BOND FUNDS
MULTI-ASSET FUND
STOCK FUNDS
MASON STREET
FUNDS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
<PAGE>
This report is submitted for the general information of shareholders of Mason
Street Funds/SM. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective Prospectus for the Funds, which
contains more information concerning the Funds' investment policies, as well as
fees and expenses and other pertinent information. Read the Prospectus
carefully.
<PAGE>
OCTOBER 12, 1997
LETTER TO SHAREHOLDERS
<PHOTO>
JAMES D. ERICSON
In this first report to investors in the Mason Street series of mutual funds, we
are pleased to report excellent investment performance for the Funds' first six
months of operation. Both equity and bond markets have risen sharply since the
Funds began offering shares on March 31, 1997, with the stock market, as
measured by the S&P 500(R) Index, delivering an extraordinary 26 percent total
return for the half-year period. The Funds have benefited from this market
strength, and most of the Funds have performed even better than their benchmark
indices. Of course, past performance, particularly for such a short time period,
cannot be considered an indication of future performance. This applies equally
to the markets in general and to these particular Funds.
The market's very strong performance over the last six months represents a
continuation of the trend of the past 15 years, an outstanding time in the
history of the U.S. equity market. The unusually high returns realized over this
period have led many investors to develop overly optimistic expectations about
the long-term returns they can expect. It is inevitable that investors who
expect annual returns of 20 percent or more from equities - or indeed from any
investment - will eventually be disappointed. In early October, Federal Reserve
Chairman Alan Greenspan said, "Aside from the question of whether stock prices
will rise or fall, it clearly would be unrealistic to look for a continuation of
stock market gains of anything like the magnitude of those recorded in the past
couple of years." We agree wholeheartedly.
There are good reasons for the market's strength, which essentially reflects a
strong and stable economy. First, it started from a very low base. The period
preceding the current lengthy expansion was dismal, with high inflation,
sluggish economic growth, and massive political problems in many parts of the
world. The compound annual return from the S&P 500(R) Index for the period from
1965 through 1981 was 6.7 percent, and returns were negative in six of those
years; over the same time period, a broad index of long-term corporate bonds
returned less than 3 percent, according to analysis published by Ibbotson
Associates, Inc.
In the early 1980s, several important positive trends and events began to
converge. In the United States, more responsible fiscal and monetary policies
began to stimulate economic growth. Politics around the world began to change
dramatically, with the end of the Cold War signaled dramatically when the Berlin
Wall came crashing down. Communism has now been virtually eliminated, and
capitalism is increasingly embraced throughout the world. Today's world is a
wide open place, with free movement of ideas, goods and capital. Economic
growth in developing countries is stimulating demand for consumer and industrial
products, generating further rounds of growth.
In the United States, companies have realized that they must be lean and
aggressive to compete in this global economy. So they have cut costs and
increased productivity, driving earnings higher. Growth in all sectors of the
economy has generated new job opportunities, reducing unemployment and
increasing consumer confidence. In fact, the robust pace of job creation has
pushed unemployment so low that employers are beginning to have difficulty
filling jobs. Now, unless the economy cools, employers will have to offer higher
wages to attract the workers they need. And, while this would be good news for
workers, rising labor costs could ignite a cycle that leads to higher prices and
endangers the economy's ability to continue growing.
Throughout the lengthy period of growth that we have experienced, cautious
Federal Reserve policies have contributed to stable growth and low inflation.
There is every indication that the Fed remains committed to keeping inflation
low, even if that means restraining the economy by raising interest rates. While
we see no reason to expect an immediate slump, we cannot expect the economy and
markets to continue improving at their current pace. We must all remind
ourselves that the excellent conditions we are now experiencing simply cannot
persist forever. We continue to enjoy the current favorable environment, while
placing our major focus on investing for the long term. We urge you to maintain
a long-term view as well.
We thank you for selecting Northwestern Mutual's Mason Street Funds/SM, and we
look forward to investing for you for many years.
Mason Street Funds/SM
/S/ JAMES D. ERICSON
JAMES D. ERICSON
President
<PAGE>
MASON STREET FUNDS
TABLE OF CONTENTS
PERFORMANCE SUMMARY 3
- ------------------------------------------------------------
OVERVIEW AND OUTLOOK 4
- ------------------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND 6
- ------------------------------------------------------------
INTERNATIONAL EQUITY FUND 9
- ------------------------------------------------------------
GROWTH STOCK FUND 12
- ------------------------------------------------------------
GROWTH AND INCOME STOCK FUND 15
- ------------------------------------------------------------
INDEX 500 STOCK FUND 18
- ------------------------------------------------------------
ASSET ALLOCATION FUND 25
- ------------------------------------------------------------
HIGH YIELD BOND FUND 30
- ------------------------------------------------------------
MUNICIPAL BOND FUND 34
- ------------------------------------------------------------
SELECT BOND FUND 37
- ------------------------------------------------------------
FINANCIAL STATEMENTS 40
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 67
- ------------------------------------------------------------
DIRECTORS AND OFFICERS 71
- ------------------------------------------------------------
<PAGE>
SEPTEMBER 30, 1997
<TABLE>
PERFORMANCE SUMMARY
For the Six Months Ended September 30, 1997
CLASS A - WITHOUT FRONT LOAD
<CAPTION>
Aggressive Growth and Asset
Total Return<F3> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/97) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------ ----------- ----------- ----------- ----------- ----------- ----- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Since inception<F4> 38.10% 10.00% 24.20% 27.60% 25.50% 19.60% 16.36% 7.76% 8.76%
CLASS A<F1> - WITH FRONT LOAD
Aggressive Growth and Asset
Total Return<F3> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/97) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------ ----------- ----------- ----------- ----------- ----------- ----- ---------- ---------- ----------
Since inception<F4> 31.52% 4.76% 18.29% 21.52% 19.52% 13.90% 10.82% 2.63% 3.58%
CLASS B - WITHOUT CONTINGENT DEFERRED SALES CHARGE
Aggressive Growth and Asset
Total Return<F3> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/97) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------ ----------- ----------- ----------- ----------- ----------- ----- ---------- ---------- ----------
Since inception<F4> 37.70% 9.70% 23.80% 27.20% 25.10% 19.20% 15.95% 7.35% 8.38%
CLASS B<F2> - WITH CONTINGENT DEFERRED SALES CHARGE
Aggressive Growth and Asset
Total Return<F3> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/97) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ----------------------------- ----------- ----------- ----------- ----------- ----- ---------- ---------- ----------
Since inception<F4> 32.70% 4.70% 18.80% 22.20% 20.10% 14.20% 10.95% 2.35% 3.38%
<FN>
<F1> Class A performance reflects the maximum sales charge of 4.75%
<F2> Class B performance reflects the maximum contingent deferred sales charge (CDSC) of 5%
<F3> Returns shown include fee waivers in effect and deductions for all Fund expenses. In the absence of fee waivers, total return
would be reduced. Past performance is not predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost.
<F4> Inception date is March 31, 1997
</TABLE>
<PAGE>
MASON STREET FUNDS
OVERVIEW AND OUTLOOK
THE ECONOMY
During 1997, the domestic economy has continued its trend of moderate growth
with minimal inflation. Unemployment is at the lowest level in 24 years, but the
inflationary pressure traditionally created by low unemployment has, to date,
been minimal. Continued economic strength in an expansion of near-record
duration suggests that productivity may be improving to a greater extent than
official measures indicate. The implication is that greater productivity may
make it possible to have continued economic growth with low unemployment and low
inflation.
Economic reports released in September and early October provide signals
pointing in several different directions. While there are signs of moderation in
consumer and business spending, there are also early indications that inflation
may be increasing. The Federal Reserve has hinted at increased concern about
inflation, implying a possible increase in interest rates in the near future.
While it is virtually impossible that the current buoyant economy will continue
indefinitely, a mild correction at some point seems more likely than a painful
recession.
ECONOMIC GROWTH AND INFLATION
% Change
-------------------
Year Real GDP CPI-U
----- ----- -----
1988 3.8% 4.4%
1989 3.4% 4.6%
1990 1.3% 6.1%
1991 -1.0% 3.1%
1992 2.7% 2.9%
1993 2.3% 2.7%
1994 3.5% 2.7%
1995 2.0% 2.5%
1996 2.2% 3.3%
1997 2.4% 2.4%
Source: U.S. Department of Commerce for years 1988 through 1996. Year-to-year
percentage change in Real Gross Domestic Product is used for real economic
growth. December-to-December percentage change in the Consumer Price Index -
Urban is used for the inflation rate. 1997 is the consensus forecast of a group
of 55 economists surveyed by the Wall Street Journal.
THE EQUITY MARKET
The equity market continued its unprecedented rise during the first three
quarters of 1997. After a moderate drop in April and a milder correction in late
August, stock prices continued their upward trend. The S&P 500 Index closed the
quarter near the record high reached in early August.
The powerful combination of solid economic growth, low inflation and rising
corporate profits continues to drive stock prices. However, some nervousness in
the markets was demonstrated by the strong negative reaction of stock prices to
management's warnings of disappointing earnings by such icons of performance as
Coca-Cola and Gillette.
During the second quarter of 1997, the market's strength, formerly concentrated
in the largest companies, broadened to include small- and mid-sized companies.
In the third quarter, stocks of smaller companies and cyclicals were among the
best performers, while the blue-chip Dow Jones Industrial Average underperformed
the broader market averages. Market sectors that have exhibited particular
strength over the last six months include technology, capital goods and
financial services.
ANNUAL TOTAL RETURNS FROM S&P 500(R) INDEX
Calendar
Years
-----
1987 5.10%
1988 16.60%
1989 31.69%
1990 -3.10%
1991 30.50%
1992 7.60%
1993 10.10%
1994 1.20%
1995 37.40%
1996 22.80%
Source: Standard & Poor's
<PAGE>
SEPTEMBER 30, 1997
THE BOND MARKET
The bond market experienced very good performance in the second and third
quarters of 1997. Good corporate earnings, steady Federal Reserve policy, and
extremely low inflation rates have all contributed to excellent conditions for
bond investors. Higher interest rates in the United States than in other major
economies have attracted foreign investors to the U.S. bond market, contributing
further to strong demand for bonds.
At this point, the obvious question is, "What could create a setback for
bonds?" The current low unemployment rate could stimulate wage inflation, if
increasingly secure employees begin to make aggressive wage demands. It is also
quite possible that Federal Reserve policy, which has kept interest rates
relatively stable so far in 1997, could change; Federal Reserve Chairman Alan
Greenspan hinted in early October that rates may be raised in the near future.
The Fed is likely to tighten modestly on any early warnings of increased
inflation, rather than waiting for official reports of increased inflation,
which might mandate a stronger move.
ANNUAL TOTAL RETURNS FROM
MERRILL LYNCH DOMESTIC MASTER INDEX
Calendar
Years
-----
1987 22.40%
1988 -9.62%
1989 14.18%
1990 9.10%
1991 23.11%
1992 1.24%
1993 10.03%
1994 -2.83%
1995 18.52%
1996 3.59%
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an unmanaged
market value weighted index comprised of U.S. government, mortgage and
investment-grade corporate bonds.
<PAGE>
MASON STREET FUNDS
AGGRESSIVE GROWTH STOCK FUND
OBJECTIVE: To seek long-term growth of capital primarily by investing in the
common stocks of companies that can be expected to increase their sales and
earnings at a pace that will exceed the growth rate of the U.S. economy over
an extended period.
PORTFOLIO: Primarily common stocks of small- and medium-sized companies.
STRATEGY: To locate and invest in companies with above-average potential for
growth.
INVESTED ASSETS: $37,109,587
The Aggressive Growth Stock Fund owns the stocks of emerging growth companies,
generally with market capitalizations of less than $3 billion. Since growth
stock portfolios tend to react strongly to changes in financial and economic
markets, as well as to changes in the prospects for individual companies,
returns of this Fund can vary considerably from time to time. A higher level of
risk (with risk defined as variability of returns over time) is accepted for the
potential of greater long-term returns. The focus in stock selection is on the
individual companies' ability to generate revenue, expanding profit margins and
solid balance sheets; industry sector selection is of secondary importance.
The Fund's performance was excellent during its first six months of operation,
as it benefited from a shift in market leadership away from the largest
companies and toward smaller- capitalization stocks. As some large companies
traditionally known for stable earnings growth warned of earnings
disappointments, smaller companies reported stellar earnings results in the
second and third quarters of 1997.
The Fund is concentrated in four sectors in which there are numerous companies
with particularly promising prospects for growth: technology, business services,
consumer cyclicals and health care. Among the strongest performing industry
groups were technology companies, which continued their strong upward trend, and
energy stocks, which benefited from stable oil prices and a shortage of drilling
equipment.
SECTOR ALLOCATION
9/30/97
- -------------------------------
Finance 2%
Cash Equivalents 4%
Transportation 5%
Industrial 6%
Business Services 8%
Health Care 11%
Energy 13%
Consumer 18%
Technology 33%
TOP 10 HOLDINGS
9/30/97
Company % Market Value
- -----------------------------------------------
Global Industries, Ltd. 2.4%
Nabors Industries, Inc. 2.3%
Robert Half International, Inc. 2.3%
Saville Systems PLC-ADR 2.3%
CRA Managed Care, Inc. 2.2%
Kohl's Corp. 2.2%
Pride International, Inc. 2.1%
CBT Group PLC-ADR 2.1%
Sybron Intl. Corp. - Wisconsin 2.0%
PeopleSoft, Inc. 1.9%
<PAGE>
SEPTEMBER 30, 1997
AGGRESSIVE GROWTH STOCK FUND
PERFORMANCE RELATIVE TO RELEVANT INDICES
3/31/97 6/30/97 9/30/97
- ---------------------------------------------------------------------------
Aggressive Growth Stock Fund $10,000 $12,250 $13,810
Wilshire Small Cap Index $10,000 $11,454 $13,410
Wilshire Next 1750 Index $10,000 $11,686 $13,450
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Aggressive Growth Stock Fund 38.10%
Wilshire Small Cap Index 34.10%
Wilshire Next 1750 Index 34.54%
Since the Fund invests primarily in small-capitalization issues, the indices
that best reflect the Fund's performance are the Wilshire Next 1750 Index and
Wilshire Small Cap Index.
The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this
index are those stocks which are ranked 750 to 2,500 by market capitalization in
the Wilshire 5000. The largest sectors represented in this index are financial
services, consumer services and basic industry. Its average market
capitalization is approximately $788 million as of September 30, 1997.
The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes
250 stocks chosen based upon their size, sector and liquidity characteristics.
Each stock is equally weighted in this unmanaged index. The average market
capitalization is approximately $883.6 million as of September 30, 1997. The
largest sector weightings include financial services, consumer services and
technology.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
AGGRESSIVE GROWTH STOCK FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------
COMMON STOCK (96.23%)
BASIC MATERIALS (1.61%)
Cambrex Corporation 12,800 $596,800
------------------------------------------------------------
CAPITAL GOODS (4.21%)
<F1> Brooks Automation, Inc. 1,500 57,562
<F1> CTB International 17,100 269,325
Kaydon Corporation 11,400 684,000
<F1> Kaynar Technologies Inc. 10,500 313,688
Omniquip International 13,000 238,875
------------------------------------------------------------
TOTAL 1,563,450
============================================================
CONSUMER CYCLICAL (13.55%)
<F1> Blyth Industries, Inc. 19,800 554,400
<F1> CUC International, Inc. 21,300 660,300
<F1> Electronic Arts Inc. 6,800 262,650
Fastenal Co. 12,100 644,325
<F1> Galileo International 3,800 106,163
<F1> Jones Apparel Group, Inc. 5,300 286,200
<F1> K & G Mens' Center, Inc. 26,850 537,000
<F1> Kohl's Corp. 11,300 802,300
<F1> O'Reilly Automotive, Inc. 26,000 591,500
<F1> Pameco Corp. 1,700 30,175
<F1> Tower Automotive, Inc. 12,300 553,500
------------------------------------------------------------
TOTAL 5,028,513
============================================================
CONSUMER STAPLES (4.28%)
Cardinal Health, Inc. 8,800 624,800
<F1> Clear Channel Communications, Inc. 4,800 311,400
<F1> Robert Mondavi Corporation 11,900 651,525
------------------------------------------------------------
TOTAL 1,587,725
============================================================
ENERGY (13.46%)
<F1> Barrett Resources Corporation 5,800 225,837
<F1> BJ Services Company 9,000 668,250
<F1> EVI, Inc. 6,200 396,800
<F1> Global Industries Ltd. 22,400 893,200
<F1> Nabors Industries, Inc. 22,000 856,625
<F1> Pride International, Inc. 23,100 785,400
Tosco Corporation 16,800 584,850
Transocean Offshore Inc. 12,200 584,838
------------------------------------------------------------
TOTAL 4,995,800
============================================================
<PAGE>
MASON STREET FUNDS
AGGRESSIVE GROWTH STOCK FUND
Shares/Par Market Value
------------------------------------------------------------
FINANCE (1.72%)
First International Bancorp, Inc. 4,500 $80,719
Investors Financial Services 13,000 536,250
<F1> LaSalle Partners, Inc. 600 21,000
------------------------------------------------------------
TOTAL 637,969
============================================================
MISCELLANEOUS (8.04%)
<F1> ABR Information Services, Inc. 15,800 436,475
Cintas Corp. 9,000 663,750
Edutrek International, Inc. 5,000 133,125
<F1> Interim Services, Inc. 24,600 691,875
<F1> Industrial Distribution Group 700 14,700
<F1> Learning Tree International, Inc. 6,700 191,788
<F1> Robert Half International, Inc. 20,550 850,256
------------------------------------------------------------
TOTAL 2,981,969
============================================================
HEALTH CARE (11.60%)
<F1> CRA Managed Care, Inc. 22,860 807,243
<F1> Lincare Holdings, Inc. 12,500 630,469
<F1> Medcath 8,500 144,500
<F1> Patterson Dental Co. 14,100 571,050
<F1> PhyCor, Inc. 17,600 511,500
<F1> Quorum Health Group, Inc. 23,250 568,172
<F1> Sybron Intl. Corp.-Wisconsin 17,200 738,525
<F1> Wesley Jessen 11,800 333,350
------------------------------------------------------------
TOTAL 4,304,809
============================================================
TECHNOLOGY (33.11%)
<F1> ADC Telecommunications 17,800 578,500
<F1> Altera Corporation 8,500 435,625
AVX Corp. 9,100 294,613
<F1> Box Hill Systems 600 10,500
<F1> Cambridge Technology Partners 18,700 669,694
<F1> Ciena Corp. 9,500 470,547
<F1> CBT Group PLC-ADR 9,600 770,400
<F1> Concord EFS 15,400 415,800
<F1> Cypress Semiconductor 18,400 285,200
Danka Business Systems PLC 15,200 676,400
<F1> DuPont Photomasks, Inc. 5,300 381,600
<F1> Great Plains Software, Inc. 13,300 372,400
<F1> Hall Kinion 7,500 158,438
HBO & Co. 18,200 687,050
<F1> J.D. Edwards & Company 900 30,150
Shares/Par Market Value
------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> Kent Electronics 12,500 $493,750
Komag, Inc. 5,800 118,175
<F1> Microchip Tech 5,700 257,391
National Data Corporation 10,100 414,100
Paychex, Inc. 17,400 606,825
PeopleSoft, Inc. 12,000 717,000
<F1> Qlogic 8,900 372,686
<F1> Saville Systems PLC-ADR 11,900 835,975
<F1> Sykes Enterprises 20,600 551,050
<F1> Tellabs, Inc. 10,700 551,050
<F1> Transaction Systems Architects 17,400 706,875
<F1> Trident International, Inc. 25,000 425,000
------------------------------------------------------------
TOTAL 12,286,794
============================================================
TRANSPORTATION (4.65%)
<F1> Heartland Express, Inc. 18,400 508,300
<F1> Hub Group - Class A 5,700 211,611
<F1> Knight Transportation, Inc. 18,700 523,600
<F1> Swift Transportation Co., Inc. 15,300 483,863
------------------------------------------------------------
TOTAL 1,727,374
============================================================
TOTAL COMMON STOCK 35,711,203
============================================================
MONEY MARKET INVESTMENTS (3.77%)
FINANCE SERVICES (3.77%)
Ford Motor Credit,
6.2%, 10/1/97 $900,000 $900,000
General Motors Acceptance,
5.54%, 10/2/97 500,000 498,384
------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 1,398,384
============================================================
TOTAL AGGRESSIVE GROWTH FUND $37,109,587
============================================================
<F1> Non-Income Producing
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
INTERNATIONAL EQUITY FUND
OBJECTIVE: To seek long-term growth of capital by investing primarily in
stocks of companies outside the U.S.
PORTFOLIO: Primarily common stocks of companies in foreign countries.
STRATEGY: To locate and invest in the undervalued stocks of foreign companies
offering the greatest discounts to their long-term values.
INVESTED ASSETS: $29,874,126
The International Equity Fund offers investors the opportunity to participate in
the growth of companies in countries throughout the world. The Fund is managed
with a disciplined approach to long-term value, with special attention to
balance sheet quality. These disciplines caused the Fund to be underinvested in
stocks during the first several months of operation, which hurt performance at a
time of rising equity prices. This situation was substantially corrected during
the third quarter.
European equity markets have soared during 1997, with most markets up 20% or
more. As a result, gains have been realized in some of these markets, and new
investment opportunities that offer good value have become more scarce. An
exception is the U.K., where many companies have increased earnings potential by
undertaking restructurings similar to those that were prevalent in the United
States several years ago. Investments in companies based in the U.K. accounted
for 20% of the total portfolio as of September 30, 1997.
Among the Asian markets, the Fund has a significant representation in Hong Kong.
Exposure in Thailand and other Asian nations has recently been increased, as
turmoil in these markets has created opportunities in selected issues.
The International Equity Fund is managed for Northwestern Mutual by Templeton
Investment Counsel, Inc.
