portfolio
Registration No.: 811-07145
CIK No.: 0000918292
Accession No.: 0000918292-97-000009
Date of Filing: 08/13/97
8. Filer/Entity: Warburg Pincus Trust Post-Venture Capital Portfolio
Registration No.: 811-07261
CIK No.: 0000941568
Accession No.: 0000950117-97-001387
Date of Filing: 08/20/97
<PAGE>
ON CALL TO HELP YOU GET THE MOST OUT OF YOUR ANNUITY.
At Prudential, we are committed to making it easy for you to take advantage
of the many benefits your DISCOVERY SELECT-SM- Variable Annuity offers.
So whenever you need assistance do not hesitate to call or write our
Prudential Annuity Service Center. Of course, your Registered
Representative or Financial Advisor is also available to assist you with
more complex matters such as helping you identify your goals, investment
time horizon and level of risk.
HOW TO REACH US BY PHONE
AUTOMATED SERVICE
For direct access to more standardized information about your contract or
to request service forms, you can call our automated service line -- 24
hours a day, 365 days a year. Simply:
1. Call 1-888-PRU-2888 toll-free from any touch-tone phone.
2. Press the number on your telephone keypad that corresponds to the type
of information you want.
Your owner's kit includes a detailed brochure on your automated service
options. Highlighted here is just a brief overview of the types of service
requests you can make through this line.
CUSTOMER SERVICE REPRESENTATIVES
For personalized annuity service, you can call one of our specially trained
Customer Service Representatives toll-free at: 1-888-PRU-2888, Press 0 *
Monday-Friday, 8:00 am to 9:00 pm ET.
TELEPHONE SERVICE OPTIONS
IF YOU WOULD LIKE THEN PRESS
To get an update on your annuity contract,
change your PIN, or order forms 1 *
To obtain general product information, e.g., unit values,
interest rates, and investment options 2 *
To speak to a Customer Service Representative 0 *
HOW TO REACH US BY MAIL
Any written requests or correspondence about your annuity should be
directed as follows:
REGULAR MAIL EXPRESS MAIL
Prudential Annuity Service Center Prudential Annuity Service Center
P.O. Box 14215 300 Columbus Circle
New Brunswick, NJ 08906-4215 Edison, NJ 08837
<PAGE>
- --------------------------------------------------------------------------------
Whether providing insurance protection for home,
family, and business, providing for future
education and retirement expenses, or offering
innovations like Critical Care Access, Prudential
people have always been able to deliver something
more: personal service, quality, attention to
detail and the financial strength of The
Rock-Registered Trademark-. Since 1875, Prudential
has been helping individuals and families meet
their financial needs.
Like most insurance policies and annuity
contracts, Prudential's policies and contracts
contain exclusions, limitations, reductions of
benefits and terms for keeping them in force. Your
Prudential Securities Financial Advisor/Pruco
Securities Registered Representative will be glad
to provide you with costs and complete details.
P.O. Box 197
Minneapolis, MN 55440-0197
Address Service Requested
[LOGO]
ORD 97344 Printed in the U.S.A. on recycled PI-MV-0897-1331
Cat.#42M524M paper using soybean ink MRA-1997-A017585
ED. 6/97
