DISCOVERY SELECT
GROUP RETIREMENT ANNUITY
SEMI-ANNUAL REPORT TO PARTICIPANTS
June 30, 2000
[GRAPHIC OMITTED]
PRUDENTIAL |X| AIM ADVISORS |X| JANUS |X| MFS |X| OPCAP ADVISORS
|X| T. ROWE PRICE |X| WARBURG PINCUS
DISCOVERY SELECT GROUP Retirement Annuity is a group annuity insurance product
issued by The Prudential Insurance Company of America, Newark, NJ. DISCOVERY
SELECT is offered through Pruco Securities Corporation, Prudential Securities,
Inc. and Prudential Investment Management Services LLC. All are subsidiaries of
the Prudential Insurance Company of America.
[LOGO]
--------------------------------------------------------------------------------
<PAGE>
PERFORMANCE RESULTS
<TABLE>
DISCOVERY SELECT(SM) GROUP RETIREMENT ANNUITY
FOR PERIODS ENDED JUNE 30, 2000
FOR CONTRACTS OTHER THAN BISYS
The following returns reflect the deduction of all fees and charges,
except for possible withdrawal charges.
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
YEAR TO ONE THREE FIVE TEN YEAR OR
DATE(4) YEAR YEAR YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------------------------------------
MONEY MARKET
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prudential Money Market Portfolio(1) ................. 2.43% 4.58% 3.99% 41.2% 3.93%
--------------------------------------------------------------------------------------------------------------------
BONDS
--------------------------------------------------------------------------------------------------------------------
Prudential Diversified Bond Portfolio ................ 2.29% 2.71% 3.49% 4.93% 6.70%
Prudential Government Income Portfolio ............... 3.92% 3.31% 4.53% 4.62% 6.29%
Prudential High Yield Bond Portfolio ................. -2.38% -1.83% 1.47% 5.33% 8.37%
--------------------------------------------------------------------------------------------------------------------
BALANCED
--------------------------------------------------------------------------------------------------------------------
Prudential Conservative Balanced Portfolio ........... 0.89% 2.95% 7.44% 9.52% 9.02%
Prudential Flexible Managed Portfolio ................ 0.15% .078% 7.36% 10.93% 10.46%
--------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE
--------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust
Managed Portfolio(2) ................................ -3.46% -5.91% 4.74% 12.08% 14.92%
Prudential Equity Portfolio .......................... -5.94% -8.84% 7.20% 12.78% 13.15%
T. Rowe Price Equity Income Portfolio ................ -3.16% -11.05% 6.12% 13.33% 14.18%[x]
--------------------------------------------------------------------------------------------------------------------
LARGE CAP BLEND
--------------------------------------------------------------------------------------------------------------------
AIM V.I Growth & Income Fund ......................... 0.63% 17.31% 21.68% 22.46% 21.21%[x]
AIM V.I Value Fund ................................... -0.76% 12.07% 21.07% 20.59% 20.04%[x]
MFS Research Series .................................. 5.77% 19.93% 18.12% N/A 20.27%[x]
Prudential Stock Index Portfolio ..................... -1.04% 5.88% 18.55% 22.42% 16.32%
--------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH
--------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Growth Portfolio .................. 1.21% 24.28% 27.43% 25.46% 21.23%[x]
Prudential Jennison Portfolio ........................ 3.47% 26.99% 29.90% 26.19% 27.94%[x]
MFS Emerging Growth Series ........................... -2.76% 51.55% 34.91% N/A 30.13%[x]
--------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP VALUE
--------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Small
Cap Portfolio(2) .................................... 12.72% 6.30% 1.44% 8.67% 11.30%
Prudential Equity Portfolio .......................... -5.80% -10.83% 4.75% 11.43% 12.15%
--------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP GROWTH
--------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust Post-Venture Capital
Portfolio .......................................... 4.29% 50.50% 24.88% N/A 19.89%[x]
--------------------------------------------------------------------------------------------------------------------
WORLD/INTERNATIONAL EQUITY(3)
--------------------------------------------------------------------------------------------------------------------
Janus Aspen International Growth Portfolio ........... 2.39% 68.71% 28.20% 30.73% 24.68%[x]
Prudential Global Portfolio .......................... - 1.49 32.41% 18.56% 18.41% 12.37%
T. Rowe Price International Stock Portfolio .......... - 5.22 21.14% 9.47% 11.99% 10.25%[x]
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
PERFORMANCE RESULTS (CONTINUED)
The following returns are legally required for comparison purposes and are after
the deduction of all fees and charges, including the maximum possible withdrawal
charges.* For an explanation of these charges, consult the "Charges, Fees and
Deductions" section of your prospectus.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
YEAR TO ONE THREE FIVE TEN YEAR OR
DATE(4) YEAR YEAR YEAR SINCE INCEPTION
--------------------------------------------------------------------------------------------------------------------
MONEY MARKET
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prudential Money Market Portfolio(1).................. -2.63% -0.48% 3.00% 3.90% 3.88%
--------------------------------------------------------------------------------------------------------------------
BONDS
--------------------------------------------------------------------------------------------------------------------
Prudential Diversified Bond Portfolio ................ -2.77% -2.35% 2.49% 4.71% 6.66%
Prudential Government Income Portfolio ............... -1.14% -1.75% 3.55% 4.40% 6.26%
Prudential High Yield Bond Portfolio ................. -7.44% -6.89% 0.43% 5.11% 8.34%
--------------------------------------------------------------------------------------------------------------------
BALANCED
--------------------------------------------------------------------------------------------------------------------
Prudential Conservative Balanced Portfolio ........... -4.17% -2.11% 6.51% 9.33% 8.99%
Prudential Flexible Managed Portfolio ................ -4.91% -4.28% 6.43% 10.76% 10.44%
--------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE
--------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust
Managed Portfolio(2) ................................ -8.52% -10.97% 3.76% 11.91% 14.90%
Prudential Equity Portfolio .......................... -11.00% -13.90% 6.27% 12.62% 13.14%
T. Rowe Price Equity Income Portfolio ................ -8.22% -16.11% 5.17% 13.17% 14.15%[x]
--------------------------------------------------------------------------------------------------------------------
LARGE CAP BLEND
--------------------------------------------------------------------------------------------------------------------
AIM V.I Growth & Income Fund ......................... -4.43% 12.25% 20.96% 22.34% 21.19%[x]
AIM V.I Value Fund ................................... -5.82% 7.01% 20.34% 20.47% 20.02%[x]
MFS Research Series .................................. 0.71% 14.87% 17.36% N/A 20.15%[x]
Prudential Stock Index Portfolio ..................... -6.10% 0.82% 17.79% 22.31% 16.20%
--------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH
--------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Growth Portfolio .................. -3.85% 19.22% 26.77% 25.36% 21.21%[x]
Prudential Jennison Portfolio ........................ -1.59% 21.93% 29.27% 26.09% 27.92%[x]
MFS Emerging Growth Series ........................... -7.82% 46.49% 34.33% N/A 30.04%[x]
--------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP VALUE
--------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Small
Cap Portfolio(2) .................................... 7.66% 1.24% 0.40% 8.49% 11.27%
Prudential Equity Income Portfolio ................... -10.86% -15.89% 3.78% 11.26% 12.12%
--------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP GROWTH
--------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust Post-Venture Capital
Portfolio ........................................... -0.77% 45.44% 24.19% N/A 19.53%[x]
--------------------------------------------------------------------------------------------------------------------
WORLD/INTERNATIONAL EQUITY(3)
--------------------------------------------------------------------------------------------------------------------
Janus Aspen International Growth Portfolio ........... -2.67% 63.65% 27.56% 30.64% 24.66%[x]
Prudential Global Portfolio .......................... -6.55% 27.35% 17.80% 18.28% 12.35%
T. Rowe Price International Stock Portfolio .......... -10.28% 16.08% 8.58% 11.83% 10.21%[x]
* The Maximum Withdrawal Charges per contract year:
Contract Year 1 2 3 4 5 Thereafter
------------------------------------------------------
Withdrawal Charge: 5% 4% 3% 2% 1% 0%
</TABLE>
<PAGE>
FOOTNOTES
[x] Performance results are from the following dates the portfolios were first
made available to the public through life insurance and annuity contracts.
Discovery Select(SM) Group Retirement Annuity was first offered in June
1997.
AIM V.I Growth and Annual Income Fund May 2, 1994
AIM V.I Value Fund May 5, 1993
Janus Apsen Series Growth Portfolio September 13, 1993
Janus Aspen Series International Growth Portfolio May 2, 1994
MFS Emerging Growth Series July 24, 1995
MFS Research Series July 24, 1995
Prudential Jennison Portfolio May 1, 1995
T. Rowe Price Equity Income Portfolio March 31,1994
T. Rowe Price International Stock Portfolio March 31, 1994
Warburg Pincus Trust Post Venture Capital Portfolio September 30, 1996
1. An investment in the Money Market Portfolio is not insured nor guaranteed
by the Federal Deposit Insurance Corporation or any other government
agency. There is no assurance that the portfolio will be able to maintain a
stable unit value. It is possible to lose money by investing in the
portfolio.
2. Based on results of the OCC Accumulation Trust and its predecessor. On
September 16, 1994 an investment company which had commenced operation on
August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573 respectively with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect
the performance of the corresponding portfolios of the Old Trust.
3. Investing in foreign securities presents certain unique risks not
associated with domestic investments, such as currency fluctuation and
political and economic changes. This may result in greater share price
volatility.
4. Year to Date are not annualized.
Returns reflect hypothetical investment experience as though Discovery
Select(SM) Group Retirement Annuity had been in existence since the inception
date of the underlying portfolio. Discovery Select(SM) Group Retirement Annuity
was first offered in June 1997.
Investment return and principal value of the Portfolios will fluctuate resulting
in a value which may at any time, including the time of withdrawal of the cash
value be more or less than the total principal investment made. The performance
information represents past performance and is no guarantee of future results.
The rates of return reflect the reinvestment of all dividends and capital gains,
and the deduction of investment management fees, expenses and product-related
insurance charges.
At times, certain funds' performance may be extraordinarily high due to
investing in sectors that achieved unprecedented returns. There can be no
assurance that this performance can be repeated in the future.
Investment in a Portfolio involves various risks which are more fully described
in the Discovery Select(SM) Group Retirement Annuity prospectus. For more
complete information about the Discovery Select(SM) Group Retirement Annuity,
including management fees and expenses, please call Prudential to obtain a free
prospectus. Please read it carefully before you invest. Discovery Select(SM)
Group Retirement Annuity is offered through these affiliated Prudential
subsidiaries: Prudential Securities Incorporated; Pruco Securities Corporation;
Prudential Investment Management Services LLC.
The Discover Select Group Retirement Annuity is a group annuity insurance
product issued by the Prudential Insurance Company of America, Newark, NJ.
Prudential Investments is a business unit of the Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102-3777.
Ed 6/30/2000
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE RESULTS
DISCOVERY SELECT(SM) GROUP RETIREMENT ANNUITY
FOR PERIODS ENDED JUNE 30, 2000
FOR BISYS CONTRACTS
THE FOLLOWING RETURNS REFLECT THE DEDUCTION OF ALL FEES AND CHARGES,
EXCEPT FOR POSSIBLE WITHDRAWAL CHANGES.
---------------------------------------------------------------------------------------------------------------------------------
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
YEAR TO ONE THREE FIVE TEN YEAR OR
DATE(1) YEAR YEAR YEAR SINCE INCEPTION
---------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prudential Money Market Portfolio(1) ............................ 2.33% 4.38% 3.78% 3.91% 3.72%
---------------------------------------------------------------------------------------------------------------------------------
BONDS
---------------------------------------------------------------------------------------------------------------------------------
Prudential Diversified Bond Portfolio ........................... 2.19% 2.51% 3.29% 4.72% 6.48%
Prudential Government Income Portfolio .......................... 3.82% 3.10% 4.32% 4.41% 6.08%
Prudential High Yield Bond Portfolio ............................ -2.48% -2.03% 1.27% 5.12% 8.15%
---------------------------------------------------------------------------------------------------------------------------------
BALANCED
---------------------------------------------------------------------------------------------------------------------------------
Prudential Conservative Balance Portfolio ....................... 0.79% 2.74% 7.22% 9.30% 8.81%
Prudential Flexible Managed Portfolio ........................... 0.05% 0.58% 7.15% 10.80% 10.40%
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE
---------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Managed
Portfolio(2) .................................................. -3.56% -6.10% 4.53% 44.86% 14.69%
Prudential Equity Portfolio ..................................... -6.03% -9.02% 6.98% 12.56% 12.93%
T. Rowe Price Equity Income Portfolio ........................... -3.25% -11.22% 5.90% 13.10% 13.96%[x]
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP BLEND
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income Fund ................................... 0.53% 17.80% 21.44% 22.21% 20.97%[x]
AIM V.I. Value Fund ............................................. -0.86% 11.85% 20.83% 20.35% 19.81%[x]
MFS Research Series ............................................. 5.67% 19.69% 17.89% N/A 20.03%[x]
Prudential Stock Index Portfolio ................................ -1.14% 5.67% 18.31% 22.18% 16.09%
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH
---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Growth Portfolio ............................. 1.12% 24.03% 27.17% 25.12% 20.99%[x]
Prudential Jennison Portfolio ................................... 3.37% 26.73% 29.64% 25.94% 27.69%[x]
MFS Emerging Growth Series ...................................... -2.86% 51.25% 34.64% N/A 29.87%[x]
---------------------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP VALUE
---------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Small Cap
Portfolio(2) ................................................... 12.61% 6.09% 1.23% 8.46% 11.08%
Prudential Equity Income Portfolio .............................. -5.89% -11.01% 4.54% 11.21% 11.92%
---------------------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP GROWTH
---------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust Post-Venture Capital Portfolio ............. 4.19% 50.20% 24.63% N/A 19.65%[x]
---------------------------------------------------------------------------------------------------------------------------------
WORLD/INTERNATIONAL EQUITY(3)
---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series International Growth Portfolio ............... 2.28% 68.37% 27.95% 30.47% 24.43%[x]
Prudential Global Portfolio ..................................... -1.59% 32.15% 18.32% 18.17% 12.15%
T. Rowe Price International Stock Portfolio ..................... -5.31% 20.90% 9.25% 11.77% 10.03%[x]
</TABLE>
<PAGE>
PERFORMANCE RESULTS (CONTINUED)
The following returns are legally required for comparison purposes and are after
the deduction of all fees and charges, including the maximum possible withdrawal
charges*. For an explanation of these charges, consult the "Charges, Fees and
Deductions" section of your prospectus.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
YEAR TO ONE THREE FIVE TEN YEAR OR
DATE(4) YEAR YEAR YEAR SINCE INCEPTION
---------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Prudential Money Market Portfolio(1)....................... -2.73% -0.68% 2.79% 3.69% 3.68%
---------------------------------------------------------------------------------------------------------------------------------
BONDS
---------------------------------------------------------------------------------------------------------------------------------
Prudential Diversified Bond Portfolio ..................... -2.87% -2.55% 2.29% 4.50% 6.45%
Prudential Government Income Portfolio .................... -1.24% -1.96% 3.34% 4.19% 6.04%
Prudential High Yield Bond Portfolio ...................... -7.54% -7.09% 0.23% 4.90% 8.12%
---------------------------------------------------------------------------------------------------------------------------------
BALANCED
---------------------------------------------------------------------------------------------------------------------------------
Prudential Conservative Balanced Portfolio ................ -4.27% -2.32% 6.29% 9.12% 8.78%
Prudential Flexible Managed Portfolio ..................... -5.01% -4.48% 6.22% 10.63% 10.37%
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE
---------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Managed
Portfolio(2) ............................................. -8.62% -11.16% 3.55% 11.69% 14.68%
Prudential Equity Portfolio ............................... -11.09% -14.08% 6.05% 12.40% 12.91%
T.Rowe Price Equity Income Portfolio ...................... -8.31% 16.28% 4.95% 12.94% 13.92%[x]
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP BLEND
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth & Income Fund ............................. -4.53% 12.02% 20.71% 22.10% 20.94%[x]
AIM V.I. Value Fund ....................................... -5.92% 6.97% 20.10% 20.22% 19.78%[x]
MFS Research Series ....................................... 0.61% 14.63% 17.12% N/A 19.91%[x]
Prudential Stock Index Portfolio .......................... -6.20% 0.61% 17.55% 22.06% 16.07%
---------------------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH
---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Growth Portfolio ....................... -3.94% 18.97% 26.51% 25.11% 20.97%[x]
Prudential Jennison Portfolio ............................. -1.69% 21.67% 29.01% 25.84% 27.66%[x]
MFS Emerging Growth Series ................................ -7.92% 46.19% 34.05% N/A 29.78%[x]
---------------------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP VALUE
---------------------------------------------------------------------------------------------------------------------------------
OpCap Advisors OCC Accumulation Trust Small Cap
Portfolio(2) ............................................. 7.55% 1.03% 0.19% 8.27% 11.05%[x]
Prudential Equity Income Portfolio ........................ -10.95% -16.07% 3.56% 11.04% 11.90%[x]
---------------------------------------------------------------------------------------------------------------------------------
SMALL/MID CAP GROWTH
---------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust Post-Venture Capital Portfolio ....... -0.87% 45.14% 23.94% N/A 19.28%[x]
---------------------------------------------------------------------------------------------------------------------------------
WORLD/INTERNATIONAL EQUITY(3)
---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series International Growth Portfolio ......... -2.78% 63.31% 27.30% 30.38% 24.41%[x]
Prudential Global Portfolio ............................... -6.65% 27.09% 17.56% 18.04% 12.12%
T.Rowe Price International Stock Portfolio ................ -10.37% 15.84% 8.36% 11.60% 9.99%[x]
*The Maximum Withdrawal Charges per contract year:
Contract Year: 1 2 3 4 5 Thereafter
--------------------------------------------
Withdrawal Charges: 5% 4% 3% 2% 1% 0%
</TABLE>
<PAGE>
FOOTNOTES
1. An investment in the Money Market Portfolio is not insured nor guaranteed
by the Federal Deposit Insurance Corporation or any other government
agency. There is no assurance that the portfolio will be able to maintain a
stable unit value. It is possible to lose money by investing in the
portfolio.
2. Based on results of the OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old
Trust"), was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operation. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573 respectively with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16,1994, the
performance figures above for the managed and Small Cap portfolios reflect
the performance of the corresponding portfolios of the Old Trust.
3. Investing in foreign securities presents certain unique risks not
associated with domestic investments, such as currency fluctuation and
political and economic changes. This may result in greater share price
volatility.
[x] Performance results are from the following dates the portfolios where first
made available to the public through life insurance and annuity contracts.
Discovery Select(SM) Group Retirement Annuity was first offered in June
1997.
AIM V.I. Growth and Income Fund May 2, 1994
AIM V.I Value Fund May 5, 1993
Janus Aspen Series Growth Portfolio September 13, 1993
Janus Aspen Series International Growth Portfolio May 2, 1994
MFS Emerging Growth Series July 24, 1995
MFS Research Series July 24, 1995
Prudential Jennison Portfolio May 1, 1995
T. Rowe Price Equity Income Portfolio March 31, 1994
T. Rowe Price International Stock Portfolio March 31, 1994
Warburg Pincus Trust Post Venture Capital Portfolio September 30, 1996
4. Year to Date returns are not annualized.
Returns reflect hypothetical investment experience as though Discovery
Select(SM) Group Retirement Annuity had been in existence since the inception
date of the underlying portfolio. Discovery Select(SM) Group Retirement Annuity
was first offered in June 1997.
Investment return and principal value of the Portfolios will fluctuate resulting
in a value which may at any time, including the time of withdrawal of the cash
value, be more or less than the total principal investment made. The performance
information represents past performance and is no guarantee of future results
The rates of return reflect the reinvestment of all dividends and capital gains,
and the deduction of investment management fees, expenses and product-related
insurance charges.
At times, certain funds(1) performance may be extraordinarily high due to
investing in sectors that achieved unprecedented returns. There can be no
assurance that this performance can be repeated in the future.
Investment in a portfolio involves various risks which are more fully described
in the Discovery Select(SM) Group Retirement Annuity Prospectus. For more
complete information about the Discovery Select(SM) Group Retirement Annuity,
including management fees and expenses, please call prudential to obtain a free
prospectus. Please read it carefully before you invest. The Discovery Select(SM)
Group Retirement Annuity is offered through these affiliated Prudential
subsidiaries: Prudential Securities Incorporated; Pruco Securities Corporation:
Prudential Investment Management Services LLC.
The Discovery Select Group Retirement Annuity, and the Guaranteed Interest
Account group annuity insurance products issued by The Prudential Insurance
Company of America, Newark, NJ. Prudential Investments is a business unit of the
Prudential Insurance Company of America, 751 Broad Street, Newark NJ 07102-3777.
Ed 6/30/2000
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Letter to Contract Owner.......................................................1
Commentary and Outlook.......................................................2-5
--------------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
--------------------------------------------------------------------------------
Money Market Portfolio.................................................6-7
Diversified Bond Portfolio.............................................8-9
Government Income Portfolio..........................................10-11
Conservative Balanced Portfolio......................................12-13
Flexible Managed Portfolio...........................................14-15
High Yield Bond Portfolio............................................16-17
Stock Index Portfolio ...............................................18-19
Equity Income Portfolio..............................................20-21
Equity Portfolio.....................................................22-23
Prudential Jennison Portfolio........................................24-25
Global Portfolio.....................................................26-27
FINANCIAL REPORTS
Financial Statements....................................................A1
Schedule of Investments.................................................B2
Notes to Financial Statements...........................................C1
Financial Highlights....................................................D1
AIM Management Group, Inc.
AIM V.I. Growth and Income Fund
AIM V.I. Value
JANUS
Janus Aspen Series - Growth Portfolio
Janus Aspen Series - International Growth Portfolio
MFS
MFS Research Series
MFS Emerging Growth Series
OPCAP ADVISORS
OpCap Advisors OCC Accumulation Trust - Small Cap Portfolio
OpCap Advisors OCC Accumulation Trust - Managed Portfolio
T. ROWE PRICE ASSOCIATES, INC.
Equity Income Portfolio
International Stock Portfolio
WARBERG PINCUS COUNSELORS, INC.
Warburg Pincus Trust Global Post-Venture Capital Portfolio
This report is not authorized for
distribution to prospective investors
unless preceded or accompanied by a
current prospectus. It is for the
information of persons participating in
the DISCOVERY SELECT(SM) Group Retirement
Annuity Contracts. This report describes the
DISCOVERY SELECT(SM) Group Variable
Annuity Contracts*, group variable annuity
contracts offered by The
Prudential Insurance Company of America
("Prudential"), a mutual Life insurance
company, in connection with retirement
arrangements that qualify for federal
tax benefits under sections 401, 403(b),
408 or 457 of the Internal Revenue Code
of 1986 and with non-qualified annuity
arrangements.
<PAGE>
LETTER TO CONTRACT OWNERS
--------------------------------------------------------------------------------
Six Months Ended June 30, 2000
CHAIRMAN
JOHN R. STRANGFELD
"The first six months of the new century were among the most tumultuous in
recent market history."
DEAR CONTRACT OWNER:
This Semiannual Report reviews the investment strategies and performance of the
portfolios in your variable life insurance or variable annuity contract
available through Prudential.
LOOKING BACK
The first six months of the new century were among the most tumultuous in recent
market history. The seemingly endless upward trajectory of new economy
stocks--those in the technology, media and telecommunications industries--came
to an abrupt halt in late March. Signs that inflation might be rising in the
U.S., continued interest rate hikes, and high stock valuations caused investors
to flee the technology-laden Nasdaq market in droves. A long-anticipated U.S.
market correction was underway, and its impact was felt across the global
marketplace.
MAINTAIN A LONG-TERM OUTLOOK
In summary, it was an eventful period in the financial markets--one that we
believe magnifies the value of several time-tested investment fundamentals.
First, maintaining a long-term outlook for your investments is vital. Market
fluctuations will occur, and reacting to short-term events is often ill-advised.
As a case in point, we've already seen a rebound in several sectors that
performed poorly during the second quarter of the year.
DIVERSIFICATION IS KEY
Second, the financial markets are a moving target. As such, many investors find
themselves buying at market highs when they gravitate to the
strongest-performing sectors. A more sound approach is to diversify your
portfolio across a wide variety of investments. And take special care to
rebalance your portfolio should your asset allocation strategy veer from its
original course.
RELY ON YOUR FINANCIAL PROFESSIONAL
Third, if you find yourself tempted to react to the latest market gyrations,
turn to your financial professional for guidance. He or she can review your
overall goals and determine if changes to your portfolio are necessary. This is
particularly important during periods of extreme market volatility.
Sincerely,
/s/ John R. Strangfeld
John R. Strangfeld
Chairman,
The Prudential Series Fund, Inc. July 17, 2000
1
<PAGE>
EQUITY COMMENTARY
--------------------------------------------------------------------------------
June 30, 2000
Turbulence and change in equity market
--------------------------------------------------------------------------------
Not only did the first half of 2000 include some of the most turbulent days in
U.S. stock market history, there were dramatic reversals of fortune at other
time scales as well--by quarter and by month. Many of these reversals canceled
each other out, so that by the end of June the S&P 500 had only a small net loss
and the Russell 2000 Index of small-cap stocks only a modest gain.
The main market stories over this period were the net correction (downward) of
extended telecommunications stocks and the see saw like rise of health care,
power utilities and energy stocks. The technology sector skyrocketed up,
corrected, then moved ahead again in a sharp June advance. Cyclical
stocks--basic materials (such as paper and forest products and metals), consumer
cyclicals (such as retail, autos and hotels), and capital goods (such as
engineering and construction)--had steep declines. These trends were global in
scope (except for capital goods, which had a moderately good local currency
return in Europe that translated into a marginally positive return for
dollar-based investors).
The result was a net advantage over the six months for growth over value
investing except among small caps, where the most speculative technology stocks
fell so much in March through May that they couldn't catch up in their June
surge. Small-cap (the Russell 2000 sectors) energy (excluding integrated oil
companies) and healthcare stocks had excellent catch-up returns of 52% and 36%,
respectively. Overall, midcap stocks had the best performance of any market
capitalization class, with midcap growth stocks the only equity market
capitalization range with strong returns.
Performance of Key Stock Market Indexes
Through June 30, 2000
[GRAPH]
S&P/ S&P/ Russell Russell MSCI MSCI MSCI
S&P BARRA BARRA 2000 2000 World Free Europe Japan
500 Value Growth Value Growth Index* Index* Index*
-0.43% -4.07% 2.63% 5.85% 1.23% -2.56% -3.08% -5.37%
Strong economic growth creates fears and opportunities
--------------------------------------------------------------------------------
This pattern was driven by rapid U.S. economic growth, which led the Federal
Reserve to continue to raise interest rates. Rising interest rates hurt the
stocks of rapidly growing companies whose value lies in their future earnings:
The present value of such future earnings is reduced in a rising interest rate
environment. Moreover, the fear that rising interest rates would cut off
economic growth hurt both growth and cyclical stocks. Moreover, a growing global
imbalance of supply and demand for oil created a turnaround in energy. Oil
service companies performed quite well. A shortage of electricity generating
capacity in the United States, as well as low inventories of the natural gas
that is burned by many new generation plants, strengthened the domestic utility
sector stocks overall, although some companies remained vulnerable to rising
fuel prices.
A global downturn
--------------------------------------------------------------------------------
Only the Nordic region provided moderately good returns, led by Sweden. Other
than that, the picture was generally bleak except for a few scattered individual
countries with good returns: Canada, France, Malaysia, Israel, Venezuela and the
Czech Republic.
*In U.S. currency.
Sources: Morgan Stanley Capital International, Standard & Poor's, Frank Russell
Company, and Prudential as of June 30, 2000. All indexes are unmanaged and
provide an indication of stock price movements. Past performance is not
indicative of future results. Investors cannot invest directly in an index.
Standard & Poor's 500 Index comprises 500 large, established, publicly traded
stocks. Morgan Stanley Capital International Europe Index comprises
approximately 620 European companies. Morgan Stanley Capital International
Europe, Australia, Far East Index is a weighted, unmanaged index of performance
that reflects stock price movements in Europe, Australasia, and the Far East.
S&P/Barra Value Index contains companies within the S&P 500 with lower
price-to-book ratios. S&P/Barra Growth Index contains companies within the S&P
500 with higher price-to-book ratios. Russell 2000 Value Index measures the
performance of those Russell 2000 companies with lower price-to-book ratios.
Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios. Morgan Stanley Capital International
World Free Index contains those companies in the MSCI World Index that reflect
actual buyable opportunities for the nondomestic investor by taking into account
local market restrictions on share ownership by foreigners. These indexes are
calculated in U.S. dollars, without dividends reinvested. Morgan Stanley Capital
International Japan Index measures the performance of Japan's stock market.
The views expressed are as of July 17, 2000, and are subject to change based on
market and other conditions.
IFS-200001-A050472
2
<PAGE>
EQUITY OUTLOOK
--------------------------------------------------------------------------------
June 30, 2000
Stocks are at a fair value
--------------------------------------------------------------------------------
Our models show that overall stock prices are at about fair value on the basis
of today's earnings growth and interest rates. That means the markets should be
able to sustain ordinary rates of equity return (not the historically abnormal
returns of recent years) as long as earnings continue to grow and if interest
rates stabilize. One good sign is that downward revisions of earnings estimates
are less common this year than usual. Value investors are benefiting from the
recent trends toward stocks that are more defensive than most, but that also
have good growth prospects--such as drugs and utilities. Growth investors are
focused on long-term structural changes in the economy: wireless and broadband
telecommunications and the growth of the Internet companies. They tend to avoid
companies whose earnings are tied to the business cycle.
Internationally, the European economic recovery is also creating opportunities.
Moreover, the signs that China is serious about opening its economy bode well
for the industrialized countries in northern Asia that can export there: Korea,
Japan, Hong Kong, and Taiwan.
Stock selection key
--------------------------------------------------------------------------------
The discrepancies in pricing between value and growth stocks are smaller than
previously, and stock selection is likely to become more important than sector
differences. Technology companies will find investment capital more expensive.
Companies with strong balance sheets, positive cash flows, or access to cash
should still be able to grow. In sectors dependent upon commodity prices, there
may be substantial differences between firms exposed to rising prices and those
whose supplies are locked in. Investment opportunities generally are likely to
be more scattered than in the sector-focused markets we have had recently.
NOTE: Past performance is not a guarantee of future results. There is no
assurance that any of the forecasts discussed will be attained.
Performance of U.S. Market Sectors Through June 30, 2000
Year to Date
<TABLE>
<CAPTION>
[GRAPH]
Capital Communication Basic Consumer Consumer
Technology Energy Goods Utilities Services Materials Cyclicals Healthcare Staples Financials Transportation
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.0% 4.7% -1.2% 15.3% -15.1% -24.8% -18.9% 23.7% -2.4% -0.5% 5.0%
</TABLE>
S&P 500 Index Sector Weightings
[GRAPH]
Technology 32.8%
Financials 12.7%
Healthcare 11.6%
Consumer Staples 10.3%
Consumer Cyclicals 7.4%
Capital Goods 8.0%
Communication Services 6.8%
Energy 5.4%
Basic Materials 1.9%
Utilities 2.5%
Transportation 0.6%
Source: Standard & Poor's as of June 30, 2000. The S&P 500 Index is an unmanaged
index of stocks that provides an indication of stock price movements. Past
performance is not indicative of future results. Investors cannot invest
directly in an index.
IFS-200001-A050472
3
<PAGE>
BOND COMMENTARY
--------------------------------------------------------------------------------
June 30, 2000
A good first half for U.S. Treasuries
--------------------------------------------------------------------------------
Prices of most U.S. Treasury securities climbed during the first half of 2000,
leaving prices of other U.S. fixed-income securities far behind. Favorable
technical factors and moderating economic growth sparked a rally primarily in
longer-term Treasuries.
Initially, though, Treasuries began 2000 on a weak note. The U.S. economy had
expanded rapidly in late 1999. Investors therefore feared the Federal Reserve
might repeatedly increase short-term interest rates to prevent the economy from
exceeding what the central bank believes to be its speed limit. In anticipation,
investors required higher bond yields, which forced bond prices lower.
However, the sell-off soon turned into a rally, at least for longer-term
Treasuries. The U.S. Treasury Department cut back issuance of its securities
because a growing federal budget surplus has reduced its borrowing needs. It
also commenced a program to buy back up to $30 billion of older, mostly
longer-term Treasuries by the end of 2000. Taken together, these two
developments set off a stampede to buy longer-term Treasuries.
The enthusiasm for longer-term Treasuries faded as it became clear the Fed's
quarter-point rate hikes in February and March would be followed by a half-point
increase in mid May. Some investors worried the Fed might prove too heavy handed
and trigger an economic downturn that would sap corporate earnings. Not
surprisingly, prices of investment-grade and high-yield U.S. corporate bonds got
hit even harder than Treasuries during this time. High-yield (junk) bonds also
suffered, because a growing number of companies failed to make interest and
principal payments on their junk bonds in May.
Not until reports began to show that the economy was gradually losing steam did
prices of U.S. fixed-income securities once again turn higher. Signs of
moderating economic growth might mean the Fed would soon be finished increasing
rates. Amid this change in market sentiment, prices in U.S. debt securities
markets gained in June. Nevertheless, among U.S. bond markets, the Treasury
market finished in first place for the six-month period, helped by the strong
performance of its longer-term securities earlier in the year.
But an even better first half for emerging market bonds
--------------------------------------------------------------------------------
Although Treasuries performed impressively, the top fixed-income market for the
first half of 2000 was emerging market bonds, based on Lehman Brothers indexes.
They returned a solid 7.59% as economic fundamentals in several developing
countries proved stronger than expected. Rising prices of oil, gas, and other
natural resources strengthened the economies of some developing nations that
export these commodities. Improving economic conditions in turn boosted their
foreign currency reserves. Moreover, some countries cut their financing costs by
swapping new bonds for older debt securities. These positive developments and
others attracted investors to emerging market bonds.
Among nations with developed economies, the government bond markets of
Australia, Canada and the United Kingdom posted attractive returns on a local
currency basis but lower returns when expressed in U.S. dollars. Their central
banks, which have repeatedly increased short-term rates to keep their respective
economies from overheating, are widely believed to be near the end of their
current tightening cycles.
Performance of Fixed-Income Market Indexes Through June 30, 2000
<TABLE>
<CAPTION>
Global U.S. Mortgage- Emerging U.S. Aggregate U.S. Corp. U.S. Corporate
(U.S. dollar) Index Backed Securities Markets U.S. Treasuries Index Invest. Grade U.S. Municipals High Yield
<S> <C> <C> <C> <C> <C> <C> <C>
-0.08% 3.67% 7.59% 5.37% 3.99% 2.68% 4.48% -1.21%
</TABLE>
Source: Lehman Brothers as of June 30, 2000. The Lehman Brothers indexes are
unmanaged indexes of bonds that provide an indication of bond price movements.
Past performance is not indicative of future results. Investors cannot invest
directly in an index.
IFS-200001-A050472
4
<PAGE>
BOND OUTLOOK 2000
--------------------------------------------------------------------------------
June 30, 2000
Current cycle of Fed rate hikes may be nearly over
--------------------------------------------------------------------------------
The commonly accepted wisdom holds that increases in short-term interest rates
hurt bonds. However, the Federal Reserve's unusually large half-point rate hike
in May 2000 might benefit U.S. fixed-income markets--at least in the long run.
This could prove true if the Fed's largest rate increase in more than five years
proves to be a signal that it has nearly completed its current round of
tightening monetary policy.
Since June 1999, the U.S. central bank has raised rates six times. The first
five were quarter-point rate hikes and the sixth was for half of a percentage
point. Taken together, these moves lifted the federal funds rate (the rate U.S.
banks charge each other for overnight loans) to 6.50%, its highest level since
January 1991.
While rates remained unchanged after its latest meeting in June 2000, the U.S.
central bank warned more rate hikes could follow, because it is not convinced
that recent indications of an economic slowdown will last. The implied yield on
federal funds futures contracts indicates the Fed is expected to raise
short-term rates by another quarter of a percentage point later this year.
We too believe the central bank's current series of rate hikes is just about
over. We expect inflation to taper off as U.S. economic activity continues to
moderate in coming months, lessening the need for further moves by the Fed.
We see good value in the U.S. high-yield bond market
--------------------------------------------------------------------------------
Historically, bond returns have been strong in the 12-month period following the
completion of a Fed tightening cycle. An examination of 12-month returns as
measured by the Lehman Aggregate Index shows U.S. bonds posted double-digit
returns after the end of each of the last six Fed tightening cycles. Although we
do not expect U.S. bond markets to perform as strongly this time around, we
nonetheless see room for improvement, particularly in the market for high-yield
(junk) corporate bonds.
Compared with the yield on 10-year U.S. Treasuries, junk bond yields earlier in
the year rose to their highest levels in nearly a decade. The huge difference in
yields partly reflects the scarcity value of Treasuries. The supply of
Treasuries is shrinking because growing federal budget surpluses have reduced
the government's need to borrow.
But the large gap in yields also occurred because volatile stock prices and an
increase in the junk bond default rate hurt demand for high-yield bonds.
Bond investors were more cautious about lending money to companies whose market
values were fluctuating wildly. Like stock investors, they were concerned about
the impact of a slowdown on corporate earnings. However, the economy is not
expected to slip into a recession, and investor cash flows into junk bond mutual
funds turned positive in the last two weeks of June. This may herald a change in
trend.
The trend had been downhill as net flows into bond mutual funds turned strongly
negative early in the year. Looking back, retail investors left bond funds in
droves in 1987 and 1994 before substantial bull markets began, according to data
by International Strategy and Investment (ISI) and Lehman Brothers. In the same
vein, an ISI survey showed institutional investors have not been this bearish on
bonds since the end of the 1994 and 1996 bear markets.
Investors that return to the junk bond market will find yields at very
attractive levels. Both the nominal yield and the real yield (yield minus the
inflation rate) have been at such high levels only once or twice in the past ten
years, based on data from Lehman Brothers.
Municipal bond yields are also attractive. Thirty-year insured munis rated AAA
are yielding roughly 97% as much as 30-year Treasury bonds. Although prices of
municipal bonds have already gained this year, we believe they will rise further
if a continued light supply of tax-exempt securities meets with strong demand
from investors.
Note: Past performance is not a guarantee of future results. There is no
assurance that any of the forecasts discussed will be attained.
IFS-200001-A050472
5
<PAGE>
PRUDENTIAL SERIES FUND
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------
June 30, 2000
INVESTMENT GOAL
Current income, stability of capital and maintenance of liquidity.
TYPES OF INVESTMENTS
Short-term money market securities that generally mature in 13 months or less.
These securities primarily consist of Certificates of Deposit (CDs), Commercial
Paper and Bankers' Acceptances, U.S. Treasury bills (T-bills) and other
instruments issued by or guaranteed by the U.S. government or its agencies.
Seven-Day Current Net Yields
Money Market Portfolio(1) Average Money Market Fund(3)
4.63 4.28
July|99 4.73 4.33
4.73 4.35
4.77 4.38
4.84 4.4
Aug|99 4.82 4.42
4.83 4.42
4.85 4.47
4.88 4.5
4.9 4.55
Sept|99 4.95 4.59
4.96 4.61
4.98 4.65
5.03 4.67
Oct|99 5.09 4.68
5.11 4.71
5.11 4.74
5.14 4.77
Nov|99 5.16 4.81
5.19 4.81
5.24 4.87
5.28 4.92
5.29 4.98
Dec|99 5.38 5.01
5.46 5.07
5.56 5.13
5.65 5.16
Jan|00 5.56 5.07
5.7 5.17
5.67 5.14
5.72 5.11
Feb|00 5.58 5.12
5.6 5.13
5.6 5.16
5.6 5.17
5.63 5.19
March|00 5.62 5.19
5.61 5.2
5.62 5.24
5.68 5.29
April|00 5.72 5.36
5.74 5.35
5.73 5.38
5.75 5.39
May|00 5.76 5.4
5.74 5.42
5.84 5.49
5.97 5.61
6.11 5.69
June|00 6.14 5.74
6.15 5.78
6.17 5.81
6.12 5.86
Weekly seven-day current net yields of the Money Market Portfolio and the
iMoneyNet First and Second Tier General Purpose Retail as of 6/27/2000.
Performance Summary
<TABLE>
<CAPTION>
Six 7-day
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year Current Net Yield(1)
---------------------- ------ ------ ------ ------ ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Portfolio(1) 2.94% 5.65% 5.38% 5.37% 5.07% 6.12%
---------------------------------------------------------------------------------------------------------------
Lipper (VIP) Money Market Avg.(2) 2.80% 5.34% 5.13% 5.14% 4.82% N/A
</TABLE>
Money Market Portfolio inception date: 5/13/83. The yield quotation more closely
reflects the current earnings of the money market portfolio than the total
return quotation.
The six months that ended on June 30, 2000, were ripe with attractive
opportunities to invest in money market securities. The Federal Reserve
repeatedly increased short-term interest rates, which pushed money market yields
sharply higher. Our investment strategy enabled the Portfolio to benefit from
this trend.
The Prudential Series Fund Money Market Portfolio returned 2.94% for the six
months, compared with a 2.80% return reported by the average money market fund
as tracked by Lipper, Inc. On June 27, 2000, the Portfolio's seven-day yield was
6.12%, up from 5.65% on December 28, 1999.
(An investment in the Prudential Series Fund Money Market Portfolio is neither
insured nor guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of your
investment at $10.00 per share, it is possible to lose money by investing in the
Portfolio.)
Performance Review
--------------------------------------------------------------------------------
The Fed's short-term rate hikes have led to higher yields on money market funds,
but yields on long-term U.S. Treasuries have fallen amid a shrinking supply of
these securities. Therefore, yields on money market funds have generally reached
levels that are comparable with yields on long-term Treasuries.
(1) Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
(2) The Lipper Variable Insurance Products (VIP) Money Market Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
(3) Source: iMoneyNet, Inc. As of 6/27/2000, based on 316 funds in the
iMoneyNet General Purpose Universe.
6
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
As we discussed in our previous letter to shareholders, the Portfolio has
sizable holdings of adjustable-rate securities, most of which carry interest
rates that adjust periodically based on London Interbank Offered Rates (LIBORs).
These adjustable-rate securities were issued in 1999 with unusually wide yield
spreads by banks and corporations rushing to complete their year-end borrowing
early. The companies wanted to minimize any problems that might occur if
computers malfunctioned when switching their internal dates from 1999 to 2000.
After the change of year proceeded relatively smoothly in the financial markets,
yield spreads on adjustable-rate securities began to narrow toward historical
norms. This trend enhanced the Portfolio's relative performance.
In early 2000, the Federal Reserve was expected to increase short-term interest
rates to curb U.S. economic growth and check inflation. Investors began to push
money market yields higher in anticipation of this change in monetary policy.
Our Portfolio positioning allowed us the flexibility to avoid purchasing
longer-term money market securities and to essentially wait for short-term rates
to rise to levels commensurate with our expectations for tighter monetary
policy. Specifically, the Portfolio's weighted average maturity (WAM), which had
begun the quarter significantly longer than that of its competition, gradually
shortened. (WAM is a measurement tool that determines a Portfolio's sensitivity
to changes in the level of interest rates. It takes into account the maturity
level of each security held by a Portfolio.) Having our WAM shorten enabled the
Portfolio to have plenty of money to buy money market securities when sharply
higher yields became available later in the spring of 2000.
In light of the Fed's short-term rate increases in February, March and May,
yields on one-year bank and corporate securities nearly rose to 7.50% in May and
June. Although these yields were attractive, we bought six-month securities
because we believed the Fed would continue to raise rates aggressively. Our
purchases lengthened the Portfolio's WAM until it was once again longer than
that of its competitive average. It is always tough to predict when rates will
peak, and in hindsight we should have bought one-year securities in the last
week of May and early June, because money market yields seem to have crested
during that time.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS MANOLITA BRASIL AND JOSEPH TULLY
[PHOTO OF MANOLITA BRASIL]
[PHOTO OF JOSEPH TULLY]
"We believe the Fed's unusually large half-point rate hike in May could signal
that its current round of tightening monetary policy is nearly over. We expect
economic activity to continue to moderate this year, decreasing the amount of
additional Fed rate hikes that might be necessary."
Portfolio Composition
as of 6/30/2000
---------------
Other Commercial Paper 26.9%
Other Corporate Obligations 21.8%
Yankee Commercial Paper 14.8%
U.S. Bank Obligations (Domestic) 13.8%
Foreign Bank Obligations 10.1%
Bank Holding Company Obligations 6.7%
Loan Participations 3.0%
Funding Agreements 1.6%
U.S. Government & Agencies 1.3%
Source: Prudential. Holdings are subject to change.
7
<PAGE>
PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO
June 30, 2000
--------------------------------------------------------------------------------
INVESTMENT GOAL
High level of income over the long term while providing reasonable safety of
capital.
TYPES OF INVESTMENTS
U.S. government securities, mortgage-backed bonds, both investment-grade and
high-yield ("junk bond") corporate debt and foreign securities (dollar and
non-dollar denominated).
INVESTMENT STYLE
This Portfolio seeks the highest yield while maintaining safety of capital, by
strategically allocating Portfolio assets among the above classes of bonds.
$10,000 Invested Over Ten Years
Diversified Bond Lipper (VIP) Corp. Lehman Aggregate
Portfolio(1) Debt BBB Avg.(2) Bond Index(3)
June 90 10,000 10,000 10,000
10,599 10,364 10,596
June 91 11,075 10,923 11,070
12,341 12,136 12,292
June 92 12,676 12,512 12,624
13,228 13,091 13,202
June 93 14,185 14,184 14,112
14,569 14,691 14,489
June 94 14,013 13,968 13,928
14,098 14,068 14,066
June 95 15,801 15,806 15,676
17,020 16,919 16,665
June 96 16,759 16,654 16,462
17,769 17,592 17,270
June 97 18,499 18,158 17,804
19,291 19,370 18,937
June 98 20,147 20,156 19,681
20,671 20,744 20,582
June 99 20,332 20,330 20,300
20,519 20,408 20,413
June 2000 21,095 20,996 21,227
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Diversified Bond Portfolio(1) 2.80% 3.75% 4.47% 5.95% 7.75%
--------------------------------------------------------------------------------
Lipper (VIP) Corp. Debt BBB Avg.(2) 3.08% 3.48% 5.08% 5.95% 7.68%
--------------------------------------------------------------------------------
Lehman Aggregate Bond Index(3) 3.99% 4.56% 6.04% 6.25% 7.82%
--------------------------------------------------------------------------------
Diversified Bond Portfolio inception date: 5/13/83.
Prices of investment-grade U.S. corporate bonds could not keep up with gains in
the prices of longer-term U.S. Treasuries during the six months that ended on
June 30, 2000. Corporate bonds underperformed as that market sold off, because
the Federal Reserve repeatedly increased short-term interest rates, and strong
investor demand for a shrinking supply of longer-term Treasuries caused their
prices to rally.
Within the corporate bond market, BBB-rated debt securities did not perform as
well as higher-rated bonds because many market participants favored the more
conservative investments. The Portfolio's holdings of BBB-rated corporate bonds
were therefore a drag on its relative performance.
The Prudential Series Fund Diversified Bond Portfolio returned 2.80% for the six
months compared with 3.08% for the Lipper (VIP) Corporate Debt BBB Average.
Performance Review
--------------------------------------------------------------------------------
U.S. high-yield corporate bonds, or junk bonds, also underperformed Treasuries
during the six months. Besides the rise in short-term rates, the high-yield bond
market was hurt by a record level of redemptions from mutual funds that invest
in high-yield bonds. We reduced our exposure to these below-investment-grade
debt securities.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risk of currency fluctuation and the impact of social, political and
economic change.
(1) Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
(2) The Lipper Variable Insurance Products (VIP) Corporate Debt BBB Average is
calculated by Lipper, Inc., and reflects the investment returns of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
(3) The Lehman Aggregate Bond Index (LAI) is comprised of more than 5,000
government and corporate bonds. The LAI is an unmanaged index that includes
the reinvestment of all interest, but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LAI may differ substantially
from the securities in the Portfolio. The LAI is not the only index that
may be used to characterize performance of income funds, and other indexes
may portray different comparative performance.
8
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
During most of the first half of 2000, the difference between the yields of
investment-grade U.S. corporate bonds and comparable U.S. Treasury securities
widened dramatically. Two major developments drove this trend.
First, investors pushed corporate bond yields higher (and their prices lower) as
the Federal Reserve raised short-term rates three times to cool off the U.S.
economy and dampen inflation. Fear that an economic slowdown could sap corporate
profits also hurt corporate bonds.
Second, yields on longer-term Treasuries fell (and their prices rose) as
investors rushed to buy a dwindling supply of these securities. The U.S.
Treasury Department reduced issuance of its securities and began to buy back up
to $30 billion of mostly longer-term Treasuries by the end of the year. Growing
federal budget surpluses have lowered the government's borrowing needs and
allowed it to pay off some of its publicly held debt.
We adopted a more defensive investment strategy reflecting the trend toward
tighter monetary policy. We sold some of our longer-term corporate bonds and
purchased shorter-term corporate bonds to maintain yield while reducing price
risk and volatility. We also took profits on some of the Portfolio's emerging
market bonds, which had performed well in the first three months of 2000. We
used some of the proceeds to buy longer-term Treasuries, which increased the
Portfolio's overall holdings of Treasuries to 15% of its total investments as of
June 30, 2000, from 10% as of December 31, 1999.
From a credit quality perspective, our high-yield bonds consisted mostly of
BB-rated securities that performed relatively well versus the high-yield market.