ASSET ALLOCATION
9/30/97
- -------------------------------
North America 2%
Australia/New Zealand 6%
Latin America 12%
Non-equity holdings 12%
Asia 17%
Europe 51%
TOP 10 HOLDINGS
9/30/97
Company % Market Value
- ----------------------------------------
BTR, PLC A 2.3%
YPF S.A., ADR 2.2%
News Corporation Limited, Pfd. 2.2%
The Oshawa Group Ltd., Class A 2.1%
British Steel PLC 2.1%
Enso Oy, A shares 2.1%
Pilkington PLC 2.1%
Autoliv, Inc. 2.1%
The Weir Group PLC 2.0%
Banque Nationale de Paris 2.0%
PERFORMANCE RELATIVE TO THE EAFE INDEX
3/31/97 6/30/97 9/30/97
- --------------------------------------------------------
International Equity Fund $10,000 $10,500 $11,000
EAFE Index $10,000 $11,255 $11,136
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- --------------------------------------------------------
International Equity Fund 10.00%
EAFE Index 11.36%
As depicted in the graph, the International Equity Fund is compared against the
Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East")
Index. The index is composed of approximately 1,100 companies in 20 countries in
Europe and the Pacific Basin. The objective of the index is to reflect the
movements of stock markets in these countries by representing an unmanaged
(indexed) portfolio within each country. The indices are constructed so that
companies chosen represent about 60% of market capitalization in each market;
industry composition of the market is reflected; and a cross section of large-,
medium-, and small-capitalization stocks is included, taking into account
liquidity concerns. The index is calculated in U.S. dollars.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
Investors should be aware of the risks of investments in foreign securities,
particularly investments in securities of companies in developing nations. These
include the risks of currency fluctuation, of political and economic instability
and of less well-developed government supervision and regulation of business and
industry practices, as well as differences in accounting standards.
<PAGE>
MASON STREET FUNDS
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
Country Shares/Par Market Value
-----------------------------------------------------------------------
COMMON STOCK (87.96%)
Aerospace & Military
Technology (1.16%)
Hong Kong Aircraft
& Engineering H.K. 106,600 $345,760
----------------------------------------------------------------------
APPLIANCE & HOUSEHOLD DURABLES (1.85%)
Fisher & Paykel
Industries Ltd. N.Z. 102,100 352,885
<F2> Thorn PLC U.K. 76,028 171,573
Thorn PLC B Shares U.K. 88,700 27,224
----------------------------------------------------------------------
TOTAL 551,682
======================================================================
AUTOMOBILES (5.77%)
Autoliv, Inc. Swe. 14,400 612,000
Bertrand Faure S.A. Fr. 5,500 359,639
Fiat SPA Ord. Italy 84,920 303,136
Renault S.A. Fr. 15,100 447,741
----------------------------------------------------------------------
TOTAL 1,722,516
======================================================================
BANKING (8.58%)
Banco Bradesco S.A. Braz. 27,950,000 294,667
Banco Itau S.A. Braz. 94,000 60,748
Banque Nationale de Paris Fr. 11,700 589,517
Credit Commercial de France Fr. 5,800 340,245
<F2><F4> Nortel Inversora S.A., ADR Arg. 15,100 419,025
<F2> Unibanco Uniao de Bancos Braz. 1,579,000 113,862
Unidanmark A/S, A,
Registered Den. 7,000 452,800
Wing Hang Bank Ltd. H.K. 67,200 293,514
----------------------------------------------------------------------
TOTAL 2,564,378
======================================================================
BROADCAST ADVERTISING PUBLISHING (3.04%)
Marieberg Tidings A Free Swe. 9,200 254,799
News Corporation Limited, Pfd. Austrl. 147,500 652,622
----------------------------------------------------------------------
TOTAL 907,421
======================================================================
BUILDING MATERIALS & COMPONENTS (4.48%)
Hepworth PLC U.K. 58,200 195,554
Pilkington PLC U.K. 242,800 613,823
Pioneer International Ltd. Austrl. 109,700 372,888
Siam City Cement Public Co., Ltd. Thai. 40,600 155,465
----------------------------------------------------------------------
TOTAL 1,337,730
======================================================================
Country Shares/Par Market Value
----------------------------------------------------------------------
CHEMICALS (1.54%)
Courtaulds PLC U.K. 42,200 $232,459
Imperial Chemical Industries, PLC U.K. 14,000 227,513
----------------------------------------------------------------------
TOTAL 459,972
======================================================================
CONSTRUCTION & HOUSING (1.99%)
Dragados & Construcciones, S.A. Sp. 15,600 348,770
Sirti SPA Italy 39,300 246,529
----------------------------------------------------------------------
TOTAL 595,299
======================================================================
ELECTRONIC COMPONENTS, INSTRUMENTS (1.22%)
BICC PLC U.K. 57,000 154,691
Nanjing Panda Electronics Co., Ltd. H.K. 868,000 210,873
----------------------------------------------------------------------
TOTAL 365,564
======================================================================
ELECTRICAL & ELECTRONICS (1.59%)
Philips Electronic Neth. 5,600 474,032
----------------------------------------------------------------------
ENERGY SOURCES (3.22%)
<F4> Gazprom, ADR (144a) Rus. 12,300 308,730
<F4> YPF S.A., ADR Arg. 17,700 652,688
----------------------------------------------------------------------
TOTAL 961,418
======================================================================
FINANCIAL SERVICES (3.22%)
AXA S.A. Fr. 8,600 576,986
<F3> Industrial Credit & Inv. Corp.
of India (144a), GDR India 17,000 272,000
Peregrine Investments
Holdings, Ltd. H.K. 66,000 112,154
----------------------------------------------------------------------
TOTAL 961,140
======================================================================
FOOD & HOUSEHOLD PRODUCTS (5.43%)
CP Pokphand Co. Thai. 83,000 457,300
Northern Foods PLC U.K. 74,000 288,090
The Oshawa Group Ltd., Class A Can. 36,500 630,880
Tate & Lyle, PLC U.K. 34,500 245,498
----------------------------------------------------------------------
TOTAL 1,621,768
======================================================================
FOREST PRODUCTS & PAPER (2.89%)
Enso Oy, A shares Fin. 61,000 619,646
Fletcher Challenge Forests N.Z. 4,840 6,041
Fletcher Challenge Paper N.Z. 121,000 238,534
----------------------------------------------------------------------
TOTAL 864,221
======================================================================
<PAGE>
SEPTEMBER 30, 1997
INTERNATIONAL EQUITY FUND
Country Shares/Par Market Value
----------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL (0.14%)
Waste Management International PLC U.K. 10,400 $43,176
----------------------------------------------------------------------
HEALTH & PERSONAL CARE (3.12%)
Medeva PLC U.K. 112,350 381,129
Nycomed ASA Series A Norw. 24,300 551,728
----------------------------------------------------------------------
TOTAL 932,857
======================================================================
INDUSTRIAL COMPONENTS (3.88%)
<F2> Granges AB Swe. 7,700 140,139
<F4> Madeco S.A., ADR Chile 17,500 428,750
The Weir Group PLC U.K. 126,200 591,204
----------------------------------------------------------------------
TOTAL 1,160,093
======================================================================
INSURANCE (2.21%)
PartnerRe Ltd. Bermuda 11,500 495,218
Zurich Versicherungs-Gesellschaft Swtz. 380 165,633
----------------------------------------------------------------------
TOTAL 660,851
======================================================================
MACHINERY & ENGINEERING (0.57%)
New Holland N.V. Neth. 5,800 171,100
----------------------------------------------------------------------
METAL-NON-FEREOUS (1.50%)
Pechiney S.A. A Fr. 9,300 446,799
----------------------------------------------------------------------
MERCHANDISING (2.82%)
David Jones Ltd. Austrl. 77,500 113,422
Koninklijke PTT Nederland Neth. 11,700 459,908
Somerfield PLC U.K. 82,500 269,206
----------------------------------------------------------------------
TOTAL 842,536
======================================================================
METAL-STEEL (4.21%)
Boehler-Uddeholm AG Aus. 4,000 336,292
British Steel PLC U.K. 217,100 625,129
Grupo Mexico B Mex. 73,700 296,203
----------------------------------------------------------------------
TOTAL 1,257,624
======================================================================
MISCELLANEOUS MATERIAL/COMMODITIES (0.52%)
Thai Glass Industries
Public Co., Ltd. Thai. 80,100 154,463
----------------------------------------------------------------------
MULTI-INDUSTRY (10.72%)
Amer Group A Fin. 13,000 282,801
BTR, PLC A U.K. 167,400 681,453
Harrisons & Crossfield U.K. 113,800 226,114
Hicom Holdings Berhad Mly. 223,300 263,152
Jardine Matheson Holdings Sing. 62,500 506,250
Metro Pacific Corporation Phil. 2,000,000 241,630
Country Shares/Par Market Value
----------------------------------------------------------------------
MULTI-INDUSTRY (CONTINUED)
Scor Fr. 13,000 $561,664
Swire-Pacific Limited B H.K. 296,000 437,966
----------------------------------------------------------------------
TOTAL 3,201,030
======================================================================
RECREATION, OTHER CONSUMER GOODS (0.28%)
<F4> Fila Holding SPA, ADR Italy 2,700 83,531
----------------------------------------------------------------------
REAL ESTATE (0.84%)
Hang Lung Development H.K. 133,000 250,068
----------------------------------------------------------------------
TELECOMMUNICATIONS (5.95%)
Telebras Braz. 4,578,500 528,666
<F4> PT Indosat, ADR Indo. 11,200 294,000
<F4> Telefonica del Peru
S.A. B, ADR Peru 17,500 413,438
British Telecom U.K. 82,000 541,773
----------------------------------------------------------------------
TOTAL 1,777,877
======================================================================
TRANSPORTATION-SHIPPING (0.81%)
Osprey Maritime Ltd. Sing. 235,000 241,144
----------------------------------------------------------------------
UTILITIES-ELECTRIC & GAS (3.62%)
Hong Kong Electric H.K. 106,000 394,495
<F4> Korea Electric Power Corp., ADR Kor. 15,775 216,906
National Grid Group PLC U.K. 31,600 144,922
Thames Water U.K. 23,000 324,356
----------------------------------------------------------------------
TOTAL 1,080,679
======================================================================
WHOLESALE & INTERNATIONAL TRADE (0.79%)
Inchcape Berhad Sing. 69,000 241,275
----------------------------------------------------------------------
TOTAL COMMON STOCK 26,278,004
======================================================================
MONEY MARKET INVESTMENTS (12.04%)
Capital Goods (8.04%)
General Electric Co.
10/1/97 U.S. $2,400,000 $2,400,000
----------------------------------------------------------------------
FINANCE SERVICES (4.00%)
General Motors Acceptance
Corp. 10/22/97 U.S. 1,200,000 1,196,122
----------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 3,596,122
======================================================================
TOTAL INTERNATIONAL STOCK FUND $29,874,126
======================================================================
<F2> Non-Income Producing
<F3> GDR - Global Depositary Receipt
<F4> ADR - American Depositary Receipt
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
GROWTH STOCK FUND
OBJECTIVE: To seek long-term growth of capital by investing in companies
believed to have above-average earnings growth potential; current income is
secondary.
PORTFOLIO: Diversified mix of high-quality growth stocks in medium and large
companies.
STRATEGY: To analyze economic trends to determine their impact on various
sectors and industries and to select high-quality stocks from industries with
the best earnings potential.
INVESTED ASSETS: $32,341,705
The Growth Stock Fund is invested in high-quality companies of large- to medium-
capitalization with strong financial characteristics and the ability to generate
internal growth. A key factor in stock selection is the choice of industries
with good earnings potential, based on analysis of economic trends to determine
their impact on various sectors of the economy. Stock selection is made through
"top down" analysis: first industry and market sector choices are made based
on the economic environment, and then the most promising companies within each
sector are selected as holdings.
During its first six months, the Growth Stock Fund's performance reflected
strength in the overall market. Relative to the S&P 500(R) Index, the Fund is
overweighted in consumer cyclicals, where specialty retailers are an area of
emphasis. Some positions in consumer-related stocks have been reduced slightly,
as the Fund's management took advantage of opportunities to realize gains. The
health care and capital goods industries are underweighted somewhat, while the
energy position is overweighted, with positions in oil field service providers
as well as multi-national oil companies. Utility stocks, which make up 3% of the
S&P 500(R) Index, are not represented in this Fund because growth opportunities
in the electric and gas utility industries are limited. Telecommunications
holdings are underweighted, with positions in only a few rapidly growing
companies, because fierce competition in this industry is likely to reduce
returns. Within the finance sector, the emphasis was shifted somewhat, with
additional investments in bank stocks balancing a reduction in the large
position in Franklin Resources, a major investment management company.
SECTOR ALLOCATION (EXCLUDING CASH EQUIVALENTS)
9/30/97
- ------------------------------------
Other 7%
Health Care 8%
Energy 11%
Consumer Staples 13%
Basic Materials/Capital Goods 13%
Finance 15%
Technology 15%
Consumer Cyclicals 18%
TOP 10 HOLDINGS
9/30/97
Company % Market Value
- --------------------------------------------------
General Electric Company 3.0%
Franklin Resources 2.9%
Kohl's Corp. 2.8%
Eli Lilly and Company 2.7%
Morgan Stanley, Dean Witter, Discover & Co. 2.4%
PepsiCo, Inc. 2.3%
Citicorp 2.2%
International Business Machines Corporation 2.2%
Walgreen Company 2.2%
Travelers Group, Inc. 2.2%
<PAGE>
SEPTEMBER 30, 1997
GROWTH STOCK FUND
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
3/31/97 6/30/97 9/30/97
- -------------------------------------------------------
Growth Stock Fund $10,000 $11,580 $12,420
S&P 500(R) Index 10,000 11,746 12,626
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- -------------------------------------------------------
Growth Stock Fund 24.20%
S&P 500(R) Index 26.26%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
GROWTH STOCK FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
------------------------------------------------------------
COMMON STOCK (90.42%)
Basic Materials (5.63%)
Avery Dennison Corporation 13,800 $552,000
E.I. du Pont de Nemours & Co. 8,600 529,435
Ecolab, Inc. 9,500 461,344
Monsanto Company 7,100 276,900
------------------------------------------------------------
TOTAL 1,819,679
============================================================
CAPITAL GOODS (5.91%)
<F5> American Standard Companies, Inc. 8,400 337,050
Boeing Company 11,400 620,588
General Electric Company 14,000 952,875
------------------------------------------------------------
TOTAL 1,910,513
============================================================
COMMUNICATION SERVICES (1.63%)
MCI Communications Corporation 7,000 205,625
<F5> WorldCom, Inc. 9,100 321,913
------------------------------------------------------------
TOTAL 527,538
============================================================
CONSUMER CYCLICAL (16.25%)
<F5> Borg Warner Automotive 12,000 682,500
<F5> Federated Department Stores, Inc. 7,300 314,813
<F5> Kohl's Corp. 12,800 908,800
McDonald's Corporation 4,800 228,600
New York Times Company 13,300 698,250
Newell Co. 14,800 592,000
Tribune Company 13,300 709,056
Wal-Mart Stores, Inc. 11,000 402,875
Walgreen Company 28,000 717,500
------------------------------------------------------------
TOTAL 5,254,394
============================================================
CONSUMER STAPLES (11.39%)
Campbell Soup Company 11,600 568,400
Hershey Foods Corp. 11,700 661,050
PepsiCo, Inc. 18,000 730,124
Philip Morris Companies, Inc. 12,300 511,219
Procter & Gamble Company 8,000 552,500
Unilever N.V. 3,100 659,138
------------------------------------------------------------
TOTAL 3,682,431
============================================================
<PAGE>
MASON STREET FUNDS
GROWTH STOCK FUND
Shares/Par Market Value
------------------------------------------------------------
ENERGY (10.00%)
Amoco Company 3,900 $375,863
British Petroleum Co. Ltd. 5,600 508,550
Diamond Offshore Drilling, Inc. 9,000 496,688
Exxon Corporation 5,800 371,562
Mobil Corporation 5,200 384,800
Schlumberger Limited 5,900 496,706
Tosco Corporation 17,200 598,775
------------------------------------------------------------
TOTAL 3,232,944
============================================================
FINANCE (13.26%)
Banc One Corporation 5,200 290,224
BankAmerica Corporation 3,800 278,588
Chase Manhattan Corporation 2,600 306,800
Citicorp 5,400 723,263
Franklin Resources 10,200 949,875
Morgan Stanley, Dean Witter,
Discover & Co. 14,100 762,281
Travelers Group, Inc. 10,500 716,625
USF&G Corp. 11,400 261,488
------------------------------------------------------------
TOTAL 4,289,144
============================================================
HEALTH CARE (7.67%)
Eli Lilly and Company 7,100 856,880
HEALTHSOUTH Corp. 4,100 109,419
<F5> Horizon/CMS Healthcare Corp. 11,850 265,144
<F5> Johnson & Johnson 4,500 259,313
Merck & Co., Inc. 6,900 689,569
United Healthcare Corp. 6,000 300,000
------------------------------------------------------------
TOTAL 2,480,325
============================================================
MISCELLANEOUS (2.16%)
AlliedSignal, Inc. 16,400 697,000
------------------------------------------------------------
TECHNOLOGY (13.78%)
Cisco Systems, Inc. 4,600 336,088
Compaq Computer Corp. 2,100 156,975
Fiserv, Inc. 15,700 688,838
<F5> Hewlett-Packard Company 8,200 570,413
Intel Corp. 5,200 480,025
International Business Machines
Corporation 6,800 720,373
Lucent Technologies, Inc. 7,000 569,625
Microsoft Corporation 5,100 674,794
<F5> Motorola, Inc. 3,600 258,750
------------------------------------------------------------
TOTAL 4,455,881
============================================================
Shares/Par Market Value
------------------------------------------------------------
TRANSPORTATION (1.71%)
<F5> AMR Corporation 5,000 $553,438
UTILITIES (1.03%)
Sonat Inc. 6,700 340,863
------------------------------------------------------------
TOTAL COMMON STOCK 29,244,150
============================================================
MONEY MARKET INVESTMENTS (9.58%)
FINANCE SERVICES (9.58%)
<F6> Federal Home Loan Bank Discount
Corp., 5.920%, 10/1/97 $2,400,000 $2,400,000
<F6> Federal Home Loan Mortgage
Corp., 5.44%, 10/2/97 100,000 99,985
Federal National Mortgage
Association, 5.43%, 11/24/97 100,000 99,186
<F6> General Motors Acceptance
Corp., 5.539%, 10/22/97 500,000 498,384
------------------------------------------------------------
TOTAL 3,097,555
------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 3,097,555
============================================================
TOTAL GROWTH STOCK FUND $32,341,705
============================================================
<F5> Non-Income Producing
<F6> Partially held by the custodian in segregated account as collateral
for open futures positions. Information regarding open futures
contracts as of September 30, 1997 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Appreciation
-------------------------------------------------------------------
S&P 500(R) INDEX 3 12/97 26,150
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
GROWTH AND INCOME STOCK FUND
OBJECTIVE: To seek long-term growth of capital and income by investing
primarily in dividend-paying common stocks.
PORTFOLIO: Primarily common stocks of medium and large companies identified as
strong candidates for significant long-term returns.
STRATEGY: To actively manage a portfolio of selected equity securities with
a goal of out-performing the total return of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500(R) Index").
INVESTED ASSETS: $34,441,853
The Growth and Income Fund invests mainly in large- capitalization stocks, with
a focus on seeking the best values in the market based on long-term earnings
forecasts. A sector balance very close to that of the S&P 500(R) Index is
normally maintained, with the emphasis on undervalued stocks within each sector;
a valuation discipline mandates the sale of stocks regarded as overvalued.
The Fund performed well during its first six months, exceeding the total return
of the S&P 500(R) Index by more than a percentage point. The Fund's performance
benefited from a significant broadening in the market's strength, which, prior
to the second quarter of 1997, had been concentrated in the largest and best-
known names.
The Fund's holdings in the financial services area performed well, as
consolidation heightened interest in the industry, and stable interest rates
enabled banks to manage earnings. Technology stocks continued to soar, while
stocks in the heath care field languished somewhat as the industry in general
was beset by problems that have little relevance to the Fund's specific
holdings. Other large positions, such as Anheuser-Busch in the Consumer Staples
sector and Cooper Industries in Capital Goods appear to hold promise for future
performance; both of these are well-managed companies with solid market
positions that have not participated fully in the market's strength to date.
The Growth and Income Stock Fund is managed for Northwestern Mutual by J. P.
Morgan Investment Management Inc.
SECTOR ALLOCATION
9/30/97
- -----------------------------------
Cash Equivalents 6%
Consumer Cyclicals 6%
Energy 8%
Health Care 9%
Consumer Staples 12%
Basic Materials/Capital Goods 12%
Finance 14%
Other 16%
Technology 17%
TOP 10 HOLDINGS
9/30/97
Company % Market Value
- -----------------------------------
Warner-Lambert Company 3.1%
Tosco Corporation 2.9%
Cooper Industries, Inc. 2.5%
NationsBank Corporation 2.4%
Anheuser-Busch Companies, Inc. 2.4%
Tele Communications, Inc. 2.2%
United Healthcare Corp. 2.2%
Pfizer, Inc. 2.1%
MCI Communications Corporation 2.1%
Mobil Corporation 2.0%
<PAGE>
MASON STREET FUNDS
GROWTH AND INCOME STOCK FUND
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
3/31/97 6/30/97 9/30/97
- ------------------------------------------------------------
Growth and Income Stock Fund $10,000 $11,550 $12,760
S&P 500(R) Index $10,000 $11,746 $12,628
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Growth and Income Stock Fund 27.60%
S&P 500(R) Index 26.26%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
------------------------------------------------------------
COMMON STOCK (93.90%)
Basic Materials (3.50%)
Albemarle Corporation 15,500 $387,500
Allegheny Teledyne, Inc. 7,900 226,135
Dow Chemical Company 1,700 154,169
Union Carbide Corporation 9,000 438,188
------------------------------------------------------------
TOTAL 1,205,992
============================================================
CAPITAL GOODS (8.07%)
Boeing Company 5,700 310,294
Cooper Industries, Inc. 14,900 805,530
Emerson Electric Co. 5,500 316,938
Johnson Controls, Inc. 6,900 341,981
Tyco International Ltd. 4,424 363,045
Waste Management, Inc. 18,400 642,850
------------------------------------------------------------
TOTAL 2,780,638
============================================================
COMMUNICATION SERVICES (6.24%)
Bell Atlantic Corporation 3,400 273,487
GTE Corporation 6,600 299,475
MCI Communications Corporation 22,900 672,688
Sprint Corp. 10,500 525,000
<F7> WorldCom, Inc. 10,700 378,513
------------------------------------------------------------
TOTAL 2,149,163
============================================================
CONSUMER CYCLICAL (6.35%)
Circuit City Stores-Circuit City Group 7,200 290,250
<F7> Federated Department Stores, Inc. 3,800 163,875
<F7> Fruit of the Loom, Inc. 19,500 548,438
Goodyear Tire & Rubber Company 5,200 357,500
<F7> Toys "R" Us, Inc. 16,700 592,850
WestPoint Stevens, Inc. 5,700 235,125
------------------------------------------------------------
TOTAL 2,188,038
============================================================
CONSUMER STAPLES (11.53%)
Anheuser-Busch Companies, Inc. 17,300 780,663
General Mills, Inc. 8,700 599,756
PepsiCo, Inc. 10,500 425,906
Philip Morris Companies, Inc. 11,300 469,656
Procter & Gamble Company 7,000 483,438
Ralston Purina Group 3,700 327,450
<F7> Tele Communications, Inc. 35,000 717,500
Time Warner, Inc. 3,100 167,981
------------------------------------------------------------
TOTAL 3,972,350
============================================================
<PAGE>
SEPTEMBER 30, 1997
GROWTH AND INCOME STOCK FUND
Shares/Par Market Value
------------------------------------------------------------
ENERGY (8.01%)
<F7> Atlantic Richfield Co. 1,200 $102,525
British Petroleum Co. Ltd. 3,043 276,342
Exxon Corporation 7,400 474,063
<F7> Input/Output, Inc. 10,500 311,063
Mobil Corporation 8,700 643,800
Tosco Corporation 27,300 950,381
------------------------------------------------------------
TOTAL 2,758,174
============================================================
FINANCE (14.16%)
Crestar Financial Corp. 7,200 337,500
Fannie Mae 10,600 498,200
First Chicago NBD Corporation 4,700 353,675
First Union Corporation 6,700 335,419
Marsh & McLennan Companies, Inc. 7,700 590,010
MBIA, Inc. 2,200 275,963
Morgan Stanley, Dean Witter,
Discover & Co. 3,100 167,594
NationsBank Corp. 12,700 785,813
<F7> Providian Financial Corp. 8,100 321,469
<F7> Signet Banking Corporation 5,500 298,375
<F7> Simon Debartolo Group, Inc. 10,400 343,200
TeleCom-TCI Ventures, Grp. A 7,700 158,813
Washington Mutual, Inc. 5,900 411,525
------------------------------------------------------------
TOTAL 4,877,556
============================================================
HEALTH CARE (9.05%)
<F7> Alza Corporation 9,100 263,900
<F7> Humana, Inc. 6,700 159,544
Pfizer, Inc. 11,500 690,719
Schering-Plough Corporation 5,300 272,950
United Healthcare Corp. 14,100 705,000
Warner-Lambert Company 7,600 1,025,525
------------------------------------------------------------
TOTAL 3,117,638
============================================================
MISCELLANEOUS (0.89%)
AlliedSignal, Inc. 7,200 306,000
------------------------------------------------------------
SERVICES (1.46%)
<F7> First USA Paymentech, Inc. 200 3,275
International Game Technology 21,900 498,225
------------------------------------------------------------
TOTAL 501,500
============================================================
Shares/Par Market Value
------------------------------------------------------------
TECHNOLOGY (17.12%)
<F7> Bay Networks, Inc. 14,100 $544,613
<F7> Cabletron Systems, Inc. 19,700 630,400
<F7> Cisco Systems, Inc. 3,100 226,494
CommScope, Inc. 8,233 111,660
<F7> Cypress Semiconductor Corporation 14,700 227,850
Cyrix Corporation 4,000 134,000
<F7> EMC Corporation 7,500 437,813
First Data Corporation 12,900 484,556
Harris Corporation 2,800 128,100
International Business Machines
Corporation 4,900 519,092
Intel Corporation 4,000 369,250
Perkin Elmer Corporation 2,300 168,044
Rohr, Inc. 11,100 343,406
Quantum Corporation 8,900 340,981
<F7> Sun Microsystems, Inc. 9,900 463,444
Symbol Technologies, Inc. 5,800 254,838
Temple-Inland, Inc. 8,000 512,000
------------------------------------------------------------
TOTAL 5,896,541
============================================================
TRANSPORTATION (4.35%)
<F7> Coltec Industries, Inc. 17,200 371,950
CSX Corporation 3,300 193,050
Union Pacific Corporation 9,800 613,725
Wisconsin Central Transportation 10,000 318,125
------------------------------------------------------------
TOTAL 1,496,850
============================================================
UTILITIES (3.17%)
Dominion Resources, Inc. 6,000 227,250
Duke Energy Corp. 3,000 148,313
Enron Corp. 6,300 242,550
New England Electric Systems 4,200 164,850
Northern States Power Company 6,200 308,450
------------------------------------------------------------
TOTAL 1,091,413
============================================================
TOTAL COMMON STOCK 32,341,853
============================================================
MONEY MARKET INVESTMENTS (6.10%)
FINANCE SERVICES (6.10%)
Federal Home Loan Bank Discount
Corp., 5.919%, 10/1/97 $2,100,000 $2,100,000
------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,100,000
============================================================
TOTAL GROWTH & INCOME FUND $34,441,853
============================================================
<F7> Non-Income Producing
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
OBJECTIVE: To seek investment results that approximate the performance of the
S&P 500(R) Index, by investing in stocks included in the S&P 500(R) Index.
Because the S&P 500(R) Index is an unmanaged index, this return does not
reflect the deduction of expenses that would exist with a mutual fund.
FOCUS: To capture broad market performance, at low cost, by investing in a
portfolio modeled after a broadly based stock index.
INVESTED ASSETS: $34,849,228
The Index 500 Stock Fund is designed to achieve results that approximate the
performance of the S&P 500(R) Index. This composite of 500 stocks of large
companies, compiled by Standard & Poor's Corporation, is generally regarded as a
good proxy for the overall U.S. equity market. The Fund therefore enables
investors to participate in overall performance of the U.S. equity market. In
its first six months of operation, the Fund achieved the objective of matching
the results of the S&P 500(R) Index before expenses.
SECTOR ALLOCATION
9/30/97
- -----------------------------------
Energy 9%
Consumer Cyclicals 9%
Health Care 10%
Other 11%
Technology 15%
Basic Materials/Capital Goods 15%
Consumer Staples 15%
Finance 16%
TOP 10 HOLDINGS
9/30/97
Company % Market Value
- ---------------------------------------------
General Electric Company 3.0%
Microsoft Corporation 2.2%
Exxon Corporation 2.2%
Intel Corp. 2.1%
The Coca-Cola Company 2.1%
Merck & Co., Inc. 1.6%
Royal Dutch Petroleum Co., ADR 1.6%
International Business Machines Corp. 1.4%
Philip Morris Companies, Inc. 1.4%
Procter & Gamble Company 1.3%
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
3/31/97 6/30/97 9/30/97
- --------------------------------------------------
Index 500 Stock Fund $10,000 $11,700 $12,550
S&P 500(R) Index $10,000 $11,746 $12,626
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Index 500 Stock Fund 25.50%
S&P 500(R) Index 26.26%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
<PAGE>
SEPTEMBER 30, 1997
INDEX 500 STOCK FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-----------------------------------------------------------------
COMMON STOCK (100.00%)
Basic Materials (5.23%)
Air Products & Chemicals, Inc. 500 $41,469
Alcan Aluminum Limited 1,100 38,225
Allegheny Teledyne, Inc. 800 22,900
Aluminum Co. of America 800 65,600
Archer Daniels Midland Company 2,620 62,716
<F8> Armco, Inc. 500 3,000
ASARCO, Inc. 200 6,400
B.F. Goodrich Company 300 13,575
Barrick Gold Corporation 1,800 44,550
Battle Mountain Gold Company 1,100 7,906
Bemis Company, Inc. 200 8,950
<F8> Bethlehem Steel Corporation 500 5,156
Boise Cascade Corporation 300 12,619
Champion International 500 30,469
Cyprus Minerals Co. 400 9,600
Dow Chemical Company 1,100 99,756
E.I. du Pont de Nemours & Co. 5,400 332,438
Eastman Chemical Company 400 24,800
Echo Bay Mines Limited Co. 700 3,981
Ecolab, Inc. 300 14,569
Engelhard Corp. 700 15,094
<F8> FMC Corporation 200 17,750
Freeport-McMoRan Copper & Gold, Inc. 900 25,931
Georgia Pacific Corp. 400 41,750
Great Lakes Chemical 300 14,794
Hercules, Inc. 500 24,875
Homestake Mining Company 700 10,719
Inco Limited 800 20,050
Inland Steel Industries, Inc. 200 4,375
International Flavors & Fragrances, Inc. 500 24,500
International Paper Company 1,400 77,088
Louisiana Pacific Corporation 500 12,500
Mead Corp. 200 14,450
Monsanto Company 2,800 109,200
Morton International, Inc. 700 24,850
Nalco Chemical Company 300 12,019
Newmont Mining Corporation 758 34,063
Nucor Corp. 400 21,075
Phelps Dodge Corporation 300 23,288
Pioneer Hi-Bred International 400 36,400
Placer Dome, Inc. 1,100 21,038
Shares/Par Market Value
-----------------------------------------------------------------
BASIC MATERIALS (CONTINUED)
Potlatch Corporation 100 $5,031
PPG Industries, Inc. 900 56,419
Praxair 800 40,950
Reynolds Metals Company 400 28,325
Rohm & Haas Company 300 28,781
Sigma-Aldrich Corp. 500 16,469
Stone Container Corporation 500 7,781
Temple-Inland, Inc. 300 19,200
Union Camp Corporation 300 18,506
Union Carbide Corporation 600 29,213
USX - U.S. Steel Group, Inc. 400 13,900
W.R. Grace & Co. 300 22,088
Westvaco Corporation 500 18,031
Weyerhaeuser Company 900 53,438
Willamette Industries, Inc. 500 19,125
Worthington Industries 500 10,125
-----------------------------------------------------------------
TOTAL 1,821,870
=================================================================
CAPITAL GOODS (9.70%)
Aeroquip-Vickers, Inc. 100 4,900
AlliedSignal, Inc. 2,700 114,750
AMP, Inc. 1,000 53,563
Avery Dennison Corp. 500 20,000
Ball Corporation 100 3,481
Boeing Company 4,770 259,667
Briggs & Stratton Corporation 100 4,944
Browning-Ferris Industries, Inc. 1,000 38,063
Case Corporation 400 26,650
Caterpillar, Inc. 1,800 97,088
Cincinnati Milacron, Inc. 200 5,375
Cooper Industries, Inc. 600 32,438
Corning, Inc. 1,100 51,975
Crane Co. 200 8,225
Crown Cork & Seal Company, Inc. 600 27,675
Cummins Engine Company, Inc. 200 15,613
Deere & Company 1,200 64,500
Dover Corporation 500 33,938
Eaton Corporation 400 36,950
Emerson Electric Co. 2,100 121,013
Fluor Corporation 400 21,450
Foster Wheeler Corporation 200 8,788
General Dynamics Corporation 300 26,138
General Electric Company 15,500 1,054,969
General Signal Corporation 200 8,650
Harnischfeger Industries, Inc. 200 8,550
Honeywell, Inc. 600 40,313
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
Shares/Par Market Value
-----------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
Illinois Tool Works, Inc. 1,200 $59,925
Ingersoll-Rand Company 750 32,297
Johnson Controls, Inc. 400 19,825
Lockheed Martin Corporation 900 95,963
McDermott International, Inc. 300 10,950
Millipore Corp. 200 9,825
Minnesota Mining & Manufacturing Co. 2,000 185,000
Moore Corporation Ltd. 403 7,657
National Service Industries, Inc. 200 8,788
<F8> Navistar International Corp. 300 8,288
Northrop Grumman Corporation 300 36,413
<F8> Owens-Illinois, Inc. 600 20,363
PACCAR, Inc. 400 22,400
Pall Corporation 600 12,938
Parker-Hannifin Corporation 550 24,750
Pitney Bowes, Inc. 700 58,231
Raychem Corp. 200 16,900
Rockwell International Corporation 1,000 62,938
Tenneco, Inc. 800 38,300
Textron, Inc. 800 52,000
<F8> Thermo Electron Corporation 700 28,000
Thomas & Betts Corporation 300 16,388
Timken Company 300 12,019
Tyco International Ltd. 1,300 106,681
United Technologies Corp. 1,100 89,100
Waste Management, Inc. 2,100 73,369
Westinghouse Electric Corp. 3,000 81,188
-----------------------------------------------------------------
TOTAL 3,380,162
=================================================================
COMMUNICATION SERVICES (5.93%)
<F8> Airtouch Communications, Inc. 2,400 85,050
ALLTEL Corporation 900 31,050
Ameritech Corporation 2,600 172,900
AT&T Corporation 7,700 341,206
Bell Atlantic Corporation 3,636 292,471
Bellsouth Corporation 4,700 217,375
Frontier Corporation 800 18,400
GTE Corporation 4,500 204,188
MCI Communications Corporation 3,300 96,938
SBC Communications, Inc. 4,316 264,895
Sprint Corporation 2,000 100,000
U S WEST Communications Group 2,300 88,550
<F8> WorldCom, Inc. 4,300 152,113
-----------------------------------------------------------------
TOTAL 2,065,136
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
CONSUMER CYCLICAL (9.38%)
American Greetings Corp. 400 $14,750
Armstrong World Industries, Inc. 200 13,413
<F8> AutoZone, Inc. 700 21,000
Black & Decker Corporation 400 14,900
Brunswick Corporation 500 17,625
Centex Corporation 100 5,838
<F8> Charming Shoppes, Inc. 500 3,078
Chrysler Corporation 3,200 117,800
Circuit City Stores, Inc. 500 20,156
Cognizant Corp. 800 32,600
Cooper Tire & Rubber Company 400 10,625
<F8> Costco Companies, Inc. 1,000 37,625
<F8> CUC International, Inc. 1,900 58,900
Dana Corporation 500 24,688
Dayton Hudson Corporation 1,000 59,938
Dillard's, Inc. 500 21,906
Dow Jones & Company, Inc. 500 23,375
Dun & Bradstreet Corporation 800 22,700
Echlin, Inc. 300 10,519
<F8> Federated Department Stores, Inc. 1,000 43,125
Fleetwood Enterprises, Inc. 200 6,713
Ford Motor Company 5,700 257,925
<F8> Fruit of the Loom, Inc. 300 8,438
Gannet Company, Inc. 700 75,556
General Motors Corp. 3,500 234,281
Genuine Parts Company 850 26,191
Goodyear Tire & Rubber Company 700 48,125
H & R Block, Inc. 500 19,313
Harcourt General 300 14,869
<F8> Harrahs Entertainment 500 11,219
Hasbro, Inc. 600 16,875
<F8> HFS, Inc. 800 59,550
Hilton Hotels Corporation 1,200 40,425
Home Depot, Inc. 3,450 179,831
Interpublic Group of Cos., Inc. 600 30,787
<F8> ITT Corp. 600 40,650
ITT Industries, Inc. 600 19,913
J.C. Penney Company, Inc. 1,200 69,900
Jostens, Inc. 200 5,425
<F8> K Mart Corporation 2,300 32,200
Kaufman & Broad Home Corp. 200 4,338
Knight-Ridder, Inc. 400 21,850
Laidlaw Transportation Limited 1,500 22,406
Liz Claiborne, Inc. 300 16,481
Lowe's Companies, Inc. 800 31,100
<PAGE>
SEPTEMBER 30, 1997
INDEX 500 STOCK FUND
Shares/Par Market Value
-----------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Marriott International 600 $42,638
Masco Corporation 800 36,650
Mattel, Inc. 1,400 46,375
May Department Stores Company 1,100 59,950
Maytag Corporation 500 17,063
McGraw-Hill Companies, Inc. 500 33,844
Mercantile Stores Company 200 12,588
Meredith Corporation 300 9,938
<F8> Mirage Resorts, Inc. 800 24,100
New York Times Company 500 26,250
Nike, Inc. 1,400 74,200
Nordstrom, Inc. 400 25,500
Owens Corning Fiberglas Corp. 300 10,950
Pep Boys - Manny, Moe & Jack 300 8,175
Pulte Corporation 100 3,825
<F8> Reebok International Ltd. 300 14,606
Russell Corp. 200 5,888
Sears Roebuck & Co. 1,900 108,181
Service Corporation International 1,200 38,625
Sherwin-Williams Company 800 23,550
Snap-On, Inc. 300 13,819
Springs Industries, Inc. 100 5,250
Stride Rite Corp. 200 2,713
Tandy Corporation 600 20,175
The Gap, Inc. 1,300 65,081
The Limited, Inc. 1,300 31,769
The Stanley Works 400 17,200
Times Mirror Company 500 27,469
TJX Companies, Inc. 700 21,394
<F8> Toys "R" Us, Inc. 1,300 46,150
Tribune Company 600 31,988
TRW, Inc. 600 32,925
VF Corporation 300 27,788
Wal-Mart Stores, Inc. 10,700 391,888
Whirlpool Corporation 400 26,525
<F8> Woolworth Corp. 600 13,275
-----------------------------------------------------------------
TOTAL 3,267,227
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
CONSUMER STAPLES (14.40%)
Adolph Coors Co. 200 $7,575
Alberto-Culver Company 300 9,131
Albertson's, Inc. 1,200 41,850
American Stores Co. 1,300 31,688
Anheuser-Busch Companies, Inc. 2,300 103,788
Avon Products, Inc. 600 37,200
Brown-Forman Corp. 300 14,906
Campbell Soup Company 2,200 107,800
Cardinal Health, Inc. 500 35,500
<F8> Clear Channel Communications, Inc. 500 32,438
Clorox Company 500 37,063
Colgate-Palmolive Co. 1,400 97,563
Comcast Corp. 1,600 41,200
Conagra, Inc. 1,100 72,600
CPC International Corp. 700 64,838
CVS Corporation 800 45,500
Darden Restaurant, Inc. 700 8,094
Deluxe Corp. 400 13,425
Fleming Companies, Inc. 200 3,663
Fort James Corporation 900 41,231
Fortune Brands, Inc. 800 26,950
General Mills, Inc. 800 55,150
Giant Food, Inc. 300 9,769
Gillette Company 2,700 233,044
Great Atlantic & Pacific Tea Co., Inc. 200 6,350
H.J. Heinz Company 1,700 78,519
Hershey Foods Corp. 700 39,550
John H. Harland Company 100 2,306
Kellogg Company 2,000 84,250
Kimberly-Clark Corporation 2,600 127,238
<F8> King World Productions, Inc. 200 8,650
Longs Drug Stores Corp. 200 5,338
McDonald's Corporation 3,300 157,163
Newell Co. 700 28,000
PepsiCo, Inc. 7,300 296,106
Philip Morris Companies, Inc. 11,500 477,969
Procter & Gamble Company 6,400 442,000
Quaker Oats Company 700 35,263
R.R. Donnelley & Sons Company 700 24,981
Ralston Purina Group 500 44,250
Rite Aid Corporation 600 33,263
Rubbermaid, Inc. 700 17,894
Safety-Kleen Corp. 300 7,181
Sara Lee Corporation 2,300 118,450
Seagram Company Ltd. 1,700 59,925
Supervalue, Inc. 300 11,775
Sysco Corporation 800 29,550
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
Shares/Par Market Value
-----------------------------------------------------------------
Consumer Staples (continued)
<F8> Tele Communications, Inc. 3,500 $71,750
The Coca-Cola Company 11,800 719,063
<F8> The Kroger Company 1,200 36,225
Time Warner, Inc. 2,700 146,306
Tupperware 300 8,438
<F8> U S West Media Group 2,900 64,706
Unilever N.V. 800 170,100
UST, Inc. 900 27,506
<F8> Viacom, Inc. 1,700 53,763
Walgreen Company 2,300 58,938
Walt Disney Company 3,200 258,000
Wendy's International, Inc. 600 12,750
Whitman Corp. 500 13,625
Winn-Dixie Stores, Inc. 700 24,806
Wm. Wrigley Jr. Company 600 45,188
-----------------------------------------------------------------
TOTAL 5,019,101
=================================================================
ENERGY (9.08%)
Amerada Hess Corporation 400 24,675
Amoco Company 2,300 221,663
Anadarko Petroleum Corporation 300 21,544
Apache Corporation 400 17,150
Ashland, Inc. 400 21,750
Atlantic Richfield Company 1,500 128,156
Baker Hughes, Inc. 800 35,000
Burlington Resource, Inc. 600 30,788
Chevron Corp. 3,100 257,881
Dresser Industries, Inc. 800 34,400
Exxon Corporation 11,700 749,531
Halliburton Company 1,200 62,400
Helmerich & Payne, Inc. 100 8,000
Kerr-McGee Corporation 200 13,763
Louisiana Land & Exploration Co. 200 15,663
Mobil Corporation 3,700 273,800
Occidental Petroleum Corporation 1,600 41,500
<F8> ORYX Energy Company 500 12,719
Pennzoil Company 200 15,938
Phillips Petroleum Company 1,200 61,950
<F8> Rowan Companies, Inc. 400 14,250
Royal Dutch Petroleum Co., ADR 10,200 566,100
Schlumberger Limited 2,400 202,050
Sun Company, Inc. 300 13,144
Texaco, Inc. 2,600 159,738
Union Pacific Resource Group 1,200 31,425
Unocal Corp. 1,200 51,900
USX-Marathon Group 1,400 52,063
<F8> Western Atlas International, Inc. 300 26,400