We sold some of our BB-rated bonds, which fell to 7% of the Portfolio's total
investments from 11%. BBB-rated corporate bonds accounted for roughly 40% of the
Portfolio's total investments throughout the six months. Despite their strong
performance in June, BBB was the worst-performing ratings category among
investment-grade corporate bonds for the period ending June 30, 2000. Therefore,
our large BBB exposure hurt the Portfolio's relative performance, as did losses
on our Conseco bonds, whose rating was downgraded by major credit rating
agencies.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER STEVEN KELLNER
[PHOTO OF STEVEN KELLNER]
"Prices of investment-grade U.S. corporate bonds rallied in June as signs of
slower U.S. economic growth fueled hope that the Fed may be nearly finished
tightening monetary policy for this interest rate cycle. If this turns out to be
true, we believe corporate bond prices will continue to gain in the second half
of the year."
Portfolio Composition
as of 6/30/2000
---------------
Corporate Bonds 66.7%
U.S. Treasuries 15.6%
Short-Term 12.2%
Asset-Backed 3.2%
Mortgages 2.0%
Equity Securities 0.3%
Credit Quality
as of 6/30/2000
---------------
U.S. Government & Agencies 17.6%
AAA 5.5%
AA 8.0%
A 17.3%
BBB 32.0%
BB 7.0%
B 1.1%
Short-Term/Cash 11.5%
Average Credit Quality A
Duration 5.1 years
Average Maturity 9.6 years
Source: Prudential. Holdings are subject to change.
9
<PAGE>
PRUDENTIAL SERIES FUND
GOVERNMENT INCOME PORTFOLIO
June 30, 2000
INVESTMENT GOAL
High level of income over the long term consistent with the preservation of
capital.
TYPES OF INVESTMENTS
Primarily intermediate and longer-term U.S. government bonds, including U.S.
Treasuries and agencies and mortgage-backed securities such as GNMA, FNMA and
FHLMC bonds and foreign government securities.
INVESTMENT STYLE
The Portfolio seeks high current return by selecting bonds that offer an
attractive combination of current income and price appreciation. The Portfolio
Manager's goal is to select bonds believed to offer the best value in a given
market climate.
$10,000 Invested Over Ten Years
[GRAPH]
Government Income Lipper (VIP) General Lehman Gov't.
Portfolio(1) U.S. Gov't. Avg.(2) Bond Index(3)
----------------- -------------------- -------------
June|90 10,000 10,000 10,000
10,512 10,588 10,637
June|91 10,735 10,967 11,014
12,205 12,255 12,266
June|92 12,293 12,526 12,528
12,919 13,111 13,152
June|93 14,092 14,091 14,144
14,542 14,412 14,554
June|94 13,727 13,715 13,955
13,791 13,821 14,063
June|95 15,442 15,381 15,638
16,477 16,364 16,642
June|96 16,076 16,031 16,343
16,842 16,787 17,103
June|97 17,285 17,253 17,552
18,470 18,312 18,743
June|98 19,199 18,998 19,527
20,148 19,860 20,589
June|99 19,621 19,445 20,122
19,604 19,480 20,129
June|2000 20,473 20,267 21,129
The Portfolio may invest in foreign securities. Foreign investments are
subject to the risk of currency fluctuation and the impact of social,
political and economic change.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Government Income Portfolio(1) 4.43% 4.34% 5.80% 5.80% 7.43%
--------------------------------------------------------------------------------
Lipper (VIP) General U.S. Gov't. Avg.(2) 4.28% 4.22% 5.43% 5.51% 7.32%
--------------------------------------------------------------------------------
Lehman Gov't. Bond Index(3) 4.97% 5.01% 6.38% 6.20% 7.77%
--------------------------------------------------------------------------------
Government Income portfolio inception date: 5/1/89.
The first half of 2000 proved to be a bullish period for the U.S. Treasury
market, which outperformed all other U.S. fixed-income markets, according to
Lehman Brothers indexes. Favorable technical factors and moderating economic
growth sparked a strong rally primarily in the prices of longer-term Treasuries.
The Prudential Series Fund Government Income Portfolio posted a 4.43% return
that surpassed the 4.28% return of the Lipper (VIP) General U.S. Government
Average during the first six month of 2000. The Portfolio had sizable positions
in longer-term Treasuries, the strongest-performing sector of the Treasury
market during our six-month review period.
The guarantee on U.S. Treasuries applies only to the underlying securities of
the Portfolio and not to the value of the Portfolio's shares. Mortgage-backed
securities entail additional prepayment and extension risks.
Performance Review
--------------------------------------------------------------------------------
Although we sold some of our U.S. Treasuries, they remained about 20% of the
Portfolio's total investments throughout our six-month review period.
Maintaining considerable positions in Treasuries, particularly longer-dated
ones, helped the Portfolio's relative performance. A look at the Lehman Brothers
U.S. Treasury Index shows Treasuries maturing in 20 years or longer, posted the
strongest returns of the six-month period in the Treasury market.
(1) Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
(2) The Lipper Variable Insurance Products (VIP) General U.S. Government Average
is calculated by Lipper, Inc., and reflects the investment returns of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses, but not product
charges.
(3) The Lehman Government Bond Index (LGI) is a weighted index comprised of
securities issued or backed by the U.S. government, its agencies and
instrumentalities with a remaining maturity of one to 30 years. The LGI is
an unmanaged index that includes the reinvestment of all interest, but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the LGI
may differ substantially from the securities in the Portfolio. The LGI is
not the only index that may be used to characterize performance of income
funds, and other indexes may portray different comparative performance.
10
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
The Federal Reserve raised short-term interest rates three times, which drove up
borrowing costs for consumers and businesses. The Fed hoped that by raising
rates and thereby increasing the cost of borrowing vehicles such as mortgages
and credit cards, it could curb economic activity and prevent rising inflation.
As the Fed tightened monetary policy, yields on shorter-term Treasuries also
rose, pushing their prices lower.
Meanwhile, the U.S. Treasury Department began to buy back up to $30 billion of
mostly longer-term Treasuries, and it also reduced issuance of Treasuries.
Growing federal budget surpluses have lowered governmental borrowing needs. The
prospect of a decreased supply and increased demand for Treasuries drove their
yields lower (and prices higher), especially among longer-term Treasuries.
The combined effect of the Fed rate hikes pushing yields on shorter-dated
Treasuries higher and the buyback program driving yields on longer-term
Treasuries lower caused an inversion of the Treasury yield curve, which is a
graph that depicts yields on the shortest to the longest bonds. Normally,
longer-dated bonds provide higher yields to compensate for the greater risk
associated with investing for a longer time. But on June 30, 2000, yields on
two- and 30-year Treasuries stood at 6.36% and 5.89%, respectively.
Prices of both mortgage-backed securities and federal agency securities lagged
gains in the prices of Treasuries, which caused the difference between their
yields and yields on Treasuries to increase significantly. We took advantage of
this trend by selling some of our Treasuries to buy mortgage-related
investments. We increased our holdings in several types of mortgage-related
investments, especially 30-year Ginnie Mae pass-through securities, 15-year
Fannie Mae pass-through securities, commercial mortgage-backed securities and
collateralized mortgage obligations. In total, mortgage-related investments
accounted for 31% of the Portfolio's total investments as of June 30, 2000, up
from 18% at the beginning of our review period. By contrast, Treasury holdings
fell to 20% from 31%.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER MICHAEL LILLARD
[PHOTO]
"While some signs of slower U.S. economic growth have emerged, we believe that
more increases in short-term rates may be necessary later in the year to keep
the resilient economy from overheating. We continue to find mortgage-backed
securities and federal agency securities attractive, because their yields remain
unusually high relative to yields on comparable Treasuries."
Portfolio Composition
as of 6/30/2000
---------------
U.S. Government Agencies 38.4%
Mortgages 26.6%
U.S. Treasuries 18.8%
CMOs 3.2%
Asset-Backed 3.2%
Short-Term/Cash 9.8%
Credit Quality
as of 6/30/2000
---------------
U.S. Government Agencies 83.8%
AAA 6.4%
Short-Term/Cash 9.8%
Average Credit Quality AAA
Duration 5.3 years
Average Maturity 8.4 years
Source: Prudential. Holdings are subject to change.
11
<PAGE>
Prudential Series Fund
Conservative Balanced Portfolio
June 30, 2000
INVESTMENT GOAL
Favorable total return consistent with a more conservatively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 35% stocks and 65%
debt obligations and money market securities.
$10,000 Invested Over Ten Years
[GRAPH]
Conservative Lipper (VIP) Lehman
Balanced Balanced S&P 500 Gov't./Corp.
Portfolio(1) Funds Avg.(2) Index(3) Bond Index(4)
June|90 10,000 10,000 10,000 10,000
10,185 9,904 9,400 10,573
June|91 11,016 10,778 10,737 11,022
12,127 12,096 12,257 12,278
June|92 12,236 12,136 12,175 12,584
12,971 13,026 13,190 13,209
June|93 13,986 13,793 13,831 14,238
14,553 14,509 14,516 14,666
June|94 14,213 13,785 14,025 14,030
14,412 14,010 14,707 14,151
June|95 15,830 15,983 17,676 15,821
16,901 17,422 20,227 16,874
June|96 17,753 18,238 22,268 16,557
19,035 19,680 24,868 17,364
June|97 20,519 21,703 29,990 17,841
21,596 23,361 33,162 19,059
June|98 23,328 25,694 39,039 19,854
24,130 26,880 42,646 20,864
June|99 25,105 28,648 47,925 20,389
25,745 29,952 51,616 20,416
June|2000 26,104 30,706 51,395 21,269
The Portfolio may invest in foreign securities. Foreign investments are
subject to the risk of currency fluctuation and the impact of social,
political and economic change.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Balanced Funds Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an unmanaged
index that includes the reinvestment of all dividends, but does not reflect
the payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the S&P 500 may
differ substantially from the securities in the Portfolio.
4 The Lehman Government/Corporate Bond Index is comprised of government and
corporate bonds. The Index is an unmanaged index that includes the
reinvestment of all interest, but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the index may differ substantially from the
securities in the Portfolio. The Lehman Gov't./Corp. Bond Index is not the
only Index that may be used to characterize performance of income funds, and
other indexes may portray different comparative performance.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Conservative Balanced Portfolio(1) 1.39% 3.98% 8.36% 10.52% 10.07%
--------------------------------------------------------------------------------
Lipper (VIP) Balanced Funds Avg.(2) 1.26% 3.88% 11.18% 13.29% 11.82%
--------------------------------------------------------------------------------
S&P 500 Index(3) -0.43% 7.24% 19.67% 23.80% 17.79%
--------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index(4) 4.18% 4.32% 6.03% 6.10% 7.84%
--------------------------------------------------------------------------------
Conservative Balanced Portfolio inception date: 5/13/83.
The Prudential Series Fund Conservative Balanced Portfolio--which invests in a
conservative mix of bonds, stocks and money market securities--returned 1.39% in
the first half of 2000, in line with the 1.26% return of the Lipper (VIP)
Balanced Funds Average. The Portfolio's conservative mandate requires us to hold
a smaller position in equities than the typical balanced portfolio, and this
served the Portfolio well in a declining stock market. The equity allocation
approximated 40% for much of the first half of the period. The Portfolio's
substantial allocation to bonds did well, because inflationary expectations fell
in response to continued Federal Reserve tightening.
Performance Review
--------------------------------------------------------------------------------
The normal allocation of the Conservative Balanced Portfolio has been
approximately equal holdings of stocks, bonds and money market instruments. This
mix was intended to provide better performance than a portfolio consisting only
of bonds, but with less annual volatility than a portfolio consisting only of
stocks. The Portfolio's equity allocation has been shared between a portion
managed to mirror the S&P 500 Index and a portion actively managed in a value
style. Over the past several years, most of the money market allocation has been
shifted to intermediate-term bonds to improve the Portfolio's return.
We made two important changes to the Portfolio in the second quarter: 1) we
increased the target equity allocation from 35% to 50%, the bond target from 35%
to 40% and reduced the short-term money market allocation to 10%, and 2) we
shifted assets from the value-style portion of the equity portfolio toward the
portion that attempts to match the performance of the S&P 500 Index. This
conversion had a modestly positive impact on performance during the reporting
period, since value stocks were near a market high. Conversely, we bought
depressed growth stocks, which rose in June's growth stock rebound. To finance
the equity increase, we eliminated a number of intermediate-term bonds that we
had held for several years as a cash substitute.
12
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
Our decision to increase the Portfolio's allocation to equities, while intended
to reduce differences in the Portfolio's performance relative to its peers, may
also increase its volatility. In the past, we had sacrificed long-term average
performance for lower volatility in absolute terms. However, the changes we made
to our style of stock management should reduce volatility in the actively
managed portion of the equity sleeve. We expect to be less exposed to swings in
market favor from one investment style to another.
The Portfolio still maintains a somewhat more conservative asset mix relative to
the average balanced fund (which has between 55% and 60% of its assets invested
in stocks). Nonetheless, we have confidence that the changes we have made will
improve the long-term performance of the Portfolio.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER MARK STUMPP
[PHOTO]
"Our models show that the overall stock market is fairly valued in light of
current earnings growth and interest rates. This means the markets should be
able to sustain normal rates of equity return (not the historically abnormal
returns of recent years) as long as earnings continue to grow and if interest
rates stabilize. If, as many expect, the U.S. has a "soft landing" (slows from
the very rapid growth it exhibited early in the year to a pace that is
sustainable), these conditions ought to be satisfied."
Portfolio Composition (Long Term)
as of 6/30/2000
---------------
Stocks 60.3%
Bonds 39.7%
Sector Breakdown--Stock
as of 6/30/2000
---------------
Technology 32.4%
Consumer Growth & Staples 23.0%
Finance 13.4%
Industrials 10.3%
Utilities 9.0%
Consumer Cyclicals 6.3%
Energy 5.6%
Sector Breakdown--Bond
as of 6/30/2000
---------------
Corporate Bonds 65.2%
U.S. Treasuries 26.6%
Asset-Backed 5.9%
Equity Securities 2.1%
Short-Term/Cash 0.2%
Source: Prudential. Holdings subject to change.
13
<PAGE>
PRUDENTIAL SERIES FUND
FLEXIBLE MANAGED PORTFOLIO
June 30, 2000
INVESTMENT GOAL
High total return consistent with a more aggressively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 60% stocks and 40%
bonds.
$10,000 Invested Over Ten Years
[GRAPH]
Flexible Lipper (VIP) S&P 50 Lehman Gov't./Corp.0
Managed Portfolio(1) Flexible Avg.(2) Index(3) Bond Index(4)
June|90 10,000 10,000 10,000 10,000
9,994 9,827 9,400 10,573
June|91 10,863 10,922 10,737 11,022
12,535 12,363 12,257 12,278
June|92 12,264 12,382 12,175 12,584
13,489 13,347 13,190 13,209
June|93 14,691 14,176 13,831 14,238
15,590 14,952 14,516 14,666
June|94 14,740 14,341 14,025 14,030
15,097 14,695 14,707 14,151
June|95 16,933 16,760 17,676 15,821
18,741 18,445 20,227 16,874
June|96 19,697 19,503 22,268 16,557
21,295 21,148 24,868 17,364
June|97 23,452 23,445 29,990 17,841
25,121 25,346 33,162 19,059
June|98 27,528 28,071 39,039 19,854
27,692 29,301 42,646 20,864
June|99 29,507 31,211 47,925 20,389
29,845 33,135 51,616 20,416
June|2000 30,037 33,762 51,395 21,269
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risk of currency fluctuation and the impact of social, political and
economic change.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Flexible Managed Portfolio1 0.64% 1.80% 8.60% 12.15% 11.63%
--------------------------------------------------------------------------------
Lipper (VIP) Flexible Avg.2 1.91% 7.59% 11.62% 14.27% 12.68%
--------------------------------------------------------------------------------
S&P 500 Index3 -0.43% 7.24% 19.67% 23.80% 17.79%
--------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index4 4.18% 4.32% 6.03% 6.10% 7.84%
--------------------------------------------------------------------------------
Flexible Managed Portfolio inception date: 5/13/83.
(1) Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
(2) The Lipper Variable Insurance Products (VIP) Flexible Average is calculated
by Lipper, Inc., and reflects the investment return of certain portfolios
underlying variable life and annuity products. These returns are net of
investment fees and fund expenses, but not product charges.
(3) The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an unmanaged
index that includes the reinvestment of all dividends, but does not reflect
the payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the S&P 500 may
differ substantially from the securities in the Portfolio.
(4) The Lehman Government/Corporate Bond Index is comprised of government and
corporate bonds. The Index is an unmanaged index that includes the
reinvestment of all interest, but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the Index may differ substantially
from the securities in the Portfolio. The Lehman Gov't./Corp. Bond Index is
not the only index that may be used to characterize performance of income
funds, and other indexes may portray different comparative performance.
The Prudential Series Fund Flexible Managed Portfolio--which invests in an
actively managed mix of bonds, stocks and money market securities--had an
overall return of 0.64% over the reporting period. The Portfolio trailed the
1.91% Lipper (VIP) Flexible Fund Average primarily because, early in the period,
half of its equity portfolio was managed in the value style. During this time,
value stocks experienced a sharp decline.
Factors that had a positive impact on performance included our active management
of asset allocation. We de-emphasized stocks in the early months of the year
when the markets were undergoing a correction but increased our equity
allocation later in the period, in time to catch an eventual upswing in the
market. The Portfolio also benefited from its exposure to mid-cap value stocks,
an asset class that finally rallied in the second quarter after an extended
period of underperformance. Finally, a change in strategy in the second quarter
(described below) led us to increase our growth-style holdings just as growth
stocks rebounded.
Performance Review
--------------------------------------------------------------------------------
The Portfolio had an excellent finish to a fair six-month reporting period. We
made major changes to the Portfolio in the second quarter that improved its
performance. In the past, half of our equity holdings were managed to mirror the
behavior of the S&P 500 Index. The other half had been in an actively managed
portfolio emphasizing stocks of mid-sized companies that were trading at
relatively attractive prices. We changed the way our stocks are managed: They
are now in a single portfolio that offers more evenly balanced exposure to
growth, value and different market capitalizations. We characterize the new
style as structured equity. It is intended to reduce the impact that shifts in
market favor between investing styles have on our return.
The timing of the conversion couldn't have been better. At the start of the
period, the Portfolio was overweighted in small to mid-sized value stocks. When
we restructured, we generally sold these stocks at a peak and simultaneously
bought larger capitalization growth stocks at bargain prices. The Portfolio
performed reasonably well as growth rebounded in late May and June. However, the
transition was not perfect, and some temporary cash investments accrued during
trading. This detracted slightly from performance.
With regard to specific holdings, we overweighted Nabisco Holdings, which rose
more than 140%, and Pioneer Natural Resources, which moved up sharply with
energy prices. Among the biggest losers were Qualcomm and Citrix Systems, which
fell on investor concerns about their ability to generate future earnings.
14
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
We use a mathematical model to compare the expected return on the entire stock
market (determined primarily by prices and estimated earnings) to interest rates
on bonds. We try to increase the proportion of the asset class (e.g., stocks or
bonds) that offers the best value at any time. Since asset class has a greater
impact on returns over the long term than does the selection of individual
securities, these shifts in allocation may affect your return significantly.
We call our new approach structured equity because it involves a rigid
discipline that strives to limit deviations in a Portfolio's return from its
benchmark return--in this case, the S&P 500 Index. The portfolio is designed to
beat the market benchmark, but it also employs sophisticated mathematical
techniques intended to limit its performance deviations from the S&P 500 to
within a few percentage points.
The strategy for reaching both goals--limited deviations and deviating on the
upside--involves overweighting stocks that we like and underweighting those that
we view as unattractive. In both instances, deviations from S&P weightings are
relatively small. We also believe in taking risks in individual stocks that we
feel justify the risk, but then we attempt to limit deviations of the overall
portfolio from the benchmark in sector weights, industry weights, and style
exposure (in other words, growth or value).
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER MARK STUMPP
[PHOTO]
"Our models show that the overall stock market is fairly valued in light of
current earnings growth and interest rates. That means the markets should be
able to sustain normal rates of equity return (not the historically abnormal
returns of recent years) as long as earnings continue to grow and if interest
rates stabilize. If, as many expect, the U.S. has a "soft landing" (slows from
the very rapid growth early in the year to a pace that is sustainable), these
conditions ought to be satisfied."
Portfolio Composition (Long Term)
as of 6/30/2000
---------------
Stocks 65.0%
Bonds 35.0%
Sector Breakdown--Stock
as of 6/30/2000
---------------
Technology 32.0%
Consumer Growth & Staples 20.5%
Finance 14.3%
Industrials 11.2%
Utilities 8.0%
Consumer Cyclicals 7.4%
Energy 6.6%
Sector Breakdown--Bond
as of 6/30/2000
---------------
Corporate Bonds 65.2%
U.S. Treasuries 32.3%
Asset-Backed 2.5%
Source: Prudential. Holdings subject to change.
15
<PAGE>
PRUDENTIAL SERIES FUND
HIGH YIELD BOND PORTFOLIO
June 30, 2000
INVESTMENT GOAL
High total return.
TYPES OF INVESTMENTS
Primarily noninvestment-grade bonds. These bonds have speculative
characteristics and are subject to greater credit and market risk than
higher-quality securities.
INVESTMENT STYLE
Concentrates primarily on junk bonds that appear to offer an attractive
combination of high current income and attractive total return.
$10,000 Invested Over Ten Years
High Yield Lipper (VIP) High Lehman Corporate
Bond Portfolio(1) Current Yield Avg.(2) High Yield Index(3)
June 90 10,000 10,000 10,000
8,716 9,183 8,821
June 91 10,919 11,172 11,433
12,115 12,450 12,895
June 92 13,415 13,792 14,230
14,239 14,539 14,926
June 93 15,856 16,205 16,499
16,982 17,293 17,481
June 94 16,796 16,883 17,085
16,520 16,751 17,301
June 95 18,095 18,556 19,448
19,422 19,821 20,618
June 96 20,351 20,759 21,331
21,634 22,462 22,959
June 97 22,905 23,807 24,295
24,615 25,408 25,889
June 98 25,895 26,522 27,054
24,035 25,109 26,373
June 99 24,876 25,851 26,953
25,143 25,990 27,003
June 2000 24,666 25,494 26,676
The Portfolio may invest in foreign securities. Foreign investments are
subject to the risk of currency fluctuation and the impact of social,
political and economic change.
<TABLE>
<CAPTION>
Performance Summary
--------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
-----------------------------------------------------------------------------------------
High Yield Bond Portfolio(1) -1.90% -0.84% 2.50% 6.39% 9.45%
-----------------------------------------------------------------------------------------
Lipper (VIP) High Current Yield Avg.(2) -1.15% -0.42% 3.19% 6.97% 9.76%
-----------------------------------------------------------------------------------------
Lehman Corporate High Yield Index(3) -1.21% -1.03% 3.17% 6.52% 10.31%
-----------------------------------------------------------------------------------------
</TABLE>
High Yield Bond Portfolio inception date: 2/23/87.
(1) Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
(2) The Lipper Variable Insurance Products (VIP) High Current Yield Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
(3) The Lehman Corporate High Yield Index (LHYI) is comprised of over 700
noninvestment-grade bonds. The LHYI is an unmanaged index that includes the
reinvestment of all interest, but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LHYI may differ substantially
from the securities in the Portfolio. The LHYI is not the only index that
may be used to characterize performance of income funds, and other indexes
may portray different comparative performance.
During the six months that ended on June 30, 2000, some investors shunned the
U.S. high-yield (junk) bond market because rising interest rates tend to make
fixed-income securities less attractive and because an increasing number of
companies failed to make interest payment on their junk bonds.
The Prudential Series Fund High Yield Bond Portfolio slightly underperformed its
benchmark during the six-month period ending June 30, 2000. The Portfolio posted
a negative return of 1.90% compared with a negative 1.15% return for the Lipper
(VIP) High Current Yield Average.
Performance Review
--------------------------------------------------------------------------------
We improved the Portfolio's risk profile by increasing its holding of debt
securities rated Ba, the highest junk bond ratings category. However, bonds in
the single-B ratings category still accounted for more than half of the
Portfolio's total investments because they provide attractive current yields and
solid credit quality.
16
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
Several factors conspired to make the first half of 2000 a troublesome period
for the high-yield bond market. The Federal Reserve worked to slow economic
growth and head off inflation by increasing short-term interest rates three
times. A growing number of companies defaulted or missed interest payments on
their junk bonds. And last but not least, many investors redeemed their shares
of high-yield mutual funds and redeployed their money in less risky investments.
In anticipation of the Fed rate hikes, investors drove yields on most bonds
higher (and their prices lower), including junk bonds. The U.S. Treasury market
weathered this trend better than other U.S. bond markets as investors hurried to
buy a shrinking supply of longer-term Treasuries. Therefore, the difference
between yields on junk bonds and 10-year Treasuries widened significantly.
Amid the growing concern about defaults, it is not surprising that the
best-performing credit tier of the Lehman High Yield Index was bonds rated BB
(or its equivalent Ba), which is the highest ratings category in the junk bond
market. Many investors were simply not interested in buying debt securities with
ratings below BB or Ba.
Companies whose bonds were rated BB or Ba comprised a select group that could
issue new junk bonds during the six months. We bought attractively priced, newly
issued bonds of such companies, including home builder Lennar and Williams Corp.
These purchases helped to increase bonds in the Ba ratings category to 11% of
the Portfolio's total investments as of June 30, 2000, up from 8% as of December
31, 1999. Nevertheless, the Portfolio's exposure to the highest junk bond
ratings category is still considerably less than the 27% of the Lehman High
Yield Index, a factor that hurt the Portfolio's relative performance. In
addition, the Portfolio experienced credit quality problems in the food and food
service sector with bonds of Ameriserve and Vlasic declining in price.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS CASEY WALSH AND GEORGE W. EDWARDS, CFA
[PHOTO OF CASEY WALSH]
[PHOTO OF GEORGE W. EDWARDS]
"After five difficult months, prices of junk bonds gained strongly in June,
because some data indicated the U.S. economic expansion is starting to slow to a
more sustainable pace. As a result, there was talk that the Fed's current round
of rate hikes may be nearly finished. Should this prove true, we believe junk
bond prices could continue to gain during the remainder of the year."
Top Industries
as of 6/30/2000
---------------
Telecommunications 21.9%
Cable 12.4%
Media 5.8%
Energy 5.7%
Capital Goods 4.7%
Top Issuers
as of 6/30/2000
---------------
Level 3 Communications 2.3%
Nextel Communications, Inc. 2.0%
Adelphia Communications 1.8%
United Pan-Europe 1.6%
CSC Holdings, Inc. 1.4%
Credit Quality
as of 6/30/2000
---------------
Baa 0.4%
Ba 11.4%
B 58.1%
Caa 9.7%
Ca 0.5%
Not-Rated 7.5%
Equity* 8.5%
Cash 3.9%
Source: Prudential. Holdings are subject to change.
*(Preferred & Common)
17
<PAGE>
Prudential Series Fund
Stock Index Portfolio
June 30, 2000
INVESTMENT GOAL
Seeks results that correspond to the price and yield performance of the S&P 500
Index.3
TYPES OF INVESTMENTS
Primarily stocks in the S&P 500 Index.
INVESTMENT STYLE
The Portfolio attempts to hold the same stocks as the S&P 500 Index, in
approximately the same proportions. The Portfolio thus tends to reflect the
general trends of the overall U.S. equity market.
<TABLE>
<CAPTION>
$10,000 INVESTED OVER TEN YEARS
<S> <C> <C> <C>
Stock Index Lipper (VIP) S&P
Portfolio1 500 Index Avg.2 S&P 500 Index3
Jun-90 10,000 10,000 10,000
9,386 9,369 9,400
Jun-91 10,695 10,754 10,737
12,176 12,215 12,257
Jun-92 12,068 12,100 12,175
13,044 13,112 13,190
Jun-93 13,650 13,801 13,831
14,305 14,465 14,516
Jun-94 13,799 13,960 14,025
14,449 14,589 14,707
Jun-95 17,334 17,489 17,676
19,805 19,958 20,227
Jun-96 21,775 21,934 22,268
24,274 24,489 24,868
Jun-97 29,205 29,391 29,990
32,244 32,430 33,162
Jun-98 37,878 38,084 39,039
41,408 41,569 42,646
Jun-99 46,416 46,598 47,925
49,915 50,094 51,616
Jun-00 49,644 49,832 51,395
</TABLE>
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) S&P 500 Index Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends, but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio.
<TABLE>
<CAPTION>
Performance Summary
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six
AVERAGE ANNUAL RETURNS Months 1-Year 3-Year 5-Year 10-Year
------------------------------------------------------------------------------------------
Stock Index Portfolio1 -0.54% 6.95% 19.34% 23.42% 17.38%
-------------------------------------------------------------------------------------------
Lipper (VIP) S&P 500 Index Avg.2 -0.59% 6.85% 19.29% 23.37% 17.39%
-------------------------------------------------------------------------------------------
S&P 500 Index3 -0.43% 7.24% 19.67% 23.80% 17.79%
-------------------------------------------------------------------------------------------
</TABLE>
Stock Index Portfolio inception date: 10/19/87.
The Prudential Series Fund Stock Index Portfolio returned -0.54%, just 11 basis
points (hundredths of a percentage point) below the S&P 500 Index, reflecting
the inclusion of transaction costs and fees for the Portfolio.
Over the first six months of 2000, the S&P 500 Index reversed many of the trends
established in 1999. The leading sectors in 2000 to date have been healthcare
and utilities, both of which had negative returns for 1999. Conversely,
telecommunications services, one of the leading sectors in 1999, had a
substantial decline, with long-distance services among the worst-performing
groups in the market.
The trend reversals didn't apply to value sectors that are particularly
susceptible to the economic cycle: basic materials, consumer cyclicals and
capital goods all had negative returns. Miscellaneous metals, metal and glass
containers, paper and forest products, and steel were among the worst-performing
groups of the period, with average losses of 35% or more.
The Standard & Poor's 500 Index is an unmanaged index. Standard & Poor's neither
sponsors nor endorses the Stock Index Portfolio. Investors cannot directly
invest in any index, including the S&P 500 Index.
Performance Review
--------------------------------------------------------------------------------
The S&P 500 reversed course often during the first half of 2000. The Stock Index
Portfolio, because it is a broadly diversified portfolio, was not as vulnerable
to these fluctuations as high growth or value funds. Given the rising interest
rate environment, an obvious trend emerged: Companies whose businesses are
sensitive to rising interest rates performed more poorly than others. This
included many of the high growth groups, such as telecommunications, whose stock
prices reflect the expectations of future earnings. Cyclical stocks--those that
perform better when an economy is expanding--also were hurt, because investors
feared that rising interest rates would choke off economic growth and possibly
even cause a recession.
Taking into account both return and sector size, almost all the good news over
this reporting period was in healthcare, with technology--despite its
volatility--making the next largest positive contribution, albeit a
significantly smaller one (less than one percentage point). The utility sector,
although performing well, was too small to have much of an impact on the overall
index return. In the end, however, the negative impact of consumer cyclicals and
communications services together outweighed the healthcare contribution.
18
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
The Stock Index Portfolio attempts to hold all 500 stocks included in the S&P
500 Index and to duplicate its performance. Portfolio Manager John W.
Moschberger manages the Portfolio by investing funds received while trying to
minimize commissions and transaction costs.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER JOHN W. MOSCHBERGER
[PHOTO OF JOHN W. MOSCHBERGER]
"The volatility of the S&P 500 from January through May was well above normal.
The market quieted down somewhat in June, although it still was more unsettled
than normal on many measures. For example, between 1978 and 2000 the S&P 500
moved up 1% or more on 12.5% of the days, and had a downward move of that size
on 10.1% of the days. In contrast, during the first six months of 2000, upward
moves of 1% or more occurred on 23.7% of the days, and similar downward moves
occurred on 19.9% of the days. Moreover, market favor shifted between sectors,
dramatically and often. The momentum investing strategies that would have
produced excellent results in the previous year would have produced sizable
losses during this time.
"In fact, any recent successes that involved chasing after market leaders could
be considered unusual. The Economist, a highly respected weekly news magazine,
calculated the result if an individual--`Henry Hindsight'--had invested $1 at
the beginning of the 20th century and each year shifted all the proceeds into
the asset class that had done best the previous year. The study permitted
investments in any established market in the world. At the end of the century,
the portfolio was worth only $290 (after trading costs). In contrast, investing
only in U.S. large-company stocks over the same period (starting well before the
S&P 500 Index was developed) would be worth thousands of dollars.
"The Stock Index Portfolio doesn't try to anticipate changes in market favor
from asset class to asset class, from sector to sector, or from investment style
to investment style. It is our opinion that mistakes in such judgments can be
costly. Rather, the Portfolio gives you the opportunity to participate in the
growth of the U.S. economy as a whole. Right now, in our opinion, the outlook
for the U.S. economy seems good. When the economy grows too fast, it threatens
to create bottlenecks that cause inflation and rising interest rates, which in
turn can choke off growth. Moderate but steady growth is best for investors, and
we believe this is where the economy is headed."
S&P 500 Index--
Total Return by Sector
as of 6/30/2000
---------------
Health Care 23.7%
Utilities 15.3%
Energy 4.7%
Technology 3.0%
Financials -0.5%
Capital Goods -1.2%
Consumer Staples -2.4%
Transportation -5.0%
Communication Services -15.1%
Consumer Cyclicals -18.9%
Basic Materials -24.8%
S&P 500 Index -0.4%
Source: Standard & Poor's.
S&P 500 Index Composition
as of 6/30/2000
---------------
Technology 32.8%
Financials 12.7%
Health Care 11.6%
Consumer Staples 10.3%
Capital Goods 8.0%
Consumer Cyclicals 7.4%
Communication Services 6.8%
Energy 5.4%
Utilities 2.5%
Basic Materials 1.9%
Transportation 0.6%
Source: Standard & Poor's. Holdings are subject to change.
Top Ten Holdings (% of Portfolio)
as of 6/30/2000
---------------
General Electric Co. 4.1%
Intel Corp. 3.5%
Cisco Systems, Inc. 3.5%
Microsoft Corp. 3.3%
Pfizer, Inc. 2.4%
Exxon Mobil Corp. 2.2%
Wal-Mart Stores, Inc. 2.0%
Oracle Corp. 1.9%
Citigroup, Inc. 1.6%
Nortel Networks Corp. 1.6%
Source: Prudential. Holdings are subject to change.
19
<PAGE>
Prudential Series Fund
Equity Income Portfolio
June 30, 2000
INVESTMENT GOAL
Current income and capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks and convertible securities with prospects for income returns
above those of the S&P 500 Index.3
INVESTMENT STYLE
The Portfolio uses a "value" investment approach to companies that are
attractively priced relative to book value, earnings, discretionary cash flow,
sales and other measures of value.
$10,000 INVESTED OVER TEN YEARS
[NO PLOT POINTS]
The Portfolio may invest in foreign securities. Foreign investments are
subject to the risk of currency fluctuation and the impact of social,
political and economic change.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Equity Income Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns and
rankings are net of investment fees and fund expenses, but not product
charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends, but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the S&P
500 may differ substantially from the securities in the Portfolio.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Equity Income Portfolio1 -5.31% -9.91% 6.55% 13.03% 13.52%
--------------------------------------------------------------------------------
Lipper (VIP) Equity Income Avg.2 -1.64% -2.98% 11.33% 15.86% 13.87%
--------------------------------------------------------------------------------
S&P 500 Index3 -0.43% 7.24% 19.67% 23.80% 17.79%
--------------------------------------------------------------------------------
Equity Income Portfolio inception date: 2/19/88.
The Prudential Series Fund Equity Income Portfolio returned -5.31% over the six
months ended June 30, 2000, while the Lipper (VIP) Equity Income Average was
-1.64%. The Portfolio's underperformance is attributable to the poor showing of
value stocks in the first quarter. Subsequently, the environment for value
stocks improved. Moreover, the management team began to refocus the holdings. As
a result, the Portfolio had a stronger second quarter, declining only 0.73%
compared with a 1.32% drop for the Lipper Average.
The largest negative impact on the Portfolio's return was the poor performance
of its industrial stocks--paper, aluminum and steel companies. Also contributing
to underperformance--albeit slightly--was the Portfolio's very low weighting in
technology. In contrast, the Portfolio benefited from its energy-related and
financial holdings.
Performance Review
--------------------------------------------------------------------------------
As investors began to fear that rising interest rates would cut off economic
growth, economically sensitive industrial stocks, such as metals, chemicals, and
forest products, became vulnerable. They were also hurt by rising energy prices,
which not only add to inflation but increase the operating costs of industrial
companies. Although we had reduced our focus on the sector significantly, their
stock decline still pulled down our return.
We owned energy exploration and production companies such as Noble Affiliates
(natural gas) and Pioneer Natural Resources. These saw substantial gains over
the period.
We overweighted and had good stock selection in financials, highlighted by our
brokerage stocks, specialty finance companies and real estate investment trusts
(REITs). Our brokerage positions, such as Lehman Brothers Holdings and
PaineWebber Group are benefiting from the active merger and acquisitions
business and an improving bond underwriting environment. Moreover, they are
themselves attractive acquisition candidates. (PaineWebber was bought at a
premium after the end of our reporting period.) Our holdings in Associates First
Capital, Countrywide Credit and Washington Mutual, which were bought
opportunistically, performed very well. Our REITs, which are well positioned to
benefit from strong rental markets, finally began to recover.
Carl Icahn's hostile bid for Nabisco Group Holdings set in motion a series of
transactions that resulted in significant advances for our Nabisco, R.J.
Reynolds and Philip Morris stocks. Our healthcare stocks had mixed results.
Tenet Healthcare, HCA--The Healthcare Company, and Aetna, our largest positions,
made positive contributions to our return, but some of our smaller holdings did
particularly poorly and offset the benefits.
20
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
The Portfolio had substantial weightings in financial services, real estate
investment trusts (REITs), housing-related stocks, healthcare, forest products
and metals. Going forward, we expect to: reduce our emphasis on industrials by
adding some technology and telecommunications stocks, trim some of our larger
positions and move the average market capitalization of our holdings from a
mid-cap to a large-cap range. Our goal is to construct a more broadly
diversified portfolio that is likely to be less volatile.
Although we will continue to manage in the value style, we expanded our range.
We are looking at stocks that are inexpensive relative to their peers but
possess a catalyst that we believe will close the pricing gap--for example, a
company that is repurchasing its shares or restructuring its business. This
broader view of value investing has enabled us to find undervalued companies
with growth prospects in areas such as wireless telecommunications.
Within the financial sector, we are reducing the size of our largest holdings
and purchasing some bank stocks, such as Chase Manhattan Bank and Bank One. In
technology, volatile stock returns in the first half of 2000 did not appreciably
hurt our performance because of our low weighting in the sector. However, it did
create value investment opportunities for us. Consequently, our technology
weighting is rising.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGER THOMAS KOLEFAS
[PHOTO OF THOMAS KOLEFAS]
"Since 1995, U.S. stock markets have favored growth investing. For much of this
period, stocks of firms with larger market capitalizations performed best. A
value style that focused on a few traditional measures of value was at a
disadvantage. We are now using a larger number of ways to measure investment
value, in part to permit us to construct a more diverse portfolio. Our goal is
to reduce the deviations in performance from our benchmarks and from our
competition while outperforming them over the long term. We will focus not only
on quantitative measures of value, but on indications that a firm's management
has the willingness and ability to close the market's misperception of the
stock's true value."
Portfolio Composition
as of 6/30/2000
---------------
Finance 32.3%
Consumer Growth & Staples 18.1%
Industrials 17.9%
Consumer Cyclicals 10.7%
Utilities 7.4%
Energy 6.9%
Technology 4.7%
Cash & Equivalents 2.0%
Top Ten Holdings (% of Portfolio)
as of 6/30/2000
---------------
Lehman Brothers Holdings, Inc. 5.7
PaineWebber Group, Inc. 3.2
Alcoa, Inc. 3.2
Nabisco Group Holdings Corp. 2.8
Equity Residential Properties Trust 2.6
Eastman Kodak Co. 2.6
Hanson PLC ADR (United Kingdom) 2.6
Bear, Stearns & Co., Inc. 2.5
GTE Corp. 2.3
Tenet Healthcare Corp. 2.3
Source: Prudential. Holdings are subject to change.
21
<PAGE>
Prudential Series Fund
Equity Portfolio
June 30, 2000
INVESTMENT GOAL
Capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks of major, established companies.
INVESTMENT STYLE
The Portfolio uses a "deep value" investment approach to invest in stocks
believed to be temporarily undervalued relative to the companies' sales,
earnings, book value and cash flow.
$10,000 INVESTED OVER TEN YEARS
Equity Class Lipper (VIP)
I Portfolio Growth Fund Avg.2 S&P 500 Index3
June 90 10,000 10,000 10,000
9,439 9,152 9,400
June 91 11,381 10,586 10,737
11,894 12,456 12,257
June 92 12,679 12,000 12,175
13,579 13,490 13,190
June 93 15,300 14,240 13,831
16,549 15,388 14,516
June 94 16,230 14,415 14,025
17,009 15,154 14,707
June 95 19,830 18,034 17,676
22,331 20,296 20,227
June 96 23,964 22,308 22,268
26,466 24,455 24,868
June 97 29,977 28,236 29,990
32,992 31,087 33,162
June 98 37,107 36,319 39,039
36,075 39,060 42,646
June 99 41,656 43,883 47,925
40,580 51,016 51,616
June 2000 38,361 53,018 51,395
The Portfolio may invest in foreign securities. Foreign investments are
subject to the risk of currency fluctuation and the impact of social,
political and economic change.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Growth Fund Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends, but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the S&P
500 may differ substantially from the securities in the Portfolio.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Equity Portfolio Class I1 -5.47% -7.91% 8.57% 14.11% 14.39%
--------------------------------------------------------------------------------
Lipper (VIP) Growth Fund Avg.2 3.27% 20.98% 23.33% 23.21% 17.73%
--------------------------------------------------------------------------------
S&P 500 Index3 -0.43% 7.24% 19.67% 23.80% 17.79%
--------------------------------------------------------------------------------
Equity Portfolio Class I inception date: 5/13/83.
The Prudential Series Fund Equity Portfolio Class I returned -5.47% in the first
half of 2000, trailing the Lipper (VIP) Growth Fund Average return of 3.27%.
During the period, the Federal Reserve implemented a series of rate hikes aimed
at slowing the economy. However, our value style led us to invest heavily in
cyclical companies, which do best in an expanding economy. Therefore, our
emphasis on value hurt performance. The fact that the Lipper Average includes
many growth portfolios further added to the return differential.
Performance Review
--------------------------------------------------------------------------------
Our paper and metals holdings suffered when the Federal Reserve began to raise
interest rates, generating fears that economic growth would cease. In an
investing climate marked by extreme investor skittishness, the stocks of some
well-managed and profitable industrial companies--such as Georgia Pacific,
International Paper and Alcoa, Inc.--steeply declined. At period end, some of
these companies released better-than-expected second-quarter earnings reports
and their stocks rallied.
Consolidation activity in the food and tobacco industries drove the sector's
performance over the period. In particular, Carl Icahn's hostile bid for Nabisco
Group Holdings set in motion a series of ownership shifts that resulted in
significant advances for our shares of Nabisco Group Holdings, R.J. Reynolds and
Philip Morris.
Healthcare companies' earnings generally are improving, and their stock prices
are beginning to reflect this. A large contributor to Portfolio performance came
from UnitedHealth Group, whose shares rose 62% over the period.
An imbalance of supply and demand for oil is helping our oil stocks: Total Fina,
BP Amoco and Amerada Hess.
22
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
We are restructuring our Portfolio with the aims of 1) reducing the impact of
the growth/value cycle on our return; 2) approximating the sector weightings of
the S&P 500; and 3) broadening our focus beyond stocks that are inexpensive on
an absolute basis to include those that are priced below their historical range
or below others in their industry. We expect the average market capitalization
of our holdings to become somewhat larger, again moving closer to the overall
market.
In the wake of price appreciation in the insurance industry, we have seen the
stock of some of our larger holdings appreciate. These include Chubb, our
largest insurance holding. However, several of our smaller companies have yet to
benefit. Overall, our insurance holdings had little impact on our return, but
the trend is positive.
Despite the fact that the basic materials businesses represented in our
Portfolio did well over the period, their stocks still declined. In our opinion,
this is due to investor uncertainty about the economy. This uncertainty is
likely to abate by year-end.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS THOMAS R. JACKSON AND PHIL SCHETTEWI
[PHOTO OF THOMAS R. JACKSON]
[PHOTO OF PHIL SCHETTEWI]
"We believe investors are gaining confidence that the Federal Reserve will
accept that the U.S. economy has slowed to a sustainable pace. As a result,
investors are beginning to focus more on current earnings. We feel that
optimistic projections will be less likely to drive stock prices, and that
investors will seek out companies with visible earnings growth. This scenario
could revive the rally in cyclical stocks that began in 1999, and also benefit
our insurance and healthcare positions."
--------------------------------------------------------------------------------
Portfolio Composition
as of 6/30/2000
---------------
Consumer Growth & Staples 22.0%
Industrials 19.0%
Finance 16.8%
Consumer Cyclicals 8.2%
Technology 7.1%
Energy 7.0%
Utilities 4.1%
Cash & Equivalents 15.8%
Top Ten Holdings (% of Portfolio)
as of 6/30/2000
---------------
Eastman Kodak Co. 3.7%
Tenet Healthcare 3.6%
WellPoint Health Networks, Inc. 3.4%
HCA--The Healthcare Company 3.2%
UnitedHealth Group, Inc. 3.0%
Total Fina Elf S.A., ADR 2.9%
Chubb Corp. 2.5%
Darden Restaurants, Inc. 2.4%
Compaq Computer Corp. 2.1%
Alcoa, Inc. 2.0%
Source: Prudential. Holdings are subject to change.
23
<PAGE>
Prudential Series Fund
Prudential Jennison Portfolio
June 30, 2000
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stocks of established companies with above-average growth
prospects.
INVESTMENT STYLE
The Portfolio uses a "growth" investment style to invest in the common stocks of
both mid-sized and large companies.
$10,000 INVESTED SINCE INCEPTION*
Prudential Jennison
Portfolio1 Lipper (VIP) Growth Avg.2 S&P 500 Index3
April 95 10,000 10,000 10,000
June 95 11,276 10,794 10,640
12,556 12,136 12,176
June 96 13,494 13,406 13,405
14,362 14,627 14,970
June 97 16,801 16,802 18,053
18,916 18,570 19,962
June 98 22,841 21,722 23,500
26,002 23,243 25,671
June 99 29,972 26,044 28,849
36,975 30,188 31,071
June 2000 38,447 31,234 30,938
* Lipper provides data on a monthly basis, so for comparative purposes, the
Lipper Average and S&P 500 Index since inception returns reflect the
Portfolio's closest calendar month-end performance of 4/30/95.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Growth Average is calculated
by Lipper, Inc., and reflects the investment return of certain portfolios
underlying variable life and annuity products. These returns are net of
investment fees and fund expenses, but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends, but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the S&P
500 may differ substantially from the securities in the Portfolio.
<TABLE>
<CAPTION>
Performance Summary
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six Since
Average Annual Returns Months 1-Year 3-Year 5-Year Inception*
Prudential Jennison Portfolio Class I1 3.98% 28.27% 31.78% 27.80% 29.67%
--------------------------------------------------------------------------------------------
Lipper (VIP) Growth Avg.2 3.27% 20.98% 23.33% 23.21% 24.07%
--------------------------------------------------------------------------------------------
S&P 500 Index3 -0.43% 7.24% 19.67% 23.80% 24.43%
--------------------------------------------------------------------------------------------
</TABLE>
Prudential Jennison Portfolio Class I inception date: 4/25/95.
The high-growth areas that are the focuses of this Portfolio all experienced
extraordinary volatility in the first six months of 2000. The net result was a
strong gain for its drug, technology and financial holdings, but losses in
communication services and retailers. Overall, The Prudential Series Fund
Prudential Jennison Portfolio Class I 3.98% return was slightly above the 3.27%
Lipper (VIP) Growth Average.
Performance Review
--------------------------------------------------------------------------------
Our largest focus is in technology. We had significant positive contributions to
our return from several holdings, including Intel, Hewlett-Packard, Texas
Instruments and Cisco Systems. Our semiconductor companies (such as Intel and
Texas Instruments) benefited from increasing demand for computer chips. On the
other hand, our position in Microsoft declined in value, primarily because of
the antitrust suit it faces. Motorola shares corrected after reporting
tightening margins and after a very strong climb in 1999. We think its
underlying businesses still have strong growth potential.
Some sectors that had been lagging in 1999 benefited when investors searched
more broadly for growth opportunities that were not as expensive as the
technology and telecommunication stocks. We owned Warner-Lambert, which was
acquired by Pfizer. Our shares, helped by enthusiasm about the combination, made
the largest single contribution to our return. Our financial holdings continued
to benefit from the merger and acquisition activity accompanying global
consolidation in several industries.
In the communications sector, we owned CBS Corporation, which was acquired by
Viacom. The CBS shares had been falling, but the Viacom shares we received in
exchange more than offset the loss. Our return also was hurt by our holdings in
Vodafone AirTouch and America OnLine. We think both are strong companies and the
correction is temporary because companies that own bandwidth, such as these, are
at the heart of the telecommunications expansion.
Fear of rising interest rates and a slowing economy hurt the consumer sector. We
felt the impact particularly in our holdings of Home Depot and Gap.
24
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
We are reducing our commitment to technology and telecommunications, and adding
in growth sectors that are selling at lower premiums to the overall market, such
as pharmaceuticals and financials. Nonetheless, four of our five largest
holdings on June 30 were technology stocks: Intel, Hewlett-Packard, Cisco
Systems and Nokia. These are dominant players in their respective core markets.
During this half-year, we added Corning and Nortel, both because of their
strength in optical computing, and Hewlett-Packard.