-----------------------------------------------------------------
TOTAL 3,165,341
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
FINANCE (16.28%)
Aetna, Inc. 700 $57,006
Allstate Corporation 2,100 168,788
American Express Company 2,200 180,125
American General Corporation 1,210 62,769
American International Group, Inc. 3,350 345,678
Aon Corporation 750 39,656
Banc One Corporation 2,800 156,275
Bank of New York Company, Inc. 1,800 86,400
BankAmerica Corporation 3,300 241,931
BankBoston Corporation 700 61,906
Bankers Trust New York Corporation 500 61,250
Barnett Banks, Inc. 900 63,675
Beneficial Corporation 300 22,856
Charles Schwab Corporation 1,200 42,900
Chase Manhattan Corporation 2,000 236,000
CIGNA Corporation 400 74,500
Citicorp 2,200 294,663
Comerica, Inc. 500 39,469
Conseco, Inc. 900 43,931
Corestates Financial Corp. 1,000 66,188
Countrywide Credit Industries, Inc. 500 18,219
Fannie Mae 5,000 235,000
Federal Home Loan Mortgage Corp. 3,300 116,325
Fifth Third Bancorp 750 49,031
First Chicago NBD Corporation 1,400 105,350
First Union Corporation 2,700 135,169
Fleet Financial Group, Inc. 1,200 78,675
General Re Corporation 400 79,400
Golden West Financial Corporation 300 26,925
Green Tree Financial Corporation 600 28,200
H.F. Ahmanson & Company 500 28,406
Hartford Financial Services Group, Inc. 600 51,638
Household International, Inc. 500 56,594
Huntington Bancshares, Inc. 700 25,244
J.P. Morgan & Company, Inc. 800 90,900
Jefferson-Pilot Corp. 300 23,700
KeyCorp 1,000 63,625
Lincoln National Corporation 500 34,813
Loews Corp. 500 56,469
Marsh & McLennan Companies, Inc. 800 61,300
MBIA, Inc. 200 25,088
MBNA Corp. 1,600 64,800
Mellon Bank Corporation 1,200 65,700
Merrill Lynch & Co. 1,600 118,700
<PAGE>
SEPTEMBER 30, 1997
INDEX 500 STOCK FUND
Shares/Par Market Value
-----------------------------------------------------------------
FINANCE (CONTINUED)
MGIC Investment Corp. 500 $28,656
Morgan Stanley, Dean Witter,
Discover & Co. 2,755 148,942
National City Corp. 1,000 61,563
NationsBank Corp. 3,400 210,375
Norwest Corporation 1,800 110,250
PNC Bank Corp. 1,500 73,219
Progressive Corporation 300 32,138
Providian Financial Corporation 400 15,875
Republic New York Corporation 300 34,088
SAFECO Corp. 600 31,800
Salomon, Inc. 500 37,594
St. Paul Companies, Inc. 400 32,625
State Street Corporation 800 48,750
SunAmerica, Inc. 900 35,269
SunTrust Banks, Inc. 1,000 67,938
The Chubb Corporation 800 56,850
Torchmark Corporation 700 27,475
Transamerica Corporation 300 29,850
Travelers Group, Inc. 3,000 204,750
UNUM Corporation 700 31,938
U.S. Bancorp 1,153 111,265
USF&G Corp. 500 11,469
Wachovia Corporation 800 57,600
Washington Mutual, Inc. 1,140 79,515
Wells Fargo & Company 400 110,000
-----------------------------------------------------------------
Total 5,675,031
=================================================================
HEALTH CARE (10.34%)
Abbott Laboratories 3,700 236,569
Allergan, Inc. 300 10,856
<F8> Alza Corporation 400 11,600
American Home Products Corporation 3,100 226,300
<F8> Amgen, Inc. 1,300 62,319
Bausch & Lomb, Inc. 300 12,150
Baxter International, Inc. 1,300 67,925
Becton, Dickinson & Company 600 28,725
<F8> Beverly Enterprises, Inc. 500 8,688
Biomet, Inc. 500 12,000
<F8> Boston Scientific Corp. 900 49,669
Bristol-Myers Squibb Company 4,700 388,925
C.R. Bard, Inc. 300 10,181
Columbia/HCA Healthcare Corporation 3,100 89,125
Eli Lilly and Company 2,600 313,788
Guidant Corp. 700 39,200
Shares/Par Market Value
-----------------------------------------------------------------
HEALTH CARE (CONTINUED)
<F8> HEALTHSOUTH Corporation 1,600 $42,700
<F8> Humana, Inc. 800 19,050
Johnson & Johnson 6,300 363,038
Mallinckrodt, Inc. 300 10,800
Manor Care, Inc. 300 9,975
Medtronic, Inc. 2,200 103,400
Merck & Co., Inc. 5,700 569,644
Pfizer, Inc. 6,100 366,381
Pharmacia & Upjohn, Inc. 2,400 87,600
Schering-Plough Corporation 3,500 180,250
<F8> St. Jude Medical, Inc. 400 14,025
<F8> Tenet Healthcare Corp. 1,400 40,775
U.S. Surgical Corporation 300 8,756
United Healthcare Corp. 900 45,000
Warner-Lambert Company 1,300 175,419
-----------------------------------------------------------------
TOTAL 3,604,833
=================================================================
TECHNOLOGY (15.36%)
<F8> 3COM Corporation 1,600 82,000
Adobe Systems, Inc. 300 15,113
<F8> Advanced Micro Devices, Inc. 700 22,794
<F8> Andrew Corporation 400 10,475
<F8> Apple Computer, Inc. 600 13,013
<F8> Applied Materials, Inc. 900 85,725
Autodesk, Inc. 200 9,075
Automatic Data Processing, Inc. 1,400 70,000
<F8> Bay Networks 900 34,763
<F8> Cabletron Systems, Inc. 700 22,400
<F8> Ceridian Corp. 400 14,800
<F8> Cisco Systems, Inc. 3,200 233,800
Compaq Computer Corporation 3,562 266,260
Computer Associates International, Inc. 1,700 122,081
<F8> Computer Sciences Corp. 400 28,300
<F8> Data General Corporation 200 5,325
<F8> Dell Computer Corp. 1,600 155,000
<F8> Digital Equipment Corporation 700 30,319
<F8> DSC Communications Corp. 600 16,163
Eastman Kodak Company 1,500 97,406
EG&G, Inc. 200 4,138
<F8> EMC Corporation 1,200 70,050
Equifax, Inc. 700 22,006
First Data Corporation 2,100 78,881
Harris Corporation 400 18,300
Hewlett-Packard Company 4,900 340,856
Ikon Office Solutions 600 15,338
Intel Corp. 7,800 720,038
International Business Machines
Corporation 4,700 497,906
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
Shares/Par Market Value
-----------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F8> KLA-Tencor Corporation 400 $27,025
<F8> LSI Logic Corp. 700 22,488
Lucent Technologies, Inc. 3,000 244,125
<F8> Micron Technology 1,000 34,688
<F8> Microsoft Corporation 5,700 754,181
Motorola, Inc. 2,800 201,250
<F8> National Semiconductor Corporation 700 28,700
<F8> NextLevel Systems, Inc. 700 11,725
Northern Telecom Limited 1,200 124,725
<F8> Novell, Inc. 1,600 14,350
<F8> Oracle Corporation 4,650 169,434
<F8> Parametric Technology Company 600 26,475
Perkin-Elmer Corporation 200 14,613
Polaroid Corporation 200 10,238
Raytheon Company 1,100 65,038
Scientific-Atlanta, Inc. 400 9,050
<F8> Seagate Technology, Inc. 1,200 43,350
Shared Medical Systems Corp. 100 5,288
<F8> Silicon Graphics 800 21,000
<F8> Sun Microsystems, Inc. 1,800 84,263
Tektronix, Inc. 200 13,488
<F8> Tellabs, Inc. 900 46,350
Texas Instruments, Inc. 900 121,613
<F8> Unisys Corporation 800 12,250
W.W. Grainger, Inc. 200 17,800
Xerox Corporation 1,500 126,281
-----------------------------------------------------------------
TOTAL 5,352,113
=================================================================
TRANSPORTATION (1.26%)
<F8> AMR Corporation 400 44,275
Burlington Northern Santa Fe 700 67,638
Caliber System, Inc. 200 10,850
CSX Corporation 1,000 58,500
Delta Air Lines, Inc. 300 28,256
<F8> Federal Express Corp. 500 40,000
Norfolk Southern Corporation 600 61,950
Ryder System, Inc. 400 14,375
Southwest Airlines Co. 700 22,356
Union Pacific Corporation 1,200 75,150
<F8> US Airways Group, Inc. 400 16,550
-----------------------------------------------------------------
TOTAL 439,900
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
UTILITIES (3.04%)
American Electric Power Co., Inc. 900 $40,950
Baltimore Gas & Electric Co. 700 19,425
Carolina Power & Light Company 700 25,156
Central & South West Corporation 1,000 22,188
Cinergy Corporation 700 23,406
Coastal Corp. 500 30,625
Columbia Gas System, Inc. 300 21,000
Consolidated Edison Co. of New York 1,100 37,400
Consolidated Natural Gas Company 500 29,094
Dominion Resources, Inc. 900 34,088
DTE Energy Company 700 21,306
Duke Energy Corp. 1,731 85,576
Eastern Enterprises 100 3,731
Edison International 1,900 47,975
Enron Corp. 1,400 53,900
Entergy Corporation 1,100 28,669
FPL Group, Inc. 900 46,125
GPU, Inc. 600 21,525
Houston Industries, Inc. 1,273 27,688
<F8> Niagara Mohawk Power Corporation 700 6,694
Nicor, Inc. 200 7,500
Northern States Power Company 400 19,900
Ohio Edison Company 700 16,406
ONEOK, Inc. 100 3,263
PP&L Resources, Inc. 800 17,500
Pacific Enterprises 400 13,550
PacifiCorp 1,400 31,325
PECO Energy Company 1,000 23,438
Peoples Energy Corporation 200 7,538
PG&E Corp. 2,100 48,694
Public Service Enterprise Group, Inc. 1,100 28,325
Sonat, Inc. 400 20,350
Southern Company 3,200 72,200
Texas Utilities Company 1,167 42,012
UNICOM Corp. 1,000 23,375
Union Electric Company 500 19,219
Williams Companies, Inc. 800 37,398
-----------------------------------------------------------------
TOTAL 1,058,514
=================================================================
TOTAL COMMON STOCK 34,849,228
=================================================================
TOTAL INDEX 500 STOCK FUND $34,849,228
=================================================================
<F8> Non-Income Producing
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
ASSET ALLOCATION FUND
OBJECTIVE: To seek to realize as high a level of total return, including
current income and capital appreciation, as is consistent with reasonable
investment risk. The Fund will follow a flexible policy for allocating assets
among common stocks, bonds and cash.
PORTFOLIO: The normal range of investments is 50-70% stocks, 25-35% bonds and
0-15% cash. Up to 50% of the stock allocation may be invested in foreign
stocks.
STRATEGY: To adjust the mix between asset sectors to capitalize on the
changing financial markets and economic conditions.
INVESTED ASSETS: $31,299,022
The Asset Allocation Fund invests in seven categories of assets: large-
capitalization stocks, small-capitalization stocks, foreign stocks, investment-
grade bonds, below investment-grade bonds, convertible securities and cash
equivalents. The proportion of the Fund in each category is adjusted as
appropriate to take advantage of market trends and opportunities, and securities
within each category are actively managed.
The Fund benefited from an emphasis on equities during the its first six months
of operation, particularly from a significant position in small-cap stocks,
which performed especially well during the third quarter. At the end of
September, 57% of the total Fund was invested in stocks, with 28% of the equity
position in small-capitalization stocks. Within the bond sector of the Fund,
the main focus is on investment-grade bonds, as historically narrow yield
spreads limit the attractiveness of assuming the additional risk of holding a
large position in below investment-grade bonds.
SECTOR ALLOCATION
9/30/97
- -----------------------------------
Convertible Securities 3%
Below Investment-Grade Bonds 6%
Cash Equivalents 6%
Foreign Stocks 11%
Small-Cap Stocks 16%
Investment-Grade Bonds 28%
Large-Cap Stocks 30%
PERFORMANCE RELATIVE TO RELEVANT INDICES
3/31/97 6/30/97 9/30/97
- -----------------------------------------------------------------
Asset Allocation Fund $10,000 $11,230 $11,960
S&P 500(R) Index $10,000 $11,746 $12,626
Merrill Lynch Domestic Master Index $10,000 $10,365 $10,712
Merrill Lynch 91-Day Treasury Bill $10,000 $10,136 $10,272
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Asset Allocation Fund 19.60%
S&P 500(R) Index 26.26%
Merrill Lynch Domestic Master Index 7.12%
Merrill Lynch 91-Day Treasury Bill 2.72%
In the graph, the Fund is compared against three indices representing the three
major components of the Fund: equities, fixed income and cash equivalent
investments.
The Merrill Lynch Domestic Master Index is an unmanaged market value weighted
index comprised of U.S. government, mortgage and investment-grade corporate
bonds. The index measures the income provided by, and the price changes of, the
underlying securities.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
The Merrill Lynch 91-Day Treasury Bill Index is an unmanaged index that
measures the monthly price change to the 3-month Treasury bill.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
Investors should be aware of the risks of investments in foreign stock,
particularly investments in stock of companies in developing nations. These
include the risks of currency fluctuation, of political and economic instability
and of less well-developed government supervision and regulation of business and
industry practices, as well as differences in accounting standards. Small-cap
stocks also may carry additional risk. Smaller or newer issuers are more likely
to realize more substantial growth as well as suffer more significant losses
than larger or more established issuers. Investments in such companies can be
both more volatile and more speculative.
<PAGE>
MASON STREET FUNDS
ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-----------------------------------------------------------------
COMMON STOCK (56.62%)
DOMESTIC COMMON STOCK (45.53%)
BASIC MATERIALS (1.85%)
Avery Dennison Corp. 4,300 $172,000
Cambrex Corp. 100 4,663
Ecolab, Inc. 3,000 145,688
E.I. du Pont de Nemours & Co. 2,700 166,219
Monsanto Company 2,300 89,700
-----------------------------------------------------------------
TOTAL 578,270
=================================================================
CAPITAL GOODS (2.97%)
<F9> American Standard Companies, Inc. 2,800 112,350
Boeing Company 3,600 195,975
General Electric Company 4,500 306,281
<F9> Jabil Circuit, Inc. 2,300 150,650
Kaydon Corp. 1,600 96,000
Omniquip International, Inc. 3,600 66,150
Tetra Tech, Inc. 100 2,450
-----------------------------------------------------------------
TOTAL 929,856
=================================================================
COMMUNICATION SERVICES (0.55%)
LCI International, Inc. 100 2,663
MCI Communications Corporation 2,200 64,625
TESSCO Technologies, Inc. 100 2,775
WorldCom, Inc. 2,900 102,588
-----------------------------------------------------------------
TOTAL 172,651
=================================================================
CONSUMER CYCLICAL (6.87%)
<F9> Blyth Industries, Inc. 3,700 103,600
<F9> Borg-Warner Automotive, Inc. 3,800 216,125
Doubletree Corporation 1,600 77,200
Electronic Arts, Inc. 1,600 61,800
J. D. Edwards & Company 100 3,350
<F9> Federated Department Stores, Inc. 2,200 94,875
Industrial Distribution Group, Inc. 100 2,100
<F9> Galileo International, Inc. 1,200 33,525
<F9> Jones Apparel Group, Inc. 1,500 81,000
<F9> Kohl's Corp. 4,100 291,100
McDonald's Corporation 1,500 71,438
Michaels Stores, Inc. 100 3,056
New York Times Company Class A 4,300 225,750
Newell Co. 4,800 192,000
<F9> O'Reilly Automotive, Inc. 4,900 111,475
Tribune Company 4,300 229,244
Wal-Mart Stores, Inc. 3,500 128,188
Walgreen Company 8,800 225,500
-----------------------------------------------------------------
TOTAL 2,151,326
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
CONSUMER STAPLES (4.58%)
Campbell Soup Company 3,700 $181,300
Cardinal Health, Inc. 1,700 120,700
Hershey Foods Corporation 3,700 209,050
Mondavi Robert Corporation Class A 2,500 136,875
PepsiCo, Inc. 5,700 231,206
Philip Morris Companies, Inc. 3,900 162,094
Procter & Gamble Company 2,600 179,563
Unilever N.V. 1,000 212,625
-----------------------------------------------------------------
TOTAL 1,433,413
=================================================================
ENERGY (5.30%)
Amoco Corporation 1,200 115,650
Barrett Resources Corporation 400 15,575
<F9> BJ Services Company 1,800 133,650
British Petroleum Company PLC 1,800 163,463
Diamond Offshore Drilling, Inc. 2,800 154,525
<F9> EVI, Inc. 1,700 108,800
Exxon Corporation 1,800 115,313
<F9> Global Industries Ltd. 3,400 135,575
Mobil Corporation 1,700 125,800
<F9> Nabors Industries, Inc. 2,800 109,025
<F9> Pride International, Inc. 2,200 74,800
Schlumberger Ltd. 1,900 159,956
Titan Exploration, Inc. 100 1,200
Tosco Corporation 5,400 187,988
Transocean Offshore Inc. 1,200 57,525
-----------------------------------------------------------------
TOTAL 1,658,845
=================================================================
FINANCE (5.40%)
Banc One Corporation 1,600 89,300
BankAmerica Corporation 1,200 87,975
Chase Manhattan Corporation 800 94,400
Citicorp 1,700 227,694
Financial Security Assurance
Holdings Ltd. 2,200 102,300
First Commonwealth, Inc. 1,700 25,288
Franklin Resources, Inc. 3,300 307,313
Investors Financial Services
Corporation 2,400 99,000
<F9> LaSalle Partners, Inc. 100 3,500
The Money Store, Inc. 3,400 96,900
Morgan Stanley, Dean Witter,
Discover and Company 4,500 243,281
Travelers Group, Inc. 3,400 232,050
USF&G Corporation 3,600 82,575
-----------------------------------------------------------------
TOTAL 1,691,576
=================================================================
<PAGE>
SEPTEMBER 30, 1997
ASSET ALLOCATION FUND
Shares/Par Market Value
-----------------------------------------------------------------
MISCELLANEOUS (1.84%)
<F9> ABR Information Services, Inc. 2,300 $63,538
AlliedSignal, Inc. 5,200 221,000
CorporateFamily Solutions, Inc. 1,500 25,313
<F9> Interim Services, Inc. 1,700 47,813
Learning Tree International, Inc. 100 2,863
<F9> Robert Half International, Inc. 3,900 161,363
Service Corporation International 1,700 54,719
-----------------------------------------------------------------
TOTAL 576,609
=================================================================
HEALTH CARE (5.88%)
American Home Patient, Inc. 4,100 94,300
<F9> Capstone Pharmacy Services, Inc. 6,800 82,025
DENTSPLY International Inc. 100 5,600
<F9> HEALTHSOUTH Corporation 1,500 40,031
Home Health Corporation of
America, Inc. 2,300 29,900
<F9> Horizon/CMS Healthcare Corporation 3,500 78,313
Johnson & Johnson 1,400 80,675
Eli Lilly and Company 2,300 277,581
<F9> Lincare Holdings, Inc. 1,900 95,831
<F9> MedCath Incorporated 4,900 83,300
Merck & Co., Inc. 2,200 219,863
Meridian Diagnostics, Inc. 6,600 78,375
NCS HealthCare, Inc. 1,000 25,500
Patterson Dental Company 2,700 109,350
<F9> PhyCor, Inc. 3,300 95,906
<F9> Quorum Health Group, Inc. 4,450 108,747
<F9> Spine-Tech, Inc. 1,400 52,675
<F9> Sybron International Corporation 3,200 137,400
United Healthcare Corporation 1,700 85,000
Wesley Jessen VisionCare, Inc. 2,100 59,325
-----------------------------------------------------------------
TOTAL 1,839,697
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
TECHNOLOGY (8.08%)
ADC Telecommunications, Inc. 3,300 $107,250
AVX Corporation 2,600 84,175
Komag, Inc. 400 8,150
Box Hill Systems Corp. 100 1,750
Cambridge Technology Partners, Inc. 2,400 85,950
<F9> CBT Group PLC 1,000 80,250
<F9> Cisco Systems, Inc. 1,400 102,288
Compaq Computer Corporation 700 52,325
DST Systems, Inc. 100 3,700
<F9> Fiserv, Inc. 5,000 219,375
<F9> GaSonics International Corporation 4,400 91,575
Great Plains Software, Inc. 1,700 47,600
HBO & Company 2,300 86,825
Hewlett-Packard Company 2,500 173,906
International Business Machines
Corporation 2,200 233,063
Integrated Process Equipment Corp. 100 3,688
Intel Corporation 1,600 147,700
Brooks Automation, Inc. 200 7,675
Kent Electronics Corp. 1,300 51,350
Lucent Technologies, Inc. 2,000 162,750
<F9> Microsoft Corporation 1,600 211,700
Motorola, Inc. 1,100 79,063
<F9> PMC-Sierra, Inc. 2,200 56,100
Qlogic Corporation 700 29,313
<F9> Sterling Software, Inc. 900 32,288
Sykes Enterprises, Incorporated 1,700 45,475
Teleflex, Inc. 2,300 79,638
<F9> Tellabs, Inc. 1,400 72,100
Transaction Systems Architects, Inc.
Class A 2,700 109,688
<F9> Trident International, Inc. 3,600 61,200
-----------------------------------------------------------------
TOTAL 2,527,910
=================================================================
TRANSPORTATION (1.86%)
<F9> AMR Corporation 1,600 177,100
<F9> Heartland Express, Inc. 3,500 96,688
Hub Group, Inc. Class A 2,900 107,663
<F9> Knight Transportation, Inc. 2,300 64,400
Mark VII, Inc. 2,300 67,275
<F9> Swift Transportation Co., Inc. 2,200 69,562
-----------------------------------------------------------------
TOTAL 582,688
=================================================================
UTILITIES (0.34%)
Sonat, Inc. 2,100 106,837
-----------------------------------------------------------------
TOTAL DOMESTIC COMMON STOCK 14,249,678
=================================================================
<PAGE>
MASON STREET FUNDS
ASSET ALLOCATION FUND
Country Shares/Par Market Value
-----------------------------------------------------------------
FOREIGN COMMON STOCK (11.1%)
Basic Materials (0.83%)
Koninklijke Hoogovens Neth. 4,000 $259,171
-----------------------------------------------------------------
CAPITAL GOODS (1.24%)
British Aerospace U.K. 8,900 239,162
City Development Sing. 23,000 148,821
-----------------------------------------------------------------
TOTAL 387,983
=================================================================
COMMUNICATION SERVICES (1.27%)
Philippines Long Distance
Telephone Company Phil. 6,600 179,025
Telecomunicacoes
Brasileiras S.A.