Although we increased our drug holdings, we sold our positions in Bristol-Myers
Squibb and Glaxo Wellcome because of product disappointments, as well as our
Schering-Plough shares. We added Pharmacia and Merck, and acquired Pfizer shares
for our Warner-Lambert holdings.
We added Schlumberger to our Portfolio. As the dominant oil service supplier, it
is well positioned to benefit from the increase in drilling inspired by the
current energy shortage. This upswing in drilling is likely to last several
years.
The pace of merger and acquisitions is continuing to be very high as several
global industries consolidate. Our financial holdings are focused on the
dominant firms in this business: Merrill Lynch, Morgan Stanley Dean Witter and
Citigroup. We sold our shares in Chase Manhattan, which we expected to suffer
because a recent change in accounting standards is likely to add volatility to
their reported earnings.
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS MICHAEL DEL BALSO, KATHLEEN MCCARRAGHER AND SPIROS SEGALAS
[PHOTO OF MICHAEL DEL BALSO]
[PHOTO OF KATHLEEN MCCARRAGHER]
[PHOTO OF SPIROS SEGALAS]
"We think the U.S. economy will slow to a sustainable pace, and equity investors
will regain their confidence by the fourth quarter of 2000. We expect to see the
new electronic- and telecommunications-based economy outperform the old basic
industry sectors in both profit growth and stock price performance. Unless the
upward movement in interest rates continues longer than we expect, we think the
current high price/earnings multiples can be sustained, so stock prices will be
able to rise in line with earnings growth. We are moving toward market sectors
with above-average earnings growth rates, but where share prices are not so high
as to reduce the likelihood we will benefit fully from that growth.
Second-quarter earnings announcements from our holdings have generally been very
strong."
Portfolio Composition
as of 6/30/2000
---------------
Technology 35.4%
Health Care 12.8%
Financials 12.1%
Communication Services 11.8%
Consumer Cyclicals 10.8%
Consumer Staples 9.9%
Cash 4.2%
Capital Goods 2.0%
Energy 1.0%
Top Ten Holdings (% of Portfolio)
as of 6/30/2000
---------------
Pfizer, Inc. 3.9%
Intel Corp. 3.7%
Hewlett-Packard Co. 3.5%
Cisco Systems, Inc. 3.4%
Nokia Corp. 3.4%
Citigroup, Inc. 3.3%
Home Depot, Inc. 3.3%
Vodafone AirTouch Group PLC 3.1%
Viacom, Inc. 2.9%
Qwest Communications Int'l., Inc. 2.7%
Source: Prudential. Holdings are subject to change.
25
<PAGE>
Prudential Series Fund
Global Portfolio
June 30, 2000
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stock and common stock equivalents of U.S. and foreign
corporations.
INVESTMENT STYLE
The Portfolio uses a "growth" investment approach, coupled with a theme-oriented
view of the markets, to identify companies that seem best positioned to take
advantage of global changes.
$10,000 INVESTED OVER TEN YEARS
Lipper (VIP) Morgan Stanley
Global Portfolio/1/ Global Avg./2/ World Index/3/
June|90 10,000 10,000 10,000
9,042 9,188 8,965
June|91 9,428 9,625 9,510
10,071 10,590 10,604
June|92 10,062 10,699 9,912
9,727 10,531 10,050
June|93 11,058 11,931 11,573
13,923 13,875 12,311
June|94 13,383 13,587 12,758
13,243 13,754 12,936
June|95 14,494 14,468 14,119
15,345 15,607 15,616
June|96 16,918 16,898 16,722
18,367 18,046 17,721
June|97 20,660 20,412 20,447
19,649 20,277 20,515
June|98 23,448 23,301 23,929
24,576 23,351 25,507
June|99 26,970 25,284 27,678
36,439 31,603 31,868
June|2000 36,079 30,536 31,053
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses, but not product
charges. Source: Prudential. Six-month returns are not annualized.
2 The Lipper Variable Insurance Products (VIP) Global Average is calculated
by Lipper, Inc., and reflects the investment return of certain portfolios
underlying variable life and annuity products. These returns are net of
investment fees and fund expenses, but not product charges.
3 The Morgan Stanley World Index is a weighted index comprised of
approximately 1,500 companies listed on the stock exchanges of the United
States, Europe, Canada, Australia, New Zealand and the Far East. The
combined market capitalization of these companies represents approximately
60% of the aggregate market value of the stock exchanges in the countries
comprising the World Index. The World Index is an unmanaged index that
includes the reinvestment of all dividends, but does not reflect the
payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the World Index
may differ substantially from the securities in the Portfolio. The World
Index is not the only index that may be used to characterize performance of
global funds, and other indexes may portray different comparative
performance.
Performance Summary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
--------------------------------------------------------------------------------
Global Portfolio1 -0.99% 33.77% 20.42% 20.01% 13.69%
--------------------------------------------------------------------------------
Lipper (VIP) Global Avg.2 -0.25% 28.06% 18.74% 18.88% 11.80%
--------------------------------------------------------------------------------
Morgan Stanley World Index3 -2.56% 12.19% 14.95% 17.07% 12.00%
--------------------------------------------------------------------------------
Global Portfolio inception date: 9/19/88.
The Prudential Series Fund Global Portfolio's 0.99% loss over the first half of
2000 slightly trailed the 0.25% decline of the Lipper (VIP) Global Average, but
both were more modest than the 2.56% decline of the MSCI World Index. Over the
past 12 months, the Portfolio remained well ahead of the Lipper Average. A sharp
and deep turnaround in global stock markets produced negative six-month returns
in most markets. The Portfolio's U.S. holdings had a strong positive return, but
the poor performance of its investments in Japan, Sweden, and the United Kingdom
offset the benefit. Software and telecommunications services stocks, focuses of
the Portfolio, peaked and gave back some of their earlier gains.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation, political and social risks and
illiquidity.
Performance Review
--------------------------------------------------------------------------------
The leading equipment and services companies in technology, media and
telecommunications (TMT) have enormous growth prospects. However, the wide
recognition of their potential led to a global explosive upward movement in
their shares--to very expensive levels even for their huge profit potential.
Prices corrected in March, April and May 2000, then recovered somewhat. Among
our holdings, our Internet-related companies and Japanese stocks hurt our return
most. However, our U.S. technology companies were among the largest contributors
to our return, including a semiconductor design company, PMC-Sierra (U.S.); a
software company, Oracle (U.S.); and a semiconductor company, Texas Instruments
(U.S.). We also did well on Thomson Multimedia (Fr.), a consumer electronics
firm. We took some profits on these stocks, as well as on other companies in
these groups, but they still are among our largest holdings. Recent acquisitions
Juniper Networks (U.S.) and Micron Technology (U.S.) helped our return. We added
Micron in mid April, after the bear market in TMT stocks brought down their
price.
Our position in USA Networks reduced our return. Its shares suffered from fears
that higher interest rates would slow consumer spending and hurt its Home
Shopping Network. So far there is no sign of this.
We owned several banks that were hurt by the global fear of rising interest
rates as well as by the attraction of investors to the greater sizzle of TMT.
Bank of Scotland and Barclays Bank (both U.K.), Wells Fargo (U.S.), Unicredito
Italiano (Italy), Bank of Ireland (Ireland), and Fuji Bank (Japan) were among
the drags on our return.
26
<PAGE>
Strategy Session
--------------------------------------------------------------------------------
We sold most of our shares of Softbank, a large Japanese conglomerate of
Internet-related businesses. We bought Ericsson (Sweden), which is a leader in
telecommunications infrastructure equipment and also a major handset
manufacturer. We think the greatest growth potential now is to be found in
companies that build the information network that powers the new services.
We added JDS Uniphase and Micron Technology in mid April, after the bear market
in TMT stocks brought down their price. JDS Uniphase is a leader in the use of
light waves (instead of electricity) to carry information, while Micron is among
the world's largest manufacturers of DRAMs (computer memory chips).
We added Barclays (U.K.), Banca Intesa (Italy), and Citigroup (U.S.).
Outlook
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS DANIEL J. DUANE AND MICHELLE PICKER
[PHOTO OF DANIEL J. DUANE]
[PHOTO OF MICHELLE PICKER]
"The large issue now is how to deal with the fact that TMT stocks still offer
the best earnings growth prospects on the market, but also are very expensive
compared with other sectors even after the correction in March and April. Since
investors are becoming more sensitive to how much they pay for growth, trimming
higher-priced positions and shopping for good value when purchasing are key. We
are gradually taking profits in some of our appreciated TMT holdings, and are
building our portfolio in other economic sectors. We expect to find better
values outside the United States, where the stock markets already have had large
gains in the past five years."
Geographic Allocation
as of 6/30/2000
---------------
United States 41.5%
Continental Europe 28.3%
Cash & Equivalents 15.0%
Japan 6.3%
Asia 4.1%
Latin America 2.5%
Pacific Basin 2.3%
Top Ten Holdings (% of Portfolio)
as of 6/30/2000
---------------
U.S. Treasury Bill 09/14/00 4.7%
Time-Warner, Inc. 3.6%
Solectron Corp. 3.4%
Vodafone AirTouch 3.1%
Oracle Corp. 3.0%
Citigroup, Inc. 2.8%
Electronics Arts Inc. 2.4%
Nokia (AB) oyj 2.3%
USA Networks Inc. 2.2%
PMC-Sierra, Inc. 2.1%
Source: Prudential. Holdings are subject to change.
27
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
JOHN R. STRANGFELD W. SCOTT MCDONALD, JR., PH.D.
Chairman, Vice President,
The Prudential Series Fund, Inc. Kaludis Consulting Group
SAUL K. FENSTER, PH.D. JOSEPH WEBER, PH.D.
President, Vice President,
New Jersey Institute of Technology Interclass (international corporate
learning)
<PAGE> 1
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $1,166,676,459).... $1,166,676,459
Cash............................................ 720,516
Interest receivable............................. 8,409,323
Receivable for capital stock sold............... 1,047,232
--------------
Total Assets.................................. 1,176,853,530
--------------
LIABILITIES
Payable for capital stock repurchased........... 8,798,835
Payable to investment adviser................... 1,149,342
Accrued expenses................................ 104,965
--------------
Total Liabilities............................. 10,053,142
--------------
NET ASSETS........................................ $1,166,800,388
==============
Net assets were comprised of:
Common stock, at $0.01 par value.............. $ 1,166,800
Paid-in capital, in excess of par............. 1,165,633,588
--------------
Net Assets, June 30, 2000....................... $1,166,800,388
==============
Net asset value, and redemption price per share,
116,680,039 outstanding shares of common stock
(authorized 170,000,000 shares)................. $ 10.00
==============
STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Interest........................................ $ 37,694,169
--------------
EXPENSES
Investment advisory fee......................... 2,426,185
Shareholders' reports........................... 91,000
Accounting fees................................. 25,000
Custodian's fees and expenses................... 21,000
Audit fee and expenses.......................... 8,000
Commitment fee on syndicated credit agreement... 6,000
Transfer agent's fees and expenses.............. 5,000
Legal fees and expenses......................... 3,000
Directors' fees................................. 2,000
Miscellaneous................................... 3,384
--------------
Total expenses................................ 2,590,569
Less: custodian fee credit...................... (4,604)
--------------
Net expenses.................................. 2,585,965
--------------
NET INVESTMENT INCOME............................. 35,108,204
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $ 35,108,204
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 35,108,204 $ 54,005,446
Net realized gain on investments........................ -- 10,627
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 35,108,204 54,016,073
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................... (35,108,204) (54,005,446)
Distributions from net realized capital gains........... -- (10,627)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS....................... (35,108,204) (54,016,073)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [55,031,773 and 122,718,909 shares,
respectively].......................................... 550,317,734 1,227,189,093
Capital stock issued in reinvestment of dividends and
distributions [3,510,820 and 5,401,607 shares,
respectively].......................................... 35,108,204 54,016,073
Capital stock repurchased [(75,409,978) and (86,592,293)
shares, respectively].................................. (754,099,772) (865,922,932)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL STOCK TRANSACTIONS.............................. (168,673,834) 415,282,234
-------------- --------------
TOTAL INCREASE IN NET ASSETS.............................. (168,673,834) 415,282,234
NET ASSETS:
Beginning of period..................................... 1,335,474,222 920,191,988
-------------- --------------
End of period........................................... $1,166,800,388 $1,335,474,222
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A1
<PAGE> 2
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost:
$1,250,401,002).......................... $1,215,763,266
Cash....................................... 772
Interest and dividends receivable.......... 20,777,674
Receivable for investments sold............ 16,042,755
Receivable for investments sold short (Note
2)....................................... 8,329,133
Receivable for capital stock sold.......... 218,479
--------------
Total Assets............................. 1,261,132,079
--------------
LIABILITIES
Payable for investments purchased.......... 39,907,192
Investments sold short at value (proceeds
$8,251,875 including accrued interest)
(Note 2)................................. 8,288,568
Payable to investment adviser.............. 1,191,170
Payable for capital stock repurchased...... 770,526
Accrued expenses and other liabilities..... 85,283
Interest payable........................... 78,520
Due to broker -- variation margin.......... 27,344
--------------
Total Liabilities........................ 50,348,603
--------------
NET ASSETS................................... $1,210,783,476
==============
Net assets were comprised of:
Common stock, at $0.01 par value......... 1,093,136
Paid-in capital, in excess of par........ 1,191,279,365
--------------
1,192,372,501
Undistributed net investment income........ 98,545,756
Accumulated net realized loss on
investments.............................. (45,454,883)
Net unrealized depreciation on
investments.............................. (34,679,898)
--------------
Net assets, June 30, 2000.................. $1,210,783,476
==============
Net asset value and redemption price per
share, 109,313,639 outstanding shares of
common stock (authorized 170,000,000
shares).................................. $ 11.08
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Interest................................... $ 44,025,610
--------------
EXPENSES
Investment advisory fee.................... 2,420,616
Shareholders' reports...................... 86,000
Accounting fees............................ 52,000
Custodian's fees and expenses.............. 21,000
Audit fee and expenses..................... 7,000
Commitment fee on syndicated credit
agreement................................ 6,000
Transfer agent's fees and expenses......... 5,000
Legal fees and expenses.................... 3,000
Directors' fees............................ 2,000
Miscellaneous.............................. 2,373
--------------
Total expenses........................... 2,604,989
--------------
Less: custodian fee credit................. (12,648)
--------------
Net expenses............................. 2,592,341
--------------
NET INVESTMENT INCOME........................ 41,433,269
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. (17,985,534)
Futures.................................. 728,377
--------------
(17,257,157)
--------------
Net change in unrealized appreciation:
Investments.............................. 9,118,160
Futures.................................. 541,375
Short sale............................... (36,693)
--------------
9,622,842
--------------
NET LOSS ON INVESTMENTS...................... (7,634,315)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 33,798,954
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 41,433,269 $ 76,304,703
Net realized loss on investments........................ (17,257,157) (26,222,144)
Net change in unrealized appreciation (depreciation) on
investments............................................ 9,622,842 (58,723,850)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. 33,798,954 (8,641,291)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................... (19,037,496) --
Distributions from net realized capital gains........... (154,720) (3,302,269)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS....................... (19,192,216) (3,302,269)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [2,893,878 and 26,987,966 shares,
respectively].......................................... 31,830,011 296,061,460
Capital stock issued in reinvestment of dividends and
distributions [1,738,425 and 298,578 shares,
respectively].......................................... 19,192,216 3,302,269
Capital stock repurchased [(9,873,656) and (14,272,876)
shares, respectively].................................. (108,677,439) (156,161,922)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL STOCK TRANSACTIONS.............................. (57,655,212) 143,201,807
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... (43,048,474) 131,258,247
NET ASSETS:
Beginning of period..................................... 1,253,831,950 1,122,573,703
-------------- --------------
End of period(a)........................................ $1,210,783,476 $1,253,831,950
============== ==============
(a) Includes undistributed net investment income of:.... $ 98,545,756 $ 76,304,703
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A2
<PAGE> 3
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $313,671,938) ........ $307,031,935
Interest .......................................... 3,690,240
Receivable for capital stock sold ................. 147,928
------------
Total Assets .................................... 310,870,103
------------
LIABILITIES
Payable for investments purchased ................. 24,533,802
Payable to investment adviser ..................... 284,553
Payable for capital stock repurchased ............. 241,110
Due to broker -- variation margin ................. 64,328
Accrued expenses and other liabilities ............ 61,509
------------
Total Liabilities ............................... 25,185,302
------------
NET ASSETS .......................................... $285,684,801
============
Net assets were comprised of:
Common stock, at $0.01 par value ................ $ 241,979
Paid-in capital, in excess of par ............... 271,336,699
------------
271,578,678
Undistributed net investment income ............... 25,815,480
Accumulated net realized loss on investments ...... (5,119,518)
Net unrealized depreciation on investments ........ (6,589,839)
------------
Net assets, June 30, 2000. ....................... $285,684,801
============
Net asset value and redemption price per
share, 24,197,886 outstanding shares of
common stock (authorized 65,000,000
shares) ........................................... $ 11.81
============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Interest .......................................... $ 9,931,266
------------
EXPENSES
Investment advisory fee ........................... 609,152
Accounting fees ................................... 49,000
Shareholders' reports ............................. 23,000
Custodian's fees and expenses ..................... 6,000
Transfer agent's fees and expenses ................ 4,000
Commitment fee on syndicated credit agreement ..... 2,000
Audit fees and expenses ........................... 2,000
Directors' fees ................................... 2,000
Legal fees and expenses ........................... 600
Miscellaneous ..................................... 80
------------
Total expenses .................................. 697,832
Less: custodian fee credit ........................ (8,010)
------------
Net expenses .................................... 689,822
------------
NET INVESTMENT INCOME ............................... 9,241,444
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on:
Investments ..................................... (3,738,143)
Futures ......................................... (1,084,972)
------------
(4,823,115)
------------
Net change in unrealized appreciation
(depreciation) on:
Investments ..................................... 8,810,079
Futures ......................................... (226,008)
------------
8,584,071
------------
NET GAIN ON INVESTMENTS ............................. 3,760,956
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .......................................... $ 13,002,400
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................... $ 9,241,444 $ 22,098,715
Net realized gain (loss) on investments ................. (4,823,115) 626,818
Net change in unrealized appreciation (depreciation) on
investments ........................................... 8,584,071 (33,763,076)
------------ --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ............................................ 13,002,400 (11,037,543)
------------ --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income .................. (5,524,679) --
Distributions from net realized capital gains ......... (865,700) --
------------ --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ..................... (6,390,379) --
------------ --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [380,066 and 1,551,024 shares,
respectively] ......................................... 4,763,627 18,087,112
Capital stock issued in reinvestment of dividends and
distributions [545,254 and-0-shares, respectively] .... 6,390,379 --
Capital stock repurchased [(5,771,781) and (9,880,838)
shares, respectively] ................................. (67,562,117) (114,780,632)
------------ --------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS ............................................ (56,408,111) (96,693,520)
------------ --------------
TOTAL DECREASE IN NET ASSETS .............................. (49,796,090) (107,731,063)
NET ASSETS:
Beginning of period ..................................... 335,480,891 443,211,954
------------ --------------
End of period (a) ....................................... $285,684,801 $ 335,480,891
============ ==============
(a) Includes undistributed net investment income of: .... $ 25,815,480 $ 22,098,715
------------ --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A3
<PAGE> 6
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $4,223,653,578).... $4,531,594,222
Cash............................................ 1,114,092
Receivable for investments sold................. 80,377,762
Interest and dividends receivable............... 26,123,530
Receivable for securities lending income........ 8,039,638
Due from broker -- variation margin............. 336,413
Receivable for capital stock sold............... 282,322
--------------
Total Assets.................................. 4,647,867,979
--------------
LIABILITIES
Collateral for securities on loan............... 549,263,308
Payable for investments purchased............... 85,802,351
Securities lending rebate payable............... 6,494,516
Payable to investment adviser................... 5,424,651
Payable for capital stock repurchased........... 2,361,382
Accrued expenses and other liabilities.......... 335,335
Interest payable for short positions............ 1,984
--------------
Total Liabilities............................. 649,683,527
--------------
NET ASSETS........................................ $3,998,184,452
==============
Net assets were comprised of:
Common stock, at $0.01 par value.............. $ 2,597,442
Paid-in capital, in excess of par............. 3,619,831,557
--------------
3,622,428,999
Undistributed net investment income............. 40,136,790
Accumulated net realized gain on investments.... 27,135,156
Net unrealized appreciation on investments...... 308,483,507
--------------
Net assets, June 30, 2000....................... $3,998,184,452
==============
Net asset value and redemption price per share,
259,744,181 outstanding shares of common stock
(authorized 370,000,000 shares)................. $ 15.39
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $113,693 foreign withholding
tax).......................................... $ 12,292,960
Interest........................................ 83,210,207
Income from securities loaned, net.............. 928,244
--------------
96,431,411
--------------
EXPENSES
Investment advisory fee......................... 11,317,778
Shareholders' reports........................... 300,000
Accounting fees................................. 117,000
Custodian's fees and expenses................... 87,000
Audit fee and expenses.......................... 27,000
Commitment fee on syndicated credit agreement... 21,000
Legal fees and expenses......................... 9,000
Transfer agent's fees and expenses.............. 5,000
Directors' fees................................. 2,000
Miscellaneous................................... 7,950
--------------
Total expenses................................ 11,893,728
Less: custodian fee credit...................... (30,558)
--------------
Net expenses.................................. 11,863,170
--------------
NET INVESTMENT INCOME............................. 84,568,241
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments................................... 37,048,475
Futures....................................... 14,717
--------------
37,063,192
--------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................... (72,515,152)
Futures....................................... 1,064,445
--------------
(71,450,707)
--------------
NET LOSS ON INVESTMENTS........................... (34,387,515)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $ 50,180,726
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 84,568,241 $ 184,232,537
Net realized gain on investments......................... 37,063,192 444,194
Net change in unrealized appreciation (depreciation) on
investments............................................ (71,450,707) 111,038,163
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... 50,180,726 295,714,894
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income..................... (44,823,492) (183,840,496)
Distributions from net realized capital gains............ (308,721) (16,406,123)
Distributions in excess of net realized capital gains.... -- (9,619,315)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (45,132,213) (209,865,934)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [1,114,890 and 3,595,334 shares,
respectively].......................................... 16,968,248 54,694,876
Capital stock issued in reinvestment of dividends and
distributions [3,018,877 and 13,845,674 shares,
respectively].......................................... 45,132,213 209,865,934
Capital stock repurchased [(30,014,439) and (49,920,477)
shares, respectively].................................. (456,104,753) (759,229,309)
-------------- --------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS............................................. (394,004,292) (494,668,499)
-------------- --------------
TOTAL DECREASE IN NET ASSETS............................... (388,955,779) (408,819,539)
NET ASSETS:
Beginning of period...................................... 4,387,140,231 4,795,959,770
-------------- --------------
End of period(a)......................................... $3,998,184,452 $4,387,140,231
============== ==============
(a) Includes undistributed net investment income of:..... $ 40,136,790 $ 392,041
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A4
<PAGE> 7
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost:
$5,082,760,902).......................... $5,397,889,319
Cash....................................... 112,043
Receivable for investments sold short...... 169,123,840
Interest and dividends receivable.......... 30,015,221
Receivable for investments sold short...... 3,254,533
Due from broker -- variation margin........ 1,592,491
Receivable for capital stock sold.......... 647,871
Receivable for securities lending income... 514,378
--------------
Total Assets............................. 5,603,149,696
--------------
LIABILITIES
Collateral for securities on loan.......... 648,016,591
Payable for investments purchased.......... 180,841,097
Payable to investment adviser.............. 7,011,441
Securities lending rebate payable.......... 6,472,530
Investments sold short, at value (proceeds
received $3,224,344) (Note 2)............ 3,238,681
Payable for capital stock repurchased...... 2,663,480
Accrued expenses and other liabilities..... 542,510
Interest payable for short position........ 30,188
--------------
Total Liabilities........................ 848,816,518
--------------
NET ASSETS................................... $4,754,333,178
==============
Net assets were comprised of:
Common stock, at $0.01 par value......... 2,741,036
Paid-in capital, in excess of par........ 4,209,322,145
--------------
4,212,063,181
Undistributed net investment income........ 207,728,336
Accumulated net realized gain on
investments.............................. 22,549,997
Net unrealized appreciation on
investments.............................. 311,991,664
--------------
Net assets, June 30, 2000.................. $4,754,333,178
==============
Net asset value and redemption price per
share, 274,103,632 outstanding shares of
common stock (authorized 370,000,000
shares).................................... $ 17.35
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $256,421 foreign
withholding tax)......................... $ 22,040,465
Income from securities loaned, net......... 251,212
Interest................................... 74,421,789
--------------
96,713,466
--------------
EXPENSES
Investment advisory fee.................... 14,443,923
Shareholders' reports...................... 348,000
Accounting fees............................ 109,000
Custodian's fees and expenses.............. 99,000
Audit fee and expenses..................... 20,000
Commitment fee on syndicated credit
agreement................................ 25,000
Legal fees and expenses.................... 10,000
Transfer agent's fees and expenses......... 5,000
Directors' fees............................ 2,000
Miscellaneous.............................. 21,823
--------------
Total expenses........................... 15,083,746
Less: custodian fee credit................. (25,151)
--------------
Net expenses............................. 15,058,595
--------------
NET INVESTMENT INCOME........................ 81,654,871
--------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on:
Investments................................ 28,005,905
Futures.................................... 11,964,917
--------------
39,970,822
--------------
Net change in unrealized appreciation on:
Investments................................ (96,364,001)
Futures.................................... (1,605,638)
--------------
(97,969,639)
--------------
NET LOSS ON INVESTMENTS...................... (57,998,817)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 23,656,054
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 81,654,871 $ 168,147,775
Net realized gain on investments......................... 39,970,822 67,028,322
Net change in unrealized appreciation (depreciation) on
investments............................................ (97,969,639) 158,247,390
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... 23,656,054 393,423,487
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................... (42,004,729) (240,137)
Distributions from net realized capital gains.......... (67,504,778) (60,930,102)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (109,509,507) (61,170,239)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [1,200,247 and 3,138,333 shares,
respectively].......................................... 20,681,448 53,348,688
Capital stock issued in reinvestment of dividends and
distributions [6,573,200 and 3,554,343 shares,
respectively].......................................... 109,509,507 61,170,239
Capital stock repurchased [(24,158,046) and (42,922,625)
shares, respectively].................................. (415,268,619) (731,489,268)
-------------- --------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS........................................... (285,077,664) (616,970,341)
-------------- --------------
TOTAL DECREASE IN NET ASSETS............................... (370,931,117) (284,717,093)
NET ASSETS:
Beginning of period...................................... 5,125,264,295 5,409,981,388
-------------- --------------
End of period (a)........................................ $4,754,333,178 $5,125,264,295
============== ==============
(a) Includes undistributed net investment income of:..... $ 207,728,336 $ 168,078,194
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A5
<PAGE> 4
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost:
$873,842,613)............................. $ 758,276,387
Interest and dividends receivable........... 17,103,516
Due from manager............................ 941,736
Receivable for investments sold............. 722,238
Receivable for capital stock sold........... 152,020
Receivable for securities lending income.... 97,177
-------------
Total Assets.............................. 777,293,074
-------------
LIABILITIES
Bank overdraft.............................. 92,635
Collateral for securities on loan........... 22,897,220
Payable for investments purchased........... 16,328,173
Payable to investment adviser............... 990,518
Payable for capital stock repurchased....... 260,583
Securities lending rebate payable........... 220,922
Accrued expenses and other liabilities...... 96,138
-------------
Total Liabilities......................... 40,886,189
-------------
NET ASSETS.................................... $ 736,406,885
=============
Net assets were comprised of:
Common stock, at $0.01 par value.......... $ 1,027,257
Paid-in capital, in excess of par......... 822,779,544
-------------
823,806,801
Undistributed net investment income......... 102,584,514
Accumulated net realized loss on
investments............................... (75,359,940)
Net unrealized depreciation on
investments............................... (114,624,490)
-------------
Net assets, June 30, 2000................... $ 736,406,885
=============
Net asset value and redemption price per
share, 102,725,876 outstanding shares of
common stock (authorized 195,000,000
shares)..................................... $ 7.17
=============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Interest.................................... $ 38,975,412
Dividends................................... 2,606,232
Income from securities loaned, net.......... 42,765
-------------
41,624,409
-------------
EXPENSES
Investment advisory fee..................... 2,086,750
Accounting fees............................. 72,600
Shareholders' reports....................... 44,700
Custodian's fee and expenses................ 22,000
Audit fee and expenses...................... 5,000
Transfer agent's fees and expenses.......... 5,000
Commitment fee on syndicated credit
agreement................................. 4,000
Directors' fees............................. 2,000
Legal fees and expenses..................... 2,000
Miscellaneous............................... 1,240
-------------
Total expenses............................ 2,245,290
Less: custodian fee credit.................. (12,137)
-------------
Net expenses.............................. 2,233,153
-------------
NET INVESTMENT INCOME......................... 39,391,256
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments............................... (24,021,874)
Options written........................... 68,000
-------------
(23,953,874)
-------------
Net change in unrealized depreciation on
investments............................... (29,872,990)
-------------
NET LOSS ON INVESTMENTS....................... (53,826,864)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $ (14,435,608)
=============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 39,391,256 $ 84,257,678
Net realized loss on investments........................ (23,953,874) (42,984,475)
Net change in unrealized depreciation on investments.... (29,872,990) (5,307,921)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. (14,435,608) 35,965,282
------------- -------------
DIVIDENDS
Dividends from net investment income.................. (21,064,420) (2,179,668)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [3,084,426 and 17,182,804 shares,
respectively].......................................... 22,712,941 127,100,943
Capital stock issued in reinvestment of dividends
[2,933,763 and 291,010 shares, respectively]........... 21,064,420 2,179,668
Capital stock repurchased [(10,003,033) and (20,307,030)
shares, respectively].................................. (74,070,995) (150,186,649)
------------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS........................................... (30,293,634) (20,906,038)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... (65,793,662) 12,879,576
NET ASSETS:
Beginning of period..................................... 802,200,547 789,320,971
------------- -------------
End of period(a)........................................ $ 736,406,885 $ 802,200,547
============= =============
(a) Includes undistributed net investment income of:.... $ 102,584,514 $ 84,257,678
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A6
<PAGE> 5
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $2,421,693,015)........ $4,632,248,585
Cash................................................ 82,577
Receivable for capital stock sold................... 5,217,430
Interest and dividends receivable................... 3,559,711
Due from broker -- variation margin................. 417,311
Receivable for securities lending income............ 26,971
--------------
Total Assets...................................... 4,641,552,585
--------------
LIABILITIES
Payable for investments purchased................... 5,350,790
Payable for capital stock repurchased............... 3,574,620
Payable to investment adviser....................... 3,384,373
Accrued expenses and other liabilities.............. 308,973
Payable for securities lending rebate............... 6,743
--------------
Total Liabilities................................. 12,625,499
--------------
NET ASSETS............................................ $4,628,927,086
==============
Net assets were comprised of:
Common stock, at $0.01 par value.................. 1,050,526
Paid-in capital, in excess of par................. 2,352,018,287
--------------
2,353,068,813
Undistributed net investment income................. 9,567,144
Accumulated net realized gain on investments........ 56,864,541
Net unrealized appreciation on investments.......... 2,209,426,588
--------------
Net assets, June 30, 2000........................... $4,628,927,086
==============
Net asset value and redemption price per share,
105,052,556 outstanding shares of common stock
(authorized 170,000,000 shares)..................... $ 44.06
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $140,415 foreign withholding
tax).............................................. $ 25,750,240
Interest............................................ 1,854,610
Income from securities loaned, net.................. 20,228
--------------
27,625,078
--------------
EXPENSES
Investment advisory fee............................. 7,945,377
Shareholders' reports............................... 317,000
Custodian's fees and expenses....................... 67,000
Accounting fee...................................... 56,000
Audit fee and expenses.............................. 28,000
Commitment fee on syndicated credit agreement....... 22,000
Directors' fees..................................... 9,800
Legal fees and expenses............................. 9,000
Transfer agent's fees and expenses.................. 5,000
Miscellaneous....................................... 2,403
--------------
Total expenses.................................... 8,461,580
Less: custodian fee credit.......................... (3,416)
--------------
Net expenses........................................ 8,458,164
--------------
NET INVESTMENT INCOME................................. 19,166,914
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on:
Investments....................................... 58,723,760
Futures........................................... 1,178,443
--------------
59,902,203
--------------
Net change in unrealized appreciation on:
Investments....................................... (100,120,922)
Futures........................................... (3,553,245)
--------------
(103,674,167)
--------------
NET LOSS ON INVESTMENTS............................... (43,771,964)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $ (24,605,050)
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 19,166,914 $ 44,408,380
Net realized gain on investments......................... 59,902,203 46,195,228
Net change in unrealized appreciation -- depreciation on
investments............................................ (103,674,167) 682,952,950
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. (24,605,050) 773,556,558
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................... (9,915,562) (44,092,588)
Distributions from net realized capital gains.......... (4,659,010) (54,347,010)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (14,574,572) (98,439,598)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [5,464,147 and 19,061,602 shares,
respectively].......................................... 236,393,149 768,257,840
Capital stock issued in reinvestment of dividends and
distributions [355,044 and 2,357,499 shares,
respectively].......................................... 14,574,572 98,439,598
Capital stock repurchased [(5,490,744) and (10,712,263)
shares, respectively].................................. (237,878,533) (434,885,868)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS........................................... 13,089,188 431,811,570
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................... (26,090,434) 1,106,928,530
NET ASSETS:
Beginning of period...................................... 4,655,017,520 3,548,088,990
-------------- --------------
End of period (a)........................................ $4,628,927,086 $4,655,017,520
============== ==============
(a) Includes undistributed net investment income of:..... $ 9,567,144 $ 315,792
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A7
<PAGE> 6
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $1,738,740,135).... $1,755,879,262
Foreign currency, at value (cost: $3,174,975)... 3,156,501
Cash............................................ 3,228,223
Receivable for investments sold................. 16,769,324
Interest and dividends receivable............... 5,595,603
Receivable for securities lending income........ 482,757
Receivable for capital stock sold............... 40,043
Deferred expenses and other assets.............. 2,712
--------------
Total Assets.................................. 1,785,154,425
--------------
LIABILITIES
Collateral for securities on loan............... 53,524,300
Securities lending rebate payable............... 3,878,871
Payable for investments purchased............... 2,374,016
Payable to investment adviser................... 1,710,226
Payable for capital stock repurchased........... 1,276,810
Accrued expenses and other liabilities.......... 234,961
--------------
Total Liabilities............................. 62,999,184
--------------
NET ASSETS........................................ $1,722,155,241
==============
Net assets were comprised of:
Common stock, at $0.01 par value.............. 942,079
Paid-in capital, in excess of par............. 1,602,326,343
--------------
1,603,268,422
Undistributed net investment income........... 11,597,212
Accumulated net realized gain on
investments................................. 90,168,954
Net unrealized appreciation on investments.... 17,120,653
--------------
Net assets, June 30, 2000................... $1,722,155,241
==============
Net asset value and redemption price per
share, 94,207,874 outstanding shares of
common stock (authorized 170,000,000
shares)..................................... $ 18.28
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $260,766 foreign withholding
tax).......................................... $ 25,903,447
Interest........................................ 1,235,907
Income from securities loaned, net.............. 163,687
--------------
27,303,041
--------------
EXPENSES
Investment advisory fee......................... 3,576,368
Shareholders' reports........................... 128,000
Accounting fees................................. 49,000
Custodian's fees and expenses................... 36,000
Audit fee and expenses.......................... 12,000
Commitment fee on syndicated credit agreement... 8,000
Transfer agent's fees and expenses.............. 5,000
Legal fees and expenses......................... 4,000
Directors' fees................................. 4,000
Miscellaneous................................... 531
--------------
Total expenses................................ 3,822,899
Less: custodian fee credit...................... (23,884)
--------------
Net expenses.................................. 3,799,015
--------------
NET INVESTMENT INCOME............................. 23,504,026
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments................................... 90,896,506
Foreign currencies............................ (689)
--------------
90,895,817
--------------
Net change in unrealized appreciation on:
Investments................................... (225,104,316)
Foreign currencies............................ (18,474)
--------------
(225,122,790)
--------------
NET LOSS ON INVESTMENTS........................... (134,226,973)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $ (110,722,947)
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 23,504,026 $ 49,197,688
Net realized gain on investments......................... 90,895,817 196,991,597
Net change in unrealized appreciation/depreciation on
investments............................................ (225,122,790) 1,676,194
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. (110,722,947) 247,865,479
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................... (15,228,194) (47,863,180)
Distributions from net realized capital gains.......... (3,969,841) (228,772,711)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (19,198,035) (276,635,891)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [2,505,161 and 4,932,597 shares,
respectively].......................................... 45,103,356 106,031,268
Capital stock issued in reinvestment of dividends and
distributions [1,076,726 and 14,298,341 shares,
respectively].......................................... 19,198,035 276,635,891
Capital stock repurchased [(13,069,113) and (22,475,612)
shares, respectively].................................. (236,264,528) (472,178,202)
-------------- --------------
NET DECREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS........................................... (171,963,137) (89,511,043)
-------------- --------------
TOTAL DECREASE IN NET ASSETS............................... (301,884,119) (118,281,455)
NET ASSETS:
Beginning of period...................................... 2,024,039,360 2,142,320,815
-------------- --------------
End of period (a)........................................ $1,722,155,241 $2,024,039,360
============== ==============
(a) Includes undistributed net investment income of:..... $ 11,597,212 $ 3,322,069
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A8
<PAGE> 7
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $4,965,052,251)........ $5,457,618,332
Cash................................................ 11,923
Dividends and interest receivable................... 10,908,592
Receivable for investments sold..................... 5,194,729
Receivable for capital stock sold................... 1,881,810
--------------
Total Assets...................................... 5,475,615,386
--------------
LIABILITIES
Payable to investment adviser....................... 6,252,193
Payable for capital stock repurchased............... 4,605,407
Accrued expenses and other liabilities.............. 616,776
Withholding Tax Payable............................. 96,189
Distribution fee payable............................ 310
Administration fee payable.......................... 186
--------------
Total Liabilities................................. 11,571,061
--------------
NET ASSETS............................................ $5,464,044,325
==============
Net assets were comprised of:
Common stock, at $0.01 par value.................. $ 2,061,844
Paid-in capital, in excess of par................. 4,479,964,367
--------------
4,482,026,211
Undistributed net investment income............... 32,189,572
Accumulated net realized gain on investments...... 457,266,189
Net unrealized appreciation on investments and
foreign currencies.............................. 492,562,353
--------------
Net assets, June 30, 2000........................... $5,464,044,325
==============
CLASS I:
Net asset value and redemption price per share,
$5,463,447,836/206,161,922 outstanding shares of
common stock (authorized 295,000,000 shares)...... $ 26.50
==============
CLASS II:
Net asset value and redemption price per share,
$596,489/22,517 outstanding shares of common stock
(authorized 5,000,000 shares)..................... $ 26.49
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $184,221 foreign withholding
tax).............................................. $ 43,271,717
Interest............................................ 26,006,743
--------------
69,278,460
--------------
EXPENSES
Investment advisory fee............................. 12,723,445
Distribution Fee -- Class II........................ 494
Administration Fee -- Class II...................... 296
Shareholders' reports............................... 414,000
Custodian expense................................... 95,000
Accounting fees..................................... 50,000
Commitment fee on syndicated credit agreement....... 37,000
Audit fee and expenses.............................. 30,000
Transfer agent's fees and expenses.................. 12,000
Legal fees and expenses............................. 5,000
Directors' fees..................................... 2,000
Miscellaneous expenses.............................. 9,991
--------------
Total expenses.................................... 13,379,226
Less: custodian fee credit.......................... (29,635)
--------------
Net expenses...................................... 13,349,591
--------------
NET INVESTMENT INCOME................................. 55,928,869
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES
Net realized gain on:
Investments....................................... 457,237,724
Foreign currencies................................ 2,338,357
--------------
459,576,081
--------------
Net change in unrealized appreciation (depreciation)
on:
Investments....................................... (857,460,809)
Foreign currencies................................ 136,271
--------------
(857,324,538)
--------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCIES........ (397,748,457)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $ (341,819,588)
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 55,928,869 $ 108,030,872
Net realized gain on investments and foreign
currencies............................................. 459,576,081 762,123,248
Net change in unrealized depreciation on investments and
foreign currencies..................................... (857,324,538) (132,832,254)
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. (341,819,588) 737,321,866
-------------- ---------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income
Class I................................................ (29,016,687) (105,053,778)
Class II............................................... (4,581) (2,550)
-------------- ---------------
(29,021,268) (105,056,328)
-------------- ---------------
Distributions from net realized capital gains
Class I................................................ (136,935,527) (737,903,685)
Class II............................................... (10,872) (30,961)
-------------- ---------------
(136,946,399) (737,934,646)
-------------- ---------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (165,967,667) (842,990,974)
-------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [3,187,694 and 8,685,422 shares,
respectively].......................................... 87,731,444 269,993,500
Capital stock issued in reinvestment of dividends and
distributions
[6,358,914 and 29,304,589 shares, respectively]........ 165,967,667 842,990,974
Capital stock repurchased [(19,095,484) and (33,043,224)
shares, respectively].................................. (517,163,773) (1,019,065,758)
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL STOCK TRANSACTIONS............................... (263,464,662) 93,918,716
-------------- ---------------
TOTAL DECREASE IN NET ASSETS............................... (771,251,917) (11,750,392)
NET ASSETS:
Beginning of period...................................... 6,235,296,242 6,247,046,634
-------------- ---------------
End of period(a)......................................... $5,464,044,325 $ 6,235,296,242
============== ===============
(a) Includes undistributed net investment income of:..... $ 32,189,572 $ 2,943,614
-------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A9
<PAGE> 8
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
PRUDENTIAL JENNISON PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $2,719,430,030).... $3,478,239,086
Cash............................................ 749
Receivable for investments sold................. 8,349,032
Receivable for capital stock sold............... 1,519,254
Interest and dividends receivable............... 1,228,980
Receivable for securities lending, net.......... 436,026
--------------
Total Assets.................................. 3,489,773,127
--------------
LIABILITIES
Payable to investment adviser................... 4,845,097
Payable for investments purchased............... 11,274,047
Payable for capital stock repurchased........... 349,577
Distribution fee payable........................ 465
Administration fee payable...................... 279
Accrued expenses and other liabilities.......... 173,711
--------------
Total Liabilities............................. 16,643,176
--------------
NET ASSETS........................................ $3,473,129,951
==============
Net assets were comprised of:
Common stock, at $0.01 par value.............. $ 1,048,296
Paid-in capital, in excess of par............. 2,473,158,889
--------------
2,474,207,185
Undistributed net investment income........... 923,669
Accumulated net realized gain on
investments................................. 239,190,019
Net unrealized appreciation on investments and
foreign currencies.......................... 758,809,078
--------------
Net assets, June 30, 2000................... $3,473,129,951
==============
Class I:
Net asset value and redemption price per
share, 3,470,354,015/104,745,716 outstanding
shares of common stock (authorized
110,000,000 shares)......................... $ 33.13
==============
Class II:
Net asset value and redemption price per
share, 2,775,935/83,915 outstanding shares
of common stock (authorized 5,000,000
shares)..................................... $ 33.08
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $189,126 foreign withholding
tax).......................................... $ 6,178,414
Interest........................................ 3,995,743
Income from securities loaned, net.............. 565,833
--------------
10,739,990
--------------
EXPENSES
Investment advisory fee......................... 9,532,134
Administration fee -- Class II.................. 285
Distribution fee -- Class II.................... 476
Shareholders' reports........................... 186,000
Accounting fee.................................. 40,000
Custodian's fees and expenses................... 35,000
Audit fees and expenses......................... 17,000
Commitment fee on syndicated credit agreement... 13,000
Legal fees and expenses......................... 5,000
Transfer agent's fees and expenses.............. 5,000
Directors' fees................................. 2,000
Miscellaneous................................... 4,616
--------------
Total expenses................................ 9,840,511
Less: custodian fee credit...................... (24,190)
--------------
Net expenses.................................. 9,816,321
--------------
NET INVESTMENT INCOME............................. 923,669
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments................ 240,205,243
--------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................... (133,489,787)
Foreign currencies............................ 22
--------------
(133,489,765)
--------------
NET GAIN ON INVESTMENTS........................... 106,715,478
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $ 107,639,147
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 923,669 $ 3,100,657
Net realized gain on investments......................... 240,205,243 147,534,996
Net change in unrealized appreciation (depreciation) on
investments............................................ (133,489,765) 574,663,580
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... 107,639,147 725,299,233
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income -- Class I.......... -- (3,100,657)
Distributions from net realized capital gains
Class I.................................................. (49,620,027) (109,146,897)
Class II................................................. (2,217) --
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS........................ (49,622,244) (112,247,554)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [22,430,665 and 46,076,803 shares,
respectively].......................................... 752,106,237 1,238,109,549
Capital stock issued in reinvestment of dividends and
distributions [1,630,701 and 3,815,423 shares,
respectively].......................................... 49,622,244 112,247,554
Capital stock repurchased [(4,763,710) and (14,500,046)
shares, respectively].................................. (157,283,294) (391,470,256)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS............................................. 644,445,187 958,886,847
-------------- --------------
TOTAL DECREASE IN NET ASSETS............................... 702,462,090 1,571,938,526
NET ASSETS:
Beginning of period...................................... 2,770,667,861 1,198,729,335
-------------- --------------
End of period(a)......................................... $3,473,129,951 $2,770,667,861
============== ==============
(a) Includes undistributed net investment income of:..... $ 923,669 $ --
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A10
<PAGE> 9
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 2000
ASSETS
Investments, at value (cost: $1,146,960,150)........ $1,436,414,240
Foreign currency, at value (cost: $102,805,522)..... 104,845,050
Receivable for capital stock sold................... 2,758,588
Receivable for investments sold..................... 2,116,815
Dividends and interest receivable................... 1,550,070
Receivable for securities lending................... 966,735
--------------
Total Assets...................................... 1,548,651,498
--------------
LIABILITIES
Bank overdraft...................................... 314,406
Collateral for securities on loan................... 103,874,453
Unrealized depreciation on interest rate swap....... 2,919,014
Payable to investment adviser....................... 2,624,532
Securities lending rebate payable................... 1,246,671
Payable for capital stock repurchased............... 419,268
Forward currency contracts payable.................. 418,608
Accrued expenses and other liabilities.............. 296,001
--------------
Total Liabilities................................. 112,112,953
--------------
NET ASSETS............................................ $1,436,538,545
==============
Net assets were comprised of:
Common stock, at $0.01 par value.................. $ 502,927
Paid-in capital, in excess of par................. 897,870,258
--------------
898,373,185
Undistributed net investment income................. 4,345,469
Accumulated net realized gain on investments........ 245,654,456
Net unrealized appreciation on investments and
foreign currencies................................ 288,165,435
--------------
Net assets, June 30, 2000........................... $1,436,538,545
==============
Net asset value and redemption price per
share, 50,292,663 outstanding shares of common stock
(authorized 70,000,000 shares)...................... $ 28.56
==============
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 2000
INVESTMENT INCOME
Dividends (net of $698,547 foreign withholding
tax).............................................. $ 4,649,364
Interest............................................ 3,309,843
Income from securities loaned, net.................. 260,853
--------------
8,220,060
--------------
EXPENSES
Investment advisory fee............................. 5,207,848
Custodian fees and expenses......................... 301,000
Shareholders' reports............................... 87,000
Accounting fees..................................... 58,000
Audit fee and expenses.............................. 8,000
Commitment fee on syndicated credit agreement....... 6,000
Transfer agent's fees and expenses.................. 5,000
Legal fees and expenses............................. 2,000
Directors' fees..................................... 2,000
Miscellaneous expenses.............................. 1,123
--------------
Total expenses.................................... 5,677,971
Less: custodian fee credit.......................... (32,581)
--------------
Net expenses...................................... 5,645,390
--------------
NET INVESTMENT INCOME................................. 2,574,670
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES
Net realized gain on:
Investments......................................... 235,305,816
Interest rate swaps................................. 6,476,461
Foreign currencies.................................. 4,528,544
--------------
246,310,821
--------------
Net change in unrealized appreciation (depreciation)
on:
Investments......................................... (262,044,493)
Interest rate swaps................................. (4,306,266)
Foreign currencies.................................. 1,783,792
--------------
(264,566,967)
--------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCIES........ (18,256,146)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $ (15,681,476)
==============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................... $ 2,574,670 $ 2,125,578
Net realized gain on investments and foreign
currencies............................................. 246,310,821 105,889,653
Net change in unrealized appreciation (depreciation) on
investments and foreign currencies..................... (264,566,967) 315,255,820
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. (15,681,476) 423,271,051
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................... (2,463,844) --
Distributions in excess of net investment income....... -- (4,140,269)
Distributions from net realized capital gains.......... (89,602,571) (7,259,626)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................... (92,066,415) (11,399,895)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [11,656,638 and 12,980,789 shares,
respectively].......................................... 353,741,716 303,934,195
Capital stock issued in reinvestment of dividends and
distributions [3,409,867 and 520,780 shares,
respectively].......................................... 92,066,415 11,399,895
Capital stock repurchased [(6,686,931) and (11,503,347)
shares, respectively].................................. (199,835,783) (273,433,117)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK
TRANSACTIONS............................................. 245,972,348 41,900,973
-------------- --------------
TOTAL INCREASE IN NET ASSETS............................... 138,224,457 453,772,129
NET ASSETS:
Beginning of period...................................... 1,298,314,088 844,541,959
-------------- --------------
End of period (a)........................................ $1,436,538,545 $1,298,314,088
============== ==============
(a) Includes undistributed net investment income of:..... $ 4,345,469 $ --
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A11
<PAGE> 10
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
BANK NOTES -- 9.7%
Amex Centurion Bank....................................... 7.01% 07/10/00 $ 6,000 $ 6,000,000
Bank of America, N.A...................................... 6.73% 09/11/00 31,000 31,000,000
Comerica Bank, N.A. (a)................................... 6.66% 07/03/00 6,000 5,999,286
Comerica Bank, N.A. (a)................................... 6.66% 07/06/00 6,000 6,000,343
Comerica Bank, N.A. (a)................................... 6.57% 07/07/00 5,000 4,998,599
Comerica Bank, N.A. (a)................................... 6.61% 07/19/00 26,000 25,992,627
First Union National Bank (a)............................. 6.28% 07/21/00 24,000 24,000,000
Keybank, N.A. (a)......................................... 6.05% 07/17/00 4,000 4,000,129
National City Bank of Cleveland........................... 6.73% 02/09/01 5,000 4,998,551
--------------
112,989,535
--------------
CERTIFICATES OF DEPOSIT-DOMESTIC -- 4.1%
First Union National Bank................................. 7.09% 12/22/00 32,000 32,000,000
Morgan Guaranty Trust Co.................................. 5.70% 07/19/00 16,000 16,000,000
--------------
48,000,000
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 10.0%
Bank of Nova Scotia....................................... 6.65% 02/01/01 10,000 9,997,204
Dexia Bank Grand Cayman................................... 7.13% 07/03/00 8,171 8,171,000
National Westminster Bank PLC............................. 6.10% 11/27/00 50,000 49,957,463
Rabobank Nederland........................................ 5.66% 07/13/00 34,000 33,999,552
Westpac Banking Corp...................................... 6.52% 01/29/01 15,000 14,995,861
--------------
117,121,080
COMMERCIAL PAPER -- 51.6%
Alcoa, Inc................................................ 6.62% 07/18/00 10,000 10,000,000
Alcoa, Inc................................................ 6.75% 07/20/00 25,000 25,000,000
Alliance & Leicester PLC.................................. 6.14% 07/10/00 10,000 9,984,650
Alliance & Leicester PLC.................................. 6.58% 08/22/00 3,800 3,763,883
Aon Corp.................................................. 6.65% 07/13/00 1,500 1,496,675
Aon Corp.................................................. 6.61% 07/14/00 2,892 2,885,097
B.B.V. Finance, Inc....................................... 6.57% 08/09/00 3,572 3,546,576
Bank One Corp............................................. 6.86% 08/21/00 10,000 10,000,000
Bank One Corp............................................. 6.86% 08/17/00 3,100 3,100,000
Bank One Corp. (a)........................................ 6.87% 09/13/00 14,000 14,001,164
Banc One Financial Corp................................... 6.07% 08/03/00 10,000 9,944,404
Bank of Scotland Treasury Services PLC.................... 6.62% 09/11/00 5,000 4,933,800
Barton Capital Corp....................................... 6.85% 07/03/00 12,401 12,396,281
Barton Capital Corp....................................... 6.84% 07/14/00 8,207 8,186,729
Barton Capital Corp....................................... 6.77% 07/21/00 36,488 36,350,765
BASF AG................................................... 6.60% 08/28/00 19,000 18,797,967
BBL North America......................................... 6.58% 08/18/00 3,821 3,787,477
Bell Atlantic Financial Services, Inc..................... 6.66% 08/16/00 9,463 9,382,470
Bradford & Bingley Building Society....................... 6.58% 08/07/00 6,000 5,959,424
Bradford & Bingley Building Society....................... 6.65% 09/08/00 24,028 23,721,743
Brahms Funding Corp....................................... 6.71% 07/28/00 15,000 14,924,569
Centric Capital Corp...................................... 6.65% 08/23/00 6,500 6,436,363
Centric Capital Corp...................................... 6.65% 09/13/00 6,250 6,164,566
CIT Group, Inc............................................ 6.62% 08/22/00 18,000 17,827,880
Citicorp (a).............................................. 6.68% 07/03/00 2,000 2,000,000
Citicorp.................................................. 6.60% 08/17/00 25,000 24,784,584
First Union Corp.......................................... 5.63% 02/12/01 2,400 2,386,206
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE> 11
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Corporate Asset Funding Co., Inc.......................... 6.63% 08/24/00 $ 8,000 $ 7,920,440
Countrywide Home Loan..................................... 6.71% 07/31/00 17,800 17,700,468
CXC, Inc.................................................. 6.73% 11/15/00 25,000 24,359,715
Delaware Funding Corp..................................... 6.65% 07/25/00 12,676 12,619,803
Duke Capital Corp......................................... 7.25% 07/05/00 10,000 9,991,945
Edison Asset Securitization LLC........................... 6.65% 08/14/00 14,305 14,188,732
Falcon Asset Securitization Corp.......................... 6.60% 08/08/00 662 657,388
Falcon Asset Securitization Corp.......................... 6.62% 08/14/00 9,955 9,874,453
Forrestal Funding Master Trust............................ 6.63% 09/15/00 18,286 18,030,057
Fortis Funding LLC........................................ 6.75% 10/06/00 21,450 21,059,878
General Electric Capital Corp............................. 6.55% 07/17/00 2,300 2,293,304
General Electric Capital Corp............................. 6.55% 07/18/00 1,000 996,907
General Electric Capital Corp............................. 6.65% 09/07/00 1,300 1,283,671
GTE Corp.................................................. 6.62% 07/05/00 20,000 19,985,289
GTE Corp.................................................. 6.62% 08/02/00 11,000 10,935,271
Hartford Financial Service Group, Inc..................... 6.65% 07/14/00 4,000 3,990,395
Hartford Financial Service Group, Inc..................... 6.62% 07/31/00 4,000 3,977,933
Homeside Lending.......................................... 6.60% 08/02/00 7,000 6,958,933
Invensys PLC.............................................. 7.30% 07/05/00 10,000 9,991,889
Salomon Smith Barney Holdings, Inc........................ 6.62% 09/11/00 11,378 11,227,355
Santander Finance, Inc.................................... 6.71% 11/14/00 34,000 33,138,138
Santander Finance, Inc.................................... 6.71% 11/15/00 20,000 19,489,294
SBC Communications, Inc................................... 6.55% 07/12/00 2,700 2,694,596
Sonoco Products Co........................................ 7.05% 07/05/00 19,000 18,985,117
Southern Co............................................... 6.75% 07/31/00 2,750 2,734,531
Sweetwater Capita Corp.................................... 6.67% 09/13/00 5,276 5,203,663
Sweetwater Capita Corp.................................... 6.67% 09/14/00 2,482 2,447,511
Sweetwater Capita Corp.................................... 6.67% 09/18/00 4,068 4,008,457
Wells Fargo & Co.......................................... 6.60% 07/18/00 13,500 13,457,925
--------------
601,966,331
--------------
OTHER CORPORATE OBLIGATIONS -- 23.3%
Abbey National Treasury Services, PLC..................... 6.24% 07/24/00 20,000 19,999,261
Centex Home Mortgage (a)(b)............................... 6.79% 07/20/00 5,000 5,000,000
CIT Group, Inc. (a)....................................... 6.68% 10/16/00 4,000 3,994,236
Commercial Credit Co...................................... 5.75% 07/15/00 2,000 1,999,855
Conseco Finance Vehicle Trust (a)(b)...................... 6.81% 07/17/00 7,360 7,359,781
Daimler Chrysler.......................................... 6.53% 07/06/00 29,000 28,999,483
Ford Motor Credit Corp. (a)............................... 6.73% 08/18/00 35,000 34,996,281
Ford Motor Credit Corp. (a)............................... 6.77% 10/02/00 28,000 27,993,051
Goldman Sachs Group L.P. (a).............................. 6.92% 09/15/00 45,000 45,000,000
Restructured Asset Securities Enhanced Return (a)(b)...... 6.74% 07/06/00 24,000 24,000,000
Security Life of Denver (a)(b)............................ 6.35% 07/12/00 15,000 15,000,000
Short Term Repackaged Asset Trust (a)(b).................. 6.75% 07/18/00 12,000 12,000,000
Strategic MM Tr 99-A (a).................................. 6.40% 07/13/00 27,000 27,000,000
Travelers Group, Inc. (a)(b).............................. 6.30% 07/06/00 4,000 4,000,000
US Bancorp (a)............................................ 6.72% 07/20/00 14,265 14,263,445
--------------
271,605,393
--------------
U.S. GOVERNMENT OBLIGATIONS -- 1.3%
Federal Home Loan Bank (a)................................ 6.19% 07/19/00 15,000 14,994,120
--------------
TOTAL INVESTMENTS -- 100.0%
(amortized cost $1,166,676,459; (c))....................................................... 1,166,676,459
--------------
ASSETS IN EXCESS OF OTHER LIABILITIES........................................................ 123,929
--------------
TOTAL NET ASSETS -- 100.0%................................................................... $1,166,800,388
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B2
<PAGE> 12
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (German Stock Company)
PLC Public Limited Company (British Corporation)
(a) Indicates a variable rate security. The maturity date presented for these
instruments is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at June 30, 2000.
(b) Indicates a restricted security and deemed illiquid. The Aggregate cost and
value of restricted securities $67,359,781 represents 5.8% of net assets.
(c) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
The industry classification of portfolio holdings and other assets in excess
of liabilities shown as a percentage of net assets as of June 30, 2000 was as
follows:
<TABLE>
<S> <C>
Commercial Banks............................................ 43.8%
Asset Backed Securities..................................... 15.0%
Motor Vehicle Parts......................................... 7.9%
Bank Holding Company U.S.................................... 6.9%
Security Brokers & Dealers.................................. 4.8%
Phone Company Communications................................ 3.7%
Metals...................................................... 3.0%
Life Insurance.............................................. 2.5%
Short Term Business Credit.................................. 2.3%
Mortgage Bankers............................................ 2.1%
Paperboard Mills............................................ 1.6%
Chemicals & Allied Products................................. 1.6%
Federal Credit Agencies..................................... 1.3%
Electrical Services......................................... 1.1%
Fire & Marine Casualty Insurance............................ 1.0%
Electric & Equipment, Computer.............................. 0.8%
Accidental/Health Insurance................................. 0.4%
Personal Credit Institution................................. 0.2%
-----
100.0%
Other assets in excess of liabilities....................... 0.0%
-----
100.0%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B3
<PAGE> 13
DIVERSIFIED BOND PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 88.2% PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS -- 87.9% ------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 1.8%
Boeing Co. ........................................... A1 8.75% 08/15/21 $ 6,250 $ 6,882,562
Northrop Grumman Corp. ............................... Baa3 7.875% 03/01/26 3,400 3,222,826
Raytheon Co. ......................................... Baa2 6.45% 08/15/02 5,000 4,871,300
Raytheon Co. ......................................... Baa2 6.50% 07/15/05 4,200 3,986,934
United Technologies Corp. ............................ A2 7.50% 09/15/29 3,200 3,150,000
--------------
22,113,622
--------------
AIRLINES -- 1.4%
Continental Airlines, Inc. ........................... Aa3 7.461% 04/01/15 5,104 4,886,677
United Airlines, Inc. ................................ Baa3 10.67% 05/01/04 7,000 7,120,330
United Airlines, Inc. ................................ Baa3 11.21% 05/01/14 5,000 5,154,400
--------------
17,161,407
--------------
ASSET BACKED SECURITIES -- 3.2%
Advanta Mortgage Loan Trust, Series 1994-3............ Aaa 8.49% 01/25/26 7,014 7,010,719
California Infrastructure PG&E, Series 1997-1......... Aaa 6.32% 09/25/05 4,000 3,908,125
Citibank Credit Card Master Trust..................... Aaa 6.10% 05/15/08 12,500 11,703,125
MBNA Corp., Series 1999-B ............................ Aaa 5.90% 08/15/11 17,900 16,201,614
--------------
38,823,583
--------------
AUTO/EQUIPMENT RENTAL -- 0.1%
Hertz Corp. .......................................... A3 8.25% 06/01/05 750 765,600
--------------
AUTOMOBILES & TRUCKS -- 0.6%
Ford Motor Co. ....................................... A2 7.45% 07/16/31 2,300 2,175,179
Navistar International Corp. ......................... Baa3 7.00% 02/01/03 3,500 3,342,500
Navistar International Corp. ......................... Ba2 8.00% 02/01/08 1,350 1,238,625
--------------
6,756,304
--------------
BANKS & FINANCIAL SERVICES -- 5.2%
Bayerische Landesbank Girozentrale, (Germany)......... Aaa 5.875% 12/01/08 7,800 6,938,568
Chase Manhattan Corp. ................................ A1 7.875% 06/15/10 1,000 998,000
Chase Manhattan Corp. ................................ A1 6.375% 04/01/08 5,770 5,335,461
International Bank for Reconstruction & Development
(Supranational) .................................... Aaa 12.375% 10/15/02 750 834,540
Lehman Brothers Holdings, Inc. ....................... A3 6.625% 04/01/04 13,245 12,640,895
Lehman Brothers Holdings, Inc. ....................... A3 6.375% 05/07/02 560 546,829
Lehman Brothers Holdings, Inc. ....................... A3 6.625% 02/05/06 3,685 3,443,227
Merrill Lynch, Pierce, Fenner & Smith, Inc. .......... Aa3 6.922% 06/24/03 15,000 14,985,000
Okobank (Japan)....................................... A2 7.2975% 09/29/49 5,000 4,935,000
PaineWebber Group, Inc. .............................. Baa1 6.45% 12/01/03 5,000 4,763,400
Salomon, Inc. ........................................ Aa3 6.65% 07/15/01 7,000 6,945,120
Salomon, Inc. ........................................ Aa3 6.125% 01/15/03 500 483,305
--------------
62,849,345
--------------
BANKS AND SAVINGS & LOANS -- 4.6%
Cho Hung Bank......................................... B1 11.50% 04/01/10 3,250 3,128,125
Cho Hung Bank......................................... B1 11.875% 04/01/10 3,250 3,128,125
Compass Bancshares, Inc. ............................. A1 8.10% 08/15/09 4,800 4,642,512
Dresdner Funding Trust................................ A1 8.151% 06/30/31 7,600 6,634,800
Hanvit Bank........................................... B1 12.75% 03/01/10 6,550 6,484,500
Kansallis-Osake-Pankki (Finland)...................... A1 10.00% 05/01/02 5,000 5,205,650
KBC Bank Funding...................................... A1 9.86% 11/29/49 5,000 5,116,000
National Australia Bank, (Australia).................. A1 6.40% 12/10/07 3,700 3,649,125
Sanwa Finance Aruba A.E.C............................. Baa1 8.35% 07/15/09 4,640 4,619,399
Sovereign Bancorp..................................... Ba3 10.25% 05/15/04 1,325 1,306,569
Sovereign Bancorp..................................... Ba3 10.50% 11/15/06 2,295 2,295,000
Washington Mutual, Inc. .............................. A3 7.50% 08/15/06 10,000 9,703,800
--------------
55,913,605
--------------
BEVERAGES -- 0.1%
Embotelladora Andina S A.............................. Baa1 7.875% 10/01/97 1,250 963,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B4
<PAGE> 14
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS (CONTINUED) ------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
CABLE & PAY TELEVISION SYSTEMS -- 1.4%
British Sky Broadcasting, Inc. ....................... Baa3 6.875% 02/23/09 $ 1,975 $ 1,735,057
Cox Enterprises, Inc. ................................ Baa1 6.625% 06/14/02 3,200 3,146,720
CSC Holdings, Inc. ................................... Ba1 7.25% 07/15/08 3,400 3,143,130
CSC Holdings, Inc. ................................... Ba1 7.875% 12/15/07 1,490 1,441,620
Rogers Cablesystems, Inc. (Canada).................... Ba1 10.00% 03/15/05 4,000 4,090,000
Tele-Communications, Inc.............................. A2 6.34% 02/01/12 3,500 3,443,650
--------------
17,000,177
--------------
COMPUTERS -- 1.0%
Hewlett Packard Company............................... Aa2 7.15% 06/15/05 5,000 5,000,000
International Business Machine Corp. ................. A1 5.50% 01/15/09 5,000 4,457,850
International Business Machine Corp. ................. A1 5.625% 04/12/04 3,000 2,854,830
--------------
12,312,680
--------------
CONSUMER PRODUCTS -- 0.1%
Fortune Brands........................................ A2 7.125% 11/01/04 1,050 1,019,235
--------------
CONTAINERS & PACKAGING -- 0.6%
Owen-Illinois, Inc. .................................. Ba1 7.85% 05/15/04 5,244 5,020,239
Pactiv Corp. ......................................... Baa3 7.95% 12/15/25 2,000 1,794,060
--------------
6,814,299
--------------
DIVERSIFIED OPERATIONS -- 0.6%
Tyco Int'l Group SA................................... Baa1 6.875% 01/15/29 3,350 2,829,980
Xerox Cap Europe PLC.................................. A3 5.75% 05/15/02 4,960 4,776,480
--------------
7,606,460
--------------
DRUGS & MEDICAL SUPPLIES -- 0.5%
Mallinckrod, Inc. .................................... Baa2 6.30% 03/15/11 3,500 3,447,500
Monsanto Corp. ....................................... A1 6.50% 12/01/18 1,015 894,743
Monsanto Corp. ....................................... A1 6.75% 12/15/27 2,415 2,166,424
--------------
6,508,667
--------------
FINANCIAL SERVICES -- 6.0%
Bombardier Capital, Inc. M.T.N........................ A3 7.30% 12/15/02 5,000 4,955,000
Calair Capital Corp. ................................. Ba2 8.125% 04/01/08 2,700 2,322,000
Capital One Financial Corp. .......................... Baa2 7.08% 10/30/01 5,000 4,924,650
Capital One Financial Corp. .......................... Baa3 7.25% 05/01/06 2,100 1,921,500
Chrysler Financial Corp. ............................. A1 5.25% 10/22/01 10,400 10,116,392
Ford Motor Credit Co. ................................ A2 7.375% 10/28/09 1,600 1,547,632
Gatx Capital Corp..................................... Baa2 7.75% 12/01/06 3,000 2,805,000
General Motors Acceptance Corp. ...................... A2 5.75% 11/10/03 10,000 9,468,500
Heller Financial, Inc. ............................... A3 6.000% 03/19/04 2,900 2,713,936
HSBC Capital Funding LP............................... A1 10.176% 12/31/49 6,000 6,450,000
HVB Funding Trust..................................... NR 9.000% 10/22/31 6,000 5,694,600
International Lease Finance Corp. .................... A1 5.900% 03/12/03 6,000 5,760,000
RBF Finance Co. ...................................... Ba3 11.375% 03/15/09 1,270 1,371,600
Sakura Cap Funding Cayman............................. Ba2 7.040% 09/29/49 5,000 4,850,000
The CIT Group, Inc. .................................. A1 5.500% 10/15/01 8,045 7,843,231
--------------
72,744,041
--------------
FOOD & BEVERAGE -- 0.4%
Archer-Daniels-Midland Co. ........................... A1 6.625% 05/01/29 4,700 3,938,365
Comunidad Andaluic.................................... Aa3 7.250% 10/01/29 540 519,048
--------------
4,457,413
--------------
FOREST PRODUCTS -- 2.0%
International Paper Co. .............................. Baa1 8.00% 07/08/03 16,000 16,083,680
Scotia Pacific Co. ................................... Baa2 7.710% 01/20/14 12,200 8,357,000
--------------
24,440,680
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B5
<PAGE> 15
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS (CONTINUED) ------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
HOSPITAL MANAGEMENT -- 0.3%
Columbia/HCA Healthcare Corp. ........................ Ba2 6.910% 06/15/05 $ 2,435 $ 2,209,762
Tenet Healthcare Corp. ............................... Ba1 7.875% 01/15/03 1,825 1,774,813
--------------
3,984,575
--------------
INDUSTRIALS -- 0.5%
Compania Sud Americana De Vapores..................... NR 7.375% 12/08/03 2,000 1,920,000
Rockwell International Corp. ......................... A1 5.200% 01/15/98 6,500 4,071,990
--------------
5,991,990
--------------
INSURANCE -- 1.3%
Allstate Corp. ....................................... A1 7.200% 12/01/09 900 860,328
Conseco, Inc. ........................................ Ba1 8.500% 10/15/02 6,875 5,087,500
Nationwide CSN Trust.................................. A1 9.875% 02/15/25 5,000 4,990,000
Reliaster Financial Corp. ............................ A3 6.625% 09/15/03 5,000 4,844,000
--------------
15,781,828
--------------
INVESTMENT BANKING -- 1.1%
Morgan Stanley Dean Witter & Co. ..................... Aa3 5.625% 04/12/02 5,450 5,293,149
Morgan Stanley Dean Witter & Co. ..................... Aa3 7.125% 01/15/03 2,830 2,811,860
Morgan Stanley Dean Witter & Co. ..................... Aa3 7.75% 06/15/05 5,000 4,999,500
--------------
13,104,509
--------------
LEISURE -- 1.9%
Harrahs Operating Co., Inc. .......................... Ba2 7.875% 12/15/05 290 272,600
HMH Properties........................................ Ba2 7.875% 08/01/05 1,970 1,861,650
ITT Corp. ............................................ Ba1 6.75% 11/15/03 7,000 6,568,870
Park Place Entertainment.............................. Ba2 7.875% 12/15/05 2,265 2,129,100
Park Place Entertainment.............................. Ba2 9.375% 02/15/07 740 740,000
Royal Caribbean Cruises Ltd. ......................... Baa2 7.00% 10/15/07 8,000 6,752,480
Royal Caribbean Cruises Ltd. ......................... Baa2 7.25% 08/15/06 5,000 4,425,050
--------------
22,749,750
--------------
MEDIA -- 3.9%
Liberty Media Group................................... Baa3 8.25% 02/01/30 5,000 4,604,050
News America Holding, Inc. ........................... Baa3 6.703% 05/21/34 22,000 20,934,760
Paramount Communications, Inc. ....................... Baa1 7.50% 01/15/02 5,000 4,983,650
Turner Broadcasting Systems Inc. ..................... Baa3 7.40% 02/01/04 13,500 13,086,090
United News & Media PLC............................... Baa2 7.25% 07/01/04 2,000 1,931,200
United News & Media PLC............................... Baa2 7.75% 07/01/09 1,000 947,700
--------------
46,487,450
--------------
OIL & GAS -- 3.9%
Amerada Hess Corp. ................................... Baa1 7.375% 10/01/09 600 583,134
Amerada Hess Corp. ................................... Baa1 7.875% 10/01/29 1,600 1,564,496
Atlantic Richfield Co. ............................... Aa2 5.55% 04/15/03 3,700 3,567,096
Atlantic Richfield Co. ............................... Aa2 5.90% 04/15/09 6,770 6,173,089
B.J. Services Co. .................................... Baa2 7.00% 02/01/06 5,000 4,795,950
Eott Energy Partners LP............................... Ba2 11.00% 10/01/09 1,960 1,989,400
K N Energy, Inc. ..................................... Baa2 6.30% 03/01/21 15,000 14,883,900
K N Energy, Inc. ..................................... Baa2 6.45% 11/30/01 4,500 4,407,300
Limestone Electron Trust.............................. Baa3 8.625% 03/15/03 6,000 6,058,080
Phillips Petroleum Company............................ Baa2 8.50% 05/25/05 2,550 2,634,354
--------------
46,656,799
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.3%
Parker & Parsley Petroleum Co. ....................... Ba2 8.875% 04/15/05 1,505 1,468,143
Seagull Energy Corp. ................................. Ba1 7.875% 08/01/03 1,830 1,775,100
--------------
3,243,243
--------------
PHOTOGRAPHY -- 0.2%
Eastman Kodak Company M.T.N........................... A2 7.25% 06/15/05 2,500 2,490,750
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B6
<PAGE> 16
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS (CONTINUED) ------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
PRINTING & PUBLISHING -- 0.2%
World Color Press, Inc. .............................. Baa3 7.75% 02/15/09 $ 2,075 $ 1,893,438
World Color Press, Inc. .............................. Baa3 8.375% 11/15/08 1,000 940,000
--------------
2,833,438
--------------
RAILROADS -- 0.3%
Norfolk Southern Corp. ............................... Baa1 6.95% 05/01/02 1,650 1,627,148
Union Pacific Corp. .................................. Baa3 7.95% 04/15/29 2,100 2,082,696
--------------
3,709,844
--------------
REAL ESTATE INVESTMENT TRUST -- 0.8%
ERP Operating L.P. ................................... A3 6.63% 04/13/15 3,900 3,666,234
ERP Operating L.P. ................................... A3 7.10% 06/23/04 1,500 1,454,640
HRPT Properties Trust................................. Baa2 7.521% 07/09/07 5,000 5,000,000
--------------
10,120,874
--------------
RETAIL -- 2.1%
Federated Department Stores, Inc. .................... Baa1 8.125% 10/15/02 5,250 5,302,605
Federated Department Stores, Inc. .................... Baa1 8.50% 06/15/03 10,200 10,293,534
Kmart Corp. .......................................... Baa3 9.78% 01/05/20 3,850 3,557,169
Kroger Co., (The)..................................... Baa3 6.375% 03/01/08 6,600 5,941,980
--------------
25,095,288
--------------
TELECOMMUNICATIONS -- 7.9%
AT&T Canada, Inc. (Canada)............................ Baa3 7.65% 09/15/06 1,600 1,590,960
TeleCommunications, Inc. ............................. Ba1 10.125% 04/15/22 6,300 7,608,447
Deutsche Telekom International........................ Aa2 7.75% 06/15/05 8,100 8,140,500
Deutsche Telekom International........................ Aa2 8.00% 06/15/10 5,000 5,035,000
Deutsche Telekom International........................ Aa2 8.25% 06/15/30 7,500 7,575,750
Electric Lightwave, Inc. ............................. A2 6.05% 05/15/04 3,300 3,073,125
Global Crossing Holdings, Ltd. ....................... Ba2 9.125% 11/15/06 4,400 4,235,000
LCI International, Inc. .............................. Baa1 7.25% 06/15/07 11,125 10,533,484
Qwest Communications, Inc............................. Baa1 7.50% 11/01/08 3,150 3,039,750
Rogers Cantel, Inc. .................................. Baa3 9.375% 06/01/08 2,350 2,420,500
Sprint Corp. ......................................... Baa1 5.70% 11/15/03 12,000 11,319,360
Sprint Corp. ......................................... Baa1 6.875% 11/15/28 2,500 2,173,175
Sprint Corp. ......................................... Baa2 7.625% 06/10/02 5,000 5,005,500
Telecom De Puerto Rico................................ Baa2 6.65% 05/15/06 6,800 6,315,500
Telecom De Puerto Rico................................ Baa2 6.80% 05/15/09 5,700 5,208,375
U.S. West Cap. Funding, Inc. ......................... Baa1 6.875% 08/15/01 5,000 4,974,000
Williams Communications Group, Inc. .................. B2 10.70% 10/01/07 2,000 1,990,000
Worldcom, Inc. ....................................... A3 6.95% 08/15/28 6,300 5,549,670
--------------
95,788,096
--------------
UTILITIES -- 11.3%
AES Corp. ............................................ Ba1 9.50% 06/01/09 4,905 4,806,900
Calenergy Co., Inc. .................................. Baa3 6.96% 09/15/03 8,000 7,802,640
Calenergy Co., Inc. .................................. Baa3 7.23% 09/15/05 5,000 4,862,250
Calpine Corp. ........................................ Ba1 10.50% 05/15/06 4,060 4,242,700
CMS Energy Corp....................................... Ba3 6.75% 01/15/04 4,500 4,185,000
CMS Energy Corp. ..................................... Ba3 8.00% 07/01/11 4,500 4,417,200
Cogentrix Energy, Inc. ............................... Ba1 8.75% 10/15/08 10,000 9,650,000
Commonwealth Edison Co. .............................. Baa2 7.625% 01/15/07 7,525 7,342,218
Connecticut Light & Power Co. ........................ Baa3 7.75% 06/01/02 5,685 5,703,078
Edison Mission Energy................................. A3 7.73% 06/15/09 3,200 3,120,512
El Paso Electric Company.............................. Baa3 9.40% 05/01/11 4,000 4,244,560
El Paso Energy Corp. ................................. Baa2 6.625% 07/15/01 3,800 3,766,636
Hydro-Quebec.......................................... A2 8.00% 02/01/13 1,850 1,923,963
Hydro-Quebec.......................................... A2 7.500% 04/01/16 500 497,680
Hydro-Quebec.......................................... A2 9.400% 02/01/21 3,925 4,631,147
Illinois Power Co. ................................... Aaa 5.38% 06/25/07 15,000 14,001,450
Niagara Mohawk Power.................................. Baa2 6.875% 04/01/03 4,000 3,909,080
Niagara Mohawk Power.................................. Baa2 7.375% 08/01/03 8,000 7,888,240
Niagara Mohawk Power.................................. Baa2 8.00% 06/01/04 5,000 5,025,350
Osprey Trust.......................................... Baa2 8.31% 01/15/03 16,000 16,054,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B7
<PAGE> 17
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS (CONTINUED) ------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
UTILITIES (CONT'D.)
PSEG Energy Holdings, Inc. ........................... Ba1 10.00% 10/01/09 $ 2,605 $ 2,637,563
Sonat, Inc. .......................................... Baa2 7.625% 07/15/11 5,100 4,981,425
Texas Utilities....................................... Baa3 5.94% 10/15/01 10,000 9,784,600
Utilicorp United Inc. ................................ Baa3 7.00% 07/15/04 1,280 1,222,566
Utilicorp United, Inc. ............................... Baa3 7.625% 11/15/09 700 660,009
--------------
137,361,167
--------------
WASTE MANAGEMENT -- 0.7%
Allied Waste Industries, Inc. ........................ Ba3 7.625% 01/01/06 1,540 1,347,500
Waste Management, Inc. ............................... Ba1 6.125% 07/15/01 7,000 6,760,040
--------------
8,107,540
--------------
U.S. GOVERNMENT AGENCY AND OBLIGATIONS -- 15.4%
United States Treasury Bond (a)....................... 8.125% 08/15/21 66,700 81,488,724
United States Treasury Bond........................... 9.00% 11/15/18 7,300 9,479,707
United States Treasury Bond........................... 6.125% 08/15/29 22,714 22,941,140
United States Treasury Bond........................... 6.75% 08/15/26 9,800 10,545,682
United States Treasury Bond........................... 13.875% 05/15/11 4,150 5,629,101
United States Treasury Note........................... 6.50% 02/15/10 31,445 32,521,048
United States Treasury Note........................... 6.50% 05/31/02 4,715 4,720,893
United States Treasury Note........................... 6.50% 10/15/06 1,825 1,846,955
United States Treasury Strips......................... zero coupon 05/15/20 36,500 10,819,695
United States Treasury Strips......................... zero coupon 11/15/15 16,446 6,378,088
--------------
186,371,033
--------------
U.S. GOVERNMENT MORTGAGE BACKED SECURITIES -- 2.0%
Federal National Mortgage Association................. 6.50% 12/31/99 20,000 19,279,600
Federal National Mortgage Association................. 9.00% 05/01/17-09/01/21 237 193,572
Government National Mortgage Association.............. 7.50% 05/20/02-01/15/26 4,987 4,959,455
--------------
24,432,627
--------------
FOREIGN GOVERNMENT BONDS -- 4.2%
Province of Saskatchewan (Canada)..................... A2 9.125% 02/15/21 3,000 3,468,090
Quebec Province (Canada).............................. A2 7.125% 02/09/24 2,650 2,503,137
Republic of Argentina (Argentina)..................... BBB (b) 0.010% 10/15/01 5,000 4,300,000
Republic of Panama (Panama)........................... Ba1 7.875% 02/13/02 8,000 7,840,000
Republic of Philippines (Philippines)................. Ba1 8.875% 04/15/08 3,200 2,880,000
United Mexican States (Mexico)........................ Baa3 7.312% 12/31/19 2,100 2,063,250
United Mexican States (Mexico)........................ Baa3 7.602% 12/31/19 4,200 4,126,500
United Mexican States (Mexico)........................ Baa3 7.800% 12/31/19 5,900 5,796,750
United Mexican States (Mexico)........................ Baa3 9.875% 02/01/10 7,500 7,762,500
United Mexican States (Mexico)........................ Baa3 10.375% 02/17/09 9,500 10,212,500
--------------
50,952,727
--------------
TOTAL LONG-TERM BONDS
(cost $1,096,849,061)......................................................................................... 1,063,513,646
--------------
<CAPTION>
SHARES
---------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK -- 0.3%
Centaur Funding Corp. (cost $4,323,180) .......................................................... 4.323 3,997,350
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,101,172,241)......................................................................................... 1,067,510,996
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B8
<PAGE> 18
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
------- ----------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 12.2%
OTHER CORPORATE OBLIGATIONS -- 9.4%
Arkla Inc., M.T.N. ................................... Baa1 9.32% 12/18/00 $ 2,000 $ 2,013,380
Burlington Northern Santa Fe Corp. ................... Baa2 6.05% 03/15/01 8,000 7,958,640
Camden Property Trust................................. Baa2 7.23% 10/30/00 5,000 4,991,000
Comdisco, Inc. ....................................... Baa1 6.32% 11/27/00 10,000 9,954,400
El Paso Electric Company.............................. Baa3 7.75% 05/01/01 5,850 5,840,581
ERP Operating L.P. ................................... BBB (b) 6.15% 09/15/00 15,000 14,962,500
Ford Motor Credit Co. ................................ A2 5.75% 01/25/01 4,000 3,964,880
Fort James Corp. ..................................... Baa2 6.234% 03/15/01 5,000 4,954,650
Goldman Sachs Group, Inc. ............................ A1 5.56% 01/11/01 4,200 4,164,720
GTE Corp. ............................................ A2 9.375% 12/01/00 6,250 6,308,437
ICI Wilmington, Inc. ................................. Baa1 9.50% 11/15/00 3,500 3,522,435
ITT Corp. ............................................ Ba1 6.25% 11/15/00 4,250 4,210,942
Kroger Co., (The) .................................... Baa3 6.34% 06/01/01 6,500 6,386,250
Norfolk Southern Corp. ............................... Baa1 6.875% 05/01/01 4,500 4,469,355
Raytheon Co. ......................................... Baa2 5.95% 03/15/01 6,500 6,424,145
Salomon, Inc. ........................................ Aa3 6.59% 02/21/01 3,500 3,484,355
Seagram (J.) & Sons................................... Baa3 5.79% 04/15/01 11,500 11,343,600
TRW, Inc. ............................................ Baa1 6.45% 06/15/01 9,200 9,062,000
--------------
(cost $114,992,761)........................................................................................... 114,016,270
--------------
REPURCHASE AGREEMENT -- 2.8%
Joint Repurchase Agreement Account (cost $34,236,000)
(Note 5)...................................................... 6.492% 07/03/00 34,236 34,236,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $149,228,761)........................................................................................... 148,252,270
--------------
TOTAL INVESTMENTS BEFORE INVESTMENT SOLD SHORT -- 100.4%
(cost $1,250,401,002; Note 6)................................................................................. 1,215,763,266
--------------
INVESTMENT SOLD SHORT -- (0.7%)
United States Treasury Note (proceeds
$8,251,875 -- Note 2)............................... Aaa 6.75% 05/15/05 (8,100) (8,288,568)
--------------
TOTAL INVESTMENTS, NET OF INVESTMENT SOLD SHORT -- 99.7%...................................................... 1,207,474,698
Variation margin on open futures contracts (c)................................................................ (27,344)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%................................................................... 3,336,122
--------------
TOTAL NET ASSETS -- 100.0%...................................................................................... $1,210,783,476
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
<TABLE>
<S> <C>
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
S.A. Sociedad Anonime (Spanish Corporation) or Societe Anonyme
(French Corporation)
NR Not Rated by Moody's or Standard & Poor's
</TABLE>
(a) Security, or portion thereof, segregated as collateral for futures contracts
(b) Standard & Poor's Rating.
(c) Open Futures contracts as of June 30, 2000 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 2000 DEPRECIATION
<S> <C> <C> <C> <C> <C>
Long position:
175 U.S. Treasury Bond Sep 00 $17,040,625 $17,035,156 $(5,469)
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B9
<PAGE> 19
GOVERNMENT INCOME PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
LONG-TERM INVESTMENTS -- 95.6% -------- ----------------- --------- ------------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 3.5%
Team Fleet Financing Corp. ............................... 7.35% 05/15/03 $ 10,000 $ 9,950,000
------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.5%
Bear Stearns Commercial Mortgage.......................... 7.64% 02/15/32 2,962 2,989,303
Federal Home Loan Mortgage Corp. ......................... 6.00% 12/15/08 5,273 5,068,239
Federal National Mortgage Association..................... 6.00% 06/25/08 3,156 2,962,297
Federal National Mortgage Association..................... 6.25% 11/25/21 5,000 4,818,750
Mortgage Capital Funding, Inc. ........................... 6.33% 10/18/07 2,931 2,815,508
------------
18,654,097
------------
MORTGAGE PASS-THROUGHS -- 24.2%
Federal National Mortgage Association..................... 6.50% 12/31/99 18,000 17,351,640
Federal National Mortgage Association..................... 7.50% 02/01/02-10/01/12 10,271 10,270,434
Federal National Mortgage Association..................... 8.00% 03/01/22-05/01/26 641 645,688
Federal National Mortgage Association..................... 9.00% 02/01/25-04/01/25 3,102 3,193,958
Government National Mortgage Association.................. 7.00% 03/15/23-12/15/23 9,810 9,574,032
Government National Mortgage Association.................. 7.50% 12/15/25-02/15/26 10,435 10,378,886
Government National Mortgage Association.................. 8.00% 05/15/22-12/15/24 10,403 10,549,610
Government National Mortgage Association.................. 8.50% 09/15/24-04/15/25 6,905 7,077,934
------------
69,042,182
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 61.4%
Federal Farm Credit Bank.................................. 5.90% 01/10/05 5,000 4,779,700
Federal Home Loan Bank.................................... 5.75% 10/15/07 15,000 14,671,875
Federal Home Loan Mortgage Corp. ......................... 7.36% 06/05/07 15,000 14,653,050
Federal National Mortgage Association..................... Zero 02/15/06 15,364 10,716,390
Federal National Mortgage Association..................... 6.06% 05/21/03 30,000 29,118,600
Small Business Administration Participation
Certificates............................................ 6.00% 09/01/18 7,384 6,780,976
Small Business Administration Participation
Certificates............................................ 6.85% 07/01/17 4,323 4,164,393
Small Business Administration Participation
Certificates............................................ 7.15% 01/01/17 16,019 15,695,102
Small Business Administration Participation
Certificates............................................ 7.20% 10/01/16 17,167 16,863,294
United States Treasury Bonds.............................. Zero 05/15/17 13,100 4,650,762
United States Treasury Bonds(b)........................... 8.125% 08/15/19 43,500 52,587,585
United States Treasury Notes.............................. 6.75% 05/15/05 715 731,645
------------
175,413,372
------------
TOTAL LONG-TERM INVESTMENTS
(cost $279,699,654)................................................................................. 273,059,651
------------
SHORT-TERM INVESTMENTS -- 11.9%
ASSET BACKED SECURITIES -- 1.4%
Westpac Securitisation Trust, Ser. 1998-1G (Australia).... 6.42% 07/19/00 3,969(a) 3,959,436
------------
COMMERCIAL PAPER -- 5.3%
Black Forest Corp. ....................................... 6.58% 07/17/00 2,600 2,592,397
Centric Capital Corp. .................................... 6.57% 07/17/00 2,800 2,791,824
Clipper Receivables Corp. ................................ 6.57% 07/17/00 2,800 2,791,824
Old Line Funding Corp. ................................... 6.60% 07/13/00 1,293 1,290,155
Sweetwater Capital........................................ 6.58% 07/17/00 2,800 2,791,812
Wood Street Funding Corp. ................................ 6.56% 07/17/00 2,800 2,791,836
------------
15,049,848
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B10
<PAGE> 20
GOVERNMENT INCOME PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
SHORT-TERM INVESTMENTS (CONTINUED) -------- ----------------- --------- ------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- 5.2%
Joint Repurchase Agreement Account........................ 6.49% 07/03/00 $ 14,963 $ 14,963,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,972,284).................................................................................. 33,972,284
------------
TOTAL INVESTMENTS -- 107.5%
(amortized cost $313,671,938; Note 6)............................................................... 307,031,935
------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (c)........................................................ (64,328)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.5)%....................................................... (21,282,806)
------------
TOTAL NET ASSETS -- 100.0%............................................................................ $285,684,801
============
</TABLE>
(a) US$ Denominated Foreign Bonds
(b) Security segregated as collateral for futures contracts
(c) Open futures contracts as of June 30, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 2000 DEPRECIATION
<S> <C> <C> <C> <C> <C>
Long Position:
250 U.S. Treasury 30yr Sep 00 24,277,563 24,335,938 $58,375
Short Position:
231 U.S. Treasury 30yr Sep 00 22,741,680 22,749,891 $(8,211)
-------
$50,164
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B11
<PAGE> 21
CONSERVATIVE BALANCED PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 82.2% VALUE
SHARES (NOTE 2)
COMMON STOCKS -- 48.8% ---------- --------------
<S> <C> <C>
ADVERTISING
Young & Rubicam, Inc. ............. 10,800 $ 617,625
--------------
AEROSPACE -- 0.5%
Boeing Co. ........................ 135,000 5,644,688
GenCorp, Inc. ..................... 30,100 240,800
General Dynamics Corp.(b) ......... 30,700 1,604,075
Goodrich (B.F.) Co. ............... 16,200 551,813
Honeywell Inc. .................... 122,912 4,140,598
Lockheed Martin Corp. ............. 60,200 1,493,713
Northrop Grumman Corp. ............ 11,200 742,000
Parker-Hannifin Corp. ............. 20,010 685,343
Raytheon Co. (Class "B" Stock) .... 52,300 1,006,775
United Technologies Corp. ......... 71,400 4,203,675
--------------
20,313,480
--------------
AIRLINES -- 0.1%
AMR Corp. ......................... 24,000 634,500
Delta Air Lines, Inc. ............. 20,600 1,041,588
Southwest Airlines Co. ............ 78,200 1,480,912
US Airways Group, Inc.(a) ......... 11,100 432,900
--------------
3,589,900
--------------
APPAREL
Nike, Inc. (Class "B" Stock) ...... 41,800 1,664,162
Reebok International Ltd.(a) ...... 10,200 162,563
--------------
1,826,725
--------------
AUTOS - CARS & TRUCKS -- 0.4%
Cummins Engine Co., Inc. .......... 7,200 196,200
Dana Corp. ........................ 25,000 529,688
Delphi Automotive Systems Corp. ... 86,252 1,256,045
Ford Motor Co. .................... 189,500 8,148,500
General Motors Corp. .............. 80,191 4,656,090
Genuine Parts Co. ................. 30,700 614,000
Navistar International Corp.(a) ... 8,800 273,350
PACCAR, Inc. ...................... 13,900 551,656
Titan International, Inc. ......... 48,650 258,453
TRW, Inc. ......................... 20,500 889,187
Visteon Corp.(a) .................. 24,812 300,843
--------------
17,674,012
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
AmSouth Bancorporation ............ 58,100 915,075
Banc One Corp. .................... 174,082 4,624,053
Bank of New York Co., Inc. ........ 114,200 5,310,300
BankAmerica Corp. ................. 263,061 11,311,623
BB&T Corp. ........................ 54,200 1,294,025
Charter One Financial, Inc. ....... 5,000 115,000
Chase Manhattan Corp. ............. 192,200 8,853,212
Comerica, Inc. .................... 26,100 1,171,237
First Union Corp. ................. 153,500 3,808,719
Firstar Corp. ..................... 147,438 3,105,413
Golden West Financial Corp. ....... 27,900 1,138,669
Huntington Bancshares, Inc. ....... 40,760 644,518
KeyCorp ........................... 68,300 1,203,787
Mellon Financial Corp. ............ 79,100 2,882,206
National City Corp. ............... 89,500 1,527,094
Northern Trust Corp. .............. 32,400 2,108,025
Old Kent Financial Corp. .......... 24,150 646,013
PNC Bank Corp. .................... 44,300 2,076,562
Providian Financial Corp. ......... 21,550 1,939,500
SouthTrust Corp. .................. 28,400 642,550
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
Summit Bancorp(b) ................. 29,600 $ 728,900
SunTrust Banks, Inc. .............. 45,900 2,097,056
U.S. Bancorp ...................... 110,400 2,125,200
Union Planters Corp. .............. 23,800 664,913
Wachovia Corp.(b) ................. 30,900 1,676,325
Wells Fargo & Co. ................. 256,500 9,939,375
--------------
72,549,350
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc. ..................... 24,500 643,125
Lexmark International Group,
Inc. ............................ 19,433 1,306,869
Molex, Inc. ....................... 30,800 1,482,250
Omnicom Group, Inc. ............... 27,200 2,422,500
--------------
5,854,744
--------------
CHEMICALS -- 0.5%
Air Products & Chemicals, Inc. .... 34,400 1,059,950
Dow Chemical Co. .................. 102,700 3,100,256
Du Pont (E.I.) de Nemours & Co. ... 162,120 7,092,750
Eastman Chemical Co. .............. 11,400 544,350
Engelhard Corp. ................... 18,100 308,831
FMC Corp.(a) ...................... 6,000 348,000
Grace (W.R.) & Co. ................ 15,400 186,725
Great Lakes Chemical Corp. ........ 9,700 305,550
Hercules, Inc. .................... 21,500 302,344
OM Group, Inc. .................... 28,400 1,249,600
Praxair, Inc. ..................... 26,000 973,375
Rohm & Haas Co. ................... 33,511 1,156,130
Sigma-Aldrich Corp. ............... 14,900 435,825
Union Carbide Corp. ............... 21,000 1,039,500
--------------
18,103,186
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp.(a) .................. 109,510 1,533,140
Convergys Corp.(a) ................ 14,000 726,250
Deluxe Corp. ...................... 15,000 353,437
Quintiles Transnational Corp. ..... 17,300 244,363
--------------
2,857,190
--------------
COMPUTER SERVICES -- 6.8%
3Com Corp.(a) ..................... 53,700 3,094,462
Adaptec, Inc.(a) .................. 17,400 395,850
Adobe Systems, Inc. ............... 18,600 2,418,000
America Online, Inc.(a) ........... 354,000 18,673,500
Autodesk, Inc. .................... 12,200 423,188
Automatic Data Processing, Inc. ... 97,800 5,238,412
BMC Software, Inc.(a) ............. 37,900 1,382,758
Cabletron Systems, Inc.(a) ........ 30,200 762,550
Ceridian Corp.(a) ................. 25,500 613,594
Cisco Systems, Inc.(a)(b) ......... 1,060,900 67,433,456
Citrix Systems, Inc. .............. 31,600 598,425
Computer Associates International, Inc. 84,500 4,325,344
Computer Sciences Corp.(a)(b) ..... 25,600 1,912,000
Compuware Corp.(a) ................ 59,000 612,125
Comverse Technology, Inc.(a) ...... 23,500 2,185,500
Electronic Data Systems Corp. ..... 68,900 2,842,125
EMC Corp.(a) ...................... 323,150 24,862,353
First Data Corp. .................. 61,300 3,042,012
Mercury Interactive Corp.(a) ...... 3,000 290,250
Microsoft Corp.(a) ................ 805,800 64,464,000
Network Appliance, Inc.(a) ........ 45,400 3,654,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B12
<PAGE> 22
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
COMPUTER SERVICES (CONT'D.)