Telebras ADR Braz. 1,700 218,875
-----------------------------------------------------------------
TOTAL 397,900
=================================================================
CONSUMER CYCLICAL (1.44%)
Nintendo C., Inc. Japan 2,800 262,072
Volkswagen Ag Ger. 270 187,573
-----------------------------------------------------------------
TOTAL 449,645
=================================================================
ENERGY (1.42%)
Elf Aquitaine Fr. 1,950 260,341
Smedvig ASA-A Norw. 6,100 184,092
-----------------------------------------------------------------
TOTAL 444,433
=================================================================
FINANCE (0.59%)
HSBC Holdings PLC U.K. 5,500 184,079
-----------------------------------------------------------------
HEALTH CARE (1.57%)
Glaxo Wellcome U.K. 10,900 245,541
Novartis A.G. Switz. 160 245,684
-----------------------------------------------------------------
TOTAL 491,225
=================================================================
MISCELLANEOUS (0.71%)
Schneider SA Fr. 3,500 220,954
-----------------------------------------------------------------
TECHNOLOGY (2.04%)
Ericsson LM B Swe. 5,700 274,007
Philips Electronics, Inc. Neth. 4,300 363,992
-----------------------------------------------------------------
TOTAL 637,999
=================================================================
TOTAL FOREIGN COMMON STOCK 3,473,389
=================================================================
TOTAL COMMON STOCK 17,723,067
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
PREFERRED STOCK (3.43%)
K-III Communications Corp. 5,000 $532,500
Sinclair Capital 5,000 542,500
-----------------------------------------------------------------
TOTAL 1,075,000
=================================================================
TOTAL PREFERRED STOCK 1,075,000
=================================================================
BONDS (33.88%)
CORPORATE BONDS (8.75%)
BROADCASTING (1.70%)
TV Azteca S.A. de C.V.,
10.50%, 2/15/07 $500,000 $530,625
-----------------------------------------------------------------
TRANSPORTATION (2.12%)
TFM S.A. de C.V.,
0%, 6/15/09 1,000,000 665,000
-----------------------------------------------------------------
BASIC MATERIALS (1.73%)
APP Int'l Finance Co. B.V.,
11.75%, 10/1/05 500,000 540,000
-----------------------------------------------------------------
FINANCE COMPANIES (1.66%)
Olympic Financial Ltd.,
11.50%, 3/15/07 500,000 520,000
-----------------------------------------------------------------
LEISURE RELATED (1.55%)
Trump Atlantic,
11.25%, 5/1/06 500,000 484,375
-----------------------------------------------------------------
TOTAL CORPORATE BONDS 2,740,000
=================================================================
<PAGE>
SEPTEMBER 30, 1997
ASSET ALLOCATION FUND
Shares/Par Market Value
-----------------------------------------------------------------
GOVERNMENT AND AGENCY
RELATED BONDS (11.74%)
Federal National Mortgage
Association, 6%, 5/1/11 $1,377,684 $1,343,243
<F11>U.S. TREASURY,
0.00%, 2/15/19 PO 1,200,000 298,308
U.S. TREASURY,
6.125%, 8/15/07 1,000,000 1,000,625
U.S. TREASURY,
6.00%, 2/15/26 1,100,000 1,033,313
-----------------------------------------------------------------
TOTAL GOVERNMENT AND
AGENCY RELATED BONDS 3,675,489
=================================================================
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES (13.38%)
AUTO RELATED (0.41%)
Team Fleet Financing Co.,
7.35%, 5/15/03 (144a) 125,000 128,555
-----------------------------------------------------------------
COMMERCIAL MORTGAGES (12.97%)
<F12>Asset Securitization Corporation,
1.25%, 11/13/26 IO 19,029,880 817,690
<F12>First Union-Lehman Brothers
Commercial Mortgage Trust,
1.307%, 4/18/27 IO 6,983,404 553,225
<F12>LB Commercial Conduit Mortgage
Trust, 1.248%, 10/25/26 IO 3,964,881 257,947
Merrill Lynch Mortgage
Investors, Inc.,
7.12%, 6/18/07 1,500,000 1,529,766
Merrill Lynch Mortgage
Investors, Inc.,
8.154%, 7/25/04 500,000 514,375
<F12>Midland Realty Acceptance Corp.,
1.389%, 1/25/29 IO (144A) 4,906,076 386,353
-----------------------------------------------------------------
TOTAL 4,059,356
=================================================================
TOTAL MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES 4,187,911
=================================================================
TOTAL BONDS 10,603,400
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
MONEY MARKET INVESTMENTS (6.06%)
FINANCE SERVICES (5.43%)
Ford Motor Credit Corp.,
6.20%, 10/1/97 $1,200,000 $1,200,000
General Motors Acceptance
Corp., 5.54%, 10/22/97 500,000 498,384
-----------------------------------------------------------------
TOTAL 1,698,384
=================================================================
FEDERAL & GOVERNMENT AGENCIES (0.64%)
Federal Home Loan Mortgage
Company, 5.44%, 10/2/97 100,000 99,985
Federal National Mortgage
Association, 5.43%, 11/24/97 100,000 99,186
-----------------------------------------------------------------
TOTAL 199,171
=================================================================
TOTAL MONEY MARKET INVESTMENTS 1,897,555
=================================================================
TOTAL ASSET ALLOCATION FUND $31,299,022
=================================================================
<F9> Non-Income Producing
<F10> ADR - American Depositary Receipt
<F11> PO - Principal Only
<F12> IO - Interest Only
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
HIGH YIELD BOND FUND
OBJECTIVE: To seek high current income and capital appreciation by investing
primarily in fixed income securities that are rated below investment-grade by
the major rating agencies.
PORTFOLIO: Diversified mix of below investment-grade fixed income securities,
commonly known as "junk bonds."
STRATEGY: To identify attractive investment opportunities through rigorous
industry and credit analysis and to generate superior performance by selecting
companies with stable or improving credit fundamentals.
INVESTED ASSETS: $30,408,344
Investing in a portfolio of high yield bonds provides investors who can accept a
moderate level of risk with a high level of current income, coupled with the
opportunity for capital gains. The investment approach is credit-driven, with
rigorous industry and credit analysis utilized to identify investment
opportunities in issuers with stable or improving credit fundamentals whose
bonds are rated below investment-grade. In many ways, investing in high yield
bonds is akin to equity investing, since an issuer's financial situation and
operational performance are the key determinants of continued ability to meet
obligations to pay interest and principal. Of particular interest are solid
investments in entities that have the possibility of a positive event, such as a
significant improvement in credit rating or earnings or a change in ownership.
When financial performance falls short of expectations, exposure is normally
reduced. In a high yield portfolio, some defaults over time are inevitable;
diversification across many holdings mitigates the impact of defaults on the
total portfolio.
The high yield market continued to perform substantially better than the
investment-grade market during the second and third quarters of 1997. Favorable
economic conditions, strong corporate earnings and low default rates were major
factors that contributed to strong demand for high yield bonds. Increasingly
broad demand for high yield bonds from mutual funds, insurance companies,
pension funds, foreign investors and issuers of Collateralized Bond Obligations
caused risk premiums to decline. Taking advantage of low interest rates and
strong demand for high yield bonds, many companies issued bonds, increasing the
supply of attractive new high yield issues.
For its first six months of operation, the High Yield Bond Fund significantly
outperformed the Lehman Brothers High Yield Intermediate Market Index. This
strong performance can be attributed to insightful selection of market sectors
and individual securities, participation in international markets, the inclusion
of preferred stocks, and the absence of any major negative credit developments
in the Fund's portfolio.
SECTOR ALLOCATION
9/30/97
- ----------------------------
Cash Equivalents 4%
Financial 6%
Transportation 8%
Telecommunications 9%
Industrial 9%
Other 9%
Consumer 10%
Leisure 14%
Media 31%
<PAGE>
SEPTEMBER 30, 1997
HIGH YIELD BOND FUND
PERFORMANCE RELATIVE TO LEHMAN BROTHERS
HIGH YIELD INTERMEDIATE MARKET INDEX
3/31/97 6/30/97 9/30/97
- -----------------------------------------------------------------
High Yield Bond Fund $10,000 $10,896 $11,636
Lehman Brothers High Yield
Intermediate Market Index $10,000 $10,427 $10,886
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
High Yield Bond Fund 16.36%
Lehman Brothers High Yield
Intermediate Market Index 8.86%
The total return performance for the High Yield Bond Fund is shown in comparison
with the Lehman Brothers High Yield Intermediate Market Index. The Lehman
Brothers index is an appropriate measure of fund performance since it has a
quality and maturity profile that resembles the High Yield Bond Fund.
The Lehman Brothers High Yield Intermediate Market Index is made up of dollar
denominated, nonconvertible, SEC publicly registered fixed rate noninvestment-
grade issues. The bonds will have remaining maturities of between one and ten
years and have an outstanding par value of at least $100 million. Yankee and
global bonds (SEC registered) of issues in G-7 countries are included. Original
issue zero coupon bonds and step-up coupon structures are also included;
however, the index excludes pay-in kind (PIK) bonds. Each bond must be rated Ba1
or lower by Moody's Investor Service. If a Moody's rating is unavailable, the
bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if a S&P
rating is unavailable. A few unrated bonds are included in the index; to be
eligible they must have previously held a high yield rating or have been
associated with a high yield issuer. The index is an unmanaged market value
weighted index and measures the income provided by, and the price changes of,
the underlying securities.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
<PAGE>
MASON STREET FUNDS
HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-----------------------------------------------------------------
BONDS (72.17%)
BROADCASTING (8.22%)
Azteca Holdings S.A. de C.V.,
11%, 6/15/02 (144a) $500,000 $526,250
<F13>Fox/Liberty Networks LLC,
9.75%, 8/15/07 1,000,000 635,000
Katz Media Corp.,
10.50%, 1/15/07 750,000 806,250
TV Azteca S.A. de C.V.,
10.50%, 2/15/07 (144a) 500,000 530,625
-----------------------------------------------------------------
TOTAL 2,498,125
=================================================================
CABLE TELEVISION (7.25%)
Adelphia Communications Corp.,
9.50%, 2/15/04 PIK 959,510 940,319
<F13>Frontiervision Holdings,
11.875%, 9/15/07 1,000,000 685,000
<F13>Marcus Cable,
14.25%, 12/15/05 695,000 578,588
-----------------------------------------------------------------
TOTAL 2,203,907
=================================================================
CONSUMER PRODUCTS (1.35%)
<F13>Hedstrom Holdings Inc.,
12%, 6/1/09 (144a) 650,000 409,500
-----------------------------------------------------------------
CONSUMER STAPLES (1.72%)
North Atlantic Trading Inc.,
11%, 6/15/04 (144a) 500,000 522,500
-----------------------------------------------------------------
FINANCE COMPANIES (3.42%)
Olympic Financial Ltd.,
11.50%, 3/15/07 1,000,000 1,040,000
-----------------------------------------------------------------
FOOD RETAIL & SERVICES (3.41%)
Fleming Companies, Inc.,
10.625%, 7/31/07 (144a) 500,000 522,500
Jitney-Jungle Stores Amer., Inc.,
10.375%, 9/15/07 (144a) 500,000 513,750
-----------------------------------------------------------------
TOTAL 1,036,250
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
LEISURE RELATED (13.65%)
Alliance Gaming,
10%, 8/1/07 (144a) $500,000 $501,250
Casino America, Inc.,
12.50%, 8/1/03 500,000 535,000
Hollywood Theaters, Inc.,
10.625%, 8/1/07 (144a) 300,000 318,000
Riviera Holdings,
10%, 8/15/04 (144a) 500,000 500,000
Station Casinos, Inc.,
9.75%, 4/15/07 (144a) 750,000 748,125
Trump Atlantic,
11.25%, 5/1/06 1,000,000 968,750
Trump Hotels & Casino Resorts,
15.50%, 6/15/05 500,000 580,000
-----------------------------------------------------------------
TOTAL 4,151,125
=================================================================
MISCELLANEOUS - BASIC MATERIALS (1.99%)
Cemex S.A.,
12.75%, 7/15/06 500,000 605,000
-----------------------------------------------------------------
OIL - GAS PRODUCERS (1.66%)
Belden & Blake Corp.,
9.875%, 6/15/07 (144a) 500,000 503,750
-----------------------------------------------------------------
PAPER (5.83%)
APP Int'l Finance Co. B.V.,
11.75%, 10/1/05 500,000 540,000
Grupo Industrial Durango S.A.
de C.V., 12.625%, 8/1/03 500,000 571,875
Pindo Deli Fin Mauritius,
10.75%, 10/1/07 (144a) 650,000 660,563
-----------------------------------------------------------------
TOTAL 1,772,438
=================================================================
PROFESSIONAL SERVICES (2.04%)
<F13>Decisionone Holdings,
11.50%, 8/1/08 200,000 133,000
Kinder-Care Learning Center,
9.50%, 2/15/09 500,000 487,500
-----------------------------------------------------------------
TOTAL 620,500
=================================================================
RAILROAD (2.19%)
<F13>TFM S.A. de C.V.,
11.75%, 6/15/09 (144a) 1,000,000 665,000
-----------------------------------------------------------------
RETAIL - GENERAL (1.68%)
Hollywood Entertainment Corp.,
10.625%, 8/15/04 (144a) 500,000 510,625
-----------------------------------------------------------------
<PAGE>
SEPTEMBER 30, 1997
HIGH YIELD BOND FUND
Shares/Par Market Value
-----------------------------------------------------------------
SOAPS AND TOILETRIES (1.78%)
Revlon Worldwide Corp.,
0%, 3/15/01 (144a) $750,000 $541,875
-----------------------------------------------------------------
TELECOMMUNICATIONS (8.08%)
ITC Deltacom, Inc.,
11%, 6/1/07 (144a) 750,000 823,125
<F13>Nextel Communications, Inc.,
9.75%, 8/15/04 500,000 433,750
<F13>Nextel Communications, Inc.,
10.65%, 9/15/07 500,000 308,750
Paging Network, Inc.,
10%, 10/15/08 500,000 518,750
<F13>Telewest PLC,
11%, 10/1/07 500,000 375,000
-----------------------------------------------------------------
TOTAL 2,459,375
=================================================================
TRUCKING AND SHIPPING (6.26%)
Greyhound Lines, Inc.,
11.50%, 4/15/07 (144a) 1,250,000 1,359,375
Navigator Gas Trans PLC,
10.50%, 6/30/07 (144a) 300,000 321,000
Navigator Gas Trans PLC,
12%, 6/30/07 (144a) 200,000 224,000
-----------------------------------------------------------------
TOTAL 1,904,375
=================================================================
UTILITIES (1.64%)
Companhia De Saneamento Basico,
10%, 7/28/05 (144a) 250,000 250,063
Espirito Santo Centrais Electric,
10%, 7/15/07 (144a) 250,000 251,160
-----------------------------------------------------------------
TOTAL 501,223
=================================================================
TOTAL BONDS 21,945,568
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
PREFERRED STOCK (24.21%)
BROADCASTING (11.47%)
American Radio Systems Corp. (144a) 7,713 $925,560
Chancellor Media Corp.-
Los Angeles (144a) 7,941 917,186
Citadel Broadcasting Co. (144a) 2,500 287,500
Sinclair Capital (144a) 12,500 1,356,250
-----------------------------------------------------------------
TOTAL 3,486,496
=================================================================
CABLE TELEVISION (3.92%)
<F14>Cablevision Systems Corp. PIK 10,596 1,193,390
-----------------------------------------------------------------
FINANCIAL (2.59%)
California Fed Pfd. Capital 30,000 787,500
-----------------------------------------------------------------
PRINTING AND PUBLISHING (3.50%)
K-III Communications Corp. (144a) 10,000 1,065,000
-----------------------------------------------------------------
TELECOMMUNICATIONS (0.95%)
<F14>NTL, Inc. PIK (144a) 2,581 290,390
-----------------------------------------------------------------
UTILITY - GAS (1.78%)
Petroleum Heat & Power, Inc. (144a) 22,500 540,000
-----------------------------------------------------------------
TOTAL PREFERRED STOCK 7,362,776
=================================================================
MONEY MARKET INVESTMENTS (3.62%)
FINANCE SERVICES (3.62%)
Ford Motor Credit,
6.199%, 10/1/97 $1,100,000 $1,100,000
-----------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 1,100,000
=================================================================
TOTAL HIGH YIELD BOND FUND $30,408,344
=================================================================
<F13> Deferred interest security that receives no coupon payments until a
predetermined date at which the stated coupon rate becomes effective.
<F14> PIK - Payment in Kind
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
MUNICIPAL BOND FUND
OBJECTIVE: To seek a high level of current income exempt from federal income
taxes, consistent with the preservation of capital, by investing primarily in
investment-grade municipal obligations.
PORTFOLIO: Diversified investment-grade bonds, with the ability to invest up
to 20% of its assets in lower-rated securities.
STRATEGY: To actively manage the portfolio to take advantage of changes in
interest rates, quality, sector and maturity of fixed income securities.
INVESTED ASSETS: $26,968,469
The Municipal Bond Fund is managed with balanced focus on income, total return,
quality of securities and avoidance of federal income taxes. There are five
major classes of securities in the Fund: revenue bonds, general obligation
bonds, pre-refunded bonds, insured bonds and money market investments, which are
cash equivalents. For revenue bonds, interest and principal is paid from revenue
from a specific source which the bonds fund, such as a tollway system or a
municipal power agency. General obligation bonds are secured by the general
credit of the issuing municipality, which can generally raise taxes as necessary
to meet obligations. Insured bonds are guaranteed by insurance companies such as
Municipal Bond Individual Assurance Corporation (MBIA) or the Financial Guaranty
Insurance Company (FGIC) <F15>. Pre-refunded bonds have no credit risk because
an escrow of Treasury securities has been established that will pay off the
bonds on the first call date and guarantees all interest payments will be met
until that time. As indicated in the accompanying chart, the quality of
securities held in the Fund is quite high, with 71% of total market value
invested in bonds that are either insured or have been pre-refunded.
During the Fund's first six months, it achieved significantly higher total
return than the Lehman Brothers Municipal Bond Index. This performance resulted
mainly from favorable selection of securities combined with management of the
Fund's interest rate exposure, which benefited from a drop in interest rates.
<F15> Insurance applies only to the prompt payment of principal and interest of
the bonds in the Fund and does not remove the market risks associated with your
investment. There is also no guarantee that the insurer will be able to meet its
commitments.
PERCENTAGE HOLDINGS
9/30/97
- -----------------------------------
General Obligations 4%
Money Market Investments 6%
Pre-refunded Bonds 17%
Revenue Bonds 19%
Insured Bonds 54%
PERFORMANCE RELATIVE TO LEHMAN BROTHERS
MUNICIPAL BOND INDEX
3/31/97 6/30/97 9/30/97
- ----------------------------------------------------------------------
Municipal Bond Fund $10,000 $10,414 $10,776
Lehman Brothers Municipal Bond Index $10,000 $10,344 $10,656
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Municipal Bond Fund 7.76%
Lehman Brothers Municipal Bond Index 6.56%
The total return performance for the Municipal Bond Fund is shown in comparison
with the Lehman Brothers Municipal Bond Index. The Lehman Brothers index is an
appropriate measure of portfolio performance since it has a quality and maturity
profile that resembles the Municipal Bond Fund.