Novell, Inc.(a)(b) ................ 55,200 $ 510,600
Oracle Corp.(a)(b) ................ 436,700 36,710,094
Parametric Technology Corp.(a) .... 49,200 541,200
Peoplesoft, Inc. .................. 44,200 740,350
Sapient Corp.(a) .................. 9,600 1,026,600
Siebel Systems, Inc.(a) ........... 28,700 4,694,244
Silicon Graphics, Inc.(a) ......... 4,600 17,250
Unisys Corp. ...................... 49,200 716,475
VERITAS Software Corp.(a)(b) ...... 60,600 6,848,747
Yahoo!, Inc.(a)(b) ................ 81,800 10,132,975
--------------
271,163,139
--------------
COMPUTERS -- 2.7%
Apple Computer, Inc.(a) ........... 48,300 2,529,713
Compaq Computer Corp. ............. 257,039 6,570,559
Dell Computer Corp.(a)(b) ......... 397,200 19,586,925
Gateway, Inc. ..................... 48,800 2,769,400
Hewlett-Packard Co. ............... 155,900 19,468,012
International Business Machines Corp. 276,800 30,326,900
NCR Corp.(a) ...................... 14,700 572,381
Seagate Technology, Inc.(a) ....... 33,400 1,837,000
Sun Microsystems, Inc.(a) ......... 244,500 22,234,219
--------------
105,895,109
--------------
CONSTRUCTION -- 0.1%
Centex Corp. ...................... 8,100 190,350
Fluor Corp. ....................... 11,300 357,363
Pulte Corp. ....................... 7,600 164,350
Standard Pacific Corp. ............ 99,100 991,000
Vulcan Materials Co. .............. 16,400 700,075
--------------
2,403,138
--------------
CONTAINERS -- 0.1%
Ball Corp. ........................ 4,400 141,625
Bemis Co., Inc. ................... 10,300 346,338
Crown Cork & Seal Co., Inc. ....... 18,300 274,500
Owens-Illinois, Inc.(a) ........... 28,000 327,250
Pactiv Corp.(a) ................... 26,200 206,325
Sealed Air Corp.(a) ............... 12,500 654,687
--------------
1,950,725
--------------
COSMETICS & SOAPS -- 0.6%
Alberto-Culver Co. (Class "B"
Stock) .......................... 9,100 278,119
Avon Products, Inc. ............... 37,900 1,686,550
Colgate-Palmolive Co. ............. 90,600 5,424,675
Gillette Co. ...................... 166,400 5,813,600
International Flavors & Fragrances,
Inc. ............................ 17,100 516,206
Procter & Gamble Co. .............. 197,800 11,311,688
--------------
25,030,838
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.3%
Eastman Kodak Co. ................. 47,800 2,844,100
Fortune Brands, Inc. .............. 27,700 638,831
Philip Morris Companies Inc. ...... 369,100 9,804,219
--------------
13,287,150
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.1%
Avery Dennison Corp. .............. 18,100 1,214,963
Pitney Bowes, Inc. ................ 43,100 1,724,000
Xerox Corp. ....................... 102,400 2,124,800
--------------
5,063,763
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
DIVERSIFIED OPERATIONS -- 2.0%
General Electric Co. .............. 1,530,100 $ 81,095,300
--------------
DRUGS & MEDICAL SUPPLIES -- 5.4%
Abbott Laboratories ............... 238,700 10,637,069
Allergan, Inc. .................... 21,500 1,601,750
ALZA Corp.(a) ..................... 16,300 963,737
American Home Products Corp. ...... 203,200 11,938,000
Amgen, Inc.(a) .................... 158,600 11,141,650
Bard (C.R.), Inc. ................. 9,400 452,375
Bausch & Lomb, Inc. ............... 8,900 688,637
Baxter International, Inc. ........ 43,200 3,037,500
Becton, Dickinson & Co. ........... 40,900 1,173,319
Biogen, Inc.(a) ................... 20,600 1,328,700
Biomet, Inc. ...................... 19,600 753,375
Boston Scientific Corp.(a) ........ 63,600 1,395,225
Bristol-Myers Squibb Co.(b) ....... 308,400 17,964,300
Cardinal Health, Inc.(b) .......... 41,200 3,048,800
Guidant Corp.(b) .................. 46,200 2,286,900
Johnson & Johnson ................. 216,200 22,025,375
Lilly (Eli) & Co.(b) .............. 169,100 16,888,862
Mallinckrodt, Inc. ................ 10,900 473,469
MedImmune, Inc.(a) ................ 16,000 1,184,000
Medtronic, Inc. ................... 180,300 8,981,194
Merck & Co., Inc. ................. 360,100 27,592,662
Pfizer, Inc. ...................... 962,700 46,209,600
Pharmacia & Upjohn, Inc.(b) ....... 196,362 10,149,461
Schering-Plough Corp. ............. 227,900 11,508,950
St. Jude Medical, Inc.(a) ......... 14,100 646,838
Watson Pharmaceuticals, Inc.(a) ... 15,900 854,625
--------------
214,926,373
--------------
ELECTRONICS -- 3.6%
Advanced Micro Devices, Inc.(a) ... 22,700 1,753,575
Altera Corp.(a) ................... 29,000 2,956,187
Analog Devices, Inc.(a) ........... 54,400 4,134,400
Applied Materials, Inc.(a) ........ 118,900 10,775,312
Broadcom Corp. (Class "A"
Stock)(a)........................ 4,000 799,930
Conexant Systems, Inc.(a) ......... 30,700 1,492,788
Emerson Electric Co. .............. 63,200 3,815,700
Intel Corp. ....................... 517,400 69,169,912
KLA-Tencor Corp.(a) ............... 29,100 1,704,169
Linear Technology Corp. ........... 46,500 2,973,094
LSI Logic Corp.(a)(b) ............. 45,000 2,435,625
Maxim Integrated Products,
Inc.(a) ......................... 39,000 2,649,563
Micron Technology, Inc. ........... 81,500 7,177,094
MIPS Technologies, Inc. (Class "B"
Stock) (a) ...................... 3,492 134,450
National Semiconductor Corp.(a) ... 27,000 1,532,250
Novellus Systems, Inc.(a) ......... 5,000 282,813
Rockwell International Corp. ...... 29,100 916,650
Sanmina Corp.(a) .................. 8,000 684,000
Solectron Corp.(a) ................ 88,900 3,722,687
Tektronix, Inc. ................... 10,800 799,200
Teradyne, Inc.(a) ................. 24,100 1,771,350
Texas Instruments, Inc. ........... 252,400 17,336,725
Thomas & Betts Corp. .............. 12,700 242,888
Xilinx Inc. (a) ................... 47,700 3,938,231
--------------
143,198,593
--------------
FINANCIAL SERVICES -- 3.1%
American Express Co. .............. 208,400 10,862,850
Associates First Capital Corp. .... 105,344 2,350,488
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B13
<PAGE> 23
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
FINANCIAL SERVICES (CONT'D.)
Bear Stearns Companies, Inc. ...... 20,416 $ 849,816
Block (H.R.), Inc. ................ 17,800 576,275
Capital One Financial Corp. ....... 32,100 1,432,463
Citigroup, Inc. ................... 528,250 31,827,062
Countrywide Credit Industries,
Inc. ............................ 20,100 609,281
Dun & Bradstreet Corp. ............ 27,500 787,188
Federal Home Loan Mortgage Corp. .. 107,800 4,365,900
Federal National Mortgage
Association ..................... 159,100 8,303,031
Fifth Third Bancorp ............... 48,500 3,067,625
Fleet Boston Financial Corp. ...... 142,412 4,842,008
Franklin Resource, Inc. ........... 39,900 1,211,963
Household International, Inc. ..... 73,052 3,036,224
Lehman Brothers Holdings, Inc. .... 18,900 1,787,231
MBNA Corp. ........................ 124,850 3,386,556
Merrill Lynch & Co., Inc.(b) ...... 58,100 6,681,500
Morgan (J.P.) & Co., Inc. ......... 25,500 2,808,187
Morgan Stanley Dean Witter &
Co. ............................. 178,680 14,875,110
PaineWebber Group, Inc. ........... 23,300 1,060,150
Paychex, Inc. ..................... 57,700 2,423,400
Price (T. Rowe) Associates,
Inc. ............................ 16,100 684,250
Regions Financial Corp. ........... 37,700 749,288
Schwab (Charles) Corp.(a) ......... 194,250 6,531,656
SLM Holding Corp. ................. 25,700 962,144
State Street Corp. ................ 23,700 2,513,681
Synovus Financial Corp. ........... 48,250 850,406
Washington Mutual, Inc. ........... 87,878 2,537,477
--------------
121,973,210
--------------
FOOD & BEVERAGE -- 1.8%
Anheuser-Busch Companies,
Inc.(b) ......................... 72,400 5,407,375
Archer-Daniels-Midland Co. ........ 103,098 1,011,649
Bestfoods ......................... 40,400 2,797,700
Brown-Forman Corp. (Class "B"
Stock) .......................... 10,500 564,375
Campbell Soup Co. ................. 64,200 1,869,825
Coca-Cola Co. ..................... 383,700 22,038,769
Coca-Cola Enterprises, Inc.(b) .... 72,100 1,176,131
ConAgra, Inc. ..................... 79,400 1,513,563
Coors (Adolph) Co. (Class "B" Stock) 6,600 399,300
General Mills, Inc.(b) ............ 46,780 1,789,335
Heinz (H.J.) & Co. ................ 53,030 2,320,062
Hershey Foods Corp. ............... 22,300 1,081,550
Kellogg Co.(b) .................... 63,200 1,880,200
Nabisco Group Holdings Corp. ...... 54,100 1,403,219
PepsiCo, Inc. ..................... 225,900 10,038,431
Quaker Oats Co. ................... 21,100 1,585,138
Ralston-Ralston Purina Group(b) ... 49,600 988,900
Sara Lee Corp. .................... 132,500 2,558,906
Seagram Co., Ltd. ................. 67,400 3,909,200
Sysco Corp. ....................... 50,100 2,110,462
Unilever NV ....................... 88,517 3,806,231
Wrigley (William) Jr. Co. ......... 18,000 1,443,375
--------------
71,693,696
--------------
FOREST PRODUCTS -- 0.2%
Boise Cascade Corp. ............... 8,100 209,587
Fort James Corp. .................. 34,400 795,500
Georgia-Pacific Corp. ............. 28,000 735,000
International Paper Co. ........... 71,373 2,127,808
Louisiana-Pacific Corp. ........... 14,500 157,688
Mead Corp. ........................ 17,100 431,775
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
FOREST PRODUCTS (CONT'D.)
Potlatch Corp. .................... 4,200 $ 139,125
Temple-Inland, Inc. ............... 10,500 441,000
Westvaco Corp. .................... 16,200 401,962
Weyerhaeuser Co. .................. 35,100 1,509,300
Willamette Industries, Inc. ....... 20,100 547,725
--------------
7,496,470
--------------
GAS PIPELINES -- 0.2%
Columbia Energy Group ............. 12,500 820,313
El Paso Energy Corp. .............. 35,200 1,793,000
Peoples Energy Corp. .............. 6,400 207,200
Sempra Energy ..................... 31,919 542,623
Williams Companies, Inc. .......... 64,700 2,697,181
--------------
6,060,317
--------------
HOSPITALS/HOSPITAL MANAGEMENT -- 0.2%
Columbia/HCA Healthcare Corp. ..... 84,100 2,554,537
Healthsouth Corp.(a) .............. 66,200 475,812
Humana, Inc.(a) ................... 71,900 350,513
IMS Health, Inc. .................. 56,200 1,011,600
Manor Care, Inc. .................. 17,000 119,000
McKesson HBOC Inc.(b) ............. 44,530 932,347
Shared Medical Systems Corp. ...... 3,000 218,813
Tenet Healthcare Corp.(a) ......... 52,500 1,417,500
UnitedHealth Group Inc. ........... 26,900 2,306,675
Wellpoint Health Networks Inc. .... 6,000 434,625
--------------
9,821,422
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.2%
Clorox Co. ........................ 36,100 1,617,731
Kimberly-Clark Corp. .............. 86,400 4,957,200
Leggett & Platt, Inc. ............. 30,400 501,600
--------------
7,076,531
--------------
HOUSING RELATED -- 0.2%
Armstrong Holdings Inc. ........... 7,100 108,719
Kaufman & Broad Home Corp. ........ 7,200 142,650
Lowe's Companies, Inc. ............ 56,900 2,336,456
Masco Corp. ....................... 70,600 1,275,212
Maytag Corp. ...................... 13,600 501,500
Newell Rubbermaid Inc. ............ 44,614 1,148,811
Owens Corning ..................... 9,700 89,725
Stanley Works ..................... 13,200 313,500
Tupperware Corp. .................. 7,000 154,000
Whirlpool Corp. ................... 11,400 531,525
--------------
6,602,098
--------------
INSTRUMENTS -- CONTROLS -- 0.2%
Agilent Technologies, Inc.(a) ..... 57,593 4,247,497
Johnson Controls, Inc. ............ 13,500 692,719
PE Corp-PE Biosystems Group ....... 32,600 2,147,525
PerkinElmer, Inc. ................. 12,100 800,112
Thermo Electron Corp.(a) .......... 36,700 772,994
--------------
8,660,847
--------------
INSURANCE -- 1.6%
Aetna, Inc. ....................... 23,100 1,482,731
AFLAC Inc. ........................ 41,100 1,888,031
Allstate Corp. .................... 120,400 2,678,900
American General Corp. ............ 37,100 2,263,100
American International Group,
Inc. ............................ 239,853 28,182,727
Aon Corp. ......................... 38,600 1,199,013
Chubb Corp. ....................... 26,700 1,642,050
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B14
<PAGE> 24
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
INSURANCE (CONT'D.)
CIGNA Corp. ....................... 25,400 $ 2,374,900
Cincinnati Financial Corp. ........ 27,000 848,813
Conseco, Inc.(b) .................. 54,821 534,505
Hartford Financial Services Group, Inc. 34,400 1,924,250
Jefferson-Pilot Corp. ............. 16,000 903,000
Lincoln National Corp. ............ 30,600 1,105,425
Loews Corp. ....................... 17,800 1,068,000
Marsh & McLennan Companies, Inc. .. 41,900 4,375,931
MBIA, Inc. ........................ 15,500 746,906
MGIC Investment Corp. ............. 16,900 768,950
Progressive Corp. ................. 12,500 925,000
Reinsurance Group of America,
Inc. ............................ 156,425 4,712,303
SAFECO Corp. ...................... 23,900 475,013
St. Paul Companies, Inc. .......... 37,200 1,269,450
Torchmark Corp. ................... 20,300 501,156
UnumProvident Corp. ............... 39,010 782,638
--------------
62,652,792
--------------
LEISURE -- 0.4%
Brunswick Corp. ................... 16,900 279,906
Carnival Corp. (Class "A"
Stock) .......................... 90,900 1,772,550
Disney (Walt) Co.(b) .............. 321,500 12,478,219
Harrah's Entertainment, Inc.(a) ... 23,800 498,313
Hilton Hotels Corp. ............... 57,500 539,062
Marriott International, Inc. (Class
"A" Stock) ...................... 38,300 1,381,194
--------------
16,949,244
--------------
MACHINERY -- 0.3%
American Power Conversion
Corp.(a) ........................ 19,000 775,437
Briggs & Stratton Corp. ........... 5,400 184,950
Caterpillar, Inc. ................. 54,600 1,849,575
Cooper Industries, Inc. ........... 15,900 517,744
Deere & Co. ....................... 36,600 1,354,200
Dover Corp. ....................... 31,300 1,269,606
Eaton Corp. ....................... 11,500 770,500
Ingersoll-Rand Co. ................ 26,600 1,070,650
Milacron, Inc. .................... 7,200 104,400
Snap-On, Inc. ..................... 8,900 236,963
Timken Co. ........................ 11,500 214,188
United Dominion Industries Ltd. ... 116,100 1,973,700
--------------
10,321,913
--------------
MANUFACTURING -- 0.4%
Illinois Tool Works, Inc. ......... 43,400 2,473,800
Smith (A.O.) Corp.(a) ............. 105,450 2,207,859
Tyco International Ltd. ........... 265,222 12,564,892
--------------
17,246,551
--------------
MEDIA -- 1.5%
Clear Channel Communications,
Inc.(a)(b) ...................... 53,100 3,982,500
Comcast Corp. (Special Class "A"
Stock) .......................... 144,000 5,832,000
Donnelley (R.R.) & Sons Co. ....... 64,900 1,464,306
Dow Jones & Co., Inc. ............. 14,400 1,054,800
Gannett Co., Inc. ................. 42,000 2,512,125
Interpublic Group of Companies,
Inc. ............................ 43,200 1,857,600
Knight-Ridder, Inc. ............... 13,600 723,350
McGraw-Hill Companies, Inc. ....... 30,900 1,668,600
Mediaone Group, Inc.(b) ........... 82,500 5,455,312
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
MEDIA (CONT'D.)
Meredith Corp. .................... 10,200 $ 344,250
New York Times Co. (Class "A"
Stock) .......................... 25,500 1,007,250
Time Warner, Inc.(b) .............. 199,600 15,169,600
Tribune Co. ....................... 51,050 1,786,750
Viacom, Inc., (Class "B" Stock)
(a) ............................. 238,169 16,240,149
--------------
59,098,592
--------------
METALS-FERROUS
Allegheny Technologies, Inc. ...... 14,200 255,600
Bethlehem Steel Corp.(a) .......... 26,200 93,338
Material Sciences Corp.(a) ........ 19,000 190,000
Nucor Corp. ....................... 12,700 421,481
USX Corp.-U.S. Steel Group,
Inc. ............................ 12,200 226,462
Worthington Industries, Inc. ...... 11,400 119,700
--------------
1,306,581
--------------
METALS-NON FERROUS -- 0.1%
Alcan Aluminum Ltd.(b) ............ 33,700 1,044,700
Alcoa, Inc. ....................... 136,440 3,956,760
Inco Ltd. ......................... 33,800 519,675
--------------
5,521,135
--------------
MINERAL RESOURCES
Homestake Mining Co. .............. 39,600 272,250
Phelps Dodge Corp. ................ 12,893 479,458
--------------
751,708
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.3%
AES Corp. ......................... 68,200 3,111,625
Crane Co. ......................... 10,800 262,575
Danaher Corp. ..................... 23,800 1,176,613
Ecolab, Inc. ...................... 23,300 910,156
Grainger (W.W.), Inc. ............. 15,500 477,594
IDEX Corp. ........................ 57,200 1,805,375
ITT Industries, Inc. .............. 19,600 595,350
Millipore Corp. ................... 8,200 618,075
NACCO Industries, Inc. (Class "A"
Stock) .......................... 200 7,025
Pall Corp. ........................ 22,000 407,000
PPG Industries, Inc. .............. 26,100 1,156,556
Textron, Inc. ..................... 24,000 1,303,500
--------------
11,831,444
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.4%
American Greetings Corp. (Class "A"
Stock) .......................... 9,800 186,200
Black & Decker Corp. .............. 15,500 609,344
Corning, Inc. ..................... 43,300 11,685,587
Energizer Holdings, Inc.(a) ....... 1 22
Minnesota Mining & Manufacturing Co. 62,000 5,115,000
Polaroid Corp. .................... 9,100 164,369
--------------
17,760,522
--------------
MOTORCYCLES
Harley-Davidson, Inc. ............. 47,300 1,821,050
--------------
OIL & GAS -- 2.2%
Amerada Hess Corp. ................ 15,100 932,425
Anadarko Petroleum Corp.(b) ....... 20,300 1,001,044
Ashland, Inc. ..................... 12,600 441,788
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B15
<PAGE> 25
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
OIL & GAS (CONT'D.)
Chevron Corp. ..................... 102,000 $ 8,650,875
Coastal Corp. ..................... 32,900 2,002,787
Eastern Enterprises ............... 5,600 352,800
Exxon Mobil Corp. ................. 537,970 42,230,645
Kerr-McGee Corp. .................. 16,525 973,942
NICOR, Inc. ....................... 7,100 231,638
Phillips Petroleum Co. ............ 39,700 2,012,294
Pioneer Natural Resources Co. ..... 212,744 2,712,486
Royal Dutch Petroleum Co. ......... 333,300 20,518,781
Sunoco, Inc. ...................... 15,600 459,225
Texaco, Inc.(b) ................... 85,900 4,574,175
Unocal Corp. ...................... 40,100 1,328,312
USX-Marathon Group ................ 48,500 1,215,531
--------------
89,638,748
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.2%
Baker Hughes, Inc. ................ 51,950 1,662,400
Burlington Resources Inc. ......... 34,100 1,304,325
Conoco, Inc. (Class "B" Stock) .... 91,394 2,244,865
Occidental Petroleum Corp. ........ 55,900 1,177,394
Transocean Sedco Forex, Inc. ...... 28,997 1,549,527
Union Pacific Resources Group,
Inc. ............................ 40,500 891,000
--------------
8,829,511
--------------
OIL & GAS SERVICES -- 0.6%
Apache Corp. ...................... 17,800 1,046,863
Enron Corp. ....................... 111,700 7,204,650
Halliburton Co. ................... 65,500 3,090,781
McDermott International, Inc. ..... 361,800 3,188,363
ONEOK, Inc. ....................... 4,700 121,906
Rowan Companies, Inc.(a) .......... 15,400 467,775
Schlumberger Ltd. ................. 85,400 6,372,975
Tosco Corp. ....................... 21,700 614,381
--------------
22,107,694
--------------
PRECIOUS METALS -- 0.1%
Barrick Gold Corp. ................ 59,600 1,083,975
Freeport-McMoRan Copper & Gold,
Inc. (Class "B" Stock) .......... 21,800 201,650
Newmont Mining Corp. .............. 29,400 635,775
Placer Dome, Inc. ................. 48,800 466,650
--------------
2,388,050
--------------
RAILROADS -- 0.2%
Burlington Northern Santa Fe
Corp. ........................... 72,500 1,662,969
CSX Corp. ......................... 34,800 737,325
Kansas City Southern Industries,
Inc. ............................ 17,700 1,569,769
Norfolk Southern Corp. ............ 64,200 954,975
Union Pacific Corp. ............... 37,800 1,405,687
--------------
6,330,725
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc. .......... 22,100 359,125
McDonald's Corp.(b) ............... 209,800 6,910,288
Starbucks Corp.(a) ................ 18,000 687,375
Tricon Global Restaurants, Inc.
(a) ............................. 23,900 675,175
Wendy's International, Inc. ....... 18,400 327,750
--------------
8,959,713
--------------
RETAIL -- 2.7%
Albertson's, Inc. ................. 61,366 2,040,419
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
RETAIL (CONT'D.)
AutoZone, Inc.(a) ................. 23,500 $ 517,000
Bed Bath & Beyond, Inc. ........... 18,000 652,500
Best Buy Co., Inc.(a) ............. 30,200 1,910,150
Circuit City Stores, Inc. ......... 33,100 1,098,506
Consolidated Stores Corp. ......... 20,100 241,200
Costco Wholesale Corp. ............ 68,100 2,247,300
CVS Corp. ......................... 59,300 2,372,000
Dillard's, Inc. ................... 22,000 269,500
Dollar General Corp. .............. 56,756 1,106,742
Federated Department Stores,
Inc.(a)(b) ...................... 36,100 1,218,375
Gap, Inc., (The)(b) ............... 128,990 4,030,937
Great Atlantic & Pacific Tea Co.,
Inc. ............................ 8,900 147,963
Harcourt General, Inc. ............ 9,800 532,875
Home Depot, Inc. .................. 357,950 17,875,128
IKON Office Solutions, Inc. ....... 26,800 103,850
J.C. Penney Co., Inc. ............. 40,900 754,094
Kmart Corp.(a)(b) ................. 78,200 532,738
Kohl's Corp.(a) ................... 47,700 2,653,312
Kroger Co.(a) ..................... 121,116 2,672,122
Liz Claiborne, Inc. ............... 8,400 296,100
Longs Drug Stores, Inc. ........... 7,000 152,250
May Department Stores Co. ......... 51,900 1,245,600
Nordstrom, Inc. ................... 21,800 525,925
Office Depot, Inc.(a) ............. 59,700 373,125
RadioShack Corp. .................. 32,000 1,516,000
Rite Aid Corp.(b) ................. 43,800 287,438
Safeway, Inc.(a) .................. 79,800 3,600,975
Sears, Roebuck & Co.(b) ........... 57,700 1,882,462
Sherwin-Williams Co. .............. 25,400 538,163
Staples, Inc.(a) .................. 74,900 1,151,588
SUPERVALU Inc. .................... 28,000 533,750
Target Corp. ...................... 68,100 3,949,800
The Limited, Inc. ................. 125,506 2,714,067
Tiffany & Co. ..................... 1,000 67,500
TJX Companies, Inc. ............... 48,500 909,375
Toys 'R' Us, Inc.(a) .............. 41,900 610,169
Wal-Mart Stores, Inc. ............. 689,500 39,732,437
Walgreen Co. ...................... 152,000 4,892,500
Winn-Dixie Stores, Inc. ........... 25,100 359,244
--------------
108,315,179
--------------
RUBBER
Cooper Tire & Rubber Co. .......... 11,200 124,600
Goodyear Tire & Rubber Co. ........ 24,500 490,000
--------------
614,600
--------------
TELECOMMUNICATIONS -- 5.4%
ADC Telecommunications, Inc.(a) ... 44,600 3,740,825
ALLTEL Corp. ...................... 47,400 2,935,838
Andrew Corp.(a) ................... 17,600 590,700
AT&T Corp. ........................ 496,548 15,703,330
Bell Atlantic Corp.(b) ............ 241,100 12,250,894
BellSouth Corp. ................... 292,600 12,472,075
CenturyTel, Inc. .................. 22,400 644,000
General Motors Corp. (Class "H"
Stock)(a) ....................... 7,145 626,974
Global Crossing Ltd.(a) ........... 117,190 3,083,562
GTE Corp. ......................... 150,800 9,387,300
Lucent Technologies, Inc.(b) ...... 495,155 29,337,934
Motorola, Inc. .................... 330,525 9,605,883
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B16
<PAGE> 26
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Nextel Communications, Inc. (Class
"A" Stock) (a) .................. 114,400 $ 6,999,850
Nortel Networks Corp.(b) .......... 448,960 30,641,520
QUALCOMM, Inc. .................... 115,700 6,942,000
SBC Communications, Inc. .......... 530,608 22,948,796
Scientific-Atlanta, Inc. .......... 24,100 1,795,450
Sprint Corp. ...................... 135,200 6,895,200
Sprint Corp. (PCS Group)(b) ....... 129,400 7,699,300
Tellabs, Inc.(a) .................. 60,600 4,147,312
US West, Inc. ..................... 75,960 6,513,570
WorldCom, Inc.(a) ................. 441,821 20,268,538
--------------
215,230,851
--------------
TEXTILES
National Service Industries,
Inc. ............................ 6,000 117,000
Russell Corp. ..................... 6,500 130,000
Springs Industries, Inc. .......... 3,200 102,400
VF Corp. .......................... 19,100 454,819
--------------
804,219
--------------
TOBACCO
UST, Inc. ......................... 26,100 383,344
--------------
TOYS
Hasbro, Inc. ...................... 30,700 462,419
Mattel, Inc. ...................... 64,951 856,541
--------------
1,318,960
--------------
TRAVEL SERVICES
Sabre Holdings Corp.(a) ........... 23,526 670,491
--------------
TRUCKING/SHIPPING -- 0.1%
FedEx Corp.(a) .................... 44,900 1,706,200
Ryder System, Inc. ................ 11,500 217,781
--------------
1,923,981
--------------
UTILITY - ELECTRIC & GAS -- 0.7%
Ameren Corp. ...................... 21,200 715,500
American Electric Power Co.,
Inc.(b) ......................... 52,160 1,545,240
CINergy Corp. ..................... 23,500 597,781
CMS Energy Corp. .................. 21,000 464,625
Consolidated Edison, Inc. ......... 34,100 1,010,212
Constellation Energy Group ........ 22,400 729,400
CP&L, Inc. ........................ 24,600 785,663
Dominion Resources, Inc. .......... 38,116 1,634,223
DTE Energy Co.(b) ................. 22,700 693,769
Duke Energy Co. ................... 56,800 3,202,100
Edison International .............. 55,500 1,137,750
Entergy Corp. ..................... 39,400 1,071,187
FirstEnergy Corp.(a) .............. 36,900 862,537
Florida Progress Corp. ............ 14,100 660,938
FPL Group, Inc. ................... 27,700 1,371,150
GPU, Inc. ......................... 19,900 538,544
New Century Energies, Inc. ........ 18,200 546,000
Niagara Mohawk Holdings Inc.
(a) ............................. 27,000 376,313
Northern States Power Co. ......... 26,900 543,044
Pacific Gas & Electric Co. ........ 61,300 1,509,512
PECO Energy Co. ................... 30,800 1,241,625
Pinnacle West Capital Corp. ....... 11,400 386,175
PPL Corp. ......................... 24,100 528,694
Public Service Enterprise Group,
Inc. ............................ 34,600 1,198,025
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
UTILITY - ELECTRIC & GAS (CONT'D.)
Reliant Energy, Inc. .............. 46,200 $ 1,365,787
Southern Co. ...................... 101,200 2,359,225
TXU Corp. ......................... 43,500 1,283,250
Unicom Corp. ...................... 35,300 1,365,669
--------------
29,723,938
--------------
WASTE MANAGEMENT -- 0.1%
Allied Waste Industries, Inc. ..... 29,700 297,000
Waste Management, Inc. ............ 96,142 1,826,698
--------------
2,123,698
--------------
TOTAL COMMON STOCKS
(cost $1,603,369,037).......................... 1,951,410,165
--------------
PREFERRED STOCKS -- 0.8%
FINANCIAL SERVICES
BCH Capital Ltd., Series B......... 225,900 5,732,212
Central Hispano Capital Corp.,
Series A......................... 1,000,000 25,000,000
--------------
TOTAL PREFERRED STOCKS
(cost $31,236,594)............................. 30,732,212
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT
LONG-TERM RATING (000)
BONDS -- 32.6% ------- -----------
<S> <C> <C> <C>
AEROSPACE -- 0.2%
Litton Industries, Inc.,
8.00%, 10/15/09....... Baa2 $ 2,100 2,107,770
Northrop-Grumman Corp.,
7.875%, 03/01/26...... Baa3 4,500 4,265,505
--------------
6,373,275
--------------
AIRLINES -- 1.6%
Continental Airlines,
Inc.,
8.00%, 12/15/05....... Ba2 1,680 1,554,269
7.461%, 04/01/15...... Aa3 7,239 6,930,197
Delta Air Lines, Inc.,
7.90%, 12/15/09....... Baa3 19,300 18,037,780
United Airlines, Inc.,
10.67%, 05/01/04...... Baa3 19,865 20,206,479
11.21%, 05/01/14...... Baa3 18,433 19,002,211
--------------
65,730,936
--------------
ASSET BACKED-SECURITIES -- 1.9%
Citibank Credit Card Master
Trust, Series 1999-5,
6.10%, 05/15/08....... Aaa 39,000 36,513,750
MBNA Master Credit Card
Trust, Series 1999-B,
5.90%, 08/15/11....... Aaa 26,300 23,804,605
Standard Credit Card
Master Trust,
5.95%, 10/07/04....... Aaa 4,650 4,484,321
Team Fleet Financing Corp.,
7.35%, 05/15/03....... Aa3 11,000 10,945,000
--------------
75,747,676
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B17
<PAGE> 27
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
AUTO - CARS & TRUCKS -- 0.3%
Hertz Corp.,
8.25%, 06/01/05....... A3 $ 1,500 $ 1,531,200
Lear Corp.,
8.25%, 02/01/02....... Ba3 2,775 2,720,638
7.96%, 05/15/05....... Ba1 7,050 6,556,500
Navistar International
Corp.,
8.00%, 02/01/08(b).... Ba2 1,455 1,334,963
--------------
12,143,301
--------------
BANKS AND SAVINGS & LOANS -- 1.5%
National Australia Bank Ltd.,
6.40%, 12/10/07....... A1 8,400 8,284,500
Capital One Bank,
6.97%, 02/04/02....... Baa2 25,000 24,611,500
6.76%, 07/23/02....... Baa2 2,500 2,429,625
Chase Manhattan Corp.,
7.875%, 06/15/10...... A1 1,000 998,000
Key Bank NA,
5.80%, 04/01/04....... Aa3 5,000 4,725,000
Sanwa Finance Aruba,
A.E.C.,
8.35%, 07/15/09....... Baa1 5,970 5,943,493
Sovereign Bancorp, Sr. Notes,
10.25%, 05/15/04...... Ba3 605 596,584
10.50%, 11/15/06...... Ba3 1,045 1,045,000
Washington Mutual, Inc.,
8.25%, 10/01/02....... A3 5,200 5,239,728
7.50%, 08/15/06....... A3 5,000 4,851,900
--------------
58,725,330
--------------
BUILDING PRODUCTS -- 0.4%
Hanson Overseas B.V.,
7.375%, 01/15/03...... A3 14,751 14,657,036
--------------
CABLE & PAY TELEVISION SYSTEMS -- 0.8%
Cox Communications,
Inc.,
6.94%, 10/01/01....... Baa2 4,000 3,988,840
CSC Holdings, Inc.,
7.875%, 12/15/07...... Ba1 1,740 1,683,502
7.25%, 07/15/08....... Ba1 3,100 2,865,795
Rogers Cablesystems Ltd.,
(Canada),
11.00%, 12/01/15...... Ba3 4,010 4,330,800
Tele-Communications,
Inc.,
8.25%, 01/15/03....... A2 2,000 2,055,980
9.875%, 06/15/22...... A2 12,900 15,256,959
--------------
30,181,876
--------------
CHEMICALS -- 0.1%
Lyondell Chemical,
9.625%, 05/01/07...... Ba3 320 316,800
Monsanto Co.,
6.50%, 12/01/18....... A1 1,145 1,009,340
6.75%, 12/15/27....... A1 2,735 2,453,486
6.60%, 12/01/28....... A1 1,150 1,017,359
--------------
4,796,985
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
CONSULTING -- 0.7%
Comdisco, Inc.,
6.00%, 01/30/02....... Baa1 $ 30,000 $ 28,912,500
--------------
CONTAINERS -- 0.5%
Owens-Illinois, Inc.,
7.15%, 05/15/05(b).... Ba1 13,000 11,883,560
Pactiv Corp.,
7.95%, 12/15/25....... Baa3 7,250 6,503,468
--------------
18,387,028
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.1%
Eastman Kodak Co.,
M.T.N.,
7.25%, 06/15/05....... A2 2,500 2,490,750
--------------
DIVERSIFIED OPERATIONS
Corning Inc.,
6.85%, 03/01/29....... A2 2,180 1,856,248
--------------
FINANCIAL SERVICES -- 2.9%
Capital One Financial
Corp.,
7.25%, 05/01/06....... Baa3 2,950 2,699,250
Enterprise Rent-A-Car
USA Finance Co.,
6.95%, 03/01/04....... Baa1 7,500 7,221,750
7.50%, 06/15/03,
M.T.N. ............. Baa1 5,000 4,981,500
Finova Capital Corp.,
6.125%, 03/15/04...... Baa2 21,000 18,060,000
Ford Motor Credit Corp.,
7.375%, 10/28/09...... A2 2,000 1,934,540
7.875%, 06/15/10...... A2 4,700 4,735,250
Gatx Capital Corp.,
7.75%, 12/01/06....... Baa2 6,000 5,610,000
General Motors
Acceptance Corp.,
5.95%, 03/14/03....... A2 27,000 25,967,250
HVB Funding Trust,
9.00%, 10/22/31....... Aa3 1,200 1,138,920
International Lease
Finance Corp.,
5.90%, 03/12/03....... A1 5,000 4,800,000
Osprey Trust,
8.31%, 01/15/03....... Baa2 26,000 26,088,400
Pemex Finance Ltd.,
(Cayman Islands),
9.14%, 08/15/04....... Baa1 6,500 6,650,150
RBF Finance Co.,
11.375%, 03/15/09..... Ba3 2,280 2,462,400
Textron Financial Corp.,
6.05%, 03/16/09....... Aaa 5,029 5,000,810
--------------
117,350,220
--------------
FOOD & BEVERAGE -- 0.1%
Coca-Cola Bottling Co.,
6.375%, 05/01/09...... Baa2 3,000 2,744,010
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B18
<PAGE> 28
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
FOOD & BEVERAGE (CONT'D.)
Embotelladora Andina, S.A.,
7.875%, 10/01/97...... Baa1 $ 1,250 $ 963,000
--------------
3,707,010
--------------
FOREST PRODUCTS -- 1.0%
International Paper Co.,
8.00%, 07/08/03(b).... Baa1 26,000 26,135,980
Scotia Pacific Co.
7.71%, 01/20/14....... Baa2 18,800 12,878,000
--------------
39,013,980
--------------
INDUSTRIAL -- 0.2%
Cendant Corp.,
7.75%, 12/01/03....... Baa1 2,000 1,922,600
Compania Sud Americana
de Vapores, S.A., (Chile),
7.375%, 12/08/03...... NR 4,600 4,416,000
--------------
6,338,600
--------------
INSURANCE -- 0.2%
Aon Corp.,
8.65%, 05/15/05(b).... A3 4,000 4,082,000
Conseco, Inc.,
8.50%, 10/15/02....... Ba1 4,050 2,997,000
--------------
7,079,000
--------------
INVESTMENT BANKERS -- 0.9%
Goldman Sachs Group, Inc.,
7.80%, 01/28/10(b).... A1 2,500 2,456,250
Lehman Brothers
Holdings, Inc.,
6.625%, 04/01/04...... A3 18,550 17,703,935
6.625%, 02/05/06...... A3 5,780 5,400,774
Morgan Stanley Dean
Witter & Co.,
7.125%, 01/15/03...... Aa3 4,360 4,332,052
PaineWebber Group, Inc.,
7.015%, 02/10/04...... Baa1 6,000 5,775,900
--------------
35,668,911
--------------
LEISURE -- 0.5%
ITT Corp.,
6.75%, 11/15/03....... Ba1 21,500 20,175,815
Park Place Entertainment
Corp.,
9.375%, 02/15/07...... Ba2 1,960 1,960,000
--------------
22,135,815
--------------
MEDIA -- 0.2%
Clear Channel
Communications, Inc.
7.875%, 06/15/05...... Baa3 1,600 1,608,512
Cox Enterprises, Inc.,
6.625%, 06/14/02...... Baa1 4,500 4,425,075
United News & Media PLC,
7.25%, 07/01/04....... Baa2 2,900 2,800,240
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
MEDIA (CONT'D.)
World Color Press Inc.,
8.375%, 11/15/08...... Baa3 $ 1,340 $ 1,259,600
--------------
10,093,427
--------------
MISCELLANEOUS - BASIC INDUSTRY
AES Corp.,
9.50%, 06/01/09(b).... Ba1 2,350 2,303,000
--------------
OIL & GAS -- 0.5%
Amerada Hess Corp.,
7.875%, 10/01/29...... Baa1 2,020 1,975,176
B.J. Services Co.,
7.00%, 02/01/06....... Baa2 4,000 3,836,760
Limestone Electron
Trust,
8.625%, 03/15/03...... Baa3 8,750 8,834,700
Phillips Petroleum Co.,
8.50%, 05/25/05(b).... Baa2 3,750 3,874,050
--------------
18,520,686
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Parker & Parsley Petroleum Co.,
8.875%, 04/15/05...... Ba2 1,375 1,341,326
Union Pacific Resources
Group Inc.,
7.95%, 04/15/29....... Baa3 3,400 3,371,984
--------------
4,713,310
--------------
REAL ESTATE INVESTMENT TRUST -- 1.4%
Duke Realty, L.P.,
7.30%, 06/30/03....... Baa1 3,850 3,778,775
EOP Operating, L.P.,
6.375%, 01/15/02...... Baa1 4,500 4,403,250
6.50%, 06/15/04....... Baa1 6,000 5,708,520
6.625%, 02/15/05(b)... Baa1 17,938 16,946,746
ERP Operating, L.P.,
7.10%, 06/23/04....... A3 2,000 1,939,520
6.63%, 4/13/05(e)..... A3 8,300 7,802,498
Simon Debartolo Group, Inc.,
6.75%, 06/15/05....... Baa1 17,500 16,395,050
--------------
56,974,359
--------------
RETAIL -- 1.2%
Federated Department
Stores, Inc.,
8.125%, 10/15/02...... Baa1 25,850 26,109,017
8.50%, 06/15/03(b).... Baa1 5,000 5,045,850
Kroger Co., (The),
7.25%, 06/01/09....... Baa3 5,100 4,692,000
Safeway Stores Inc.,
6.05%, 11/15/03....... Baa2 12,000 11,458,680
--------------
47,305,547
--------------
TELECOMMUNICATIONS -- 3.5%
360 Communication Co.,
7.125%, 03/01/03(b)... A2 22,550 22,191,906
7.60%, 04/01/09....... A2 7,000 6,793,150
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B19
<PAGE> 28
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Airtouch Communications,
Inc.,
7.00%, 10/01/03....... A2 $ 4,100 $ 4,030,300
Deutsche Telekom
International Finance B.V.,
7.75%, 06/15/05....... Aa2 15,000 15,075,000
8.00%, 06/15/10....... Aa2 10,000 10,070,000
8.25%, 06/15/30....... Aa2 15,000 15,151,500
Electric Lightwave,
Inc.,
6.05%, 05/15/04....... A2 4,700 4,376,875
Global Crossing
Holdings, Ltd.,
9.125%, 11/15/06...... Ba2 1,765 1,698,813
Rogers Cantel Inc.,
9.375%, 06/01/08...... Baa3 1,055 1,086,650
Sprint Capital Corp.,
6.125%, 11/15/08...... Baa1 18,500 16,490,345
Telecom De Puerto Rico,
6.65%, 05/15/06....... Baa2 9,500 8,823,125
6.80%, 05/15/09....... Baa2 7,900 7,218,625
U.S. West Capital
Funding Inc.,
6.875%, 08/15/01...... Baa1 15,000 14,922,000
Williams Communications
Group, Inc.,
10.875%, 10/01/09..... B2 1,460 1,430,800
Worldcom Inc.,
7.875%, 05/15/03...... A3 3,000 3,030,000
8.00%, 05/15/06(b) A3 5,000 5,056,250
8.25%, 05/15/10....... A3 1,000 1,025,810
--------------
138,471,149
--------------
UTILITIES -- 1.1%
Calpine Corp.,
10.50%, 05/15/06...... Ba1 4,500 4,702,500
Cogentrix Energy, Inc.,
8.75%, 10/15/08....... Ba1 2,940 2,837,100
Edison Mission Energy,
7.73%, 06/15/09....... A3 4,300 4,193,188
Entergy Louisiana, Inc.,
8.50%, 06/01/03....... Baa2 5,000 5,044,000
Hydro-Quebec,
8.00%, 02/01/13....... A2 1,900 1,975,962
Niagara Mohawk Power Co.,
7.375%, 08/01/03(b)... Baa2 10,000 9,860,300
Peco Energy Transition Trust,
5.80%, 03/01/07....... Aaa 7,500 7,087,500
PSEG Energy Holdings, Inc.,
10.00%, 10/01/09...... Ba1 2,385 2,414,813
Sonat, Inc.,
7.625%, 07/15/11...... Baa2 6,700 6,544,225
--------------
44,659,588
--------------
WASTE MANAGEMENT
Allied Waste Industries, Inc.,
7.625%, 01/01/06...... Ba3 970 848,750
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
FOREIGN GOVERNMENT BONDS -- 0.7%
Junta de Andalucia, (Spain),
7.25%, 10/01/29....... Aa3 $ 720 $ 692,064
Province of Saskatchewan,
(Canada),
9.125%, 02/15/21...... A2 1,800 2,080,854
Quebec Province, (Canada),
7.125%, 02/09/24(b)... A2 2,700 2,550,366
Republic of Philippines,
8.875%, 04/15/08...... Ba1 4,700 4,230,000
United Mexican States,
10.375%, 02/17/09..... Baa3 18,600 19,995,000
--------------
29,548,284
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 10.0%
United States Treasury Bonds,
13.875%, 05/15/11(d)........... 3,350 4,543,974
7.50%, 11/15/16................ 13,750 15,528,838
8.75%, 05/15/17(b)............. 53,391 67,247,566
8.125%, 05/15/21(b)............ 57,900 70,647,264
8.125%, 08/15/21(b)............ 28,800 35,185,536
7.625%, 11/15/22(b)............ 35,600 41,652,000
7.125%, 02/15/23(b)............ 20,300 22,561,623
6.75%, 08/15/26(b)............. 12,050 12,966,885
6.125%, 08/15/29(b)............ 12,540 12,665,400
6.25%, 05/15/30(b)............. 5,750 6,033,015
United States Treasury Notes,
6.625%, 05/31/02(b)............ 13,500 13,550,625
5.50%, 03/31/03................ 150 146,672
7.50%, 02/15/05(d)............. 185 193,902
6.875%, 05/15/06............... 1,915 1,970,956
6.50%, 10/15/06................ 1,100 1,113,233
6.25%, 02/15/07................ 5,250 5,254,095
6.625%, 05/15/07(b)............ 37,250 38,030,015
6.50%, 02/15/10(b)............. 49,684 51,384,186
--------------
400,675,785
--------------
TOTAL LONG-TERM BONDS
(cost $1,343,500,689).......................... 1,305,410,362
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,978,106,320).......................... 3,287,552,739
--------------
SHORT-TERM INVESTMENTS -- 31.1%
COMMERCIAL PAPER -- 22.6%
Abbott Laboratories,
7.00%, 07/06/00....... P1 1,200 1,198,833
Alltel Corp.,
6.55%, 07/12/00....... P1 11,900 11,876,183
American Electric Power Co.,
6.83%, 07/21/00(c).... P2 40,000 39,848,222
Aon Corp.,
6.60%, 07/20/00(c).... P2 46,013 45,852,721
Associates Corp. of
North America,
6.80%, 07/13/00....... P1 16,800 16,761,920
Bank One Corp.,
6.78%, 8/18/00........ P1 2,000 2,013,563
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B20
<PAGE> 30
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Barton Capital Corp.,
6.60%, 07/21/00....... NR $ 7,419 $ 7,391,797
Baus Funding LLC,
6.77%, 07/14/00....... P1 23,600 23,542,305
Bishops Gate Residential
Mortgage,
6.60%, 07/17/00....... P1 10,400 10,369,493
Blue Ridge Asset Funding,
6.60%, 07/25/00....... P1 2,000 1,991,200
Bombardier Capital,
Inc.,
6.84%, 07/28/00(c).... P2 10,000 9,948,700
6.90%, 08/18/00(c).... P2 10,000 9,908,000
6.90%, 08/23/00(c).... P2 15,000 14,847,625
Bradford & Bingley
Building Society,
6.65%, 09/08/00....... P1 22,249 21,965,418
Citicorp,
6.55%, 07/10/00(c).... P1 15,000 14,975,438
6.55%, 07/27/00(c).... P1 25,176 25,056,904
6.60%, 08/10/00....... P1 23,000 22,831,333
Cooper Industries, Inc.,
7.05%, 07/05/00....... P1 23,600 23,581,513
Dexia CLF Finance Co.,
6.58%, 07/20/00....... P1 4,000 3,986,109
Dow Chemical Co., Inc.,
7.00%, 07/03/00....... P1 6,500 6,497,472
Dresdner U.S. Finance, Inc.,
6.75%, 07/12/00....... P1 1,100 1,097,731
Du Pont (E. I.) De
Nemours & Co., Inc.,
7.00%, 07/05/00....... P1 4,675 4,671,364
Duke Capital Corp.,
7.25%, 07/05/00(c).... P2 40,000 39,967,776
Enterprise Funding
Corp.,
6.60%, 07/19/00....... P1 9,000 8,970,300
6.61%, 08/23/00....... P1 14,000 13,863,761
Equitable Resources, Inc.,
6.57%, 07/17/00....... P1 10,000 9,970,800
6.62%, 07/21/00....... P1 13,500 13,450,350
Falcon Asset
Securitization Corp.,
6.72%, 07/21/00(c).... P1 20,000 19,925,333
First National Bank
Chicago,
5.70%, 07/12/00....... P1 3,000 2,997,604
Ford Motor Credit Corp.,
6.55%, 07/12/00....... P1 3,100 3,093,796
Fortis Funding LLC,
6.70%, 07/13/00....... P1 15,257 15,222,926
Fortune Brands, Inc.,
6.57%, 07/11/00....... P1 11,900 11,878,283
GE International Funding
Corp.,
6.52%, 07/17/00(c).... P1 20,000 19,942,044
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
General Electric Capital
Corp.,
6.60%, 07/12/00....... P1 $ 3,100 $ 3,093,748
6.75%, 07/12/00....... P1 4,000 3,991,750
6.63%, 07/13/00....... P1 12,100 12,073,259
Goldman Sachs Group, Inc.,
6.57%, 07/26/00....... 24,000 23,890,500
GTE Corp.,
6.62%, 07/06/00....... P1 1,293 1,291,811
6.62%, 07/13/00....... P1 9,662 9,640,679
6.62%, 07/27/00....... P1 2,400 2,388,525
6.62%, 07/28/00....... P1 1,600 1,592,056
6.63%, 08/09/00(c).... P1 10,000 9,928,172
Heller Financial, Inc.
6.75%, 07/21/00(c).... P2 35,000 34,868,750
Hertz Corp.,
7.15%, 07/06/00....... P1 1,200 1,198,808
Homeside Lending, Inc.,
6.55%, 07/18/00....... P1 11,900 11,863,192
6.62%, 07/27/00....... P1 12,000 11,942,627
ING America Insurance
Holdings, Inc.,
6.57%, 07/11/00....... P1 11,900 11,878,283
Invensys PLC,
7.30%, 07/05/00(c).... P1 15,900 15,887,102
Keyspan Corp.,
6.83%, 07/31/00(c).... P2 30,000 29,829,250
Morgan Stanley Dean
Witter & Co.,
6.58%, 07/27/00....... P1 24,000 23,885,947
Nike Inc.,
6.60%, 07/28/00....... P1 6,373 6,341,454
6.60%, 08/04/00....... P1 2,263 2,248,894
Northern Rock PLC,
6.60%, 07/14/00....... P1 24,000 23,942,800
Old Line Funding Corp.,
6.62%, 08/01/00....... P1 2,753 2,737,306
Phillips Petroleum Co.,
6.83%, 07/31/00(c).... P2 40,000 39,772,333
PNC Funding Corp.,
6.63%, 07/24/00....... P1 10,000 9,957,642
Potomac Electric Power Co.,
6.62%, 08/01/00....... P1 2,900 2,883,468
Preferred Receivables
Funding Corp.,
6.62%, 08/03/00....... P1 1,900 1,888,470
PSE&G Fuel Corp.,
7.30%, 07/06/00(c).... P2 40,000 40,000,000
Santander Finance
Delaware Inc.,
6.62%, 09/05/00....... P1 1,000 987,863
Scotiabanc Inc.,
6.62%, 07/26/00....... P1 14,000 13,935,639
Sweetwater Capital
Corp.,
6.63%, 07/24/00....... P1 4,965 4,943,969
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B21
<PAGE> 31
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Target Corp.,
7.50%, 07/05/00....... P1 $ 1,746 $ 1,744,545
6.64%, 08/07/00....... P1 16,333 16,221,536
Thunder Bay Funding,
Inc.,
6.60%, 07/06/00....... P1 8,627 8,619,092
6.60%, 07/07/00....... P1 1,322 1,320,546
6.60%, 07/10/00....... P1 1,935 1,931,807
6.60%, 07/17/00....... P1 2,562 2,554,485
6.60%, 07/24/00....... P1 2,980 2,967,434
6.62%, 08/03/00....... P1 2,365 2,350,649
TRW, Inc.,
6.88%, 08/15/00(c).... P2 17,000 16,853,800
Triple-A-One Funding
Corp.,
7.00%, 07/07/00(c).... P1 6,312 6,304,630
United Technologies
Corp.,
6.60%, 07/27/00....... P1 5,765 5,737,520
--------------
904,987,159
--------------
OTHER CORPORATE OBLIGATIONS -- 4.1%
Advanta Corp.,
7.50%, 08/28/00....... B1 35,000 34,928,250
Camden Property Trust,
7.23%, 10/30/00....... Baa2 22,000 21,960,400
El Paso Energy Corp.,
6.625%, 07/15/01...... Baa2 5,100 5,055,222
Fort James Corp.,
6.234%, 03/15/01(e)... Baa2 10,000 9,909,300
HRPT Properties Trust,
7.521%, 07/10/00(e)... Baa2 750 750,000
ITT Corp.,
6.25%, 11/15/00....... Ba1 5,253 5,204,725
KN Energy, Inc.,
6.30, 03/01/01(e)..... Baa2 20,000 19,845,200
Kroger Co., (The),
6.34%, 06/01/01....... Baa3 8,700 8,547,750
Mallinckrodt, Inc.,
6.30%, 03/15/01(e).... Baa2 7,000 6,895,000
MCN Investment Corp.,
6.30%, 04/02/01(e).... Baa3 8,250 8,119,650
Raytheon Co.,
5.95%, 03/15/01....... Baa2 7,400 7,313,642
Seagram (J.) & Sons,
Inc.,
5.79%, 04/15/01....... Baa3 13,300 13,119,120
Sovereign Bancorp,
Sr. Notes,
6.625%, 03/15/01...... Ba3 4,000 3,940,000
TRW, Inc.,
6.45%, 06/15/01....... Baa1 9,700 9,554,500
Waste Management, Inc.,
6.125%, 07/15/01...... Ba1 8,000 7,725,760
--------------
162,868,519
--------------
REPURCHASE AGREEMENT -- 1.4%
Joint Repurchase Agreement
Account,
6.49%, 07/03/00 (Note 5)....... 57,017 57,017,000
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
RATING (000) (NOTE 2)
------- ----------- --------------
<S> <C> <C> <C>
TIME DEPOSIT - EURODOLLAR -- 2.9%
Dexia Bank, S.A.,
(Cayman Islands)
7.125%, 07/03/00(c)... P1 $ 66,000 $ 66,000,000
Suntrust Bank,
7.00%, 07/13/00(c).... P1 48,210 48,210,000
Westdeutsche Landesbank
Girozentrale,
7.06%, 07/03/00....... P1 1,800 1,800,000
--------------
116,010,000
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Bills,
5.64%, 09/21/00(d)............. 1,700 1,678,161
5.67%, 09/21/00(d)............. 1,500 1,480,644
--------------
3,158,805
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,245,547,258).......................... 1,244,041,483
--------------
TOTAL INVESTMENTS -- 113.3%
(cost $4,223,653,578; Note 6).................. 4,531,594,222
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (f)...
336,413
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS --
(13.3%)........................................ (533,746,183)
--------------
TOTAL NET ASSETS -- 100.0%....................... $3,998,184,452
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
<TABLE>
<S> <C>
AG Aktiengesellschaft (German Stock Company)
ADR American Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anomia (Spanish Corporation) or Societe
Anonyme (French Corporation)
</TABLE>
(a) Non-income producing security.
(b) Portion of securities on loan with an aggregate market value of
$547,926,800; cash collateral of $549,263,308 was received with which the
portfolio purchased securities.
(c) Represents securities purchased with cash collateral received for securities
on loan.
(d) Security segregated as collateral for futures contracts.
(e) Mandatory put/call.
(f) Open futures contracts as of June 30, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 2000 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
83 U.S. T-Bond Sept 00 $8,082,125 $ 8,079,531 $ (2,594)
28 S&P 500 Index Sept 00 10,464,000 10,276,700 (187,300)
220 U.S. Treasury 5yr Sept 00 21,505,313 21,783,438 278,125
81 S&P 500 Index Sept 00 29,837,875 29,729,025 (108,850)
458 U.S. Treasury 5yr Sept 00 44,785,688 45,349,157 563,469
---------
$ 542,850
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B22
<PAGE> 32
FLEXIBLE MANAGED PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 88.7% VALUE
SHARES (NOTE 2)
COMMON STOCKS -- 57.1% ----------- --------------
<S> <C> <C>
ADVERTISING -- 0.1%
Omnicom Group, Inc. ............. 31,200 $ 2,778,750
--------------
AEROSPACE/DEFENSE -- 0.4%
Boeing Co. ...................... 214,500 8,968,781
GenCorp, Inc. ................... 140,000 1,120,000
General Dynamics Corp.(d) ....... 68,700 3,589,575
Lockheed Martin Corp. ........... 48,900 1,213,331
Northrop Grumman Corp. .......... 8,500 563,125
Raytheon Co. (Class "B" Stock)... 40,600 781,550
Titan Corp. ..................... 3,900 174,525
United Technologies Corp. ....... 58,100 3,420,638
--------------
19,831,525
--------------
AIRLINES -- 0.1%
AMR Corp. ....................... 164,600 4,351,612
Delta Airlines, Inc. ............ 15,800 798,888
Southwest Airlines Co. .......... 61,800 1,170,338
US Airways Group, Inc.(a)........ 8,700 339,300
--------------
6,660,138
--------------
AUTOS - CARS & TRUCKS -- 0.8%
Borg-Warner Automotive, Inc. .... 77,800 2,732,725
Cummins Engine Co., Inc. ........ 4,700 128,075
Dana Corp. ...................... 83,650 1,772,334
Delphi Automotive Systems
Corp. ......................... 253,054 3,685,099
Ford Motor Co. .................. 321,700 13,833,100
General Motors Corp. ............ 176,234 10,232,587
Genuine Parts Co................. 21,600 432,000
Johnson Controls, Inc. .......... 10,000 513,125
Navistar International
Corp.(a)....................... 9,000 279,562
PACCAR, Inc. .................... 10,000 396,875
Titan International, Inc. ....... 200,000 1,062,500
TRW, Inc. ....................... 14,800 641,950
Visteon Corp. ................... 42,121 510,719
--------------
36,220,651
--------------
BANKS AND SAVINGS & LOANS -- 2.1%
AmSouth Bancorp.................. 41,500 653,625
Associates First Capital
Corp. ......................... 137,390 3,065,514
Banc One Corp. .................. 140,064 3,720,450
Bank of New York Co., Inc. ...... 164,900 7,667,850
BankAmerica Corp. ............... 288,041 12,385,763
BB&T Corp. ...................... 43,400 1,036,175
Capital One Financial............ 24,900 1,111,163
Charter One Financial, Inc. ..... 3,000 69,000
Chase Manhattan Corp. ........... 291,900 13,445,644
Comerica, Inc. .................. 19,200 861,600
Fifth Third Bancorp.............. 36,000 2,277,000
First Union Corp. ............... 119,700 2,970,056
Firstar Corp. ................... 195,847 4,125,027
Golden West Financial Corp. ..... 28,500 1,163,156
Huntington Bancshares, Inc. ..... 29,392 464,761
KeyCorp.......................... 55,200 972,900
Mellon Financial Corp. .......... 61,400 2,237,262
National City Corp. ............. 73,100 1,247,269
Northern Trust Corp. ............ 39,100 2,543,944
PNC Bank Corp. .................. 137,400 6,440,625
Providian Financial Corp. ....... 95,400 8,586,000
SouthTrust Corp. ................ 19,000 429,875
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
State Street Corp. .............. 36,000 $ 3,818,250
Summit Bancorp(b)(d)............. 21,300 524,513
Suntrust Banks, Inc. ............ 47,100 2,151,881
U.S. Bancorp..................... 145,300 2,797,025
Union Planters Corp. ............ 18,000 502,875
Wells Fargo & Co. ............... 357,900 13,868,625
--------------
101,137,828
--------------
CHEMICALS -- 0.7%
Air Products & Chemicals,
Inc. .......................... 83,400 2,569,763
Dow Chemical Co. ................ 147,600 4,455,675
Du Pont (E.I.) de Nemours &
Co. ........................... 213,549 9,342,769
Eastman Chemical Co. ............ 9,800 467,950
Engelhard Corp. ................. 15,600 266,175
FMC Corp.(a)..................... 3,500 203,000
Grace (W.R.) & Co.(a)............ 8,000 97,000
Great Lakes Chemical Corp. ...... 6,400 201,600
Hercules, Inc. .................. 11,700 164,531
Material Sciences Corp.(a)....... 255,600 2,556,000
OM Group, Inc. .................. 223,200 9,820,800
Praxair, Inc. ................... 57,100 2,137,681
Rohm & Haas Co. ................. 27,158 936,951
Sigma-Aldrich Corp. ............. 11,300 330,525
Union Carbide Corp. ............. 15,600 772,200
--------------
34,322,620
--------------
COMMERCIAL SERVICES -- 0.2%
Cendant Corp.(a)................. 84,000 1,176,000
Convergys Corp. ................. 42,500 2,204,687
Deluxe Corp. .................... 9,000 212,063
Electronic Data Systems Corp. ... 98,500 4,063,125
Quintiles Transnational Corp. ... 13,100 185,038
--------------
7,840,913
--------------
COMPUTERS -- 3.6%
Apple Computer, Inc.(a)(b)....... 92,700 4,855,163
Citrix Systems, Inc.(a).......... 19,900 376,856
Compaq Computer Corp. ........... 208,361 5,326,228
Dell Computer Corp.(a)........... 438,500 21,623,531
EMC Corp.(a)(b).................. 470,736 36,217,251
Gateway, Inc. ................... 38,500 2,184,875
Hewlett-Packard Co.(d) .......... 230,600 28,796,175
International Business Machines
Corp.(d) ...................... 308,100 33,756,206
Network Appliance, Inc.(a)....... 34,400 2,769,200
Seagate Technology, Inc.(a)...... 66,400 3,652,000
Sun Microsystems, Inc.(a)........ 355,600 32,337,375
--------------
171,894,860
--------------
COMPUTER SERVICES -- 7.2%
3Com Corp.(a).................... 42,200 2,431,775
Adaptec, Inc.(a)................. 11,500 261,625
Adobe Systems, Inc. ............. 34,000 4,420,000
America Online, Inc.(a)(d)....... 519,800 27,419,450
Autodesk, Inc. .................. 7,600 263,625
Automatic Data Processing,
Inc. .......................... 137,100 7,343,419
BMC Software, Inc.(a)............ 29,200 1,065,344
Cabletron Systems, Inc.(a)....... 25,600 646,400
Cadence Design Systems,
Inc.(a)........................ 2,100 42,788
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B23
<PAGE> 33
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
COMPUTER SERVICES (CONT'D.)
Ceridian Corp.(a)................ 18,600 $ 447,563
Cisco Systems, Inc.(a)........... 1,499,000 95,280,187
Computer Associates
International, Inc. ........... 71,700 3,670,144
Computer Sciences Corp.(a)(d).... 20,000 1,493,750
Compuware Corp.(a)............... 48,000 498,000
Comverse Technology, Inc.(a)..... 44,100 4,101,300
First Data Corp. ................ 89,000 4,416,625
Fiserv, Inc. .................... 30,000 1,297,500
Intuit, Inc.(a).................. 50,200 2,077,025
Jabil Circuit, Inc.(a)........... 35,000 1,736,875
Lexmark International Group,
Inc.(a)........................ 15,984 1,074,924
Mercury Interactive Corp. ....... 2,000 193,500
Microchip Technology, Inc. ...... 26,100 1,520,733
Micron Technology, Inc. ......... 108,400 9,545,975
Microsoft Corp.(a)............... 1,005,800 80,464,000
NCR Corp.(a)..................... 7,600 295,925
Networks Associates, Inc. ....... 49,200 1,002,450
Novell, Inc.(a)(d)............... 38,500 356,125
Oracle Corp.(a)(d)............... 624,800 52,522,250
Parametric Technology Corp.(a)... 31,500 346,500
Peoplesoft, Inc.(a).............. 294,900 4,939,575
Rational Software Corp.(a)....... 17,900 1,663,581
Sapient Corp. ................... 4,000 427,750
Siebel Systems, Inc.(a).......... 19,000 3,107,687
Symantec Corp. .................. 29,000 1,564,187
VERITAS Software Corp.(a)(d)..... 78,700 8,894,330
Yahoo, Inc.(d) .................. 127,700 15,818,837
--------------
342,651,724
--------------
CONSTRUCTION -- 0.2%
Armstrong Holdings, Inc. ........ 5,800 88,813
Centex Corp. .................... 7,000 164,500
Fluor Corp. ..................... 9,800 309,925
Kaufman & Broad Home Corp. ...... 6,400 126,800
Pulte Corp. ..................... 6,900 149,212
Standard Pacific Corp. .......... 597,500 5,975,000
Vulcan Materials Co. ............ 11,200 478,100
Webb (Del E.) Corp. ............. 189,200 2,897,125
--------------
10,189,475
--------------
CONTAINERS -- 0.1%
Ball Corp. ...................... 2,700 86,906
Bemis Co., Inc. ................. 6,600 221,925
Crown Cork & Seal Co., Inc. ..... 100,400 1,506,000
Owens-Illinois, Inc. ............ 144,200 1,685,337
Pactiv Corp. .................... 21,500 169,313
Sealed Air Corp. ................ 10,900 570,888
--------------
4,240,369
--------------
COSMETICS & SOAPS -- 0.6%
Alberto Culver Co. (Class "B"
Stock)......................... 6,200 189,488
Avon Products, Inc. ............. 28,700 1,277,150
Colgate-Palmolive Co. ........... 136,700 8,184,913
Gillette Co. .................... 262,200 9,160,612
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
COSMETICS & SOAPS (CONT'D.)
International Flavors &
Fragrances, Inc. .............. 10,300 $ 310,931
Procter & Gamble Co.............. 159,900 9,144,281
--------------
28,267,375
--------------
DIVERSIFIED OPERATIONS -- 2.9%
Corning, Inc. ................... 34,000 9,175,750
Fortune Brands, Inc. ............ 18,300 422,044
General Electric Co.(d) ......... 2,149,100 113,902,300
Perkinelmer, Inc. ............... 6,100 403,362
Smith (A.O.) Corp. .............. 433,350 9,073,266
Unilever N. V.................... 95,042 4,086,806
--------------
137,063,528
--------------
DRUGS & MEDICAL SUPPLIES -- 5.2%
Abbott Laboratories.............. 284,000 12,655,750
Allergan, Inc. .................. 16,100 1,199,450
ALZA Corp.(a).................... 12,500 739,063
Amgen, Inc.(a)................... 240,800 16,916,200
Bard (C.R.), Inc. ............... 5,900 283,938
Bausch & Lomb, Inc. ............. 7,200 557,100
Baxter International, Inc. ...... 35,400 2,489,063
Becton Dickinson & Co. .......... 31,500 903,656
Biogen, Inc.(a).................. 16,000 1,032,000
Biomet, Inc.(a).................. 14,500 557,344
Boston Scientific Corp.(a)....... 52,700 1,156,106
Cardinal Health, Inc.(b)(d)...... 142,850 10,570,900
Forest Laboratories, Inc. ....... 28,700 2,898,700
Guidant Corp.(d) ................ 37,800 1,871,100
Johnson & Johnson................ 320,900 32,691,687
Lilly (Eli) & Co.(d) ............ 250,600 25,028,675
Mallinckrodt, Inc. .............. 7,500 325,781
Medimmune, Inc.(a)............... 11,000 814,000
Medtronic, Inc. ................. 146,000 7,272,625
Merck & Co., Inc. ............... 516,700 39,592,137
Minimed, Inc. ................... 9,600 1,132,800
PE Corp. ........................ 64,100 4,222,588
Pfizer, Inc. .................... 1,251,925 60,092,400
Pharmacia & Upjohn, Inc.(d) ..... 155,004 8,011,769
Schering-Plough Corp. ........... 279,300 14,104,650
St. Jude Medical, Inc.(a)........ 9,500 435,813
Watson Pharmaceuticals,
Inc.(a)........................ 11,200 602,000
--------------
248,157,295
--------------
ELECTRICAL EQUIPMENT
American Power Conversion Co. ... 3,000 122,438
--------------
ELECTRONICS -- 1.9%
Advanced Micro Devices,
Inc.(a)........................ 45,800 3,538,050
Agilent Technologies, Inc. ...... 46,931 3,461,161
Altera Corp.(a).................. 49,200 5,015,325
Analog Devices, Inc.(a).......... 87,300 6,634,800
Atmel Corp.(a)................... 88,000 3,245,000
Belden, Inc. .................... 199,900 5,122,437
Emerson Electric Co. ............ 96,300 5,814,112
Florida Progress Corp. .......... 9,100 426,563
Litton Industries, Inc. ......... 6,700 281,400
LSI Logic Corp.(a)(d)............ 127,400 6,895,525
Maxim Integrated Products,
Inc.(a)........................ 22,000 1,494,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B24
<PAGE> 34
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
ELECTRONICS (CONT'D.)
Molex, Inc. ..................... 22,600 $ 1,087,625
Novellus Systems, Inc.(a)........ 96,900 5,480,906
Pinnacle West Capital Corp. ..... 6,400 216,800
PPL Corp. ....................... 16,600 364,163
Rockwell International Corp. .... 21,600 680,400
Sanmina Corp. ................... 71,000 6,070,500
Sawtek, Inc.(a).................. 37,100 2,135,569
Solectron Corp.(a)(d)............ 69,700 2,918,687
Tektronix, Inc. ................. 6,600 488,400
Teradyne, Inc.(a)................ 53,600 3,939,600
Texas Instruments, Inc. ......... 344,500 23,662,844
Thomas & Betts Corp. ............ 5,900 112,838
--------------
89,087,330
--------------
FINANCIAL SERVICES -- 3.7%
American Express Co. ............ 306,200 15,960,675
Bear Stearns Companies, Inc. .... 14,458 601,814
Charles Schwab Corp.(d) ......... 150,750 5,068,969
Citigroup, Inc. ................. 752,276 45,324,629
Countrywide Mortgage Investments,
Inc. .......................... 13,900 421,344
Dun & Bradstreet Corp. .......... 20,100 575,363
Equifax, Inc. ................... 17,100 448,875
Federal Home Loan Mortgage
Corp. ......................... 159,200 6,447,600
Federal National Mortgage
Association.................... 233,000 12,159,687
Fleetboston Financial Corp. ..... 203,551 6,920,734
Franklin Resource, Inc. ......... 30,700 932,512
Goldman Sachs Group, Inc. ....... 20,400 1,935,450
H&R Block, Inc. ................. 11,400 369,075
Household International, Inc. ... 97,792 4,064,480
Lehman Brothers Holdings,
Inc. .......................... 71,500 6,761,219
MBNA Corp. ...................... 316,000 8,571,500
Merrill Lynch & Co., Inc.(d) .... 117,000 13,455,000
Morgan (J.P.) & Co., Inc. ....... 73,000 8,039,125
Morgan Stanley Dean Witter &
Co. ........................... 292,590 24,358,117
Old Kent Financial Corp. ........ 10,920 292,110
PaineWebber Group, Inc. ......... 52,400 2,384,200
Paychex, Inc. ................... 45,075 1,893,150
Regions Financial Corp. ......... 23,900 475,013
SLM Holding Corp. ............... 18,900 707,569
Synovus Financial Corp. ......... 35,300 622,163
T. Rowe Price & Associates,
Inc. .......................... 11,000 467,500
Washington Mutual, Inc. ......... 247,636 7,150,489
--------------
176,408,362
--------------
FOOD & BEVERAGE -- 1.7%
Anheuser-Busch Companies,
Inc.(d)........................ 111,700 8,342,594
Archer-Daniels-Midland Co. ...... 69,460 681,576
Bestfoods........................ 33,500 2,319,875
Brown-Forman Corp. (Class "B"
Stock)......................... 8,500 456,875
Campbell Soup Co. ............... 51,300 1,494,112
Coca-Cola Co. ................... 438,700 25,197,831
Coca-Cola Enterprises,
Inc.(d) ....................... 50,600 825,413
ConAgra, Inc. ................... 60,900 1,160,906
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
FOOD & BEVERAGE (CONT'D.)
Coors (Adolph) Co. (Class "B"
Stock)......................... 5,000 $ 302,500
General Mills, Inc.(d) .......... 50,300 1,923,975
Heinz (H.J.) & Co. .............. 48,200 2,108,750
Hershey Foods Corp. ............. 16,500 800,250
Kellogg Co.(d) .................. 50,700 1,508,325
Nabisco Group Holding Corp. ..... 143,700 3,727,219
PepsiCo, Inc. ................... 346,700 15,406,481
Quaker Oats Co. ................. 16,000 1,202,000
Ralston-Ralston Purina
Group(d)....................... 38,600 769,588
Sara Lee Corp. .................. 109,200 2,108,925
Seagram Co., Ltd. ............... 92,900 5,388,200
Starbucks Corp. ................. 3,000 114,563
Sysco Corp. ..................... 46,100 1,941,962
Whitman Corp. ................... 26,300 325,463
Wrigley (William) Jr. Co. ....... 13,900 1,114,606
--------------
79,221,989
--------------
FOREST PRODUCTS -- 0.5%
Boise Cascade Corp. ............. 57,900 1,498,162
Fort James Corp. ................ 27,100 626,688
Georgia-Pacific Corp.(d) ........ 84,000 2,205,000
International Paper Co. ......... 130,981 3,904,871
Kimberly-Clark Corp. ............ 120,300 6,902,212
Louisiana-Pacific Corp. ......... 245,600 2,670,900
Mead Corp. ...................... 13,200 333,300
Potlatch Corp. .................. 3,700 122,563
Temple-Inland, Inc. ............. 7,100 298,200
Westvaco Corp. .................. 11,900 295,269
Weyerhaeuser Co. ................ 34,400 1,479,200
Willamette Industries, Inc. ..... 60,600 1,651,350
--------------
21,987,715
--------------
GAS PIPELINES -- 0.2%
Cinergy Corp. ................... 20,700 526,556
Columbia Gas System, Inc.(a)..... 10,500 689,062
El Paso Energy Corp. ............ 64,500 3,285,469
Peoples Energy Corp. ............ 5,700 184,538
Sempra Energy.................... 27,573 468,741
Williams Companies, Inc. ........ 52,300 2,180,256
--------------
7,334,622
--------------
HOSPITAL MANAGEMENT -- 0.4%
Columbia/HCA Healthcare Co. ..... 68,700 2,086,763
Healthsouth Corp.(a)............. 55,000 395,313
Humana, Inc.(a).................. 211,600 1,031,550
IMS Health, Inc. ................ 36,900 664,200
Manor Care, Inc. ................ 13,300 93,100
Mckesson HBOC, Inc.(d) .......... 33,881 709,383
Service Corp. International...... 1,001,500 3,192,281
Shared Medical Systems Corp. .... 3,200 233,400
Tenet Healthcare Corp.(a)........ 113,200 3,056,400
UnitedHealth Group, Inc.(d) ..... 107,200 9,192,400
Wellpoint Health Networks,
Inc. .......................... 6,000 434,625
--------------
21,089,415
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B25
<PAGE> 35
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
HOUSEHOLD & PERSONAL CARE PRODUCTS
Clorox Co. ...................... 28,300 $ 1,268,194
Leggett & Platt, Inc. ........... 15,800 260,700
--------------
1,528,894
--------------
HOUSING RELATED -- 0.3%
Lowe's Companies, Inc. .......... 209,200 8,590,275
Masco Corp. ..................... 52,300 944,669
Maytag Corp. .................... 13,500 497,812
Newell Rubbermaid, Inc........... 36,155 930,991
Owens Corning.................... 117,500 1,086,875
Stanley Works.................... 13,600 323,000
Tupperware Corp. ................ 9,900 217,800
Whirlpool Corp. ................. 9,900 461,588
--------------
13,053,010
--------------
INSURANCE -- 2.1%
Aetna, Inc. ..................... 49,800 3,196,537
Allstate Corp. .................. 306,200 6,812,950
American General Corp.(d) ....... 44,300 2,702,300
American International Group,
Inc. .......................... 342,778 40,276,415
Aon Corp.(d)..................... 29,650 921,003
Berkley (W.R.) Corp. ............ 75,000 1,406,250
Chubb Corp. ..................... 88,800 5,461,200
CIGNA Corp. ..................... 20,700 1,935,450
Cincinnati Financial Corp. ...... 20,200 635,038
Conseco, Inc.(d) ................ 41,587 405,473
ITT Hartford Group, Inc. ........ 37,600 2,103,250
Jefferson-Pilot Corp. ........... 13,400 756,263
Lincoln National Corp. .......... 22,300 805,588
Marsh & McLennan Companies,
Inc. .......................... 34,100 3,561,319
MBIA, Inc. ...................... 12,100 583,069
MGIC Investment Corp............. 13,300 605,150
Progressive Corp. ............... 9,400 695,600
Reinsurance Group of America,
Inc. .......................... 642,800 19,364,350
SAFECO Corp. .................... 79,900 1,588,012
St. Paul Companies, Inc. ........ 25,900 883,837
Torchmark Corp. ................. 74,800 1,846,625
UnumProvident Corp. ............. 27,270 547,104
Wachovia Corp.(d) ............... 23,800 1,291,150
--------------
98,383,933
--------------
LEISURE -- 0.2%
Brunswick Corp. ................. 11,200 185,500
Carnival Corp. (Class "A"
Stock)......................... 75,700 1,476,150
Harrah's Entertainment,
Inc.(a)........................ 16,400 343,375
Hasbro, Inc. .................... 23,500 353,969
Hilton Hotels Corp. ............. 44,600 418,125
Loews Corp. ..................... 41,900 2,514,000
Marriott International, Inc.
(Class "A" Stock).............. 31,200 1,125,150
Mattel, Inc. .................... 53,400 704,212
--------------
7,120,481
--------------
MACHINERY -- 0.7%
Briggs & Stratton Corp. ......... 3,300 113,025
Caterpillar, Inc. ............... 60,700 2,056,212
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
MACHINERY (CONT'D.)
Cooper Industries, Inc. ......... 12,900 $ 420,056
Deere & Co. ..................... 164,200 6,075,400
Dover Corp. ..................... 25,800 1,046,513
Eaton Corp. ..................... 9,300 623,100
Harley-Davidson, Inc. ........... 38,000 1,463,000
IDEX Corp. ...................... 234,900 7,414,031
Ingersoll-Rand Co. .............. 61,400 2,471,350
Milacron, Inc. .................. 6,400 92,800
Parker Hannifin Corp. ........... 78,400 2,685,209
Snap-On, Inc. ................... 7,100 189,038
Thermo Electron Corp.(a)......... 17,600 370,700
Timken Co. ...................... 10,200 189,975
United Dominion Industries Ltd.
(Canada)....................... 468,100 7,957,700
--------------
33,168,109
--------------
MANUFACTURING -- 0.5%
Danaher Corp. ................... 18,100 894,819
Donaldson Co., Inc. ............. 173,100 3,418,725
Honeywell, Inc. ................. 187,512 6,316,810
Illinois Tool Works, Inc. ....... 34,500 1,966,500
Southdown, Inc. ................. 100 5,775
Tyco International Ltd. ......... 209,866 9,942,402
York International Corp. ........ 300 7,575
--------------
22,552,606
--------------
MEDIA -- 1.9%
Clear Channel Communications,
Inc.(a)(d)..................... 41,700 3,127,500
Comcast Corp. (Special Class "A"
Stock)......................... 225,500 9,132,750
Dow Jones & Co., Inc. ........... 10,700 783,775
Gannett Co., Inc. ............... 44,000 2,631,750
Interpublic Group of Companies,
Inc. .......................... 34,600 1,487,800
Knight-Ridder, Inc............... 40,600 2,159,413
McGraw-Hill, Inc. ............... 23,400 1,263,600
Mediaone Group, Inc.(d).......... 75,400 4,985,825
Meredith Corp. .................. 4,600 155,250
New York Times Co. (Class "A"
Stock)......................... 22,600 892,700
R.R. Donnelley & Sons, Co. ...... 219,400 4,950,212
Time Warner, Inc.(d) ............ 291,900 22,184,400
Tribune Co. ..................... 41,500 1,452,500
Viacom, Inc. (Class "B"
Stock)(a)...................... 248,438 16,940,366
Walt Disney Co.(d) .............. 464,500 18,028,406
--------------
90,176,247
--------------
METAL - STEEL -- 0.1%
Allegheny Teldyne, Inc. ......... 12,650 227,700
Bethlehem Steel Corp.(a)......... 20,700 73,744
Nucor Corp. ..................... 11,800 391,613
USX Corp. -- U.S. Steel Group.... 121,000 2,246,062
Worthington Industries, Inc. .... 9,700 101,850
--------------
3,040,969
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B26
<PAGE> 36
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
METALS-NON FERROUS -- 0.2%
Alcan Aluminum Ltd.(d) .......... 26,100 $ 809,100
Alcoa, Inc. ..................... 293,488 8,511,152
I Ltd. .......................... 23,000 353,625
--------------
9,673,877
--------------
MINERAL RESOURCES
Homestake Mining Co. ............ 34,300 235,812
Phelps Dodge Corp. .............. 10,953 407,315
--------------
643,127
--------------
MISCELLANEOUS BASIC INDUSTRY -- 0.1%
Crane Co. ....................... 7,600 184,775
Ecolab, Inc. .................... 14,500 566,406
ITT Industries, Inc. ............ 11,300 343,238
Millipore Corp. ................. 6,000 452,250
Pall Corp. ...................... 17,200 318,200
PPG Industries, Inc. ............ 20,400 903,975
Textron, Inc. ................... 18,600 1,010,212
W.W. Grainger, Inc. ............. 11,200 345,100
Wolverine Tube, Inc.(a).......... 2,300 39,100
--------------
4,163,256
--------------
MISCELLANEOUS CONSUMER GROWTH -- 0.2%
American Greetings Corp. (Class
"A" Stock)..................... 7,300 138,700
Black & Decker Corp. ............ 11,100 436,369
Minnesota Mining & Manufacturing
Co.(d)......................... 90,500 7,466,250
SMM Trust........................ 5,600 320,250
--------------
8,361,569
--------------
OFFICE EQUIPMENT & SUPPLIES -- 0.1%
Avery Dennison Corp. ............ 13,600 912,900
Office Depot, Inc.(a)............ 44,700 279,375
Pitney Bowes, Inc. .............. 33,600 1,344,000
Staples, Inc.(a)................. 60,000 922,500
Unisys Corp.(a).................. 36,600 532,988
Xerox Corp. ..................... 80,900 1,678,675
--------------
5,670,438
--------------
OIL & GAS -- 3.5%
Amerada Hess Corp. .............. 10,400 642,200
Anadarko Petroleum Corp.(d) ..... 15,300 754,481
Ashland Oil, Inc. ............... 8,700 305,044
Burlington Resources, Inc. ...... 24,500 937,125
Chevron Corp. ................... 150,500 12,764,281
Coastal Corp. ................... 55,200 3,360,300
Conoco, Inc. (Class "B" Stock)... 106,224 2,609,127
Eastern Enterprises, Inc. ....... 3,300 207,900
Exxon Mobil Corp. ............... 763,158 59,907,903
Kerr-McGee Corp. ................ 12,409 731,355
McDermott International, Inc. ... 1,475,600 13,003,725
NICOR, Inc. ..................... 5,000 163,125
Occidental Petroleum Corp. ...... 44,100 928,856
PG&E Corp. ...................... 110,900 2,730,913
Phillips Petroleum Co. .......... 133,000 6,741,438
Pioneer Natural Resources
Co.(a)......................... 686,431 8,751,995
Royal Dutch Petroleum Co. ....... 476,400 29,328,375
Sunoco, Inc. .................... 11,100 326,756
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
OIL & GAS (CONT'D.)
Texaco, Inc.(d) ................. 218,800 $ 11,651,100
Transocean Sedco Forex, Inc. .... 26,235 1,401,933
Union Pacific Resources Group,
Inc. .......................... 32,200 708,400
Unocal Corp. .................... 30,800 1,020,250
USX- Marathon Corp. ............. 132,100 3,310,756
Western Gas Resources, Inc. ..... 262,800 5,518,800
--------------
167,806,138
--------------
OIL & GAS DRILLING -- 0.1%
Global Marine, Inc.(a)........... 67,600 1,905,475
Nabors Industries, Inc. ......... 42,100 1,749,781
--------------
3,655,256
--------------
OIL & GAS SERVICES -- 0.6%
Apache Corp. .................... 59,100 3,475,819
Baker Hughes, Inc. .............. 79,140 2,532,480
BJ Services Co. ................. 42,300 2,643,750
Enron Corp. ..................... 126,800 8,178,600
ENSCO International, Inc. ....... 39,500 1,414,594
Halliburton Co. ................. 55,300 2,609,469
ONEOK, Inc. ..................... 5,000 129,688
Rowan Companies, Inc.(a)......... 13,900 422,212
Schlumberger Ltd................. 71,600 5,343,150
Smith International, Inc.(a)..... 36,500 2,657,656
Tosco Corp. ..................... 12,200 345,412
--------------
29,752,830
--------------
PHARMACEUTICALS -- 0.8%
American Home Products Corp. .... 159,400 9,364,750
Bristol-Myers Squibb Co. ........ 449,600 26,189,200
--------------
35,553,950
--------------
PHOTOGRAPHY -- 0.1%
Eastman Kodak Co. ............... 62,800 3,736,600
Polaroid Corp. .................. 3,700 66,831
--------------
3,803,431
--------------
PRECIOUS METALS
Barrick Gold Corp. (ADR)
(Canada)....................... 46,900 852,994
Freeport-McMoRan Copper & Gold,
Inc. (Class "B" Stock)(a)...... 22,100 204,425
Newmont Mining Corp. ............ 20,600 445,475
Placer Dome, Inc. ............... 39,600 378,675
--------------
1,881,569
--------------
PROFESSIONAL SERVICES
CSG Systems International,
Inc. .......................... 12,500 700,781
--------------
PUBLISHING
Houghton Mifflin Co. ............ 300 14,006
--------------
RAILROADS -- 0.2%
Burlington Northern Santa Fe
Corp. ......................... 56,500 1,295,969
CSX Corp. ....................... 25,900 548,756
Kansas City Southern Industries,
Inc. .......................... 61,800 5,480,887
Norfolk Southern Corp. .......... 48,900 727,388
Union Pacific Corp. ............. 29,400 1,093,312
--------------
9,146,312
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B27
<PAGE> 37
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
RESTAURANTS -- 0.1%
Darden Restaurants, Inc. ........ 13,400 $ 217,750
McDonald's Corp.(d) ............. 164,800 5,428,100
Tricon Global Restaurants,
Inc.(a)........................ 20,100 567,825
Wendy's International, Inc. ..... 15,700 279,656
--------------
6,493,331
--------------
RETAIL -- 3.0%
Albertson's, Inc. ............... 55,361 1,840,753
AutoZone, Inc.(a)................ 16,000 352,000
Bed Bath & Beyond, Inc.(a)....... 116,000 4,205,000
Best Buy Co., Inc.(a)............ 133,900 8,469,175
Charming Shoppes, Inc.(a)........ 144,200 734,519
Circuit City Stores, Inc. ....... 25,200 836,325
Consolidated Stores Corp.(a)..... 13,100 157,200
Costco Wholesale Corp.(b)........ 53,400 1,762,200
CVS Corp. ....................... 48,500 1,940,000
Dillard's, Inc. ................. 75,900 929,775
Dollar General Corp. ............ 41,500 809,250
Dollar Tree Stores, Inc.(a)...... 4,500 178,031
Federated Department Stores,
Inc.(a)(d)..................... 25,700 867,375
Great Atlantic & Pacific Tea Co.,
Inc. .......................... 5,200 86,450
Harcourt General, Inc. .......... 8,100 440,438
Home Depot, Inc. ................ 375,950 18,774,003
IKON Office Solutions, Inc. ..... 21,800 84,475
J.C. Penney Co., Inc. ........... 33,800 623,188
Kmart Corp.(a)(d)................ 271,800 1,851,637
Kohl's Corp.(a).................. 152,100 8,460,562
Kroger Co.(a).................... 103,500 2,283,469
Liz Claiborne, Inc. ............. 8,000 282,000
Longs Drug Stores, Inc. ......... 4,300 93,525
May Department Stores Co. ....... 40,050 961,200
Nike, Inc. ...................... 44,600 1,775,637
Nordstrom, Inc. ................. 17,400 419,775
Radioshack Corp. ................ 23,800 1,127,525
Reebok International Ltd. ....... 9,100 145,031
Rite Aid Corp.(d) ............... 31,600 207,375
Safeway, Inc.(a)................. 61,400 2,770,675
Sears, Roebuck & Co.(d) ......... 139,400 4,547,925
Sherwin-Williams Co. ............ 22,500 476,719
Supervalu, Inc. ................. 15,300 291,656
Target Corp. .................... 95,200 5,521,600
The Gap, Inc. ................... 102,900 3,215,625
The Limited, Inc. ............... 188,680 4,080,205
Tiffany & Co. ................... 1,000 67,500
TJX Companies, Inc. ............. 35,800 671,250
Toys 'R' Us, Inc.(a)............. 128,700 1,874,194
Wal-Mart Stores, Inc............. 970,800 55,942,350
Walgreen Co. .................... 122,800 3,952,625
Winn-Dixie Stores, Inc. ......... 19,500 279,094
--------------
144,389,311
--------------
RUBBER -- 0.1%
B.F. Goodrich Co. ............... 14,000 476,875
Cooper Tire & Rubber Co. ........ 8,600 95,675
Goodyear Tire & Rubber Co. ...... 80,000 1,600,000
--------------
2,172,550
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
SEMICONDUCTORS -- 2.9%
Applied Materials, Inc.(a)(d).... 235,200 $ 21,315,000
Conexant Systems, Inc. .......... 23,200 1,128,100
Intel Corp. ..................... 715,700 95,680,144
KLA Instruments Corp.(a)......... 22,000 1,288,375
Linear Technology Corp. ......... 75,500 4,827,281
MIPS Technologies, Inc. ......... 4,351 167,529
National Semiconductor
Corp.(a)....................... 35,900 2,037,325
Semtech Corp.(a)................. 14,700 1,124,320
Vitesse Semiconductor Corp.(a)... 64,300 4,730,069
Xilinx, Inc.(a).................. 80,400 6,638,025
--------------
138,936,168
--------------
TELECOMMUNICATIONS -- 5.5%
ADC Telecommunications,
Inc.(a)(d)..................... 79,600 6,676,450
AFLAC, Inc. ..................... 33,200 1,525,125
Alltel Corp. .................... 49,900 3,090,681
Andrew Corp.(a).................. 12,300 412,819
AT&T Corp. ...................... 625,072 19,767,902
Bell Atlantic Corp.(d) .......... 369,700 18,785,381
BellSouth Corp. ................. 439,200 18,720,900
Broadcom Corp.(a)................ 4,000 799,930
CenturyTel, Inc. ................ 14,500 416,875
Global Crossing Ltd. ............ 90,960 2,393,385
GTE Corp. ....................... 120,400 7,494,900
Lucent Technologies, Inc. ....... 542,630 32,150,828
MCI Worldcom, Inc. .............. 391,255 17,948,823
Motorola, Inc.(d) ............... 360,205 10,468,458
Nextel Communications, Inc.
(Class "A" Stock)(a)(b)........ 88,800 5,433,450
Nortel Networks Corp............. 649,200 44,307,900
Polycom, Inc. ................... 16,400 1,543,138
Powerwave Technologies, Inc. .... 51,300 2,257,200
Qualcomm, Inc.................... 91,500 5,490,000
SBC Communications, Inc. ........ 783,350 33,879,887
Scientific-Atlanta, Inc. ........ 28,300 2,108,350
Sprint Corp. .................... 219,000 11,169,000
Sprint Corp. (PCS Group)(d)...... 105,300 6,265,350
Tellabs, Inc.(a)................. 50,100 3,428,719
US West, Inc. ................... 62,641 5,371,466
--------------
261,906,917
--------------
TEXTILES
National Service Industries,
Inc. .......................... 4,900 95,550
Russell Corp. ................... 5,900 118,000
Springs Industries, Inc. ........ 3,300 105,600
VF Corp. ........................ 16,700 397,669
--------------
716,819
--------------
TOBACCO -- 0.3%
Philip Morris Companies, Inc. ... 369,200 9,806,875
R.J. Reynolds Tobacco Holdings,
Inc. .......................... 127,233 3,554,572
UST, Inc. ....................... 21,800 320,187
--------------
13,681,634
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B28
<PAGE> 38
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ----------- --------------
<S> <C> <C>
TRUCKING & SHIPPING -- 0.1%
Federal Express Corp.(a)......... 36,100 $ 1,371,800
Ryder System, Inc. .............. 4,700 89,006
Sabre Group Holdings, Inc. ...... 73,547 2,096,090
Yellow Corp.(a).................. 153,500 2,264,125
--------------
5,821,021
--------------
UTILITIES - ELECTRIC -- 0.8%
AES Corp.(a)(d).................. 50,200 2,290,375
Ameren Corp...................... 15,500 523,125
American Electric Power Co.,
Inc.(d)........................ 40,980 1,214,032
Calpine Corp.(a)................. 43,900 2,886,425
CMS Energy Corp. ................ 16,200 358,425
Consolidated Edison, Inc. ....... 25,900 767,288
Constellation Energy Group....... 18,800 612,175
CP&L Energy, Inc. ............... 18,400 587,650
Dominion Resources, Inc. ........ 29,018 1,244,147
DTE Energy Co.(d) ............... 17,000 519,563
Duke Energy Corp. ............... 177,700 10,017,837
Edison International............. 42,800 877,400
Entergy Corp. ................... 117,110 3,183,928
FirstEnergy Corp.(a)............. 29,000 677,875
FPL Group, Inc. ................. 22,100 1,093,950
GPU, Inc. ....................... 13,400 362,638
New Century Energies, Inc. ...... 15,000 450,000
Niagara Mohawk Holdings,
Inc.(a)........................ 24,300 338,681
Northern States Power Co. ....... 19,900 401,731
PECO Energy Co. ................. 87,500 3,527,344
Public Service Enterprise Group,
Inc. .......................... 27,100 938,338
Reliant Energy, Inc. ............ 37,400 1,105,637
Southern Co...................... 136,100 3,172,831
TXU Corp. ....................... 35,900 1,059,050
Unicom Corp. .................... 25,800 998,137
--------------
39,208,582
--------------
WASTE MANAGEMENT
Allied Waste Industries,
Inc.(a)........................ 19,000 190,000
Waste Management, Inc. .......... 70,535 1,340,165
--------------
1,530,165
--------------
TOTAL COMMON STOCKS
(cost $2,353,527,383)......................... 2,711,216,209
--------------
<CAPTION>
PREFERRED STOCK -- 0.5%
<S> <C> <C>
FINANCIAL SERVICES
Central Hispano Eurocapital (cost
$25,440,000),.................. 1,000 25,000,000
--------------
<CAPTION>
WARRANT
<S> <C> <C>
Mexico Debenture (cost $0)....... 31,074 0
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM RATING (000) (NOTE 2)
BONDS -- 31.1% ----------- ----------- --------------
<S> <C> <C> <C>
AEROSPACE -- 0.1%
Northrop Grumman Corp.,
7.88%, 03/01/26...... Baa3 $ 5,300 $ 5,023,817
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
AIRLINES -- 1.4%
Continental Airlines,
Inc.,
7.46%, 04/01/15...... Aa3 $ 8,260 $ 7,907,532
Delta Airlines, Inc.,
7.90%, 12/15/09(d)... Baa3 23,800 22,243,480
United Airlines, Inc.,
10.67%, 05/01/04..... Baa3 19,500 19,835,205
11.21%, 05/01/14..... Baa3 17,500 18,040,400
--------------
68,026,617
--------------
AUTOMOBILES & TRUCKS -- 0.5%
Lear Corp.,
7.96%, 05/15/05(d)... Ba1 11,740 10,918,200
Navistar International
Corp.,
7.00%, 02/01/03...... Baa3 11,500 10,982,500
8.00%, 02/01/08(d)... Ba2 2,360 2,165,300
--------------
24,066,000
--------------
BANKS AND SAVINGS & LOANS -- 1.1%
Bank of Nova Scotia,
(Canada),
6.50%, 07/15/07...... A1 5,400 5,103,000
Bank Tokyo Mitsubishi
Ltd.,
8.40%, 04/15/10...... A3 2,500 2,525,750
Chase Manhattan Corp.,
7.88%, 06/15/10...... A1 1,000 998,000
Key Bank NA,
5.80%, 04/01/04...... Aa3 20,000 18,900,000
National Australia
Bank,
6.40%, 12/10/07...... A1 8,700 8,580,375
Sanwa Finance Aruba,
8.35%, 07/15/09...... Baa1 7,120 7,088,387
Sovereign Bancorp,
10.25%,
05/15/04(d).......... Ba3 2,670 2,632,861
10.50%,
11/15/06(d)........ Ba3 3,955 3,955,000
--------------
49,783,373
--------------
CONSULTING -- 0.5%
Comdisco, Inc.,
6.32%, 11/27/00...... Baa1 19,000 18,913,360
6.38%, 11/30/01...... Baa1 2,700 2,612,493
--------------
21,525,853
--------------
CABLE & PAY TELEVISION SYSTEMS -- 0.3%
British Sky
Broadcasting, Inc.,
6.88%, 02/23/09...... Baa3 2,090 1,836,086
Cox Communications,
Inc.,
6.94%, 10/01/01...... Baa2 4,000 3,988,840
CSC Holdings, Inc.,
7.88%, 12/15/07...... Ba1 3,025 2,926,778
7.25%, 07/15/08...... Ba1 5,500 5,084,475
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B29
<PAGE> 39
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
CABLE & PAY TELEVISION SYSTEMS (CONT'D.)
Rogers Cablesystems,
Inc., (Canada),
10.00%, 03/15/05.... Ba1 $ 2,000 $ 2,045,000
--------------
15,881,179
--------------
CHEMICALS -- 0.1%
Lyondell Chemical,
9.63%, 05/01/07..... Ba3 1,625 1,608,750
Monsanto Co.,
6.50%, 12/01/18..... A2 1,550 1,366,356
6.75%, 12/15/27..... A1 3,715 3,332,615
--------------
6,307,721
--------------
CONTAINERS -- 0.6%
Owens-Illinois, Inc.,
7.15%, 05/15/05...... Ba1 26,250 23,995,650
Pactiv Corp.,
7.95%, 12/15/25...... Baa3 7,050 6,324,062
--------------
30,319,712
--------------
DIVERSIFIED OPERATIONS -- 0.2%
Corning, Inc.,
6.85%, 03/01/29 A2 5,000 4,257,450
Cox Enterprises, Inc.,
6.63%, 06/14/02...... Baa1 5,200 5,113,420
--------------
9,370,870
--------------
DRUGS & MEDICAL SUPPLIES -- 0.3%
Columbia/HCA Healthcare
Corp.,
6.91%, 06/15/05(d)... Ba2 4,990 4,528,425
Mallinckrodt, Inc.,
6.30%, 03/15/11...... Baa2 8,000 7,880,000
Tenet Healthcare Corp.,
7.88%, 01/15/03...... Ba1 3,805 3,700,363
--------------
16,108,788
--------------
FINANCIAL SERVICES -- 3.5%
AT&T Capital Corp.,
6.60%, 05/15/05...... A1 16,000 15,057,120
Calair Capital Corp.,
8.13%, 04/01/08...... Ba2 4,920 4,231,200
Capital One Bank Corp.,
6.76%, 07/23/02...... Baa2 7,500 7,288,875
Capital One Financial
Corp.,
7.25%, 05/01/06...... Baa3 3,400 3,111,000
Citibank Credit Card
Master Trust I
6.10%, 05/15/08...... Aaa 11,000 10,298,750
ERAC USA Finance Co.,
6.95%, 03/01/04...... Baa1 7,500 7,221,750
Ford Motor Credit
Corp.,
7.38%, 10/28/09...... A2 2,500 2,418,175
6.70%, 07/16/04...... A2 3,450 3,342,567
7.50%, 03/15/05(d)... A2 5,700 5,671,785
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
FINANCIAL SERVICES (CONT'D)
General Motors
Acceptance Corp.,
5.95%, 03/14/03...... A2 $ 21,500 $ 20,677,625
Heller Financial, Inc.,
6.00%, 03/19/04(d)... A3 4,900 4,585,616
HVB Funding Trust,
9.00%, 10/22/31...... Aa3 1,400 1,328,740
KBC Bank Funding Trust
III,
9.86%, 11/29/49...... A1 2,500 2,558,000
Lehman Brothers
Holdings, Inc.,
6.38%, 05/07/02...... A3 2,100 2,050,608
6.63%, 04/01/04...... A3 10,000 9,543,900
MBNA Master Credit Card
Trust,
5.90%, 08/15/11...... Aaa 29,800 26,972,518
Osprey Trust,
8.31%, 01/15/03...... Baa2 20,000 20,068,000
RBF Finance Co.,
11.38%, 03/15/09..... Ba3 2,615 2,824,200
Sakura Capital Funding
(Cayman Islands),
7.04%, 09/29/49...... Ba1 5,000 4,850,000
Salomon Smith Barney,
Inc.,
6.13%, 01/15/03...... Aa3 1,000 966,610
Textron Financial
Corp.,
6.05%, 03/16/09...... Aaa 3,370 3,351,505
Washington Mutual,
Inc.,
7.50%, 08/15/06...... A3 7,000 6,792,660
--------------
165,211,204
--------------
FOOD & BEVERAGE -- 0.1%
Coca-Cola Bottling Co.,
6.38%, 05/01/09...... Baa2 3,500 3,201,345
--------------
FOREST PRODUCTS -- 0.7%
Fort James Corp.,
6.23%, 03/15/11...... Baa2 11,000 10,900,230
Scotia Pacific Co.,
7.71%, 01/20/14...... Baa2 29,500 20,207,500
--------------
31,107,730
--------------
HOUSING RELATED -- 0.4%
Hanson, PLC, ADR,
(United Kingdom),
7.375%, 01/15/03..... A3 17,400,000 17,289,162
--------------
INDUSTRIAL -- 0.2%
Allied Waste North
America, Inc.,
7.63%, 01/01/06...... Ba3 2,840 2,485,000
Cendant Corp.,
7.75%, 12/01/03...... Baa1 2,000 1,922,600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B30
<PAGE> 40
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
INDUSTRIAL (CONT'D.)