The Lehman Brothers Municipal Bond Index includes municipal bonds that have: a
minimum credit rating of Baa; been issued as part of an issuance of at least $50
million; a maturity value of at least $3 million; a maturity of at least one
year; and been issued after December 31, 1990. Recently the index included
31,098 issues totaling $440 billion par amount. The index represents
approximately 30% of the municipal bond market capitalization.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
<PAGE>
September 30, 1997
MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-----------------------------------------------------------------
MUNICIPAL BONDS (94.07%)
CALIFORNIA (3.74%)
California Housing Financing
Agency, 5.75%, 2/1/29 RB,
MBIA, AMT $1,000,000 $1,008,460
-----------------------------------------------------------------
COLORADO (4.21%)
Douglas County, Colorado School
District RE.1, 6.5%, 12/15/16
GO, PR, MBIA 1,000,000 1,136,140
-----------------------------------------------------------------
DISTRICT OF COLUMBIA (3.82%)
District of Columbia, 5.1%,
6/1/03 GO, AMBAC 1,000,000 1,030,170
-----------------------------------------------------------------
FLORIDA (3.63%)
Dade County, Florida, Water &
Sewer, 5.25%, 10/1/26 RB, FGIC 1,000,000 979,580
-----------------------------------------------------------------
ILLINOIS (15.91%)
Chicago, Illinois Board of Education,
6.75%, 12/1/09 GO, AMBAC 1,000,000 1,176,050
Chicago, Illinois O'Hare
International Airport, 5.7%,
1/1/08 RB, MBIA, AMT 1,000,000 1,043,980
Illinois State Toll Highway
Authority, 6.0%, 1/1/09 RB, FGIC 1,000,000 1,105,150
Metropolitan Fair & Exposition
Authority, 5.0%, 6/1/15 RB, BIGI
Insurance purchased by MBIA 1,000,000 965,780
-----------------------------------------------------------------
TOTAL 4,290,960
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
KENTUCKY (4.09%)
Louisville & Jefferson County,
Kentucky Regional Airport
Authority, 6.5%, 7/1/17
RB, MBIA, AMT $1,000,000 $1,102,380
-----------------------------------------------------------------
MICHIGAN (8.06%)
Nice Community School District,
Michigan, Maruette & Baraga
Counties, 5.25%, 5/1/16
GO, MBIA 1,000,000 988,270
Pinckney Michigan Community
Schools, 7.25%, 5/1/06 GO, FGIC 1,000,000 1,185,550
-----------------------------------------------------------------
TOTAL 2,173,820
=================================================================
MINNESOTA (3.23%)
Northern Municipal Power Agency,
Electric Systems, 7.25%, 1/1/16 RB 825,000 872,339
-----------------------------------------------------------------
NEBRASKA (3.87%)
Nebraska Investment Finance
Authority, Single Family Housing,
6.25%, 3/1/21 RB, AMT,
GNMA, FNMA, FHLMC 1,000,000 1,042,670
-----------------------------------------------------------------
NEVADA (4.14%)
Clark County, Nevada, Sanitation
District, 6.8%, 7/1/12 RB, PR 1,000,000 1,116,110
-----------------------------------------------------------------
<PAGE>
MASON STREET FUNDS
MUNICIPAL BOND FUND
Shares/Par Market Value
-----------------------------------------------------------------
NEW YORK (23.07%)
Metropolitan Transportation
Authority, 5.625%, 7/1/25
RB, MBIA $1,000,000 $1,017,550
The City of New York,
6.0%, 4/15/09 GO 1,000,000 1,069,570
New York City Municipal Water
Finance Authority,
5.75%, 6/15/29 RB 1,000,000 1,018,310
New York State Local Government
Assistance Corporation,
7.0%, 4/1/16 RB, PR 1,000,000 1,110,040
Port Authority of New York
and New Jersey, 5.75%,
12/1/25 RB, AMT, MBIA 1,000,000 1,023,100
New York St. Medical Care Facility
Financing Agency,
5.375%, 2/15/25 RB, FHA 1,000,000 983,740
-----------------------------------------------------------------
TOTAL 6,222,310
=================================================================
NORTH CAROLINA (4.23%)
North Carolina Eastern Municipal
Power Agency, 7.0%, 1/1/08 RB 1,000,000 1,140,690
-----------------------------------------------------------------
TEXAS (3.83%)
Brazos, Texas, Higher Education
Authority, 5.5%, 6/1/02
RB, AMT, GTD STD LNS 1,000,000 1,031,640
-----------------------------------------------------------------
WASHINGTON (8.24%)
Washington State Public Power
Supply System, 6.5%,
7/1/15 RB, PR 2,000,000 2,221,200
-----------------------------------------------------------------
TOTAL MUNICIPAL BONDS 25,368,469
=================================================================
MONEY MARKET INVESTMENTS (5.93%)
Federal Home Loan Bank Discount
Corporation, 5.919%, 10/1/97 CP $1,600,000 $1,600,000
-----------------------------------------------------------------
TOTAL MUNICIPAL BOND FUND $26,968,469
=================================================================
CP = Commercial Paper
RB = Revenue Bond
GO = General Obligation
PR = Pre-refunded security will be called on the first call date
(with certainty)
AMT = Subject to the Alternative Minimum Tax
Scheduled principal and interest payments are guaranteed by:
MBIA (Municipal Bond Insurance Organization)
AMBAC (AMBAC Indemnity Corporation)
FGIC (Financial Guaranty Insurance Company)
BIGI (Bond Investors Guarantee Insurance)
GNMA (Government National Mortgage Association)
FNMA (Federal National Mortgage Association)
FHLMC (Federal Home Loan Mortgage Corporation)
FHA (Federal Housing Authority)
GTD STD LNS (Guaranteed Student Loans)
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
September 30, 1997
SELECT BOND FUND
OBJECTIVE: To seek high income and capital appreciation, consistent with
preservation of capital.
PORTFOLIO: Diversified investment-grade corporate, Treasury and government
agency bonds with maturities generally exceeding one year.
STRATEGY: To actively manage the portfolio to take advantage of changes in
interest rates, quality and maturity of fixed income securities.
INVESTED ASSETS: $28,172,714
During the second and third quarters of 1997, performance of the Select Bond
Fund benefited from general strength in the bond market, as well as from the
market sectors selected for investment. An area of particular emphasis in recent
months has been commercial mortgage-backed bonds, which are more attractive than
residential mortgage bonds in a period of falling interest rates because
prepayment penalties prevent mortgage holders from refinancing at lower rates.
At the end of September, mortgage-backed and asset-backed securities represented
52% of the Select Bond Fund's investments. Government bonds have been de-
emphasized because of their yield disadvantage relative to other classes of
bonds.
PERCENTAGE HOLDINGS
9/30/97
- --------------------------------------------------
Money Market Investments 11%
Corporate Bonds 15%
Government and Government Agencies 22%
Mortgage-Backed and Asset-Backed Securities 52%
The Corporate Bonds sector includes bonds of companies headquartered outside the
United States. The Government and Government Agencies category includes taxable
bonds of domestic and foreign governments and a small position in municipal
bonds. Consistent with the Fund's stated parameters, no more than 15% of the
portfolio is invested in foreign securities, and no more than 15% is invested in
high yield securities.
PERFORMANCE RELATIVE TO
MERRILL LYNCH DOMESTIC MASTER INDEX
3/31/97 6/30/97 9/30/97
- -------------------------------------------------------
Select Bond Fund $10,000 $10,448 $10,867
MLDM Index $10,000 $10,365 $10,712
TOTAL RETURN
For Six-Month Period Ended September 30, 1997
- ---------------------------------------------
Select Bond Fund 8.76%
MLDM Index 7.12%
Since the Fund invests broadly in U.S. government, mortgage and corporate
bonds, the graph depicts an approximate comparison to the Merrill Lynch Domestic
Master Index. The index is an unmanaged market value weighted index comprised
of U.S. government, mortgage and investment-grade corporate bonds. The index
measures the income provided by, and the price changes of, the underlying
securities.
This chart assumes an initial investment of $10,000 made in Class A shares,
without the sales load, on March 31, 1997 (commencement of operations). Returns
shown include fee waivers and deductions for all Fund expenses. In the absence
of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales load for Class A
and the maximum contingent deferred sales charge for Class B.
<PAGE>
MASON STREET FUNDS
SELECT BOND FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-----------------------------------------------------------------
BONDS (89.36%)
CORPORATE BONDS (14.61%)
BANK HOLDING COMPANIES (0.89%)
<F17>First Union Institutional Capital II,
7.85%, 1/1/27 $250,000 $251,961
-----------------------------------------------------------------
COMMUNICATIONS (3.60%)
<F16>Panamsat, 0%, 8/1/03 500,000 487,185
WorldCom, Inc., 7.75%, 4/1/27 500,000 526,047
-----------------------------------------------------------------
TOTAL 1,013,232
=================================================================
DIVERSIFIED/CONGLOMERATE (3.57%)
Hutchison Whampoa Finance (CI)
Limited, 6.988%, 8/1/37 (144A) 1,000,000 1,004,657
-----------------------------------------------------------------
MEDIA/CABLE (1.80%)
<F17>Time Warner Entertainment,
7.25%, 9/1/08 500,000 507,424
-----------------------------------------------------------------
TEXTILES (1.93%)
Polysindo International Finance,
11.375%, 6/15/06 500,000 542,500
-----------------------------------------------------------------
UTILITIES (2.82%)
Camuzzi Gas Pampeana,
9.25%, 12/15/01 750,000 795,840
-----------------------------------------------------------------
TOTAL CORPORATE BONDS 4,115,614
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
GOVERNMENT BONDS
(DOMESTIC AND FOREIGN)
AND AGENCY BONDS (19.32%)
Federal National Mortgage
Association, 12%, 9/1/12 $592,014 $679,707
Federal National Mortgage
Association, 12%, 9/1/17 183,753 212,234
Federal National Mortgage
Association, 11%, 9/1/17 540,000 608,681
Federal National Mortgage
Association, 6.96%, 4/1/07 300,000 307,641
Federal National Mortgage
Association, 7.23%, 1/25/22 300,000 309,047
Federal National Mortgage
Association, 10%, 10/1/17 80,000 87,350
Poland, 12%, 10/12/01 2,000,000 447,086
U.S. Treasury, 6.125%, 8/15/07 800,000 800,500
U.S. Treasury, 6.375%, 8/15/27 2,000,000 1,990,626
-----------------------------------------------------------------
TOTAL GOVERNMENT AND AGENCY BONDS 5,442,872
=================================================================
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES (52.01%)
AUTO-RELATED (13.19%)
<F17>Team Fleet Financing Corporation,
7.35%, 5/15/03 (144a) 750,000 771,328
Union Acceptance Corp.,
6.45%, 7/9/03 2,921,667 2,943,638
-----------------------------------------------------------------
TOTAL 3,714,966
=================================================================
COMMERCIAL MORTGAGES (31.60%)
<F18>Asset Securitization Corporation,
1.257%, 11/13/26 IO 19,029,881 817,690
Chase Commercial Mortgage
Securities Corp., 7.37%, 6/19/29 250,000 254,728
Credit Suisse First Boston
Mortgage Securities Corp.,
9.591%, 4/25/25 (144a) 457,000 537,475
Credit Suisse First Boston
Mortgage Securities Corp.,
7.26%, 6/20/29 (144a) 249,080 257,053
Credit Suisse First Boston
Mortgage Securities Corp.,
7.28%, 6/20/29 (144a) 250,000 260,262
Credit Suisse First Boston
Mortgage Securities Corp.,
7.46%, 6/20/29 (144A) 500,000 520,185
<PAGE>
SEPTEMBER 30, 1997
SELECT BOND FUND
Shares/Par Market Value
-----------------------------------------------------------------
COMMERCIAL MORTGAGES (CONTINUED)
DLJ Mortgage Acceptance Corp.,
.3571%, 10/15/17 IO (144a) $25,000,000 $663,575
<F18>First Union-Lehman Brothers
Commercial Mortgage Trust,
1.307%, 4/18/27 IO 13,966,810 1,106,451
<F18>LB Commercial Conduit
Mortgage Trust,
1.248%, 10/25/26 IO 17,841,965 1,160,762
LB Mortgage Trust,
8.396%, 1/20/17 409,785 470,485
Merrill Lynch Mortgage
Investors, Inc., 7.12%, 6/18/29 500,000 496,953
Merrill Lynch Mortgage
Investors, Inc.,
8.103%, 6/25/22 (144a) 500,000 514,375
<F18>Midland Realty Acceptance Corp.,
1.389%, 1/25/29 (144a) IO 9,812,154 772,707
NationsBank Lease Pass Thru
Trust, 7.442%, 1/10/11 (144a) 500,000 513,828
Red Mountain Funding LLC,
7.365%, 1/15/19 (144a) 176,000 176,330
Red Mountain Funding LLC,
7.471%, 1/15/19 (144a) 400,000 380,813
-----------------------------------------------------------------
TOTAL 8,903,672
=================================================================
CREDIT CARD ASSET-BACKED (0.89%)
Iroquois Trust,
6.752%, 6/25/07 (144a) 250,000 250,234
-----------------------------------------------------------------
MANUFACTURED HOUSING (2.52%)
Mid-State Trust VI, 7.54%, 7/1/35 688,822 709,487
-----------------------------------------------------------------
OTHER ASSET-BACKED (2.62%)
Greentree Recreation & Consumer
Trust, 6.49%, 2/15/18 250,000 251,016
Newcourt Equipment,
6.764%, 9/20/04 (144a) 487,336 487,488
-----------------------------------------------------------------
TOTAL 738,504
=================================================================
RESIDENTIAL MORTGAGES (1.19%)
BCF L.L.C. Mortgage Pass Thru
Certificate, 7.75%, 3/25/37 (144A) 333,593 334,219
-----------------------------------------------------------------
TOTAL MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES 14,651,082
=================================================================
Shares/Par Market Value
-----------------------------------------------------------------
MUNICIPAL BONDS (3.42%)
<F17>New Jersey Economic
Development Authority,
0.00%, 2/15/26 $3,000,000 $409,830
<F17>New Jersey Economic
Development Authority,
0.00%, 2/15/16 2,000,000 554,960
-----------------------------------------------------------------
TOTAL MUNICIPAL BONDS 964,790
=================================================================
TOTAL BONDS 25,174,358
=================================================================
MONEY MARKET INVESTMENTS (10.64%)
GOVERNMENT (DOMESTIC AND FOREIGN) (10.64%)
Russia Government,
9.5%, 11/5/97 $1,000,000 $1,000,000
Federal Home Loan Bank,
5.9201%, 10/1/97 1,700,000 1,700,000
Federal National Mortgage
Association, 5.43%, 11/24/97 200,000 198,371
<F17>Federal Home Loan Mortgage
Corporation, 5.44%, 10/2/97 100,000 99,985
-----------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,998,356
=================================================================
TOTAL SELECT BOND PORTFOLIO $28,172,714
=================================================================
<F16> Deferred interest security that receives no coupon payments until a
predetermined date at which the stated coupon rate becomes effective.
<F17> Partially held by the custodian in segregated account as collateral for
open futures positions. Information regarding open futures contracts as of
September 30, 1997 is summarized below:
Number of Expiration Unrealized
Issuers Contracts Date Depreciation
- ----------------------------------------------------------------------------
U.S. Treasury Bond Futures 60 12/97 ($1,406)
<F18> IO - Interest Only
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
AGGRESSIVE GROWTH STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ------------------------------------------------------------
ASSETS
Common Stocks (cost $26,750,025) $35,711,203
Money Market Investments (cost $1,398,384) 1,398,384
- ------------------------------------------------------------
37,109,587
============================================================
Cash 23,491
Due from Sale of Fund Shares 65,640
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
Dividends and Interest Receivable 1,592
- ------------------------------------------------------------
TOTAL ASSETS 37,231,713
============================================================
LIABILITIES
Due to Investment Advisor 61,451
Accrued Shareholder Servicing Fees 38,632
Due on Purchase of Securities 36,784
Other Accrued Liabilities 28,738
Accrued Distribution Expense 16,294
Accrued Administrative Fees 15,503
- ------------------------------------------------------------
TOTAL LIABILITIES 197,402
============================================================
NET ASSETS $37,034,311
============================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,681,350 shares outstanding) $27,247,085
Undistributed Net Investment Loss (142,779)
Undistributed Accumulated Net
Realized Gain on Investments 968,827
Net Unrealized Appreciation of
Investment Securities 8,961,178
- ------------------------------------------------------------
NET ASSETS FOR 2,681,350
SHARES OUTSTANDING $37,034,311
============================================================
Per Share of Class A (Based on
2,631,913 Shares Issued and Outstanding):
OFFERING PRICE $14.50
============================================================
NET ASSET VALUE AND REDEMPTION PRICE $13.81
============================================================
Per Share of Class B (Based on 49,437
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $13.77
============================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $45,278
Dividends (less foreign dividend tax of $242) 4,321
- ------------------------------------------------------------
TOTAL INCOME 59,599
============================================================
Expenses
Management Fees 116,272
Shareholder Servicing Fees 38,757
Registration Fees 24,719
Transfer Agent Fees 21,826
Other Expenses 18,122
Distribution Fees:
Class A 15,373
Class B 971
Administrative Fees 15,503
Custody Fees 5,656
- ------------------------------------------------------------
TOTAL EXPENSES 257,199
============================================================
Less:
Custodian Fees Paid Indirectly (2,532)
Other Expenses Reimbursed by Affiliates (52,289)
- ------------------------------------------------------------
TOTAL NET EXPENSES 202,378
============================================================
NET INVESTMENT LOSS (142,779)
============================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments 968,827
Net Change in Unrealized Appreciation
of Investments for the Period 8,961,178
- ------------------------------------------------------------
NET GAIN ON INVESTMENTS 9,930,005
============================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $9,787,226
============================================================
The accompanying Notes are an integral part of the Financial
Statements(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
AGGRESSIVE GROWTH STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Loss $ (142,779)
Net Realized Gain on Investments 968,827
Net Change in Unrealized Appreciation of Investments
for the Period 8,961,178
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 9,787,226
===========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,632,550 Shares 26,642,670
Payments for 1,237 Shares Redeemed (16,468)
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (2,631,313 shares) 26,626,202
===========================================================================
Class B
Proceeds from Sale of 49,227 Shares 613,872
Payments for 390 Shares Redeemed (4,989)
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B Fund
Share Transactions (48,837 shares) 608,883
===========================================================================
TOTAL INCREASE IN NET ASSETS 37,022,311
NET ASSETS
Beginning of Period 12,000
- ---------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
LOSS OF $142,779) $37,034,311
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
AGGRESSIVE GROWTH STOCK FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F19> to March 31, 1997<F19> to
(For a share outstanding September 30, 1997 September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Loss<F20> (0.06) (0.10)
Net Realized and Unrealized
Gains on Investments 3.87 3.87
- --------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 3.81 3.77
==========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- --------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
==========================================================================
NET ASSET VALUE, END OF PERIOD $13.81 $13.77
==========================================================================
TOTAL RETURN<F21> 38.10%<F22> 37.70%<F22>
==========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $36,353,688 $680,623
==========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.30%<F23> 1.95%<F23>
==========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE
NET ASSETS 1.65%<F23> 2.30%<F23>
==========================================================================
RATIO OF NET INVESTMENT LOSS
TO AVERAGE NET ASSETS (0.91)%<F23> (1.66)%<F23>
==========================================================================
PORTFOLIO TURNOVER RATE 23.84% 23.84%
==========================================================================
AVERAGE COMMISSION RATE $0.0529 $0.0529
==========================================================================
<F19> Commencement of Operations
<F20> Calculated based on average shares outstanding
<F21> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F22> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F23> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
SEPTEMBER 30, 1997
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ----------------------------------------------------------------------
ASSETS
Common Stocks (cost $24,181,095) $26,278,004
Money Market Investments (cost $3,596,122) 3,596,122
- ----------------------------------------------------------------------
29,874,126
======================================================================
Cash 1,584,086
Due from Foreign Currency Contracts 1,204,157
Dividends Receivable 116,083
Unamortized Organizational Costs 18,579
Due from Purchase of Fund Shares 14,917
Prepaid Initial Registration Expenses 12,742
- ----------------------------------------------------------------------
TOTAL ASSETS 32,824,690
======================================================================
LIABILITIES
Due on Purchase of Securities 2,023,019
Due on Foreign Currency Contracts 1,191,365
Other Accrued Liabilities 63,762
Accrued Shareholder Servicing Fees 33,348
Due to Investment Advisor 15,625
Accrued Distribution Expense 14,262
Accrued Administrative Fees 13,401
Due on Sale of Fund Shares 250
- ----------------------------------------------------------------------
TOTAL LIABILITIES 3,355,032
======================================================================
NET ASSETS $29,469,658
======================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,679,722 shares outstanding) $26,859,753
Undistributed Net Investment Income 506,970
Undistributed Accumulated Net
Realized Gain on Investments 7,681
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 2,096,909
Foreign Currency Transactions (1,655)
- ----------------------------------------------------------------------
NET ASSETS FOR 2,679,722
SHARES OUTSTANDING $29,469,658
======================================================================
Per Share of Class A (Based on
2,628,852 Shares Issued and Outstanding):
OFFERING PRICE $11.55
======================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.00
======================================================================
Per Share of Class B (Based on 50,870
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $10.97
======================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ----------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $39,348) $379,676
Interest 349,192
- ----------------------------------------------------------------------
TOTAL INCOME 728,868
======================================================================
Expenses
Management Fees 113,904
Custody Fees 75,474
Shareholder Servicing Fees 33,501
Registration Fees 25,193
Other Expenses 23,104
Transfer Agent Fees 21,277
Distribution Fees:
Class A 13,258
Class B 1,065
Administrative Fees 13,401
- ----------------------------------------------------------------------
TOTAL EXPENSES 320,177
======================================================================
Less:
Expenses Reimbursed by Affiliates (98,279)
- ----------------------------------------------------------------------
TOTAL NET EXPENSES 221,898
======================================================================
NET INVESTMENT INCOME 506,970
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain on Foreign Currency Transactions 7,681
- ----------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities 2,096,909
Foreign Currency Transactions (1,655)
- ----------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
FOR THE PERIOD 2,095,254
======================================================================
NET GAIN ON INVESTMENTS 2,102,935
======================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,609,905
======================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- --------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $506,970
Net Realized Gain on Investments 7,681
Net Unrealized Appreciation of Investments for the Period 2,095,254
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 2,609,905
==========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,638,170 Shares 26,435,741
Payments for 9,918 Shares Redeemed (106,010)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class
A Fund Share Transactions (2,628,252 shares) 26,329,731
==========================================================================
Class B
Proceeds from Sale of 50,281 Shares 518,135
Payments for 11 Shares Redeemed (113)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (50,270 shares) 518,022
==========================================================================
TOTAL INCREASE IN NET ASSETS 29,457,658
NET ASSETS
Beginning of Period 12,000
==========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $506,970) $29,469,658
==========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F24> March 31, 1997<F24>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F25> 0.20 0.17
Net Realized and Unrealized Gains
on Investments 0.80 0.80
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.00 0.97
=========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
=========================================================================
NET ASSET VALUE, END OF PERIOD $11.00 $10.97
========================================================================
TOTAL RETURN <F26> 10.00%<F27> 9.70%<F27>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $28,911,782 $557,876
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65%<F28> 2.30%<F28>
========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 2.39%<F28> 3.04%<F28>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 3.79%<F28> 2.81%<F28>
=========================================================================
PORTFOLIO TURNOVER RATE 0.00% 0.00%
=========================================================================
AVERAGE COMMISSION RATE $0.0030 $0.0030
=========================================================================
<F24> Commencement of Operations
<F25> Calculated based on average shares outstanding
<F26> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F27> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F28> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
MASON STREET FUNDS
GROWTH STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
September 30, 1997
ASSETS
Common Stocks (cost $23,900,444) $29,244,150
Money Market Investments (cost $3,097,555) 3,097,555
- ---------------------------------------------------------------------------
32,341,705
===========================================================================
Cash 130,973
Due from Sale of Securities 108,632
Dividends and Interest Receivable 25,993
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
Due from Sale of Fund Shares 3,355
- ---------------------------------------------------------------------------
TOTAL ASSETS 32,642,061
===========================================================================
LIABILITIES
Due to Investment Advisor 53,222
Due on Purchase of Securities 37,010
Accrued Shareholder Servicing Fees 36,655
Other Accrued Liabilities 33,051
Accrued Distribution Expense 15,045
Accrued Administrative Fees 14,698
Futures Variation Margin 10,875
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 200,556
===========================================================================
NET ASSETS $32,441,505
===========================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,611,773 shares outstanding) $26,286,644
Undistributed Net Investment Income 41,006
Undistributed Accumulated Net
Realized Gain on Investments 743,999
Net Unrealized Appreciation of:
Investment Securities 5,343,706
Index Futures Contracts 26,150
- ---------------------------------------------------------------------------
NET ASSETS FOR 2,611,773
SHARES OUTSTANDING $32,441,505
===========================================================================
Per Share of Class A (Based on
2,589,538 Shares Issued and Outstanding):
OFFERING PRICE $13.04
===========================================================================
NET ASSET VALUE AND REDEMPTION PRICE $12.42
===========================================================================
Per Share of Class B (Based on 22,235
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $12.38
===========================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ---------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $1,700) $158,543
Interest 73,914
- ---------------------------------------------------------------------------
TOTAL INCOME 232,457
===========================================================================
Expenses
Management Fees 110,231
Shareholder Servicing Fees 36,744
Registration Fees 23,145
Transfer Agent Fees 21,157
Distribution Fees:
Class A 14,639
Class B 441
Administrative Fees 14,698
Custody Fees 9,693
Other Expenses 17,712
- ---------------------------------------------------------------------------
TOTAL EXPENSES 248,460
===========================================================================