Compania Sud Americana
de Vapores, S.A.,
(Chile),
7.38%, 12/08/03...... NA $ 3,650 $ 3,504,000
--------------
7,911,600
--------------
INSURANCE -- 0.1%
Conseco, Inc.,
8.50%, 10/15/02...... Ba1 1,500 1,110,000
8.70%, 11/15/26...... Ba3 4,100 1,783,500
--------------
2,893,500
--------------
LEISURE & TOURISM -- 0.5%
Harrahs Operating Co.,
Inc.,
7.88%, 12/15/05...... Ba2 600 564,000
HMH Properties, Inc.,
7.88%, 08/01/05(d)... Ba2 6,560 6,199,200
ITT Corp.,
6.75%, 11/15/03...... Ba1 14,000 13,137,740
Park Place
Entertainment Corp.,
7.88%, 12/15/05(d)... Ba2 5,030 4,728,200
9.38%, 02/15/07...... Ba2 1,360 1,360,000
--------------
25,989,140
--------------
MEDIA -- 0.3%
Paramount
Communications, Inc.,
7.50%, 01/15/02...... Baa1 9,100 9,070,243
United News & Media
PLC,
7.25%, 07/01/04...... Baa2 3,180 3,070,608
--------------
12,140,851
--------------
OIL & GAS -- 0.3%
Amerada Hess Corp.,
7.38%, 10/01/09(d)... Baa1 900 874,701
7.88%, 10/01/29...... Baa1 2,500 2,444,525
B.J. Services Co.,
7.00%, 02/01/06...... Baa2 4,000 3,836,760
Eott Energy Partners,
11.00%, 10/01/09..... Ba2 3,935 3,994,025
Phillips Petroleum Co.,
8.50%, 05/25/05(d)... Baa2 4,750 4,907,130
--------------
16,057,141
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Parker & Parsley
Petroleum Co.,
8.88%, 04/15/05...... Ba2 3,100 3,024,081
--------------
OIL & GAS SERVICES -- 0.7%
KN Energy, Inc.,
6.30%, 03/01/21...... Baa2 30,000 29,767,800
Seagull Energy Co.,
7.88%, 08/01/03...... Ba1 3,750 3,637,500
--------------
33,405,300
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
PAPER -- 0.6%
International Paper
Co.,
8.00%, 07/08/03...... Baa1 $ 30,000 $ 30,156,900
--------------
PRINTING -- 0.1%
World Color Press,
Inc.,
8.38%, 11/15/08...... Baa3 1,500 1,410,000
7.75%, 02/15/09...... Baa3 4,960 4,526,000
--------------
5,936,000
--------------
RAILROADS -- 0.1%
Union Pacific Corp.,
7.95%, 04/15/29...... Baa3 3,700 3,669,512
--------------
REAL ESTATE INVESTMENT TRUST -- 1.5%
Duke Realty L.P.,
7.30%, 06/30/03...... Baa1 4,350 4,269,525
EOP Operating, L.P.,
6.38%, 01/15/02...... NA 5,000 4,892,500
6.50%, 06/15/04...... Baa1 6,000 5,708,520
6.63%, 02/15/05...... Baa1 18,187 17,181,986
ERP Operating, L.P.,
7.10%, 06/23/04...... NA 2,375 2,303,180
Felcor Suites L.P.,
7.38%, 10/01/04...... Ba2 24,200 21,659,000
Simon Debartolo Group,
Inc.,
6.75%, 06/15/05...... Baa1 17,500 16,395,050
--------------
72,409,761
--------------
RETAIL -- 0.1%
Kroger Co.,
7.25%, 06/01/09...... Baa3 6,000 5,520,000
--------------
TELECOMMUNICATIONS -- 3.8%
360 Communication Co.,
7.13%, 03/01/03...... A2 23,776 23,398,437
7.60%, 04/01/09...... A2 12,885 12,504,248
Airtouch
Communications, Inc.,
7.00%, 10/01/03...... A2 16,800 16,514,400
Clear Channel
Communications,
7.88%, 06/15/05(d)... Baa3 1,600 1,608,512
Deutsche Telekom
International,
7.75%, 06/15/05...... Aa2 5,000 5,025,000
8.00%, 06/15/10...... Aa2 10,000 10,070,000
8.25%, 06/15/30...... Aa2 8,475 8,560,598
Electric Lightwave,
Inc.,
6.05%, 05/15/04...... A2 5,300 4,935,625
Global Crossing
Holdings Ltd.,
9.13%, 11/15/06...... Ba2 8,970 8,633,625
LCI International,
Inc.,
7.25%, 06/15/07...... Ba1 18,030 17,071,345
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B31
<PAGE> 41
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Qwest Communications
International, Inc.,
7.50%, 11/01/08...... Baa1 $ 14,500 $ 13,992,500
Rogers Cantel, Inc.,
(Canada),
9.38%, 06/01/08...... Baa3 4,830 4,974,900
Tele-Communications,
Inc.,
6.34%, 02/01/12 A2 8,500 8,363,150
Telecom De Puerto Rico,
6.15%, 05/15/02...... Baa2 10,500 10,185,000
6.65%, 05/15/06(d)... Baa2 10,700 9,937,625
6.80%, 05/15/09...... NA 9,000 8,223,750
Williams Communications
Group, Inc.,
10.70%, 10/01/07..... B2 4,100 4,079,500
Worldcom, Inc.,
7.88%, 05/15/03(d)... A3 4,000 4,040,000
8.00%, 05/15/06...... A3 5,000 5,056,250
8.25%, 05/15/10...... A3 1,600 1,641,296
--------------
178,815,761
--------------
UTILITIES -- 1.4%
AES Corp.,
9.50%, 06/01/09...... Ba1 9,080 8,898,400
Calenergy Co., Inc.,
6.96%, 09/15/03...... Baa3 15,000 14,629,950
Calpine Corp.,
10.50%, 05/15/06..... Ba1 8,330 8,704,850
CMS Energy Corp.,
8.00%, 07/01/11...... Ba3 7,200 7,067,520
Cogentrix, Inc.,
8.10%, 03/15/04...... Ba1 5,775 5,567,331
El Paso Energy,
6.63%, 07/15/01...... Baa2 6,000 5,947,320
Entergy Louisiana,
Inc.,
8.50%, 06/01/03...... Baa2 5,000 5,044,000
Hydro-Quebec,
8.00%, 02/01/13 A2 1,500 1,559,970
PSEG Energy Holdings,
Inc.,
10.00%, 10/01/09..... Ba1 5,370 5,437,125
Utilicorp United, Inc.,
7.00%, 07/15/04...... Baa3 5,000 4,775,650
7.63%, 11/15/09...... Baa3 650 612,866
--------------
68,244,982
--------------
WASTE MANAGEMENT -- 0.3%
Waste Management, Inc.,
6.13%, 07/15/01...... Ba1 15,695 15,156,975
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM MOODY'S AMOUNT VALUE
BONDS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 10.0%
United States Treasury
Bonds,
8.75%, 05/15/17(d)... $ 72,848 $ 91,754,241
8.75%, 05/15/20(d)... 24,000 30,806,160
8.13%, 08/15/21(d)... 45,000 54,977,400
7.63%, 11/15/22(d)... 60,400 70,668,000
7.13%, 02/15/23(d)... 50,700 56,348,487
7.50%, 11/15/24(d)... 38,800 45,214,028
6.13%, 08/15/29(d)... 990 999,900
6.25%, 05/15/30(d)... 2,450 2,579,008
United States Treasury
Notes,
6.88%, 05/15/06(d)... 2,400 2,470,128
6.63%, 05/15/07(d)... 84,500 86,269,430
6.00%, 08/15/09(d)... 1,980 1,964,219
6.50%, 02/15/10(d)... 28,936 29,926,190
United States Treasury
Strips,
zero, 02/15/19(d).... 10,500 3,353,700
--------------
477,330,891
--------------
FOREIGN GOVERNMENT BONDS -- 1.2%
Comunidad Autonoma De
Andalucia,
7.25%, 10/01/29...... Aa3 840 807,408
Quebec Hydro, (Canada),
7.50%, 04/01/16...... A2 800 796,288
Quebec Province,
(Canada),
7.00%, 01/30/07...... A2 1,200 1,176,624
Republic of Argentina,
zero, 10/15/01....... B1 7,625 6,557,500
Republic of
Philippines,
8.88%, 04/15/08...... Ba1 5,400 4,860,000
Saskatchewan Province,
(Canada),
9.13%, 02/15/21 A1 2,300 2,658,869
United Mexican States,
10.38%,
02/17/09(d).......... Baa3 15,500 16,662,500
9.88%, 02/01/10(d)... Baa3 4,000 4,140,000
6.93%, 12/31/19...... Baa3 3,550 3,487,875
6.94%, 12/31/19...... Baa3 6,900 6,779,250
5.87%, 12/31/19...... Baa3 9,750 9,579,375
--------------
57,505,689
--------------
TOTAL LONG-TERM BONDS
(cost $1,510,867,563),............................. 1,479,391,455
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $3,889,834,946),............................. 4,215,607,664
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B32
<PAGE> 42
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT VALUE
INVESTMENTS -- RATING (000) (NOTE 2)
24.9% ----------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 19.4%
Abbey National Treasury
Services PLC,
5.67%, 07/13/00...... P1 $ 7,000 $ 7,365,590
Alcoa, Inc.,
7.30%, 07/05/00...... P1 500 499,595
Allianz of America
Finance(c),
6.60%, 07/18/00...... P1 10,000 9,972,500
American Electric
Power(c),
6.83%, 07/21/00...... P1 40,000 39,863,400
American Express Co.,
6.80%, 07/06/00...... P1 1,900 1,898,205
6.68%, 07/07/00...... P1 700 699,221
6.60%, 07/10/00...... P1 900 898,515
Aon Corp.,
6.60%, 07/06/00...... P1 7,133 7,126,462
Associates Corp. of
North America,
6.80%, 07/12/00...... P1 3,000 2,993,767
6.80%, 08/25/00...... P1 450 450,259
AT&T Corp.,
6.55%, 07/13/00...... P1 1,000 997,817
6.62%, 07/20/00...... P1 1,200 1,195,807
Barton Capital Corp.,
6.73%, 07/14/00...... P1 10,000 9,975,697
6.77%, 07/14/00...... P1 20,000 19,951,106
6.62%, 07/26/00...... P1 3,700 3,682,990
Baus Funding LLC,
6.82%, 07/07/00...... P1 20,000 19,977,267
6.77%, 07/14/00...... P1 5,400 5,386,798
BCI Funding Corp,
6.54%, 07/10/00...... P1 5,000 4,991,825
Black Forest Corp.,
6.57%, 07/05/00...... P1 3,200 3,197,664
6.58%, 07/05/00...... P1 2,500 2,498,172
Bombardier Capital,
Inc.,
6.84%, 07/28/00(c)... P1 29,000 28,862,250
6.90%, 08/23/00(c)... P1 15,000 14,853,375
Canadian Imperial Bank
of Commerce,
6.58%, 07/12/00...... P1 49,077 49,077,000
Citicorp,
6.55%, 07/10/00(c)... P1 15,000 14,980,895
6.55%, 07/27/00(c)... P1 20,000 19,912,666
6.60%, 08/10/00...... P1 2,000 1,985,333
Comdisco, Inc,
6.80%, 07/28/00(c)... P1 8,000 7,962,222
Conagra, Inc.,
6.85%, 07/07/00(c)... P1 16,000 15,987,822
Cooper Industries,
Inc.,
7.05%, 07/05/00...... P1 5,400 5,395,770
Countrywide Funding
Corp.,
6.92%, 07/05/00...... P1 1,200 1,199,077
Dexia Bank Grand
Cayman,
7.13%, 07/03/00...... P1 3,736 3,736,000
7.125%, 07/03/00(c).. P1 90,000 90,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT VALUE
INVESTMENTS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Dow Chemical & Company,
Inc.,
7.00%, 07/03/00...... P1 $ 5,114 $ 5,112,010
Duke Capital Corp.,
7.25%, 07/05/00(c)... P1 38,216 38,200,608
Enterprise Funding
Corp.,
6.70%, 07/21/00...... P1 2,582 2,572,389
Ford Motor Credit
Corp.,
6.63%, 07/10/00...... P1 1,600 1,597,349
6.70%, 07/10/00...... P1 1,600 1,597,320
Forrestal Funding
Master,
6.62%, 08/04/00...... P1 4,280 4,253,241
G.E. Capital Intl.
Funding,
6.52%, 07/17/00(c)... P1 30,000 29,923,935
General Electric
Capital Corp.,
6.55%, 07/05/00...... P1 1,556 1,554,867
6.60%, 07/13/00...... P1 1,700 1,696,260
6.70%, 07/18/00...... P1 1,754 1,748,450
General Motors
Acceptance Corp.,
6.55%, 07/18/00...... P1 328 326,986
Goldman Sachs Group
L.P.,
6.54%, 07/13/00(b)... P1 5,000 4,989,100
GTE Corp.,
6.65%, 07/10/00...... P1 20,600 20,565,752
6.62%, 07/13/00...... P1 2,754 2,747,923
6.63%, 08/09/00(c)... P1 10,000 9,931,859
6.65%, 08/11/00...... P1 5,000 4,962,132
Halliburton Corp.,
6.55%, 07/05/00...... P1 100 99,927
Heinz Co.,
6.65%, 07/20/00...... P1 1,000 996,490
Heller Financial, Inc.,
6.75%, 07/18/00(c)... P1 50,000 49,859,376
6.75%, 07/21/00(c)... P1 40,000 39,865,000
Homeside Lending,
6.65%, 07/25/00...... P1 3,593 3,577,071
International Business
Machines Corp.,
6.58%, 07/07/00...... P1 1,350 1,348,520
6.90%, 07/07/00...... P1 2,700 2,696,895
Keyspan Corp.,
6.82%, 07/28/00(c)... P1 25,800 25,677,808
Morgan Stanley Dean
Witter,
6.58%, 07/27/00...... P1 3,052 3,037,496
National Rural
Utilities Cooperative
Finance,
6.80%, 07/11/00...... P1 1,242 1,239,654
Nike, Inc.,
6.55%, 07/17/00...... P1 2,200 2,193,595
6.68%, 07/17/00...... P1 1,595 1,590,265
Northern Rock PLC,
6.60%, 07/14/00...... P1 14,000 13,966,633
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B33
<PAGE> 43
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT VALUE
INVESTMENTS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Novartis Finance Corp.,
6.83%, 07/14/00...... P1 $ 2,800 $ 2,793,094
Old Line Funding Corp.,
6.57%, 07/17/00(c)... P1 9,875 9,849,769
Phillips Petroleum Co.,
6.83%, 07/31/00(c)... P1 48,000 47,745,013
Procter & Gamble Co.,
6.85%, 07/06/00...... P1 1,500 1,498,573
PSE&G Fuel Corp.,
7.30%, 07/06/00(c)... P1 43,000 43,000,000
Scotiabanc, Inc.,
6.62%, 07/26/00...... P1 2,751 2,738,353
Southern Co.,
6.65%, 07/19/00(c)... P1 9,360 9,332,336
Sprint Capital Corp.,
7.00%, 07/28/00(c)... P1 15,000 14,927,083
Suntrust Grand Cayman,
7.00%, 07/03/00(c)... P1 45,607 45,607,000
Sweetwater Capital,
6.55%, 07/05/00...... P1 4,928 4,924,414
Target Corp.,
7.10%, 07/05/00(c)... P1 35,000 34,986,194
Thunder Bay Funding,
Inc.,
6.56%, 07/06/00...... P1 6,916 6,909,699
6.60%, 07/06/00...... P1 3,100 3,097,158
Transamerica Fin.
Corp.,
6.60%, 07/17/00(c)... P1 13,000 12,966,633
Triple-A One Plus
Funding,
6.70%, 07/24/00...... P1 4,921 4,899,936
Westdeutsche
Landesbank,
7.06%, 07/03/00...... P1 3,200 3,200,000
--------------
923,979,233
--------------
OTHER CORPORATE
OBLIGATIONS -- 3.1%
Donaldson, Lufkin &
Jenrette,
5.74%, 05/01/01...... A3 10,000 9,884,500
ERAC USA Finance Co.,
6.35%, 01/15/01...... Baa1 21,000 20,821,500
ERP Operating, L.P.,
6.63%, 10/13/00...... A3 9,200 8,648,552
HRPT Properties Trust,
7.52%, 07/10/00...... NA 2,000 2,000,000
ITT Corp.,
6.25%, 11/15/00...... Ba1 5,183 5,135,368
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT VALUE
INVESTMENTS RATING (000) (NOTE 2)
(CONTINUED) ----------- ----------- --------------
<S> <C> <C> <C>
OTHER CORPORATE OBLI-
GATIONS (CONT'D.)
Kroger Co.,
6.34%, 06/01/01...... Baa3 $ 10,450 $ 10,267,125
Lockheed Martin Corp.,
6.85%, 05/15/01...... Baa3 400 398,016
MCN Investment Corp.,
6.30%, 10/02/00...... Baa3 8,250 8,119,650
Niagara Mohawk Power
Corp.,
7.00%, 10/01/00...... Ba2 18,902 18,877,115
Raytheon Co.,
5.95%, 03/15/01...... Baa2 12,000 11,859,960
Seagram (J.) & Sons,
5.79%, 04/15/01...... Baa3 20,000 19,728,000
TRW, Inc.,
6.45%, 06/15/01...... Baa1 32,800 32,308,000
--------------
148,047,786
--------------
REPURCHASE AGREEMENT -- 2.1%
Joint Repurchase
Agreement Account
6.49%, 07/03/00 (Note
5)................... 97,471 97,471,000
--------------
U.S. GOVERNMENT OBLIGATIONS -- 0.3%
United States Treasury
Bill
5.64%, 09/21/00...... 12,950 12,783,636
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,192,925,956).............................. 1,182,281,655
--------------
TOTAL INVESTMENTS BEFORE INVESTMENT SOLD
SHORT -- 113.6%
(cost $5,082,760,902; Note 6)...................... 5,397,889,319
--------------
INVESTMENT SOLD SHORT -- (.1%)
United States Treasury Note, 6.75%,
05/15/05 (proceeds $3,224,344)....... (3,165) (3,238,681)
--------------
TOTAL INVESTMENTS, NET OF INVESTMENT SOLD
SHORT -- 113.5% (cost $5,079,536,558; Note 6)...... 5,394,650,638
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS(e).......
1,592,491
--------------
OTHER LIABILITIES IN EXCESS OF OTHER
ASSETS -- (13.5)%.................................. (641,909,951)
--------------
TOTAL NET ASSETS -- 100.0%.......................... $4,754,333,178
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B34
<PAGE> 44
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
The following abbreviations are used in portfolio descriptions:
<TABLE>
<S> <C>
AG Aktiengesellschaft (German Stock Company)
ADR American Depository Receipt
L.P. Limited Partnership
PLC Public Limited Company
SA Sociedad Anomia (Spanish Corporation) or Societe
Anonyme (French Corporation)
</TABLE>
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Represents security purchased with cash collateral received for securities
on loan.
(d) Portion of securities on loan with an aggregate market value of
$648,016,591; cash collateral of $654,267,744 was received with which the
portfolio purchased securities.
(e) Open Future Contracts as of June 30, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 2000 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
39 U.S. 5 yr Treasury Note Sep 00 $ 3,783,000 $ 3,861,609 $ 78,609
40 S&P 500 Index Sep 00 14,977,000 14,681,000 (296,000)
589 S&P 500 Index Sep 00 219,082,750 216,177,725 (2,905,025)
-----------
$(3,122,416)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B35
<PAGE> 45
HIGH YIELD BOND PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 90.7% PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS -- 77.6% ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 0.9%
American Commercial Lines LLC, Sr. Notes.................. B1 10.25% 06/30/08 $ 3,000 $ 2,460,000
BE Aerospace, Inc., Sr. Sub. Notes, AB.................... B1 9.50% 11/01/08 1,000 920,000
Compass Aerospace Corp., Sr. Sub. Notes................... Caa3 10.125% 04/15/05 750 112,500
Continental Airlines, Inc., Sr. Notes..................... Ba2 8.00% 12/15/05 1,850 1,711,546
Delta Air Lines, Inc., Sr. Notes.......................... Baa3 8.30% 12/15/29 700 612,045
Stellex Industries, Inc. Sr. Sub. Notes(d)................ B3 9.50% 11/01/07 4,000 800,000
United Air Lines, Inc., Sr. Notes......................... Baa3 9.75% 08/15/21 185 180,373
------------
6,796,464
------------
AUTOMOTIVE PARTS -- 1.5%
AM General Corp., Sr. Notes............................... B3 12.875% 05/01/02 3,375 2,970,000
Collins & Aikman Products, Sr. Sub. Notes................. B2 11.50% 04/15/06 720 689,400
Eagle Picher Holdings, Inc., Sr. Sub. Notes............... B3 9.375% 03/01/08 1,750 1,470,000
Hayes Lemmerz Int'l., Inc., Sr. Sub. Notes................ B2 8.25% 12/15/08 800 672,000
Hayes Wheels Int'l., Inc., Sr. Sub. Notes, Ser. B......... B2 9.125% 07/15/07 1,000 897,187
Standyne Automotive Corp., Sr. Sub. Notes, Ser. B......... Caa1 10.25% 12/15/07 2,000 1,680,000
Tenneco Automotive, Inc., Sr. Sub. Notes.................. B2 11.625% 10/15/09 1,860 1,655,400
United Rentals, Inc., Sr. Sub. Notes...................... B1 8.80% 08/15/08 1,370 1,198,750
------------
11,232,737
------------
BANKS -- 0.4%
Sovereign Bancorp, Sr. Notes.............................. Ba3 10.25% 05/15/04 1,235 1,217,821
Sovereign Bancorp, Sr. Notes.............................. Ba3 6.625% 03/15/01 795 783,075
Sovereign Bancorp, Sr. Notes.............................. Ba3 10.50% 11/15/06 1,265 1,265,000
------------
3,265,896
------------
BROADCASTING & OTHER MEDIA -- 4.6%
Ackerley Group, Inc., Sr. Sub. Notes, Ser. B ............. B2 9.00% 01/15/09 3,000 2,730,000
Alliance Atlantis Communications, Inc., Sr. Sub. Notes ... B2 13.00% 12/15/09 1,670 1,711,750
American Lawyer Media Holdings, Inc., Sr. Disc. Notes,
Zero Coupon
(until 12/15/02)........................................ B3 12.25% 12/15/08 3,000 1,920,000
Capstar Broadcasting Partners, Inc., Sr. Sub. Notes....... B1 9.25% 07/01/07 875 872,813
Globo Communicacoes, Sr. Notes (Brazil)................... B2 10.50% 12/20/06 1,300 1,131,000
Imax Corp., Sr. Notes .................................... Ba2 7.875% 12/01/05 325 300,625
Liberty Group Publishing, Inc., Sr. Disc. Notes, Zero
Coupon (until 02/01/03)................................. Caa1 11.625% 02/01/09 240 117,600
Lin Holdings Corp., Sr. Disc. Notes Zero Coupon (until
03/01/03)............................................... B3 10.00% 03/01/08 1,950 1,282,125
Mail-Well I Corp., Sr. Sub. Notes ........................ B1 8.75% 12/15/08 4,750 4,037,500
Phoenix Color Corp., Sr. Sub. Notes ...................... B3 10.375% 02/01/09 4,000 3,590,000
Radio Unica, Sr. Disc. Notes, Zero Coupon (until
08/01/02)............................................... NR 11.75% 08/01/06 2,750 1,773,750
Spectrasite Holdings, Inc., Sr. Sub. Notes................ B1 8.50% 05/15/09 1,900 1,021,250
Spectrasite Holdings, Inc., Sr. Disc. Notes Zero Coupon
(until 04/15/04)........................................ B3 11.25% 04/15/09 900 511,875
Sullivan Graphics Inc., Sr. Sub. Notes ................... Caa 12.75% 08/01/05 4,500 4,567,500
Susquehanna Media Co., Sr. Sub. Notes .................... B1 8.50% 05/15/09 1,800 1,710,000
TV Azteca S.A. De CV, Sr. Notes, (Mexico)................. B1 10.50% 02/15/07 2,850 2,515,125
XM Satellite Radio Holdings Inc., Sr. Notes............... NR 14.00% 03/15/10 4,505 3,964,400
------------
33,757,313
------------
BUILDING & RELATED INDUSTRIES -- 2.0%
Ainsworth Lumber Ltd., Bonds, PIK......................... B2 12.50% 07/15/07 4,625 4,625,000
Building Materials Corp., Sr. Sub., Notes................. Ba3 7.75% 07/15/05 265 218,625
Collins & Aikman Floorcovering Sr. Sub. Notes............. B3 10.00% 01/15/07 500 490,000
Engle Homes, Inc., Sr. Notes.............................. B1 9.25% 02/01/08 2,300 1,932,000
ICF Kaiser Int'l., Inc., Sr. Sub. Notes(d)................ B3 13.00% 12/31/03 4,450 2,047,000
Lennar Corp., Sr. Notes................................... Ba1 9.95% 05/01/10 345 340,688
New Millenium Homes, Sr. Notes(d)......................... NR 13.50% 09/03/04 3,000 2,340,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B36
<PAGE> 46
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
BUILDING & RELATED INDUSTRIES (CONT'D.)
Nortek, Inc. Sr. Notes, Ser. B............................ B1 9.125% 09/01/07 $ 2,770 $ 2,562,250
Webb (Del E.) Sr. Sub. Deb................................ B2 9.375% 05/01/09 425 355,937
------------
14,911,500
------------
CABLE -- 7.6%
Adelphia Communications Corp., Sr. Notes, PIK............. B3 9.50% 02/15/04 43 39,784
Adelphia Communications Corp., Sr. Notes.................. B2 9.25% 10/01/02 6,000 5,880,000
Adelphia Communications Corp., Sr. Notes.................. B2 10.50% 07/15/04 500 500,000
Avalon Cable Holdings Sr. Disc. Notes Zero Coupon (until
12/01/03)............................................... Caa 11.875% 12/01/08 6,000 3,900,000
Century Communications Corp., Sr. Notes................... B1 9.50% 03/01/05 8,500 8,138,750
Charter Communications Holdings LLC, Sr. Notes............ B2 8.625% 04/01/04 4,855 2,755,212
Classic Cable Inc., Sr. Sub. Notes........................ B3 10.50% 03/01/10 1,390 1,278,800
Classic Cable, Inc., Sr. Sub. Notes....................... B3 9.375% 08/01/09 1,095 952,650
Coaxial Communications, Inc. Sr. Notes.................... B3 10.00% 08/15/06 1,250 1,193,750
Diamond Cable Communications, Sr. Disc. Notes Zero Coupon
(until 02/15/02) (United Kingdom)....................... B3 6.75% 02/15/07 4,000 3,080,000
International Cabletel, Inc. Sr. Disc. Notes.............. B3 12.75% 04/15/05 6,100 6,237,250
Mediacom LLC., Sr. Notes.................................. Ba2 7.875% 02/15/11 2,000 1,750,000
Multicanal S.A., Bonds.................................... Ba3 13.125% 04/15/09 2,400(e) 2,304,000
NTL, Inc., Sr. Notes, Zero Coupon (until 10/01/03) ....... B3 12.375% 10/01/08 3,750 2,418,750
NTL, Inc., Sr. Notes, Zero Coupon (until 04/01/03)........ B3 9.75% 04/01/08 2,000 1,240,000
Northeast Optic Sr. Notes................................. NR 12.75% 08/15/08 2,005 1,864,650
Rogers Cablesystems Ltd. Gtd. Notes....................... B2 11.00% 12/01/15 235 253,800
Scott Cable Communications, Inc. Jr. Sub., PIK............ NR 16.00% 07/18/02 108 32,400
Star Choice Communications, Sr. Sec'd. Notes (Canada)..... B3 13.00% 12/15/05 3,000 3,075,000
Telewest Communications PLC, Sr. Disc. Deb., Zero Coupon
(until 2/01/05) (United Kingdom)........................ B1 9.25% 02/1/10 3,570 1,953,500
United International Holdings, Inc., Sr. Disc. Notes, Zero
Coupon (until 02/15/03)................................. B3 10.75% 02/15/08 4,750 3,313,125
United Pan Europe Communications, Sr. Disc. Notes......... B2 11.25% 11/01/09 4,125 3,568,125
------------
55,729,546
------------
CHEMICALS -- 1.8%
Avecia Group Plc, Sr. Notes............................... B2 11.00% 07/01/09 2,595 2,543,100
Huntsman ICI Chemical, Sr. Sub Notes...................... B2 10.13% 07/1/09 3,265 3,281,325
Lyondell Chemical Co. Sr. Sub Notes....................... Ba3 10.875% 05/01/09 2,625 2,605,312
NL Industries, Inc., Sr. Notes............................ B1 11.75% 10/15/03 885 902,700
Sterling Chemicals, Inc., Sr. Sub Notes................... B3 12.375% 07/15/06 690 707,250
Sterling Chemicals, Inc., Sr. Sub Notes................... B3 11.75% 08/15/06 2,630 2,130,300
Texas Petrochemicals Corp., Sr. Sub Notes................. B3 11.125% 07/01/06 1,460 1,219,100
------------
13,389,087
------------
CONSUMER PRODUCTS -- 0.8%
Consumers International, Inc., Sr. Notes.................. B3 10.25% 04/01/05 3,125 1,593,750
Electronic Retailing Systems Int'l., Sr. Disc. Notes (b)
(cost $1,868,753; purchased 2/29/00).................... NR 13.25% 02/01/04 2,000 420,000
Radnor Holdings, Inc., Sr. Notes.......................... B2 10.00% 12/01/03 1,750 1,526,875
Windmere-Durable Holdings, Inc., Sr. Notes................ B3 10.00% 07/31/08 2,000 1,960,000
------------
5,500,625
------------
CONTAINERS -- 2.5%
Ball Corp., Sr. Sub. Notes ............................... B2 8.25% 08/01/08 500 468,125
Gaylord Container Corp. Sr. Notes ........................ B 9.75% 06/15/07 2,100 1,638,000
Owens Illinois Inc. Sr. Deb Notes ........................ Ba1 7.50% 05/15/10 340 294,868
Owens-Illinois, Inc., Sr., Notes.......................... Ba1 7.85% 05/15/04 2,000 1,914,660
Packaged Ice, Inc. Sr. Notes.............................. B3 9.75% 02/01/05 3,130 2,597,900
Silgan Holdings Inc. Sr. Sub Notes........................ NR 13.25% 07/15/06 3,149 3,369,430
Stone Container Corp., Sr. Sub Notes ..................... B2 11.50% 08/15/06 555 571,650
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B37
<PAGE> 47
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
CONTAINERS (CONT'D.)
Stone Container Corp., Sr. Sub Notes...................... B2 10.75% 10/01/02 $ 490 $ 494,900
Stone Container Corp., Sr. Sub. Notes..................... B2 12.58% 08/01/16 250 260,000
Stone Container Corp., Sr. Sub. Notes .................... B3 12.25% 04/01/02 6,800 6,851,000
------------
18,460,533
------------
DRUGS & HEALTH CARE -- 3.9%
Abbey Healthcare Group, Inc. Sr. Notes.................... B3 9.50% 11/01/02 1,890 1,833,300
BIO Rad Laboratories, Inc., Sr. Sub Notes ................ B2 11.625% 02/15/07 1,070 1,103,438
Columbia/HCA Healthcare Corp., Sr. Notes ................. Ba2 8.36% 04/15/24 2,000 1,770,000
Columbia/HCA Healthcare Corp. Sr. Notes................... Ba2 7.50% 11/15/95 2,570 1,959,625
Columbia/HCA Healthcare Corp., Sr. Notes ................. Ba2 6.63% 07/15/45 1,000 952,210
Concentra Operating Corp., Sr. Sub. Notes................. B3 13.00% 08/15/09 1,936 1,635,075
Dade Int'l., Inc. Sr. Sub Notes........................... B2 11.125% 05/01/06 3,845 2,114,750
Fresnius Medical Care, Sr. Notes.......................... NR 7.875% 02/01/08 2,250 2,013,750
Harborside Healthcare Corp., Sr. Sub Disc. Notes Zero
Coupon
(until 08/01/03)........................................ B3 11.00% 08/01/08 2,500 500,000
Healthsouth Corp., Sr. Notes.............................. Baa3 6.875% 06/15/05 1,905 1,652,949
ICN Pharmaceuticals, Inc. Sr. Sub. Notes.................. Ba3 6.875% 11/15/08 3,250 3,152,500
Integrated Health Svcs., Inc. Sr. Sub. Notes(d)........... C 9.25% 01/15/08 3,250 65,000
Lifepoint Hospitals Holdings, Inc. Sr. Sub. Notes......... B3 10.75% 05/15/09 675 693,563
Magellan Health Services, Inc. Sr. Sub. Notes............. Caa1 9.00% 02/15/08 7,000 3,570,000
Mariner Post Acute Network, Inc. Sr. Sub Disc. Notes(d)
Zero Coupon
(until 11/01/02)........................................ C 10.50% 11/01/07 5,520 34,500
Team Health Inc., Sr. Sub. Notes.......................... B3 12.00% 03/15/09 3,250(e) 2,713,750
Tenet Healthcare Corp., Sr. Sub. Notes, Ser. B............ Ba3 8.125% 12/01/08 430 392,375
Triad Hospitals Holding Sr. Sub. Notes.................... B3 11.00% 05/15/09 2,555 2,615,681
------------
28,772,466
------------
ENERGY -- 3.7%
Applied Power, Inc., Sr. Sub. Notes....................... B1 8.75% 04/01/09 1,450 1,500,750
CMS Energy Corp. Sr. Notes................................ Ba3 7.50% 01/15/09 1,125 1,009,687
DI Industries, Inc. Sr. Notes............................. B1 8.875% 07/01/07 2,020 1,908,900
Eott Energy Partners LP, Sr. Notes........................ Ba2 11.00% 10/01/09 710 720,650
Gothic Production Corp., Sr. Notes........................ B3 11.125% 05/01/05 1,045 982,300
Great Lakes Carbon Corp. Sr. Sub. Notes................... B3 10.25% 05/15/08 2,000 1,600,000
Key Energy Group, Inc. Ser. D............................. NR 5.00% 09/15/04 3,500 2,756,250
Parker Drilling Co., Sr. Notes, Ser. D.................... B1 9.75% 11/15/06 3,005 2,987,337
RBF Finance Co., Sr. Sec'd. Notes......................... Ba3 11.375% 03/15/09 2,600 2,808,000
RBF Finance Co., Sr. Sec'd Notes dates: 08/23/99 through
10/06/99)............................................... Ba3 11.00% 03/15/06 2,410 2,584,725
R & B Falcon Corp., Sr. Notes............................. Ba3 12.25% 03/15/06 935 1,023,825
Seven Seas Petroleum, Inc. Sr. Sub. Notes, Ser. B......... Caa1 12.50% 05/15/05 1,500 375,000
Tesoro Petroleum Corp. Sr. Sub Notes...................... B1 9.00% 07/01/08 3,000 2,857,500
Universal Compression Holdings, Sr. Disc. Notes Zero
Coupon (until 02/15/03)................................. B2 9.875% 02/15/08 1,750 1,251,250
York Power Funding, Sr. Sec'd. Notes (Cayman Islands)..... Ba3 12.00% 10/30/07 3,000 2,940,000
------------
27,306,174
------------
ENTERTAINMENT -- 1.1%
Alliance Atlantis Sr. Sub Notes........................... NR 13.00% 12/15/09 1,000 1,025,000
Circus Enterprises, Inc. Sr. Notes........................ Baa3 6.45% 02/01/06 1,220 1,051,445
Circus Enterprises, Inc. Sr. Notes........................ Baa3 6.70% 11/15/96 1,680 1,540,341
Harrahs Entertainment, Inc. Sr. Sub. Gtd., Notes.......... Ba2 7.875% 12/15/05 250 235,000
Park Place Entertainment Corp. Sr. Sub. Notes............. Ba2 9.375% 02/15/07 485 485,000
SFX Entertainment Inc. Sr. Sub. Notes..................... B3 9.125% 12/01/08 3,500 3,535,000
TVN Entertainment Corp. Sr. Notes......................... NR 14.00% 08/01/08 1,135 454,000
------------
8,325,786
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B38
<PAGE> 48
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
FINANCIAL SERVICES -- 1.4%
AmeriCredit Corp., Sr. Notes.............................. B1 9.25% 02/01/04 $ 1,350(e) $ 1,309,500
AmeriCredit Corp., Sr. Notes.............................. B1 9.875% 04/15/06 3,000 2,940,000
Calair Capital Corp., Sr. Notes........................... Ba2 8.125% 04/01/08 400 344,000
Delta Financial Corp., Sr. Notes.......................... Caa2 9.50% 08/01/04 1,075 483,750
Hanvit Bank, Sr. Sub Notes................................ B1 12.75% 03/01/10 2,000 1,980,000
Metris Companies, Inc., Gtd. Notes........................ Ba3 10.125% 07/15/06 3,000 2,850,000
------------
9,907,250
------------
FOOD & BEVERAGE -- 3.0%
Advantica Restaurant Group, Inc. Sr. Notes ............... B3 11.25% 01/15/08 4,342 2,909,455
Agrilink Foods, Inc. Sr., Gtd. Notes...................... B3 11.875% 11/01/08 2,260 1,808,000
Ameriking, Inc. Sr. Notes................................. B3 10.75% 12/01/06 1,000 830,000
Aurora Foods, Inc. Sr. Sub. Notes......................... Caa1 9.875% 02/15/07 1,310 759,800
Carrols Corp. Sr. Notes .................................. B2 9.50% 12/01/08 2,885 2,394,550
CKE Restaurants, Inc., Gtd. Notes......................... B1 9.125% 05/01/09 2,250 1,552,500
Del Monte Foods Co., Sr. Disc. Notes, Zero Coupon (until
12/15/02)............................................... Caa1 12.50% 12/15/07 456 344,280
Fresh Foods, Inc., Bonds.................................. B3 10.75% 06/01/06 2,300 1,426,000
Grupo Azucarero, Sr. Notes (Mexico)(d).................... B3 11.50% 01/15/05 2,900 783,000
Premium Standard Farms, Sr. Sec'd. Notes, PIK(b) (cost
$284,644, purchased 02/25/99)........................... NR 11.00% 09/17/03 285 289,626
Pilgrim's Pride Corp. Sr. Sub Notes....................... B1 10.875% 08/01/03 1,919 1,933,393
Purina Mills, Inc. Sr. Sub. Notes(b)(d)
(cost $3,489,680; purchased 01/07/99 and 01/08/99)...... Ca 9.00% 03/15/10 3,500 1,015,000
Sbarro, Inc., Sr. Notes................................... Ba3 11.00% 09/15/09 1,260 1,282,050
SFC New Holdings, Inc. Sr. Notes, PIK..................... Ba3 11.25% 08/15/01 2,096 2,033,120
SFC Sub, Inc. Deb Notes, Zero Coupon (until 06/15/05)..... NR 11.00% 12/15/09 465 470,000
Stater Brothers Holdings, Sr. Notes....................... B2 10.75% 08/15/06 2,020 1,777,600
Vlasic Foods Int'l, Inc., Sr. Sub Notes................... Caa1 10.25% 07/01/09 1,875 693,750
------------
22,302,124
------------
GAMING -- 2.8%
Alliance Gaming Corp., Sr. Sub. Notes, Ser. B............. Caa1 10.00% 08/01/07 1,350 526,500
Aztar Corp., Sr. Sub. Notes............................... B2 8.875% 05/15/07 1,250 1,168,750
Boyd Gaming Corp., Sr. Sub. Notes......................... B1 9.50% 07/15/07 1,085 1,041,600
Casino Magic Corp., First Mtge. Bonds..................... B1 13.00% 08/15/03 3,750 3,993,750
Coast Hotels & Casinos, Inc., Sr. Sub. Notes.............. B3 9.50% 04/01/09 600 573,000
Fitzgeralds Gaming Corp., Sr. Notes(d) (b) (cost
$2,271,503; purchased 12/22/97)......................... B3 12.25% 12/15/04 2,375 1,306,250
Hollywood Park, Inc. Sr. Sub Notes........................ B2 9.25% 02/15/07 3,500 3,491,250
Harveys Casino Resorts Sr. Sub. Notes..................... B2 10.625% 06/01/06 2,960 3,019,200
Station Casinos, Inc., Sr. Sub. Notes..................... B1 10.125% 03/15/06 260 261,300
Station Casinos, Inc., Sr. Sub. Notes..................... B1 9.875% 07/01/10 1,605 1,613,025
Trump Atlantic City Assoc., First Mtge. Notes............. B3 11.25% 05/01/06 630 441,000
Venetian Casino Resort LLC, Gtd. Notes.................... NR 12.25% 11/15/04 2,880 2,908,800
------------
20,344,425
------------
INDUSTRIAL -- 1.4%
International Wireless Group, Inc. Sr. Sub Notes.......... NR 11.75% 06/01/05 700 703,500
International Wireless Group, Inc. Sr. Sub Notes(c)....... B3 11.75% 06/01/05 3,000 3,015,000
Kaiser Aluminum & Chemical Corp., Sr. Sub Notes........... NR 9.88% 02/15/02 250 240,000
Motors & Gears, Inc., Sr. Notes........................... B3 10.75% 11/15/06 3,500 3,395,000
Neenah Corp. Sr. Sub Notes................................ B3 11.125% 05/01/07 250 191,250
Thermadyne Holdings Sr. Disc. Notes Zero Coupon (until
06/01/03)............................................... Caa1 12.50% 06/01/08 2,375 855,000
Thermadyne Manufacturing Sr. Sub. Notes................... B3 9.875% 06/01/08 2,500 1,925,000
------------
10,324,750
------------
LEISURE -- 0.9%
Bally Health & Tennis Corp., Sr. Sub. Notes............... B3 9.875% 10/15/07 3,855 3,527,325
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B39
<PAGE> 49
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
LEISURE (CONT'D.)
ITT Corp. Sr. Sub. Notes, Ser. B.......................... Ba1 7.375% 11/15/15 $ 1,250 $ 1,035,700
Premier Parks, Inc. Sr. Notes............................. B3 9.75% 06/15/07 2,000 1,925,000
------------
6,488,025
------------
LODGING -- 0.4%
Hilton Hotels, Sr. Notes.................................. Baa1 7.50% 12/15/17 285 240,115
HMH Properties, Inc. Sr. Notes Ser. C .................... Ba2 8.45% 12/01/08 3,350 3,082,000
------------
3,322,115
------------
MANUFACTURING -- 1.0%
Corning Consumer Prod. Co. Sr. Sub Notes.................. B3 9.625% 05/01/08 4,250 2,826,250
Gentek, Inc. Sr. Sub Notes................................ B2 11.00% 08/01/09 1,620 1,644,300
Polymer Group Inc., Sr. Sub Notes, Ser. B ................ B2 9.00% 07/01/07 570 484,500
Polymer Group, Inc., Sr. Sub Notes, Ser. B ............... B2 8.75% 03/01/08 855 718,200
Venture Holdings, Inc., Sr. Notes, Ser. B ................ B2 9.50% 07/01/05 2,270 1,657,100
------------
7,330,350
------------
MISCELLANEOUS -- 0.9%
Continental Global Group, Inc., Sr. Notes ................ B3 11.00% 04/01/07 2,320 580,000
Intersil Corp., Sr. Sub Notes............................. B3 13.25% 08/15/09 909 1,027,170
It Group, Inc., Sr. Sub Notes ............................ B3 11.25% 04/01/09 2,080 1,872,000
La Petite Academy, Inc., Sr. Notes ....................... B3 10.00% 05/15/08 1,250 737,500
MSX International, Inc., Gtd. Notes....................... B3 11.38% 01/15/08 1,750 1,653,750
Sun World International, Gtd. Notes ...................... B2 11.25% 04/15/04 270 251,100
USEC, Inc., Sr. Notes..................................... Ba1 6.75% 01/20/09 1,000 692,300
------------
6,813,820
------------
OIL & GAS -- 2.2%
Canadian First Oil, Ltd., Sr. Sub Notes .................. B2 8.75% 09/15/07 1,610 1,513,400
Clark USA, Inc., Sr. Notes................................ B3 10.875% 12/01/05 1,250 687,500
Comstock Resources, Inc., Sr. Notes ...................... B2 11.25% 05/01/07 4,500 4,556,250
Houston Exploration Co., Sr. Sub Notes.................... B2 8.625% 01/01/08 815 757,950
Leviathan Gas, Sr. Sub. Notes............................. Ba2 10.375% 06/01/09 2,000 2,035,000
Plains Resources, Inc., Sr. Sub. Notes ................... B2 10.25% 03/15/06 870 863,475
Snyder Oil Corp., Sr. Notes............................... Ba3 8.75% 06/15/07 1,000 990,000
Swift Energy Co., Sr. Sub. Notes ......................... B2 10.25% 08/01/09 2,015 2,035,150
Vintage Petroleum, Inc., Sr. Sub Notes ................... B1 9.75% 06/30/09 3,125 3,156,250
------------
16,594,975
------------
PAPER & PACKAGING -- 2.3%
AMM Holdings, Inc., Sr. Disc. Notes, Zero Coupon (until
07/01/03)............................................... Caa1 13.50% 07/01/09 6,000 300,000
APP International, Sr. Sec'd Notes........................ Ba3 11.75% 10/01/05 1,296 828,800
APP Int'l., Gtd. Notes ................................... B3 11.75% 10/01/05 2,600 1,820,000
Doman Industries Ltd., Sr. Notes ......................... Caa1 9.25% 11/15/07 270 199,800
Doman Industries Ltd., Sr. Notes ......................... Caa1 8.75% 03/15/04 2,915 2,244,550
Graham Packaging, Sr. Disc. Notes Zero Coupon (until
01/15/03) .............................................. Caa 10.75% 01/15/09 1,100 616,000
Maxxam Group, Inc., Sr. Notes............................. B3 12.00% 08/01/03 4,300 3,956,000
Repap New Brunswick, Inc. Sr. Sec'd Notes ................ B3 10.625% 04/15/05 4,805(e) 4,228,400
Riverwood Int'l., Corp., Gtd. Notes ...................... B3 10.25% 04/01/06 495(e) 470,250
Riverwood Int'l., Corp., Gtd. Notes ...................... B3 10.625% 08/01/07 455 443,625
Riverwood Int'l., Corp., Gtd. Notes ...................... Caa 10.875% 04/01/08 455 395,850
Sligan Holdings, Inc. Sub. Debs. PIK...................... NR 13.25% 07/15/06 1,250 1,185,250
------------
16,688,525
------------
REAL ESTATE -- 0.6%
CB Richards Ellis Svcs., Inc. Sr. Sub Notes .............. B1 8.875% 06/01/06 1,600 1,370,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B40
<PAGE> 50
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
REAL ESTATE (CONT'D.)