Less:
Custodian Fees Paid Indirectly (1,084)
Expenses Reimbursed by Affiliates (55,925)
- ---------------------------------------------------------------------------
TOTAL NET EXPENSES 191,451
===========================================================================
NET INVESTMENT INCOME 41,006
===========================================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities 690,439
Futures Contracts 53,560
- ---------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 743,999
===========================================================================
Net Change in Unrealized Appreciation of:
Investment Securities 5,343,706
Index Futures Contracts 26,150
- ---------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS FOR THE PERIOD 5,369,856
===========================================================================
NET GAIN ON INVESTMENTS 6,113,855
===========================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $6,154,861
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
GROWTH STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $41,006
Net Realized Gain on Investments 743,999
Net Change in Unrealized Appreciation of Investments
for the Period 5,369,856
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 6,154,861
===========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,594,956 Shares 26,094,632
Payments for 6,018 Shares Redeemed (73,431)
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,588,938 shares) 26,021,201
===========================================================================
Class B
Proceeds from Sale of 21,635 Shares 253,443
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (21,635 shares) 253,443
===========================================================================
TOTAL INCREASE IN NET ASSETS 32,429,505
NET ASSETS
Beginning of Period 12,000
===========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $41,006) $32,441,505
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
GROWTH STOCK FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F29> March 31, 1997<F29>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income(Loss)<F30> 0.02 (0.02)
Net Realized and Unrealized Gains
on Investments 2.40 2.40
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.42 2.38
=========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
=========================================================================
NET ASSET VALUE, END OF PERIOD $12.42 $12.38
=========================================================================
TOTAL RETURN <F31> 24.20%<F32> 23.80%<F32>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $32,166,233 $275,272
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.30%<F33> 1.95%<F33>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.69%<F33> 2.34%<F33>
=========================================================================
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS 0.28%<F33> (0.42)%<F33>
=========================================================================
PORTFOLIO TURNOVER RATE 16.23% 16.23%
=========================================================================
AVERAGE COMMISSION RATE $0.0486 $0.0486
=========================================================================
<F29> Commencement of Operations
<F30> Calculated based on average shares outstanding
<F31> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F32> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F33> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
SEPTEMBER 30, 1997
GROWTH AND INCOME STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ---------------------------------------------------------------------------
ASSETS
Common Stocks (cost $28,134,653) $32,341,853
Money Market Investments (cost $2,100,000) 2,100,000
- ---------------------------------------------------------------------------
34,441,853
===========================================================================
Cash 96,663
Due from Sale of Securities 171,801
Due from Sale of Fund Shares 72,073
Dividends and Interest Receivable 37,379
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
- ---------------------------------------------------------------------------
TOTAL ASSETS 34,851,172
===========================================================================
LIABILITIES
Due on Purchase of Securities 1,053,081
Due to Investment Advisor 43,843
Accrued Shareholder Servicing Fees 36,893
Other Accrued Liabilities 23,867
Accrued Distribution Expense 15,329
Accrued Administrative Fees 14,810
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 1,187,823
===========================================================================
NET ASSETS $33,663,349
===========================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,637,673 shares outstanding) $26,620,663
Undistributed Net Investment Income 58,813
Undistributed Accumulated Net
Realized Gain on Investments 2,776,673
Net Unrealized Appreciation of
Investment Securities 4,207,200
- ---------------------------------------------------------------------------
NET ASSETS FOR 2,637,673
SHARES OUTSTANDING $33,663,349
===========================================================================
Per Share of Class A (Based on
2,605,883 Shares Issued and Outstanding):
OFFERING PRICE $13.40
===========================================================================
NET ASSET VALUE AND REDEMPTION PRICE $12.76
===========================================================================
Per Share of Class B (Based on 31,790
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $12.72
===========================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ---------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $2,382) $209,472
Interest 27,625
- ---------------------------------------------------------------------------
TOTAL INCOME 237,097
===========================================================================
Expenses
Management Fees 96,268
Shareholder Servicing Fees 37,026
Registration Fees 22,133
Transfer Agent Fees 21,199
Distribution Fees:
Class A 14,724
Class B 645
Administrative Fees 14,810
Custody Fees 6,198
Other Expenses 17,706
- ---------------------------------------------------------------------------
TOTAL EXPENSES 230,709
===========================================================================
Less:
Custodian Fees Paid Indirectly (1,894)
Expenses Reimbursed by Affiliates (50,531)
- ---------------------------------------------------------------------------
TOTAL NET EXPENSES 178,284
===========================================================================
NET INVESTMENT INCOME 58,813
===========================================================================
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net Realized Gain on Investments 2,776,673
Net Change in Unrealized Appreciation
of Investments for the Period 4,207,200
- ---------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 6,983,873
===========================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $7,042,686
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
GROWTH AND INCOME STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $58,813
Net Realized Gain on Investments 2,776,673
Net Change in Unrealized Appreciation of Investments
for the Period 4,207,200
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 7,042,686
==========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,605,606 Shares 26,248,367
Payments for 323 Shares Redeemed (4,026)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,605,283 shares) 26,244,341
==========================================================================
Class B
Proceeds from Sale of 31,296 Shares 365,565
Payments for 106 Shares Redeemed (1,243)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (31,190 shares) 364,322
==========================================================================
TOTAL INCREASE IN NET ASSETS 33,651,349
NET ASSETS
Beginning of Period 12,000
==========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $58,813) $33,663,349
==========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
GROWTH AND INCOME STOCK FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F34> March 31, 1997<F34>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income(Loss)<F35> 0.02 (0.02)
Net Realized and Unrealized Gains
on Investments 2.74 2.74
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.76 2.72
=========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
=========================================================================
NET ASSET VALUE, END OF PERIOD $12.76 $12.72
=========================================================================
TOTAL RETURN <F36> 27.60%<F37> 27.20%<F37>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $33,258,989 $404,360
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.20%<F38> 1.85%<F38>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.55%<F38> 2.20%<F38>
=========================================================================
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS 0.40%<F38> (0.36)%<F38>
=========================================================================
PORTFOLIO TURNOVER RATE 71.07% 71.07%
=========================================================================
AVERAGE COMMISSION RATE $0.0233 $0.0233
=========================================================================
<F34> Commencement of Operations
<F35> Calculated based on average shares outstanding
<F36> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F37> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F38> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ---------------------------------------------------------------------------
ASSETS
Common Stocks (cost $28,603,811) $34,849,228
- ---------------------------------------------------------------------------
Cash 55,182
Dividends and Interest Receivable 52,572
Due from Sale of Fund Shares 22,481
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
- ---------------------------------------------------------------------------
TOTAL ASSETS 35,010,866
===========================================================================
LIABILITIES
Other Accrued Liabilities 63,662
Accrued Distribution Expense 17,115
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 80,777
===========================================================================
NET ASSETS $34,930,089
===========================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,783,972 shares outstanding) $28,310,667
Undistributed Net Investment Income 176,055
Undistributed Accumulated Net
Realized Gain on Investments 197,950
Net Unrealized Appreciation of
Investment Securities 6,245,417
- ---------------------------------------------------------------------------
NET ASSETS FOR 2,783,972
SHARES OUTSTANDING $34,930,089
===========================================================================
Per Share of Class A (Based on
2,669,595 Shares Issued and Outstanding):
OFFERING PRICE $13.18
===========================================================================
NET ASSET VALUE AND REDEMPTION PRICE $12.55
===========================================================================
Per Share of Class B (Based on 114,377
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $12.51
===========================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ---------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $3,722) $271,557
Interest 36,376
- ---------------------------------------------------------------------------
TOTAL INCOME 307,933
===========================================================================
Expenses
Management Fees 45,775
Shareholder Servicing Fees 38,146
Registration Fees 31,071
Custody Fees 30,182
Other Expenses 24,639
Transfer Agent Fees 21,664
Distribution Fees:
Class A 14,922
Class B 2,519
Administrative Fees 15,258
- ---------------------------------------------------------------------------
TOTAL EXPENSES 224,176
===========================================================================
Less:
Custodian Fees Paid Indirectly (1,687)
Expenses Reimbursed by Affiliates (90,611)
- ---------------------------------------------------------------------------
TOTAL NET EXPENSES 131,878
===========================================================================
NET INVESTMENT INCOME 176,055
===========================================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities 61,160
Index Futures Contracts 136,790
- ---------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 197,950
===========================================================================
Net Change in Unrealized Appreciation
of Investment Securities for the Period 6,245,417
- ---------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 6,443,367
===========================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $6,619,422
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
INDEX 500 STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $176,055
Net Realized Gain on Investments 197,950
Net Change in Unrealized Appreciation of Investments
for the Period 6,245,417
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 6,619,422
==========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,678,794 Shares 27,086,675
Payments for 9,799 Shares Redeemed (104,319)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,668,995 shares) 26,982,356
==========================================================================
Class B
Proceeds from Sale of 123,549 Shares 1,434,805
Payments for 9,772 Shares Redeemed (118,494)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (113,777 shares) 1,316,311
==========================================================================
TOTAL INCREASE IN NET ASSETS 34,918,089
NET ASSETS
Beginning of Period 12,000
==========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $176,055) $34,930,089
==========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
INDEX 500 STOCK FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F39> March 31, 1997<F39>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F40> 0.07 0.03
Net Realized and Unrealized Gains
on Investments 2.48 2.48
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.55 2.51
=========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
=========================================================================
NET ASSET VALUE, END OF PERIOD $12.55 $12.51
=========================================================================
TOTAL RETURN<F41> 25.50%<F42> 25.10%<F42>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $33,498,949 $1,431,140
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.85%<F43> 1.50%<F43>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.45%<F43> 2.10%<F43>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 1.17%<F43> 0.48%<F43>
=========================================================================
PORTFOLIO TURNOVER RATE 1.42% 1.42%
=========================================================================
AVERAGE COMMISSION RATE $0.0259 $0.0259
=========================================================================
<F39> Commencement of Operations
<F40> Calculated based on average shares outstanding
<F41> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F42> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F43> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
SEPTEMBER 30, 1997
ASSET ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ---------------------------------------------------------------------------
ASSETS
Common Stocks (cost $11,388,014) $14,249,678
Bonds (cost $10,199,959) 10,603,400
Foreign Common Stock (cost $2,757,578) 3,473,389
Money Market Investments (cost $1,897,555) 1,897,555
Preferred Stock (cost $977,500) 1,075,000
- ---------------------------------------------------------------------------
31,299,022
===========================================================================
Cash 62,880
Dividends and Interest Receivable 184,974
Due from Sale of Fund Shares 43,932
Due from Sale of Securities 32,187
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
- ---------------------------------------------------------------------------
TOTAL ASSETS 31,654,398
===========================================================================
LIABILITIES
Due to Investment Advisor 50,428
Other Accrued Liabilities 35,563
Accrued Shareholder Servicing Fees 35,451
Due on Purchase of Securities 16,981
Accrued Distribution Expense 15,065
Accrued Administrative Fees 14,213
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 167,701
===========================================================================
NET ASSETS $31,486,697
===========================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,632,550 shares outstanding) $26,502,522
Undistributed Net Investment Income 392,755
Undistributed Accumulated Net
Realized Gain on Investments 512,957
Net Unrealized Appreciation of:
Investment Securities 4,078,416
Foreign Currency Transactions 47
- ---------------------------------------------------------------------------
NET ASSETS FOR 2,632,550
SHARES OUTSTANDING $31,486,697
===========================================================================
Per Share of Class A (Based on
2,582,045 Shares Issued and Outstanding):
OFFERING PRICE $12.56
===========================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.96
===========================================================================
Per Share of Class B (Based on 50,505
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.92
===========================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ---------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $441,606
Dividends (less foreign dividend tax of $4,285) 143,908
- ---------------------------------------------------------------------------
TOTAL INCOME 585,514
===========================================================================
Expenses
Management Fees 99,490
Shareholder Servicing Fees 35,532
Registration Fees 24,325
Other Expenses 23,866
Transfer Agent Fees 21,085
Distribution Fees:
Class A 14,077
Class B 1,021
Administrative Fees 14,213
Custody Fees 8,212
- ---------------------------------------------------------------------------
TOTAL EXPENSES 241,821
===========================================================================
Less:
Custodian Fees Paid Indirectly (7,039)
Other Expenses Reimbursed by Affiliates (42,023)
- ---------------------------------------------------------------------------
TOTAL NET EXPENSES 192,759
===========================================================================
NET INVESTMENT INCOME 392,755
===========================================================================
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments:
Investment Securities 513,046
Foreign Currency Transactions (89)
- ---------------------------------------------------------------------------
NET REALIZED GAIN FOR THE PERIOD 512,957
===========================================================================
Net Change in Unrealized Appreciation of:
Investment Securities 4,078,416
Foreign Currency Transactions 47
- ---------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION FOR THE PERIOD 4,078,463
===========================================================================
NET GAIN ON INVESTMENTS 4,591,420
===========================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 4,984,175
===========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
ASSET ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $392,755
Net Realized Gain on Investments 512,957
Net Change in Unrealized Appreciation of Investments
for the Period 4,078,463
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 4,984,175
==========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,582,229 Shares 25,938,109
Payments for 784 Shares Redeemed (9,183)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,581,445 shares) 25,928,926
==========================================================================
Class B
Proceeds from Sale of 49,905 Shares 561,596
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (49,905 shares) 561,596
==========================================================================
TOTAL INCREASE IN NET ASSETS 31,474,697
NET ASSETS
Beginning of Period 12,000
==========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $392,755) $31,486,697
==========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F44> March 31, 1997<F44>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F45> 0.15 0.11
Net Realized and Unrealized Gains
on Investments 1.81 1.81
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.96 1.92
=========================================================================
Less Distributions:
Distributions from Net Investment
Income 0.00 0.00
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00
=========================================================================
NET ASSET VALUE, END OF PERIOD $11.96 $11.92
=========================================================================
TOTAL RETURN<F46> 19.60%<F47> 19.20%<F47>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $30,884,525 $602,172
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.35%<F48> 2.00%<F48>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.70%<F48> 2.35%<F48>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 2.77%<F48> 2.01%<F48>
=========================================================================
PORTFOLIO TURNOVER RATE 38.78% 38.78%
=========================================================================
AVERAGE COMMISSION RATE $0.0626 $0.0626
=========================================================================
<F44> Commencement of Operations
<F45> Calculated based on average shares outstanding
<F46> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F47> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F48> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
MASON STREET FUNDS
HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ----------------------------------------------------------------------
ASSETS
Bonds (cost $20,685,820) $21,945,568
Preferred Stock (cost $6,683,883) 7,362,776
Money Market Investments (cost $1,100,000) 1,100,000
- ----------------------------------------------------------------------
30,408,344
======================================================================
Cash 17,436
Dividends and Interest Receivable 552,701
Due from Sale of Fund Shares 51,093
Prepaid Initial Registration Expenses 18,591
Unamortized Organizational Costs 12,812
- ----------------------------------------------------------------------
TOTAL ASSETS 31,060,977
======================================================================
LIABILITIES
Due on Purchase of Securities 648,037
Income Dividend Payable 209,428
Due to Investment Advisor 53,344
Accrued Shareholder Servicing Fees 34,314
Other Accrued Liabilities 25,700
Accrued Distribution Expense 14,050
Accrued Administrative Fees 13,755
- ----------------------------------------------------------------------
TOTAL LIABILITIES 998,628
======================================================================
NET ASSETS $30,062,349
======================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,690,825 shares outstanding) $27,038,330
Undistributed Accumulated Net
Investment Income 159,521
Undistributed Accumulated Net
Realized Gain on Investments 925,857
Net Unrealized Appreciation of
Investment Securities 1,938,641
- ----------------------------------------------------------------------
NET ASSETS FOR 2,690,825
SHARES OUTSTANDING $30,062,349
======================================================================
Per Share of Class A (Based on
2,674,532 Shares Issued and Outstanding):
OFFERING PRICE $11.73
======================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.17
======================================================================
Per Share of Class B (Based on 16,293
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.17
======================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ----------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $1,138,711
Dividends 340,750
- ----------------------------------------------------------------------
TOTAL INCOME 1,479,461
======================================================================
Expenses
Management Fees 103,165
Shareholder Servicing Fees 34,388
Registration Fees 21,514
Transfer Agent Fees 20,845
Distribution Fees:
Class A 13,705
Class B 374
Administrative Fees 13,755
Other Expenses 21,205
- ----------------------------------------------------------------------
TOTAL EXPENSES 228,951
======================================================================
Less:
Custodian Fees Paid Indirectly (5,891)
Expenses Reimbursed by Affiliates (43,929)
- ----------------------------------------------------------------------
TOTAL NET EXPENSES 179,131
======================================================================
NET INVESTMENT INCOME 1,300,330
======================================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments 925,857
Net Change in Unrealized Appreciation
of Investments for the Period 1,938,641
- ----------------------------------------------------------------------
NET GAIN ON INVESTMENTS 2,864,498
======================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $4,164,828
======================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- ------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $1,300,330
Net Realized Gain on Investments 925,857
Net Change in Unrealized Appreciation of Investments
for the Period 1,938,641
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 4,164,828
==========================================================================
Distributions to Class A Shareholders from Net
Investment Income (1,137,070)
Distributions to Class B Shareholders from Net
Investment Income (3,739)
- --------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions
to Shareholders (1,140,809)
==========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,587,153 Shares 25,935,159
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (87,012 shares) 927,412
Payments for 233 Shares Redeemed (2,546)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,673,932 shares) 26,860,025
=========================================================================
Class B
Proceeds from Sale of 15,472 Shares 163,901
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (221 shares) 2,404
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (15,693 shares) 166,305
==========================================================================
TOTAL INCREASE IN NET ASSETS 30,050,349
==========================================================================
NET ASSETS
Beginning of Period 12,000
==========================================================================
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME OF $159,521) $30,062,349
==========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F49> March 31, 1997<F49>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income 0.50 0.45
Net Realized and Unrealized Gains
on Investments 1.11 1.11
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.61 1.56
=========================================================================
Less Distributions:
Distributions from Net Investment
Income (0.44) (0.39)
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.44) (0.39)
=========================================================================
NET ASSET VALUE, END OF PERIOD $11.17 $11.17
=========================================================================
TOTAL RETURN<F50> 16.36%<F51> 15.95%<F51>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $29,880,355 $181,994
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.30%<F52> 1.95%<F52>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.66%<F52> 2.31%<F52>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 9.46%<F52> 8.64%<F52>
=========================================================================
PORTFOLIO TURNOVER RATE 94.94% 94.94%
=========================================================================
<F49> Commencement of Operations
<F50> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F51> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F52> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
SEPTEMBER 30, 1997
MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ----------------------------------------------------------------------
ASSETS
Bonds (cost $24,272,900) $25,368,469
Money Market Investments (cost $1,600,000) 1,600,000
- ----------------------------------------------------------------------
26,968,469
======================================================================
Cash 39,511
Due from Sale of Fund Securities 2,869,121
Interest Receivable 473,548
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
- ----------------------------------------------------------------------
TOTAL ASSETS 30,382,052
======================================================================
LIABILITIES
Due on Purchase of Securities 2,834,066
Income Dividend Payable 99,251
Accrued Shareholder Servicing Fees 32,808
Other Accrued Liabilities 23,568
Accrued Distribution Expense 13,059
Accrued Administrative Fees 4,550
- ----------------------------------------------------------------------
TOTAL LIABILITIES 3,007,302
======================================================================
NET ASSETS $27,374,750
======================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,596,704 shares outstanding) $25,994,243
Undistributed Accumulated Net
Realized Gain on Investments 284,938
Net Unrealized Appreciation of
Investment Securities 1,095,569
- ----------------------------------------------------------------------
NET ASSETS FOR 2,596,704
SHARES OUTSTANDING $27,374,750
======================================================================
Per Share of Class A (Based on
2,571,807 Shares Issued and Outstanding):
OFFERING PRICE $11.07
======================================================================
NET ASSET VALUE AND REDEMPTION PRICE $10.54
======================================================================
Per Share of Class B (Based on 24,897
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $10.54
======================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ----------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $698,911
- ----------------------------------------------------------------------
Expenses
Management Fees 39,411
Shareholder Servicing Fees 32,843
Other Expenses 20,999
Transfer Agent Fees 20,126
Registration Fees 19,996
Distribution Fees:
Class A 13,058
Class B 594
Administrative Fees 13,137
- ----------------------------------------------------------------------
TOTAL EXPENSES 160,164
======================================================================
Less:
Custodian Fees Paid Indirectly (2,958)
Expenses Reimbursed by Affiliates (45,046)
- ----------------------------------------------------------------------
TOTAL NET EXPENSES 112,160
======================================================================
NET INVESTMENT INCOME 586,751
======================================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net Realized Gain on Investments:
Investment Securities 182,644
Futures Contracts 102,294
- ----------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 284,938
======================================================================
Net Change in Unrealized Appreciation
of Investment Securities for the Period 1,095,569
- ----------------------------------------------------------------------
NET GAIN ON INVESTMENTS 1,380,507
======================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,967,258
======================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $586,751
Net Realized Gain on Investments 284,938
Net Change in Unrealized Appreciation of Investments
for the Period 1,095,569
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 1,967,258
=========================================================================
Distributions to Class A Shareholders from Net
Investment Income (583,838)
Distributions to Class B Shareholders from Net
Investment Income (2,913)
- --------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders (586,751)
=========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,524,206 Shares 25,246,807
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (47,001 shares) 485,323
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,571,207 shares) 25,732,130
=========================================================================
Class B
Proceeds from Sale of 24,238 Shares 249,496
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (59 shares) 617
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (24,297 shares) 250,113
- --------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 27,362,750
=========================================================================
NET ASSETS
Beginning of Period 12,000
=========================================================================
END OF PERIOD (INCLUDES NO UNDISTRIBUTED NET INVESTMENT
INCOME) $27,374,750
=========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F53> March 31, 1997<F53>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income 0.24 0.19
Net Realized and Unrealized Gains
on Investments 0.54 0.54
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.78 0.73
=========================================================================
Less Distributions:
Distributions from Net Investment
Income (0.24) (0.19)
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.24) (0.19)
=========================================================================
NET ASSET VALUE, END OF PERIOD $10.54 $10.54
=========================================================================
TOTAL RETURN<F54> 7.76%<F55> 7.35%<F55>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $27,112,290 $262,460
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.85%<F56> 1.50%<F56>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.22%<F56> 1.87%<F56>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 4.47%<F56> 3.68%<F56>
=========================================================================
PORTFOLIO TURNOVER RATE 128.60% 128.60%
=========================================================================
<F53> Commencement of Operations
<F54> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F55> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F56> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
MASON STREET FUND
SELECT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
- ----------------------------------------------------------------------
ASSETS
Bonds (cost $24,947,673) $25,174,358
Money Market Investments (cost $2,998,356) 2,998,356
- ----------------------------------------------------------------------
28,172,714
======================================================================
Cash 270,570
Due from Sale of Fund Securities 5,390,211
Interest Receivable 337,775
Due from Foreign Currency Contracts 242,112
Futures Variation Margin 20,625
Unamortized Organizational Costs 18,591
Prepaid Initial Registration Expenses 12,812
Due from Sale of Fund Shares 3,187
- ----------------------------------------------------------------------
TOTAL ASSETS 34,468,597
======================================================================
LIABILITIES
Due on Purchase of Securities 6,447,619
Due on Foreign Currency Contracts 236,456
Income Dividend Payable 144,585
Accrued Shareholder Servicing Fees 32,743
Other Accrued Liabilities 26,539
Accrued Distribution Expense 13,241
Accrued Administrative Fees 1,864
- ----------------------------------------------------------------------
TOTAL LIABILITIES 6,903,047
======================================================================
NET ASSETS $27,565,550
======================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,615,373 shares outstanding) $26,189,707
Undistributed Accumulated Net
Realized Gain on Investments 1,151,450
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 226,685
Futures Contracts (1,406)
Foreign Currency Transactions (886)
- ----------------------------------------------------------------------
NET ASSETS FOR 2,615,373
SHARES OUTSTANDING $27,565,550
======================================================================
Per Share of Class A (Based on
2,606,686 Shares Issued and Outstanding):
OFFERING PRICE $11.07
======================================================================
NET ASSET VALUE AND REDEMPTION PRICE $10.54
======================================================================
Per Share of Class B (Based on 8,687
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $10.54
======================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1997
- ----------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest (less foreign tax of $3,294) $943,061
- ----------------------------------------------------------------------
Expenses
Management Fees 39,330
Shareholder Servicing Fees 32,775
Transfer Agent Fees 20,254
Other Expenses 19,371
Registration Fees 19,322
Distribution Fees:
Class A 13,088
Class B 166
Administrative Fees 13,110
Custody Fees 4,735
- ----------------------------------------------------------------------
TOTAL EXPENSES 162,151
======================================================================
Less:
Custodian Fees Paid Indirectly (4,028)
Expenses Reimbursed by Affiliates (46,543)
- ----------------------------------------------------------------------
TOTAL NET EXPENSES 111,580
======================================================================
NET INVESTMENT INCOME 831,481
======================================================================
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
NET REALIZED GAIN ON INVESTMENTS:
Investment Securities 1,040,397
Futures Contracts 111,053
- ----------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 1,151,450
======================================================================
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities 226,685
Futures Contracts (1,406)
Foreign Currency Transactions (886)
- ----------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
FOR THE PERIOD 224,393
======================================================================
NET GAIN ON INVESTMENTS 1,375,843
======================================================================
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,207,324
======================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
SEPTEMBER 30, 1997
SELECT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the
Six Months Ended
September 30, 1997
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net Investment Income $831,481
Net Realized Gain on Investments 1,151,450
Net Change in Unrealized Appreciation of Investments
for the Period 224,393
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 2,207,324
=========================================================================
Distributions to Class A Shareholders from Net
Investment Income (830,241)
Distributions to Class B Shareholders from Net
Investment Income (1,240)
- --------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders (831,481)
=========================================================================
Fund Share Transactions
Class A
Proceeds from Sale of 2,539,785 Shares 25,410,800
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (66,401 shares) 684,508
Payments for 100 Shares Redeemed (1,042)
- --------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class A
Fund Share Transactions (2,606,086 shares) 26,094,266
=========================================================================
Class B
Proceeds from Sale of 8,927 Shares 92,157
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (80 shares) 829
Payments for 920 Shares Redeemed (9,545)
- -------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Class B
Fund Share Transactions (8,087 shares) 83,441
=========================================================================
TOTAL INCREASE IN NET ASSETS 27,553,550
NET ASSETS
Beginning of Period 12,000
=========================================================================
END OF PERIOD (INCLUDES NO UNDISTRIBUTED NET INVESTMENT
INCOME) $27,565,550
=========================================================================
The accompanying Notes are an integral part of the Financial Statements
(Prepared from Unaudited Figures)
<PAGE>
MASON STREET FUNDS
SELECT BOND FUND
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
-------- --------
For the Period For the Period
March 31, 1997<F57> March 31, 1997<F57>
(For a share outstanding to September 30, 1997 to September 30, 1997
throughout the period) (Unaudited) (Unaudited)
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations:
Net Investment Income 0.32 0.29
Net Realized and Unrealized Gains
on Investments 0.54 0.54
- -------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.86 0.83
=========================================================================
Less Distributions:
Distributions from Net Investment
Income (0.32) (0.29)
Distributions from Realized Gains
on Investments 0.00 0.00
- -------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.32) (0.29)
=========================================================================
NET ASSET VALUE, END OF PERIOD $10.54 $10.54
=========================================================================
TOTAL RETURN<F57> 8.76%<F58> 8.38%<F58>
=========================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $27,473,994 $91,556
=========================================================================
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.85%<F59> 1.50%<F59>
=========================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET
ASSETS 1.24%<F59> 1.89%<F59>
=========================================================================
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 6.34%<F59> 5.60%<F59>
=========================================================================
PORTFOLIO TURNOVER RATE 197.39% 197.39%
=========================================================================
<F57> Commencement of Operations
<F58> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales
charges.
<F59> Reflects total return for the period; not annualized. Returns include fee
waivers in effect. In the absence of fee waivers, total return would be
reduced.
<F60> Computed on an annualized basis
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
NOTE 1
Mason Street Funds, Inc. was incorporated under the laws of the state of
Maryland on August 30, 1996 as an open-end investment company under the
Investment Company Act of 1940. Mason Street Funds/SM consist of the Aggressive
Growth Stock Fund, International Equity Fund, Growth Stock Fund, Growth and
Income Stock Fund, Index 500 Stock Fund, Asset Allocation Fund, High Yield Bond
Fund, Municipal Bond Fund and the Select Bond Fund, collectively known as "the
Funds." The Funds commenced operations on March 31, 1997 at $10.00 per share
with 1,200 shares in each of the Funds owned by Northwestern Mutual Life
Insurance Company ("Northwestern Mutual Life"). On April 1, 1997, Northwestern
Mutual Life invested an additional $225 million in Mason Street Funds/SM; $25
million in the Class A shares in each of the Funds.
Each Fund offers two classes of shares: Class A shares with an initial sales
charge up to 4.75% and Class B shares with a surrender charge of 0-5% over a
period of up to six years. Each class of shares has equal rights with respect to
voting privileges.
Organizational costs and initial registration expenses are being deferred and
amortized over the period of benefit, but not to exceed 60 months from the
Funds' commencement of operations. These costs, totaling $417,215, were advanced
by Northwestern Mutual Life and were reimbursed by the Funds equally.
NOTE 2
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principal accounting policies are summarized in the following Notes.
NOTE 3
Bonds are valued on the basis of prices furnished by a service which determines
prices for normal institutional size trading units of bonds, without regard to
exchange or over-the-counter prices. When quotations are not readily available,
bonds are valued at fair market value determined by procedures approved by the
Board of Directors. Stocks listed on a national or foreign stock exchange are
valued at the final sale price, or final bid price in absence of a sale. Stocks
not listed on a national or foreign stock exchange are valued at the closing
bid price on the over-the-counter market. Money market investments with
maturities exceeding 60 days but generally not exceeding one year are valued by
marking to market on the basis of an average of the most recent bid prices or
yields. Money market investments with maturities of 60 days or less are valued
on an amortized cost basis or, if the current market value differs substantially
from the amortized cost, by marking to market.
NOTE 4
Securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollar amounts on the date of valuation. Purchases and
sales of securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. When the International Equity Fund, Asset Allocation Fund and
Select Bond Fund purchase or sell a foreign security they may enter into a
foreign exchange currency contract to minimize market risk from the trade date
to the settlement date of such transaction. Such foreign exchange currency
contracts are marked to market daily.
The International Equity Fund, Asset Allocation Fund and Select Bond Fund do not
separately report the results of operations due to changes in foreign exchange
rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized gain or
loss from investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade date and the
settlement date on security transactions, the differences between the amounts of
dividends and foreign withholding taxes recorded on the Funds' books, and the
U.S. dollar equivalent of the amounts actually received or paid.
<PAGE>
MASON STREET FUNDS
NOTE 5
The Aggressive Growth Stock Fund, Growth Stock Fund, Index 500 Stock Fund, Asset
Allocation Fund, Municipal Bond Fund and the Select Bond Fund invest in futures
contracts as an alternative to investing in individual securities. The
Aggressive Growth Stock Fund, Growth Stock Fund, Index 500 Stock Fund, Asset
Allocation Fund, Municipal Bond Fund and the Select Bond Fund could be exposed
to market risk due to changes in the value of the underlying securities or due
to an illiquid secondary market. Futures contracts are marked to market daily
based upon quoted settlement prices. The Funds receive from or pay to brokers an
amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments, known as the "variation margin," are recorded by
the Funds as unrealized gains or losses. When the contract is closed, the Funds
record a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
For federal income tax purposes, net unrealized appreciation (depreciation) on
open futures contracts is required to be treated as realized gains (losses).
NOTE 6
Income, Fund expenses, realized and unrealized gains and losses are allocated
daily to each class of shares based on the value of shares outstanding for the
Aggressive Growth Stock Fund, International Equity Fund, Growth Stock Fund,
Growth and Income Stock Fund, Index 500 Stock Fund and Asset Allocation Fund.
Dividends and other distributions are calculated in a similar manner and are
declared and distributed to shareholders annually for these Funds. For the High
Yield Bond Fund, Municipal Bond Fund and Select Bond Fund, income and Fund
expenses are allocated daily to each class of shares based on the value of paid
shares. Realized and unrealized gains and losses are allocated daily to each
class of shares based on the value of shares outstanding. Dividends and other
distributions are calculated in a similar manner. Income dividends are declared
daily, paid monthly. Capital gain dividends are declared and distributed
annually for these Funds.
NOTE 7
Interest income and discounts earned are recorded daily on the accrual basis and
dividend income is recorded on the ex-dividend date or as soon as information
from foreign issuers is available. Where applicable, dividends are recorded net
of foreign dividend tax. Discounts on securities purchased in the Funds are
amortized over the life of the respective securities using the effective
interest method. Premiums for the Municipal Bond Fund are amortized to the
remaining life or earlier call date, whichever is earlier. Securities
transactions are accounted for on trade date. The basis for determining cost on
sale of securities is identified cost. For the six-month period ended September
30, 1997, transactions in securities other than money market investments were:
Total U.S. Gov't.
Total U.S. Gov't. Security Security
Security Security Sales/ Sales/
Portfolios Purchases Purchases Maturities Maturities
- -------------------------------------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND $33,132,698 - $7,351,479 -
===============================================================================
INTERNATIONAL EQUITY FUND 24,313,115 - - -
===============================================================================
GROWTH STOCK FUND 27,706,935 - 4,496,895 -
===============================================================================
GROWTH AND INCOME STOCK FUND 46,648,880 - 21,292,443 -
===============================================================================
INDEX 500 STOCK FUND 28,973,890 - 431,242 -
===============================================================================
ASSET ALLOCATION FUND 35,289,471 $5,306,704 10,407,504 $1,805,262
===============================================================================
HIGH YIELD BOND FUND 52,808,897 - 25,521,257 -
===============================================================================
MUNICIPAL BOND FUND 57,769,960 - 33,418,534 -
===============================================================================
SELECT BOND FUND 73,515,116 32,371,961 49,069,166 28,357,214
<PAGE>
SEPTEMBER 30, 1997
NOTE 8
Northwestern Mutual Investment Services, Inc. ("NMIS") serves as investment
advisor to each of the Funds, with certain of the Funds also being served by a
subadvisor. Each Fund pays NMIS an annual fee for investment advisory services
based on average daily net assets of the Fund according to the following
schedule:
Fund Fee
- ----------------------------------------
AGGRESSIVE GROWTH FUND 0.75%
========================================
INTERNATIONAL EQUITY FUND 0.85%
========================================
GROWTH STOCK FUND 0.75%
========================================
GROWTH AND INCOME STOCK FUND 0.65%
========================================
INDEX 500 STOCK FUND 0.30%
========================================
ASSET ALLOCATION FUND 0.70%
========================================
HIGH YIELD BOND FUND 0.75%
========================================
MUNICIPAL BOND FUND 0.30%
========================================
SELECT BOND FUND 0.30%
========================================
J.P. Morgan Investment Management Inc. ("J.P. Morgan") and Templeton
Investment Counsel, Inc. ("Templeton") have been retained under investment
subadvisory agreements to provide investment advice and, in general, to conduct
the management investment program of the Growth and Income Stock Fund and the
International Equity Fund, respectively. Of the amounts received from the Growth
and Income Stock Fund, NMIS pays J.P. Morgan 0.45% on the first $100 million of
the combined net assets for all funds managed for Northwestern Mutual Life by
J.P. Morgan, 0.40% on the next $100 million, 0.35% on the next $200 million and
0.30% on the combined net assets in excess of $400 million. Of the amounts
received from the International Equity Fund, NMIS pays Templeton 0.50% on the
first $100 million of the combined net assets for all funds managed for
Northwestern Mutual Life by Templeton and 0.40% on the combined net assets in
excess of $100 million.
Robert W. Baird & Co. Incorporated ("Baird") serves as the Distributor of the
Funds. Baird is an affiliate of Northwestern Mutual Life and NMIS. The Funds
have a 12b-1 distribution plan and shareholder services agreement with Baird
pursuant to which a 0.35% and a 1.00% annual fee for Class A and Class B,
respectively, is calculated based on daily net assets. The 0.35% fee for Class A
is comprised of a 0.25% shareholder servicing fee and a 0.10% distribution fee
paid to Baird for various distribution expenses. The 1.00% fee for Class B is
comprised of a 0.25% shareholder servicing fee and a 0.75% distribution fee. Of
the 1.00%, 0.35% is paid to Baird for distribution expenses; the remaining 0.65%
is paid to Northwestern Mutual Life for reimbursement of commissions paid to
agents.
Each Fund also pays the administrator, Northwestern Mutual Life, a monthly fee
at an annual rate of 0.10% plus costs for pricing securities. This
administration fee is for services including recordkeeping, preparation of
reports and fund accounting (except for the International Equity Fund). For the
International Equity Fund, Northwestern Mutual Life waives a portion of its fee
equal to the fund accounting fee paid to Brown Brothers Harriman & Co.
In addition, each Fund pays transfer agent and custodian fees, outside
professional and auditing fees, registration fees, trademark fees,
organizational costs, insurance premiums, Directors' fees and expenses, and the
printing and mailing costs of sending reports and other information to existing
shareholders.
The Funds pay a portion of their custodian fees indirectly through expense
offset arrangements. Custodian fees are reduced for maintaining compensating
balances in non-interest bearing accounts. The Funds could have invested the
assets used to pay for the custodian fees, had the assets not been used in the
expense offset arrangements.
NMIS and affiliates have agreed to waive their fees and absorb certain other
operating expenses during the first year of operations to the extent necessary
so that Total Operating Expenses will not exceed the following amounts:
Fund Class A Class B
- -------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND 1.30% 1.95%
=================================================
INTERNATIONAL EQUITY FUND 1.65% 2.30%
=================================================
GROWTH STOCK FUND 1.30% 1.95%
=================================================
GROWTH AND INCOME STOCK FUND 1.20% 1.85%
=================================================
INDEX 500 STOCK FUND 0.85% 1.50%
=================================================
ASSET ALLOCATION FUND 1.35% 2.00%
=================================================
HIGH YIELD BOND FUND 1.30% 1.95%
=================================================
MUNICIPAL BOND FUND 0.85% 1.50%
=================================================
SELECT BOND FUND 0.85% 1.50%
=================================================
<PAGE>
MASON STREET FUNDS
NOTE 9
Each Fund intends to comply with the requirements for the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of income and capital gains to its shareholders sufficient to
relieve it from all or substantially all federal income taxes.
Accordingly, no provisions have been made for federal taxes. As of September 30,
1997, the federal income tax basis of investments is the same as the cost basis
in the financial statements. The net unrealized appreciation (depreciation) for
federal income tax purposes are shown below:
Aggressive
Growth International Growth
(in thousands) Stock Fund Equity Fund Stock Fund
- -------------------------------------------------------------------------------
Gross unrealized appreciation $9,243 $2,952 $5,542
Gross unrealized depreciation (282) (856) (198)
- -------------------------------------------------------------------------------
NET UNREALIZED APPRECIATION $8,961 $2,096 $5,344
===============================================================================
Growth and Asset
Income Index 500 Allocation
(in thousands) Stock Fund Stock Fund Fund
- -------------------------------------------------------------------------------
Gross unrealized appreciation $4,433 $6,412 $4,263
Gross unrealized depreciation (226) (167) (185)
- -------------------------------------------------------------------------------
NET UNREALIZED APPRECIATION $4,207 $6,245 $4,078
===============================================================================
High Yield Municipal Select
(in thousands) Bond Fund Bond Fund Bond Fund
- -------------------------------------------------------------------------------
Gross unrealized appreciation $2,043 $1,101 $256
Gross unrealized depreciation (104) (5) (29)
- -------------------------------------------------------------------------------
NET UNREALIZED APPRECIATION $1,939 $1,096 $227
===============================================================================
NOTE 10
Dividends from net investment income in the High Yield Bond Fund, Municipal Bond
Fund and Select Bond Fund are declared daily and distributed to shareholders
monthly. Dividends from net investment income for the Aggressive Growth Stock
Fund, International Equity Fund, Growth Stock Fund, Growth and Income Stock
Fund, Index 500 Stock Fund and Asset Allocation Fund are declared and
distributed to shareholders annually. Net long-term capital gains are
distributed annually. Dividends are paid on the record date. The following
distributions were made for the six months ended September 30, 1997:
Class A Shares Class B Shares
-------------- --------------
Ordinary Ordinary
Record Income Income
Funds Date Per Share Per Share
- -----------------------------------------------------------
HIGH YIELD 4/30/97 $.061129 $.053177
BOND FUND 5/31/97 .077775 .071678
6/30/97 .070789 .064950
7/31/97 .068452 .062336
8/31/97 .085444 .079136
9/30/97 .076623 .070861
- -----------------------------------------------------------
$.440212 $ .402138
===========================================================
MUNICIPAL 4/30/97 $.035378 $.026612
BOND FUND 5/31/97 .040091 .034007
6/30/97 .036607 .028968
7/31/97 .039901 .034070
8/31/97 .040810 .034849
9/30/97 .037012 .031562
- -----------------------------------------------------------
$.229808 $.190068
===========================================================
SELECT 4/30/97 $.047940 $.042453
BOND FUND 5/31/97 .054720 .048928
6/30/97 .053516 .046324
7/31/97 .057469 .051258
8/31/97 .057940 .051911
9/30/97 .053717 .048139
- -----------------------------------------------------------
$.325302 $.289013
===========================================================
<PAGE>
DIRECTORS AND OFFICERS
DIRECTORS
JAMES D. ERICSON
President and Chief Executive Officer
Northwestern Mutual Life, Milwaukee
MARTIN F. STEIN
Chairman of the Board
EyeCare One Corporation, Milwaukee
JOHN K. MACIVER
Partner
Michael Best & Friedrich, Attorneys at Law, Milwaukee
STEPHEN N. GRAFF
Retired Partner
Arthur Andersen, LLP, Milwaukee
WILLIAM J. BLAKE
Chairman
Blake Financial Corporation, Milwaukee
WILLIAM A. MCINTOSH
Retired Division Head - U.S. Fixed Income
Salomon Brothers, Chicago
OFFICERS
JAMES D. ERICSON
President
MARK G. DOLL
Vice President and Treasurer
MERRILL C. LUNDBERG
Secretary
BARBARA E. COURTNEY
Controller
<PAGE>
MASON STREET FUNDS
The reference to analysis published by Ibbotson Associates, Inc. in the Letter
to Shareholders on p. 1 is used with permission.
(C)1997 Ibbotson Associates, Inc. All rights reserved.
<PAGE>
MASON STREET FUNDS/SM
P.O. BOX 419419
KANSAS CITY, MO 64141-6419
1-888-MASONST (1-888-627-6678)
94-1002
Robert W. Baird & Co. Incorporated, Distributor 11/97