Intrawest Corp., Sr. Notes................................ B1 10.50% 02/01/10 $ 1,275 $ 1,300,500
Saul B F Real Estate Investment Trust Sr. Sec'd Note...... NR 9.75% 04/01/08 1,750 1,518,125
------------
4,188,625
------------
RETAIL -- 2.5%
Big 5 Holdings Corp. Sr. Disc Notes, Zero Coupon (until
11/30/02) .............................................. NR 13.45% 11/30/08 1,500 735,000
Duane Reade, Inc., Sr. Sub Notes ......................... B3 9.25% 02/15/08 270 244,013
Franks Nursery & Crafts, Sr. Sub. Notes .................. Caa1 10.25% 03/01/08 2,100 756,000
French Fragrances, Inc., Sr. Notes, Ser. B ............... B2 10.375% 05/15/07 470 453,550
Kasper A.S.L Ltd., Sr. Notes.............................. NR 13.00% 03/31/04 7,171 4,876,280
Musicland Group, Inc., Gtd. Notes......................... B3 9.88% 03/15/08 4,600 4,186,000
Phar-Mor, Inc., Sr. Notes ................................ B3 11.72% 09/11/02 3,429 2,777,490
Phillips Van Heusen Corp., Sr. Sub. Notes................. B1 9.50% 05/01/08 1,250 1,137,500
Specialty Retailers, Inc., Gtd. Notes(d).................. Ca 8.50% 07/15/05 1,615 80,750
TNP Enterprises, Inc., Sr. Notes.......................... Ba3 10.25% 04/01/10 3,000 3,082,500
------------
18,329,083
------------
STEEL & METALS -- 1.9%
Alaska Steel Corp., Gtd. Notes............................ Ba2 7.875% 02/15/09 500 443,750
Algoma Steel, Inc., First Mtge. Notes..................... B2 12.375% 07/15/05 1,765 1,535,550
Golden Northwest Alum., Inc., First Mtge. Notes........... B2 9.00% 07/01/07 570 410,850
Kaiser Aluminum & Chemical Corp. Sr. Sub Notes............ B3 12.75% 02/01/03 4,000 3,670,000
LTV Corp. Sr. Notes....................................... Ba3 11.75% 11/15/09 1,450 1,232,500
National Steel Corp. Gtd. Sec'd First Mtge. Notes......... Ba3 9.875% 03/01/09 340 289,000
Renco Steel Holdings, Sr. Notes........................... NR 10.875% 02/01/05 500 410,000
Sheffield Steel Corp., First Mtge. Notes.................. NR 11.50% 12/01/05 3,500 2,450,000
Wheeling-Pittsburgh Corp., Sr. Notes...................... B2 9.25% 11/15/07 2,600 1,690,000
WHX Corp., Sr. Notes...................................... B3 10.50% 04/15/05 3,015 2,261,250
------------
14,392,900
------------
SUPERMARKETS -- 1.1%
Homeland Stores, Inc., Sr. Notes.......................... NR 10.00% 08/01/03 4,260 2,896,800
Pantry, Inc., Sr. Notes................................... B3 10.25% 10/15/07 2,615 2,471,175
Pathmark Stores, Inc. Sr. Sub Notes(d).................... B3 9.625% 05/01/03 4,215 2,950,500
------------
8,318,475
------------
TECHNOLOGY -- 0.8%
Ampex Corp., Sr. Notes.................................... NR 12.00% 03/15/03 5,000 5,025,000
Details Holding Corp., Sr. Disc. Notes, Zero Coupon (until
11/15/02)............................................... NR 12.50% 11/15/07 1,000 660,000
------------
5,685,000
------------
TEXTILES -- 1.4%
Burlington Inds., Inc. Sr. Notes.......................... Ba2 7.25% 08/01/27 1,000 660,000
Cluett American Corp., Sr. Sub Notes ..................... B3 10.125% 05/15/08 3,060 2,264,400
Foamex L.P., Sr. Sub Notes ............................... B3 9.875% 06/15/07 2,950 2,212,500
Simmons Co. Sr. Sub Notes, Ser. B......................... B3 10.25% 03/15/09 4,000 3,500,000
Steel Heddle Manufacturing Co., Sr. Sub. Notes............ Caa1 10.625% 06/01/06 2,000 700,000
Worldtex, Inc. Sr. Notes, Ser. B ......................... B1 9.625% 12/15/07 1,900 712,500
------------
10,049,400
------------
TELECOMMUNICATIONS -- 20%
Allegiance Telecommunications, Inc., Sr. Disc. Notes, Zero
Coupon
(until 02/15/03)........................................ NR 11.75% 02/15/08 3,300 2,392,500
Allegiance Telecommunications, Inc., Sr. Notes............ NR 12.875% 05/15/08 1,750 1,890,000
Birch Telecommunications, Inc., Sr. Notes................. NR 14.00% 06/15/08 2,500 2,425,000
Caprock Communications, Sr. Notes......................... Caa 12.00% 07/15/08 1,500 1,395,000
Cellnet Data Systems, Inc., Sr. Disc. Notes, Zero Coupon
(until 10/01/02)(b) (cost $2,566,560; purchased
01/26/99)............................................... NR 14.00% 10/01/07 3,680 257,600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B41
<PAGE> 51
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Charter Communications Int'l., Sr. Notes.................. B2 10.25% 01/15/10 $ 2,235 $ 2,156,775
Charter Communications Int'l., Sr. Notes.................. B2 10.00% 01/15/10 4,000 2,270,000
Charter Communications Int'l., Sr. Notes.................. B2 10.00% 04/01/09 1,000 972,500
DTI Holdings, Inc. Sr. Disc. Notes Zero Coupon (until
03/01/03)............................................... NR 12.50% 03/01/08 1,000 421,250
Exodus Communications, Inc. Sr. Notes..................... NR 10.75% 12/15/09 1,680 1,621,200
Exodus Communications, Inc. Sr. Notes..................... NR 11.625% 07/15/10 4,280 4,301,400
Fairpoint Commerce Sr. Sub Notes.......................... B3 12.50% 05/01/10 2,120 2,141,200
Focal Communications Corp. Sr. Notes...................... B3 11.875% 01/15/10 650 654,875
Geotek Communications, Inc., Sr. Disc. Notes(d)........... Ca 15.00% 07/15/05 5,000 2,391,360
Global Crossing Holdings, Ltd. Sr. Notes.................. Ba2 9.13% 11/15/06 3,520 3,381,750
Globix Corp., Sr. Notes................................... NR 12.50% 02/01/10 3,400 2,805,000
GT Group Telecom Inc. Sr. Notes........................... Caa1 13.25% 02/01/05 6,725 3,698,750
Hyperion Telecommunications Inc., Sr. Disc Notes.......... B3 13.00% 04/15/03 2,205 2,028,600
Hyperion Telecommunications, Inc. Sr. Sec'd............... B3 12.25% 09/01/04 1,150 1,167,250
Impsat Corp. Gtd. Sr. Notes............................... B2 12.125% 07/15/03 2,235 1,989,150
Impsat Corp. Sr. Notes.................................... B3 12.375% 06/15/08 3,000 2,370,000
IPC Information Systems, Inc. Sr. Disc. Notes, Zero Coupon
(until 05/01/01)........................................ B3 10.875% 05/01/08 2,250 2,030,625
KMC Telecom Holdings Inc. Sr. Notes....................... NR 13.50% 05/15/09 1,985 1,707,100
Level 3 Communications, Inc. Sr. Disc Notes, Zero Coupon
(until 12/01/03) ....................................... B3 10.50% 12/01/08 4,760 2,903,600
Level 3 Communications, Inc. Sr. Notes.................... NR 10.50% 03/15/05 25,000 13,750,000
Level 3 Communications, Inc. Sr. Notes.................... B3 11.00% 03/15/08 615 608,850
Mcleodusa, Inc., Sr. Sub Notes Zero Coupon (until
03/01/02)............................................... B1 10.50% 03/01/07 2,765 2,231,625
McLeodusa, Inc., Sr. Sub Notes............................ B1 8.375% 03/15/08 150 136,500
Mcleodusa, Inc., Sr. Sub Notes............................ B1 8.125% 02/15/09 200 180,000
Metromedia Fiber Network, Inc., Sr. Notes ................ B2 10.00% 12/15/09 1,645 1,628,550
Microcell Telecommunications, Zero Coupon (until
06/01/04)............................................... B3 12.00% 06/01/09 5,500 3,616,250
Millicom International Cellular S.A Sr. Sub Disc. Notes... B3 12.00% 06/30/01 4,245 3,650,700
Netia Holdings Sr. Disc. Notes Zero Coupon (until
11/01/01)............................................... B2 11.25% 11/01/07 3,480 2,340,300
Netia Holdings Sr. Notes.................................. B2 10.25% 11/01/07 2,350 1,938,750
Nextel Communications, Inc. Sr. Sub Notes................. B1 9.375% 11/15/09 5,065 4,862,400
Nextel Communications, Inc. Sr. Sub Notes, Zero Coupon
(until 09/15/02)........................................ B1 10.65% 09/15/07 11,515 9,039,275
Nextel Partners, Inc. Sr. Disc. Notes, Zero Coupon (until
02/01/04)............................................... B3 14.00% 02/01/09 1,661 1,137,785
Nextlink Communications, Inc. Sr. Disc. Notes............. B2 10.75% 06/01/09 2,340 2,316,600
Nextlink Communications Inc. Sr. Notes ................... B2 10.50% 12/01/09 2,140 2,097,200
Price Communications Wireless, Inc. Sr. Sub Notes......... B2 11.75% 07/15/07 1,750 1,876,875
Primus Telecommunications Group, Sr. Notes ............... B3 12.75% 10/15/09 2,465 1,972,000
PSINet, Inc. Sr. Notes.................................... B3 11.00% 08/01/09 5,345 4,944,125
PTC Int'l. Corp., Gtd. Notes, Zero Coupon (until
07/01/02)............................................... B2 10.75% 07/01/07 1,250 887,500
RCN Corp. Sr. Notes....................................... B3 10.00% 10/05/07 17 435,765
RCN Corp. Sr. Notes ...................................... B3 10.125% 01/15/10 1,235 1,037,400
RSL Communications Plc, Sec'd Notes....................... B2 12.00% 11/01/08 1,000 730,000
RSL Communications Plc, Sr. Notes......................... B2 12.25% 11/15/06 1,500 1,230,000
SF Holdings Group, Inc. Sr. Notes......................... NR 10.25% 08/15/03 22 242,275
Telegroup Inc. Sr. Disc Notes(d) ......................... NR 10.50% 11/01/04 4,000 2,140,000
Tritel PCS, Inc., Sr. Disc. Notes, Zero Coupon (until
05/15/04)............................................... B3 12.75% 05/15/09 4,000 2,640,000
US Unwired Inc. Sr. Disc. Notes, Zero Coupon (until
11/01/04)............................................... Caa1 13.375% 11/01/09 7,340 3,981,950
US Xchange LLC. Sr. Notes................................. NR 15.00% 07/01/08 2,250 2,452,500
Verio, Inc. Sr. Notes..................................... B3 11.25% 12/01/08 210 235,725
Versatel Telecom Sr. Notes................................ Caa1 11.875% 07/15/09 625 615,625
Versatel Telecom Sr. Notes................................ Caa1 13.25% 05/15/08 2,000 2,040,000
Viasystems, Inc., Sr. Sub. Notes.......................... B3 9.75% 06/01/07 3,705 3,223,350
Viatel, Inc. Sr. Disc. Notes Zero Coupon (until
04/15/03)............................................... NR 12.50% 04/15/08 1,100 506,000
Viatel, Inc. Sr. Notes ................................... Caa1 11.25% 04/15/08 1,500 1,125,000
Viatel, Inc., Sr. Notes .................................. B3 11.50% 03/15/09 2,401 1,824,760
VoiceStream Wireless Corp. Sr. Disc. Notes................ B2 11.875% 11/15/09 10,515 6,992,475
VoiceStream Wireless Corp. Sr. Disc. Notes................ B2 10.375% 11/15/09 1,840 1,922,800
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B42
<PAGE> 52
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS (CONTINUED) ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
WamNet, Inc., Sr. Disc Notes, Zero Coupon (until
03/01/02)............................................... NR 13.25% 03/01/05 $ 500 $ 280,000
Williams Communications Group, Inc., Sr. Notes............ B2 10.875% 10/01/09 5,080 4,978,400
------------
147,221,795
------------
TRANSPORTATION -- 0.2%
Holt Group, Inc. Sr. Notes ............................... Caa3 9.75% 01/15/06 800 80,000
Kitty Hawk, Inc. Sr. Notes(d)............................. B1 9.95% 11/15/04 2,000 800,000
Trism, Inc., Sr. Notes ................................... NR 12.00% 02/15/05 83 59,389
Trism, Inc., Sr. Notes ................................... NR 12.00% 02/04/05 1,305 874,115
------------
1,813,504
------------
UTILITIES -- 0.7%
AES Corp., Sr. Sub Notes.................................. Ba1 9.50% 06/01/09 5,000 4,900,000
AES Corp., Sr. Sub. Notes................................. Ba1 8.875% 11/01/27 50 41,000
------------
4,941,000
------------
WASTE MANAGEMENT -- 1.3%
Allied Waste of North America, Inc., Sr. Sub Notes ....... Ba3 10.00% 08/01/09 1,310 1,100,400
Allied Waste of North America, Inc., Sr. Notes............ Ba3 7.875% 01/01/09 4,560 3,876,000
Allied Waste of North America, Inc., Sr. Notes............ Ba3 7.625% 01/01/06 3,250 2,843,750
GNI Group, Inc. Sr. Notes................................. Caa3 10.875% 07/15/05 4,000 800,000
Waste Management, Inc., Sr. Notes(b) (cost $912,342;
purchased 2/29/00)...................................... Ba1 6.375% 12/01/03 1,000 925,710
------------
9,545,860
------------
TOTAL CORPORATE BONDS
(cost $669,502,566)..................................................................................... 572,050,128
------------
CONVERTIBLE BONDS -- 0.4%
OIL/GAS
Key Energy Group, Inc. (cost $2,759,048).................. NR 5.00% 09/15/04 3,500 2,756,250
------------
<CAPTION>
SHARES
COMMON STOCK -- 5.1% ---------
<S> <C> <C> <C> <C> <C>
Callahan Nordrhein Westfalen.............................. 11,500 7,743,125
CD Radio, Inc............................................. 4,245 2,377,200
Classic Communications, Inc.(a)........................... 6,000 51,000
Dr. Pepper Bottling Holdings, Inc. (Class B)(a)(b) (cost
$5,226; purchased 10/21/88)............................. 5,807 145,175
Federal Mogul Corp. ...................................... 2,475 1,737,250
Flextronics International Ltd............................. 3,000 3,030,000
Fox Family Worldwide, Inc................................. 425 380,375
Intermediate Act Operating Co., Inc. ..................... 2,354 1,082,840
Lodgian Financing Corp.................................... 400 312,000
Maxcom Telecommunications................................. 245 215,600
Mcleodusa, Inc., (b) (cost 130,705; purchased at
06/26/00)............................................... 16 336,039
Midland Funding Corp. .................................... 170 190,301
Norampac Inc. ............................................ 350 337,750
Orion Power Holdings Inc.................................. 4,900 5,047,000
Packaging Resources, Inc.(a).............................. 2,251 900,526
Premier Cruises, Ltd. (a)(b) (cost $0; purchased
09/15/99)............................................... 74,058 203,660
Samuels Jewelers Inc.(a) ................................. 38 168,750
South Carolina Holding Corp. ............................. 1,596 1,703,730
Star Gas Partners L. P.................................... 2,561 39,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B43
<PAGE> 53
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
COMMON STOCK (CONTINUED) --------- ------------
<S> <C> <C> <C> <C> <C>
United Pan Europe Commerce................................ 13,495 $ 8,252,550
Waste Systems International, Inc.(a)(b) (cost $1,970,169;
purchased 02/01/99)..................................... 503 880,864
YankeeNets LLC(b) (cost $2,100,000; purchased 03/09/00)... 2,100 2,021,250
------------
TOTAL COMMON STOCKS
(cost $42,333,756)...................................................................................... 37,156,360
------------
<CAPTION>
PREFERRED STOCKS -- 6.7%
<S> <C> <C> <C> <C> <C>
Adelphia Communications, Inc., PIK........................ 65,250 6,851,250
AmeriKing, Inc., Sr. Notes PIK............................ 27,505 220,040
California Federal Bancorp, Inc. ......................... 100,000 2,118,750
CSC Holdings, Inc., PIK................................... 38,533 4,055,566
Century Maintenance Supplies, PIK......................... 48,369 3,627,675
Clark USA, Inc., PIK...................................... 626 125,250
Cluett American Corp., PIK................................ 44,746 907,105
Contour Energy Co.(a)..................................... 38,400 254,400
Dobson Communications, PIK................................ 4,833 4,978,614
Eagle-Picher Holdings, Inc.(a)............................ 170 510,000
Fitzgeralds Gaming, Inc.(a)............................... 50,000 50,000
Geneva Steel, Inc.(a)..................................... 22,000 2,200
Global Crossing Holdings, Ltd., PIK....................... 16,250 1,576,250
GPA Group Plc(a).......................................... 1,550,000 744,000
ICG Communications, Inc., PIK............................. 1,567 1,316,272
Intermedia Communications, Inc., PIK...................... 129 298,151
Isle Capri Black Hawk LLC ................................ 4,000 4,360,000
Nextel Communications, Inc., PIK.......................... 1,084 1,051,480
Paxson Communications Inc., PIK........................... 591 5,664,750
Primedia, Inc............................................. 44,668 4,154,124
R&B Falcon Corp., PIK..................................... 3,305 3,751,719
Rural Cellular Corp., PIK................................. 12 11,280
Supermarkets General Holdings Corp., PIK(a)............... 25,000 4,062
Viasystems, Inc., PIK(a).................................. 47,804 860,467
Waste Systems International Inc.(b) (cost 4,000,000;
purchased 2/29/00)...................................... 4,038 1,070,070
World Access Inc.(b) (cost $2,000,000; purchased
02/11/00)............................................... 1,332 852,480
------------
TOTAL PREFERRED STOCKS
(cost $65,810,623)...................................................................................... 49,415,955
------------
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION
DATE UNITS
WARRANTS(a) -- 0.9% ---------- ---------
<S> <C> <C> <C> <C> <C>
21st Century Telecom Group, Inc. ......................... 02/15/10 400 4,900
Allegiance Telecommunications, Inc. ...................... 02/03/08 3,800 444,600
American Banknote Corp. .................................. 12/01/02 2,500 25
Ampex Corp. .............................................. 03/15/03 170,000 1,700
Asia Pulp & Paper Ltd.(b) (cost $0; purchased 3/09/00).... 03/15/05 1,295 13
Bell Technology Group, Ltd. .............................. 03/15/03 1,250 51,250
Bestel S.A................................................ 05/01/05 2,500 30,000
Birch Telecomm, Inc. ..................................... 06/15/08 2,500 13,750
Cellnet Data Systems, Inc. ............................... 09/15/07 7,010 70
Clearnet Communications, Inc. ............................ 09/15/05 26,202 628,848
DTI Holdings, Inc. ....................................... 03/01/08 5,000 50
Electronic Retailing Systems.............................. 02/01/04 2,000 2,000
First World Communications................................ 04/15/08 1,175 82,250
GT Group Telecommunication, Inc. ......................... 02/01/10 6,725 0
HFI Icon Health........................................... 09/27/09 18,093 27,140
Intelcom Group, Inc. ..................................... 09/15/05 20,790 353,430
Interact Systems, Inc. ................................... 12/15/09 4,400 44
Intermediate Act Electronic Mktg. Inc..................... 12/15/09 4,400 22,000
Maxcom Telecommunications................................. 04/01/07 245 0
McCaw Int'l., Ltd. ....................................... 01/01/49 1,650 6,600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B44
<PAGE> 54
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
EXPIRATION VALUE
DATE UNITS (NOTE 2)
WARRANTS (CONTINUED) ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
MGC Communications, Inc. ................................. 01/01/49 2 $ 585,000
Pagemart, Inc. ........................................... 12/31/03 9,200 59,800
Powertel, Inc. ........................................... 02/01/06 6,720 342,720
Price Communications Cellular Holdings.................... 08/01/07 6,880 1,148,960
Primus Telecommunications Group........................... 05/01/07 1,500 46,125
R & B Falcon ............................................. 05/01/09 2,875 1,437,500
Star Choice Communications, Inc. ......................... 12/15/05 69,480 451,620
Sterling Chemical Holdings, Inc. ......................... 08/15/08 560 5,040
TVN Entertainment Corp. .................................. 08/01/08 1,135 0
USN Communications, Inc. ................................. 10/15/04 10,590 0
Versatel Telecommunications............................... 05/15/08 2,000 1,040,000
WamNet, Inc. ............................................. 08/01/08 3,000 36,000
Waste Systems International............................... 11/15/06 60,000 30,000
XM Satellite Radio Inc. .................................. 03/03/10 4,505 0
------------
TOTAL WARRANTS
(cost $2,071,260)....................................................................................... 6,851,435
------------
TOTAL LONG-TERM INVESTMENTS
(cost $782,477,253)..................................................................................... 668,230,128
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS -- 12.2% PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
CORPORATE BONDS -- 3.3% ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 0.4%
Aircraft Funding, Sr. Notes............................... NR 12.00% 07/16/00 $ 1,024 870,731
United States Air, Inc., Sr. Notes........................ B3 9.63% 02/01/01 2,000 1,977,600
------------
2,848,331
------------
CABLE
Century Communications Corp............................... B1 9.50% 08/15/00 100 99,500
------------
CONSUMER PRODUCTS -- 0.4%
Coinstar, Inc., Sr. Disc. Notes........................... NR 13.00% 06/30/00 3,275 3,307,750
------------
LEISURE -- 0.4%
Santa Fe Hotel, Inc., Gtd. First Mtge. Notes.............. Caa 11.00% 12/15/00 2,750 2,667,600
------------
RETAIL -- 0.4%
Family Restaurants, Inc., Sr. Notes....................... NR 15.00% 06/30/00 3,000 3,000,000
------------
TELECOMMUNICATIONS -- 1.6%
Bestel S.A., Sr. Disc. Notes.............................. NR 12.75% 05/15/01 2,500 1,775,000
GST Telecommunications, Inc., Sr. Sub. Notes(d)........... NR 13.88% 12/15/00 650 130,000
ICG Holdings, Inc., Sr. Sub. Notes........................ B3 13.50% 09/15/00 850 822,376
Millicom Intl. Cellular S.A., Sr. Sub. Notes.............. B3 12.00% 06/30/01 4,245 3,650,700
Pagemart Nationwide, Inc., Sr. Disc. Notes................ B3 15.00% 06/30/00 2,550 2,435,250
Telewest PLC, Sr. Disc. Notes............................. B1 9.25% 10/01/00 2,850 2,714,625
------------
11,527,951
------------
WASTE MANAGEMENT -- 0.1%
Clean Harbors, Inc., Sr. Notes............................ B2 12.50% 5/15/01 1,250 975,000
------------
TOTAL CORPORATE BONDS
(cost $26,765,233)...................................................................................... 24,426,132
------------
<CAPTION>
EXPIRATION
DATE UNITS
WARRANTS(a) -- 0.1% ---------- ---------
<S> <C> <C> <C> <C> <C>
Adelphia Business Solutions
(cost $127,500)......................................... 4/15/01 4,250 1,147,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B45
<PAGE> 55
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
COMMERCIAL PAPER -- 2.5% -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
American Electric Power Co. .............................. 6.85% 7/20/00 $ 3,000(f) $ 2,990,296
American Electric Power Co. .............................. 6.83% 7/21/00 5,000(f) 4,982,925
Comdisco, Inc. ........................................... 7.00% 7/10/00 1,000(f) 998,639
GPU Capital, Inc. ........................................ 6.88% 7/31/00 1,197(f) 1,190,595
PSE&G Fuel Corp. ......................................... 6.82% 7/20/00 5,000(f) 4,983,897
TRW, Inc. ................................................ 6.90% 8/15/00 3,000(f) 2,975,275
------------
TOTAL COMMERCIAL PAPER
(cost $18,121,627)...................................................................................... 18,121,627
------------
TIME DEPOSIT -- 0.7%
Deutsche Bank AG
(cost $4,914,000)....................................... 7.125% 07/03/00 4,914(f) 4,914,000
------------
REPURCHASE AGREEMENT -- 5.6%
Joint Repurchase Agreement Account
(cost $41,437,000; Note 5)................................ 6.493% 07/03/00 41,437 41,437,000
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $91,365,360)...................................................................................... 90,046,259
------------
TOTAL INVESTMENTS -- 102.9%
(cost $873,842,613; Note 6)............................................................................. 758,276,387
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.9)%........................................................... (21,869,502)
------------
TOTAL NET ASSETS -- 100.0%................................................................................ $736,406,885
============
</TABLE>
The following abbreviations are used in portfolio descriptions:
<TABLE>
<S> <C>
LLC Limited Liability Company
LP Limited Partnership
NR Not Rated by Moody's or Standard & Poors
PIK Payment in Kind Securities
PLC Public Limited Company
</TABLE>
(a) Non-income producing security.
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $25,043,821. The aggregate value, $10,518,737 is approximately
1.4% of net assets.
(c) Indicates a fair valued security. The aggregate value, $3,304,625 is
approximately .45% of net assets.
(d) Represents issuer in default on interest payments, non-income producing
security.
(e) Portion of securities on loan with an aggregate market value of $21,880,778,
cash collateral of $22,897,220 was received with which the portfolio
purchased securities.
(f) Represents security purchased with cash collateral received for securities
on loan.
SEE NOTES TO FINANCIAL STATEMENTS.
B46
<PAGE> 56
STOCK INDEX PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 98.7% VALUE
SHARES (NOTE 2)
COMMON STOCKS ---------- --------------
<S> <C> <C>
ADVERTISING -- 0.2%
Omnicom Group, Inc. ............... 65,700 $ 5,851,406
Young & Rubicam, Inc............... 24,000 1,372,500
--------------
7,223,906
--------------
AEROSPACE -- 0.8%
Boeing Co. ........................ 321,936 13,460,949
General Dynamics Corp. ............ 74,700 3,903,075
Lockheed Martin Corp. ............. 148,298 3,679,644
Northrop Grumman Corp. ............ 24,200 1,603,250
Raytheon Co. (Class "B" Stock)..... 123,018 2,368,097
Rockwell International Corp. ...... 71,900 2,264,850
United Technologies Corp. ......... 173,500 10,214,812
--------------
37,494,677
--------------
AIRLINES -- 0.2%
AMR Corp. ......................... 55,300 1,461,994
Delta Airlines, Inc. .............. 48,300 2,442,169
Southwest Airlines Co. ............ 181,725 3,441,417
US Airways Group, Inc.(a).......... 30,900 1,205,100
--------------
8,550,680
--------------
APPAREL -- 0.1%
Nike, Inc. (Class "B" Shares) ..... 102,200 4,068,837
Reebok International Ltd. ......... 19,000 302,813
--------------
4,371,650
--------------
AUTOS - CARS & TRUCKS -- 0.9%
Cummins Engine Co., Inc. .......... 14,400 392,400
Dana Corp. ........................ 63,594 1,347,398
Delphi Automotive Systems Corp. ... 206,044 3,000,516
Ford Motor Co. .................... 442,700 19,036,100
General Motors Corp. .............. 199,700 11,595,081
Genuine Parts Co. ................. 65,925 1,318,500
Johnson Controls, Inc. ............ 32,000 1,642,000
Navistar International Corp.(a).... 23,900 742,394
PACCAR Inc. ....................... 29,160 1,157,287
TRW, Inc. ......................... 44,200 1,917,175
Visteon Corp.(a)................... 57,964 702,814
--------------
42,851,665
--------------
BANKS AND SAVINGS & LOANS -- 4.0%
AmSouth Bancorporation............. 134,900 2,124,675
Associates First Capital Corp. .... 274,266 6,119,560
Bank of New York Co., Inc. ........ 270,900 12,596,850
Bank One Corp. .................... 427,045 11,343,383
BankAmerica Corp. ................. 615,044 26,446,892
Capital One Financial.............. 74,400 3,320,100
Charter One Financial, Inc.(a)..... 34,000 782,000
Chase Manhattan Corp. ............. 453,241 20,877,414
Comerica, Inc. .................... 58,450 2,622,944
Fifth Third Bancorp................ 109,600 6,932,200
First Union Corp. ................. 362,978 9,006,392
Firstar Corp. ..................... 361,460 7,613,251
Golden West Financial Corp. ....... 61,900 2,526,294
Huntington Bancshares, Inc. ....... 85,250 1,348,016
KeyCorp............................ 169,700 2,990,962
Mellon Financial Corp. ............ 180,300 6,569,681
National City Corp. ............... 232,400 3,965,325
Northern Trust Corp. .............. 82,000 5,335,125
PNC Bank Corp. .................... 109,200 5,118,750
Providian Financial Corp. ......... 52,550 4,729,500
SouthTrust Corp. .................. 59,400 1,343,925
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
State Street Corp. ................ 58,800 $ 6,236,475
Summit Bancorp..................... 63,900 1,573,538
Suntrust Banks, Inc. .............. 112,200 5,126,137
U.S. Bancorp....................... 268,926 5,176,825
Union Planters Corp. .............. 53,200 1,486,275
Wells Fargo & Co. ................. 596,560 23,116,700
--------------
186,429,189
--------------
CHEMICALS -- 0.9%
Air Products & Chemicals, Inc. .... 85,300 2,628,306
Dow Chemical Co. .................. 243,600 7,353,675
Du Pont (E.I.) de Nemours & Co. ... 386,291 16,900,231
Eastman Chemical Co. .............. 27,600 1,317,900
Engelhard Corp. ................... 49,875 850,992
FMC Corp.(a)....................... 12,300 713,400
Grace (W.R.) & Co.(a).............. 24,400 295,850
Great Lakes Chemical Corp. ........ 20,600 648,900
Hercules, Inc. .................... 37,400 525,938
Praxair, Inc. ..................... 59,100 2,212,556
Rohm & Haas Co. ................... 79,100 2,728,950
Sigma-Aldrich Corp. ............... 38,000 1,111,500
Union Carbide Corp. ............... 50,600 2,504,700
--------------
39,792,898
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp.(a)................... 267,618 3,746,652
Convergys Corp. ................... 34,000 1,763,750
Deluxe Corp. ...................... 29,000 683,312
Quintiles Transnational,
Corp.(a)......................... 36,000 508,500
--------------
6,702,214
--------------
COMPUTERS -- 5.4%
Apple Computer, Inc.(a) ........... 121,200 6,347,850
Citrix Systems, Inc.(a)............ 64,800 1,227,150
Compaq Computer Corp. ............. 629,069 16,080,576
Comverse Technology, Inc.(a)....... 52,000 4,836,000
Dell Computer Corp.(a)............. 944,200 46,560,863
Hewlett-Packard Co. ............... 369,300 46,116,338
International Business Machines
Corp. ........................... 651,400 71,369,012
Seagate Technology, Inc.(a)........ 81,200 4,466,000
Sun Microsystems, Inc.(a).......... 579,700 52,716,469
--------------
249,720,258
--------------
COMPUTER SERVICES -- 14.2%
3Com Corp. ........................ 127,600 7,352,950
Adaptec, Inc.(a)................... 37,500 853,125
Adobe Systems, Inc. ............... 44,900 5,837,000
America Online, Inc.(a)............ 839,600 44,288,900
Autodesk, Inc. .................... 19,800 686,813
Automatic Data Processing, Inc. ... 232,900 12,474,706
BMC Software, Inc.(a).............. 90,300 3,294,539
Cabletron Systems, Inc.(a)......... 63,500 1,603,375
Ceridian Corp.(a).................. 53,200 1,280,125
Cisco Systems, Inc.(a)............. 2,526,000 160,558,875
Computer Associates International,
Inc. ............................ 204,543 10,470,045
Computer Sciences Corp.(a)......... 60,700 4,533,531
Compuware Corp.(a)................. 133,600 1,386,100
EMC Corp.(a)....................... 776,174 59,716,887
First Data Corp. .................. 155,400 7,711,725
Gateway, Inc. ..................... 114,800 6,514,900
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B47
<PAGE> 57
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
COMPUTER SERVICES (CONT'D.)
Lexmark International Group,
Inc.(a).......................... 48,414 $ 3,255,841
Mercury Interactive Corp. ......... 9,000 870,750
Micron Technology, Inc. ........... 199,400 17,559,662
Microsoft Corp. ................... 1,913,500 153,080,000
NCR Corp.(a)....................... 31,300 1,218,744
Network Appliance, Inc.(a)......... 110,400 8,887,200
Novell, Inc.(a).................... 126,100 1,166,425
Oracle Corp.(a).................... 1,038,460 87,295,544
Parametric Technology Corp.(a)..... 97,000 1,067,000
Peoplesoft, Inc.(a)................ 96,000 1,608,000
Sapient Corp. ..................... 15,000 1,604,063
Siebel Systems Inc.(a)............. 67,000 10,958,688
Unisys Corp.(a).................... 111,000 1,616,438
VERITAS Software Corp.(a).......... 138,000 15,596,156
Yahoo!, Inc. ...................... 194,400 24,081,300
--------------
658,429,407
--------------
CONSTRUCTION -- 0.1%
Armstrong Holdings Inc. ........... 14,700 225,094
Centex Corp. ...................... 21,600 507,600
Fluor Corp. ....................... 28,300 894,988
Kaufman & Broad Home Corp. ........ 16,166 320,289
Pulte Corp. ....................... 14,500 313,562
Vulcan Materials Co. .............. 37,600 1,605,050
--------------
3,866,583
--------------
CONSUMER PRODUCTS
Tupperware Corp. .................. 22,300 490,600
--------------
CONTAINERS -- 0.1%
Ball Corp. ........................ 10,900 350,844
Bemis Co., Inc. ................... 18,100 608,612
Crown Cork & Seal Co., Inc.(a)..... 44,200 663,000
Owens-Illinois, Inc.(a)............ 59,700 697,744
Pactiv Corp.(a).................... 58,900 463,838
--------------
2,784,038
--------------
COSMETICS & SOAPS -- 1.4%
Alberto-Culver Co. (Class "B"
Stock)........................... 19,100 583,744
Avon Products, Inc. ............... 91,000 4,049,500
Clorox Co. ........................ 86,500 3,876,281
Colgate-Palmolive Co. ............. 214,900 12,867,137
Gillette Co. ...................... 387,500 13,538,281
International Flavors & Fragrances,
Inc. ............................ 39,400 1,189,388
Procter & Gamble Co. .............. 480,704 27,490,260
--------------
63,594,591
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.6%
Eastman Kodak Co. ................. 117,900 7,015,050
Philip Morris Companies, Inc. ..... 843,200 22,397,500
Polaroid Corp. .................... 15,400 278,163
--------------
29,690,713
--------------
DIVERSIFIED MANUFACTURING -- 4.1%
General Electric Co. .............. 3,615,800 191,637,400
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.3%
Avery Dennison Corp. .............. 43,900 2,946,787
Pitney Bowes, Inc. ................ 100,900 4,036,000
Xerox Corp. ....................... 245,792 5,100,184
--------------
12,082,971
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
DRUGS & MEDICAL SUPPLIES -- 10.3%
Abbott Laboratories................ 566,700 $ 25,253,569
Allergan, Inc. .................... 50,600 3,769,700
ALZA Corp.(a)...................... 35,700 2,110,762
American Home Products Corp. ...... 480,100 28,205,875
Bausch & Lomb, Inc. ............... 20,100 1,555,237
Baxter International, Inc. ........ 109,500 7,699,219
Becton, Dickinson & Co. ........... 93,100 2,670,806
Biogen, Inc. ...................... 52,000 3,354,000
Biomet, Inc........................ 42,100 1,618,219
Boston Scientific Corp.(a)......... 151,800 3,330,112
Bristol-Myers Squibb Co. .......... 725,760 42,275,520
Bard, (C.R.), Inc. ................ 19,000 914,375
Cardinal Health, Inc. ............. 101,650 7,522,100
Guidant Corp.(a)................... 113,100 5,598,450
Johnson & Johnson.................. 508,900 51,844,187
Lilly (Eli) & Co. ................. 401,200 40,069,850
Mallinckrodt, Inc. ................ 25,800 1,120,688
Medtronic, Inc. ................... 442,700 22,051,994
Merck & Co., Inc. ................. 843,800 64,656,175
Pfizer, Inc. ...................... 2,292,750 110,052,000
Pharmacia Corporation.............. 461,456 23,851,507
Schering-Plough Corp. ............. 536,300 27,083,150
St. Jude Medical, Inc. ............ 30,300 1,390,013
Watson Pharmaceuticals, Inc.(a).... 35,000 1,881,250
--------------
479,878,758
--------------
ELECTRICAL SERVICES -- 0.2%
American Power Conversion.......... 53,000 2,163,063
CP&L Energy, Inc.(a)............... 59,900 1,913,056
TXU Corp. ......................... 103,506 3,053,427
--------------
7,129,546
--------------
ELECTRONICS -- 7.4%
Advanced Micro Devices, Inc.(a).... 54,100 4,179,225
Altera Corp.(a).................... 67,000 6,829,812
Analog Devices, Inc.(a)............ 128,900 9,796,400
Applied Materials, Inc.(a)......... 282,200 25,574,375
Broadcom Corp. .................... 16,000 3,199,722
Conexant Systems Inc. ............. 72,000 3,501,000
Electronic Data Systems Corp. ..... 173,900 7,173,375
Emerson Electric Co.(a)............ 157,500 9,509,062
Intel Corp. ....................... 1,227,600 164,114,775
KLA-Tencor Corp.(a)................ 67,400 3,947,113
Linear Technology Corp. ........... 105,000 6,713,437
LSI Logic Corp.(a)................. 110,800 5,997,050
Maxim Integrated Products,
Inc.(a).......................... 92,000 6,250,250
MIPS Technologies, Inc. (Class "B"
Stock)........................... 9,396 361,735
Molex Inc. ........................ 70,000 3,368,750
National Semiconductor Corp.(a).... 65,400 3,711,450
Novellus Systems, Inc. ............ 28,000 1,583,750
Perkin Elmer, Inc. ................ 18,000 1,190,250
Pinnacle West Capital Corp. ....... 29,000 982,375
PPL Corp. ......................... 57,000 1,250,438
RadioShack Corp.(a)................ 70,660 3,347,518
Sanmina Corp. ..................... 31,000 2,650,500
Solectron Corp.(a)................. 218,000 9,128,750
Tektronix, Inc. ................... 17,500 1,295,000
Teradyne, Inc. (United
States)(a)....................... 63,900 4,696,650
Texas Instruments, Inc. ........... 596,600 40,978,962
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B48
<PAGE> 58
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
ELECTRONICS (CONT'D.)
Thomas & Betts Corp. .............. 23,800 $ 455,175
Xilinx Inc.(a)..................... 118,400 9,775,400
--------------
341,562,299
--------------
FINANCIAL SERVICES -- 5.8%
American Express Co. .............. 493,100 25,702,837
Bear Stearns Companies, Inc. ...... 44,210 1,840,241
Schwab (Charles) Corp. ............ 468,800 15,763,400
Citigroup, Inc. ................... 1,235,213 74,421,583
Countrywide Credit Industries,
Inc. ............................ 40,800 1,236,750
Dun & Bradstreet Corp. ............ 62,360 1,785,055
Equifax, Inc. ..................... 52,300 1,372,875
Federal Home Loan Mortgage Corp. .. 257,700 10,436,850
Federal National Mortgage
Association...................... 372,700 19,450,281
Fleetboston Financial Corp. ....... 334,488 11,372,592
Franklin Resource, Inc. ........... 92,400 2,806,650
H&R Block, Inc. ................... 36,700 1,188,163
Household International, Inc. ..... 175,458 7,292,473
Lehman Brothers Holdings, Inc. .... 43,700 4,132,381
MBNA Corp. ........................ 296,768 8,049,832
Merrill Lynch & Co., Inc. ......... 136,900 15,743,500
Morgan (J.P.) & Co., Inc. ......... 61,150 6,734,144
Morgan Stanley Dean Witter &
Co. ............................. 416,910 34,707,757
Old Kent Financial Corp. .......... 32,550 870,713
PaineWebber Group, Inc. ........... 54,000 2,457,000
Paychex, Inc. ..................... 137,250 5,764,500
Price (T.Rowe) Associates, Inc. ... 36,000 1,530,000
Regions Financial Corp. ........... 83,100 1,651,613
SLM Holding Corp. ................. 59,600 2,231,275
Synovus Financial Corp. ........... 97,500 1,718,438
Washington Mutual, Inc. ........... 205,648 5,938,086
--------------
266,198,989
--------------
FOOD & BEVERAGE -- 3.7%
Anheuser-Busch Companies, Inc. .... 169,300 12,644,594
Archer-Daniels-Midland Co. ........ 225,931 2,216,948
Bestfoods.......................... 100,100 6,931,925
Brown-Forman Corp. (Class "B"
Stock)........................... 23,800 1,279,250
Campbell Soup Co. ................. 157,100 4,575,537
Coca-Cola Co. ..................... 907,100 52,101,556
Coca-Cola Enterprises Inc. ........ 159,000 2,593,688
ConAgra, Inc. ..................... 179,100 3,414,094
Coors (Adolph) Co. (Class "B"
Stock)........................... 12,800 774,400
General Mills, Inc. ............... 113,800 4,352,850
Heinz (H.J.) & Co. ................ 132,350 5,790,312
Hershey Foods Corp. ............... 49,500 2,400,750
Kellogg Co. ....................... 148,900 4,429,775
Nabisco Group Holdings Corp.(a).... 119,900 3,109,906
PepsiCo, Inc. ..................... 530,100 23,556,319
Quaker Oats Co. ................... 47,600 3,575,950
Ralston-Ralston Purina Group....... 113,620 2,265,299
Sara Lee Corp. .................... 328,400 6,342,225
Seagram Co., Ltd. ................. 161,800 9,384,400
Sysco Corp. ....................... 121,500 5,118,187
Unilever NV, ADR (Netherlands)..... 210,432 9,048,576
Wrigley (William) Jr. Co. ......... 42,600 3,415,988
--------------
169,322,529
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 0.4%
Boise Cascade Corp. ............... 19,886 $ 514,550
Fort James Corp. .................. 81,000 1,873,125
Georgia-Pacific Corp. ............. 66,800 1,753,500
International Paper Co. ........... 179,968 5,365,281
Louisiana-Pacific Corp. ........... 38,900 423,038
Mead Corp. ........................ 37,400 944,350
Potlatch Corp. .................... 10,000 331,250
Temple-Inland, Inc. ............... 20,000 840,000
Westvaco Corp. .................... 35,700 885,806
Weyerhaeuser Co. .................. 87,100 3,745,300
Willamette Industries, Inc. ....... 44,200 1,204,450
--------------
17,880,650
--------------
GAS PIPELINES -- 0.6%
Cinergy Corp. ..................... 58,739 1,494,174
Columbia Energy Group.............. 30,250 1,985,156
Enron Corp. ....................... 265,700 17,137,650
Peoples Energy Corp. .............. 11,400 369,075
Sempra Energy...................... 74,154 1,260,618
Williams Companies, Inc. .......... 162,300 6,765,881
--------------
29,012,554
--------------
HOSPITALS/HEALTHCARE MANAGEMENT -- 1.4%
Agilent Technologies, Inc. ........ 155,613 11,476,459
Amgen, Inc.(a)..................... 376,900 26,477,225
Columbia/HCA Healthcare Corp....... 206,398 6,269,339
HEALTHSOUTH Corp.(a)............... 154,500 1,110,469
Humana, Inc.(a).................... 58,100 283,238
IMS Health, Inc. .................. 119,120 2,144,160
Manor Care, Inc. .................. 40,850 285,950
McKesson HBOC, Inc. ............... 101,107 2,116,928
MedImmune, Inc. ................... 57,000 4,218,000
Shared Medical Systems Corp. ...... 9,000 656,437
Tenet Healthcare Corp.(a).......... 111,100 2,999,700
UnitedHealth Group, Inc. .......... 62,200 5,333,650
Wellpoint Health Networks,
Inc.(a).......................... 25,100 1,818,181
--------------
65,189,736
--------------
HOUSEHOLD PRODUCTS & PERSONAL
CARE -- 0.3%
Kimberly-Clark Corp. .............. 200,788 11,520,212
Leggett & Platt, Inc. ............. 64,000 1,056,000
--------------
12,576,212
--------------
HOUSING RELATED -- 0.4%
Lowe's Companies, Inc. ............ 37,800 2,268,000
Lowe's Companies, Inc. ............ 143,000 5,871,937
Masco Corp. ....................... 161,200 2,911,675
Maytag Corp. ...................... 32,700 1,205,813
Newell Rubbermaid, Inc. ........... 107,049 2,756,512
Owens Corning...................... 21,100 195,175
Stanley Works...................... 32,300 767,125
Whirlpool Corp. ................... 27,300 1,272,862
--------------
17,249,099
--------------
INSTRUMENT - CONTROLS -- 0.1%
PE Corp. - PE Biosystems Group..... 77,400 5,098,725
--------------
INSURANCE -- 3.0%
Aetna, Inc. ....................... 53,312 3,421,964
AFLAC, Inc. ....................... 97,400 4,474,313
Allstate Corp. .................... 283,688 6,312,058
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B49
<PAGE> 59
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
INSURANCE (CONT'D.)
American General Corp. ............ 92,286 $ 5,629,446
American International Group,
Inc. ............................ 565,943 66,498,302
Aon Corp. ......................... 94,125 2,923,758
Chubb Corp. ....................... 64,600 3,972,900
CIGNA Corp. ....................... 60,100 5,619,350
Cincinnati Financial Corp. ........ 62,500 1,964,844
Conseco, Inc. ..................... 118,259 1,153,025
Hartford Financial Services Group,
Inc. ............................ 81,200 4,542,125
Jefferson-Pilot Corp. ............. 39,912 2,252,533
Lincoln National Corp. ............ 68,800 2,485,400
Marsh & McLennan Companies,
Inc. ............................ 98,000 10,234,875
MBIA, Inc. ........................ 36,300 1,749,206
MGIC Investment Corp. ............. 40,200 1,829,100
Progressive Corp. ................. 27,000 1,998,000
SAFECO Corp. ...................... 48,300 959,963
St. Paul Companies, Inc. .......... 83,110 2,836,129
Torchmark Corp. ................... 51,000 1,259,063
UnumProvident Corp. ............... 86,656 1,738,536
Wachovia Corp. .................... 74,200 4,025,350
--------------
137,880,240
--------------
LEISURE -- 1.0%
Brunswick Corp. ................... 33,400 553,188
Carnival Corp. (Class "A" Stock)... 229,700 4,479,150
Disney (Walt) Co. ................. 760,001 29,497,539
Harley-Davidson Inc. .............. 100,000 3,850,000
Harrah's Entertainment, Inc.(a).... 46,350 970,453
Hilton Hotels Corp. ............... 104,800 982,500
Marriott International, Inc. (Class
"A" Stock)....................... 93,200 3,361,025
Sabre Group Holdings, Inc. (Class
"A" Stock)....................... 42,419 1,208,941
--------------
44,902,796
--------------
MACHINERY -- 0.4%
Briggs & Stratton Corp. ........... 7,800 267,150
Caterpillar, Inc. ................. 134,300 4,549,412
Cooper Industries, Inc. ........... 37,000 1,204,812
Deere & Co. ....................... 85,200 3,152,400
Dover Corp. ....................... 75,900 3,078,694
Eaton Corp. ....................... 27,600 1,849,200
Ingersoll-Rand Co. ................ 62,750 2,525,687
Milacron, Inc. .................... 6,600 95,700
Parker Hannifin Corp. ............. 41,225 1,411,956
Snap-On, Inc. ..................... 22,800 607,050
Thermo Electron Corp.(a)........... 57,000 1,200,563
Timken Co. ........................ 21,500 400,438
--------------
20,343,062
--------------
MEDIA -- 3.0%
Clear Channel Communications,
Inc.(a).......................... 124,200 9,315,000
Comcast Corp. (Special Class "A"
Stock)........................... 330,400 13,381,200
Dow Jones & Co., Inc. ............. 32,700 2,395,275
Gannett Co., Inc. ................. 99,700 5,963,306
Interpublic Group of Companies,
Inc. ............................ 105,100 4,519,300
Knight-Ridder, Inc. ............... 31,100 1,654,131
McGraw Hill, Inc. ................. 72,900 3,936,600
Mediaone Group, Inc.(a)............ 226,300 14,964,087
Meredith Corp. .................... 17,800 600,750
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
MEDIA (CONT'D.)
New York Times Co. (Class "A"
Stock)........................... 65,200 $ 2,575,400
R.R. Donnelley & Sons, Co. ........ 49,500 1,116,844
Time Warner, Inc. ................. 473,180 35,961,680
Tribune Co. ....................... 124,400 4,354,000
Viacom, Inc. (Class "B"
Stock)(a)........................ 560,436 38,214,730
--------------
138,952,303
--------------
METALS - FERROUS -- 0.1%
Allegheny Technologies, Inc. ...... 34,940 628,920
Bethlehem Steel Corp.(a)........... 47,300 168,506
Nucor Corp. ....................... 31,200 1,035,450
USX -- U.S. Steel Group, Inc. ..... 31,540 585,462
Worthington Industries, Inc. ...... 34,000 357,000
--------------
2,775,338
--------------
METALS - NON FERROUS -- 0.3%
Alcan Aluminum Ltd. ............... 83,350 2,583,850
Alcoa, Inc. ....................... 320,476 9,293,804
INCO Ltd. ......................... 67,200 1,033,200
--------------
12,910,854
--------------
MINERAL RESOURCES -- 0.1%
Burlington Resources, Inc. ........ 75,817 2,900,000
Homestake Mining Co. .............. 93,700 644,188
Phelps Dodge Corp. ................ 27,528 1,023,698
--------------
4,567,886
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.6%
AES Corp.(a)....................... 150,400 6,862,000
BB&T Corp. ........................ 114,300 2,728,912
Crane Co. ......................... 25,625 623,008
Danaher Corp. ..................... 51,400 2,541,087
Ecolab, Inc. ...................... 48,000 1,875,000
Fortune Brands, Inc. .............. 56,500 1,303,031
Honeywell Inc. .................... 293,250 9,878,859
Illinois Tool Works, Inc. ......... 106,900 6,093,300
ITT Industries, Inc. .............. 37,900 1,151,213
Millipore Corp. ................... 16,200 1,221,075
Pall Corp. ........................ 44,000 814,000
PPG Industries, Inc. .............. 65,800 2,915,762
Sealed Air Corp. .................. 30,810 1,613,674
Textron, Inc. ..................... 55,600 3,019,775
Tyco International Ltd. ........... 625,114 29,614,776
W.W. Grainger, Inc. ............... 33,400 1,029,138
--------------
73,284,610
--------------
MISCELLANEOUS - CONSUMER
GROWTH/STABLE -- 0.9%
American Greetings Corp. (Class "A"
Stock)........................... 24,800 471,200
Black & Decker Corp. .............. 32,900 1,293,381
Corning, Inc. ..................... 99,000 26,717,625
Energizer Holdings Inc. ........... 1 18
Minnesota Mining & Manufacturing
Co. ............................. 144,900 11,954,250
--------------
40,436,474
--------------
OIL & GAS -- 4.4%
Amerada Hess Corp. ................ 34,200 2,111,850
Anadarko Petroleum Corp. .......... 47,600 2,347,275
Ashland Oil, Inc. ................. 23,100 809,944
Chevron Corp. ..................... 241,600 20,490,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B50
<PAGE> 60
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
OIL & GAS (CONT'D.)
Coastal Corp. ..................... 78,800 $ 4,796,950
Eastern Enterprises, Inc. ......... 9,500 598,500
Exxon Mobil Corp. ................. 1,268,235 99,556,447
Kerr-McGee Corp. .................. 31,926 1,881,639
NICOR, Inc. ....................... 16,200 528,525
Phillips Petroleum Co. ............ 91,700 4,648,044
Royal Dutch Petroleum Co........... 785,300 48,345,031
Sunoco, Inc. ...................... 29,200 859,575
Texaco, Inc. ...................... 204,982 10,915,291
Union Pacific Resources Group,
Inc. ............................ 83,656 1,840,432
Unocal Corp. ...................... 87,100 2,885,188
USX-Marathon Corp. ................ 112,000 2,807,000
--------------
205,422,391
--------------
OIL & GAS EXPLORATION/PRODUCTION
-- 0.1%
Occidental Petroleum Corp. ........ 136,000 2,864,500
--------------
OIL - EXPLORATION/PRODUCTION -- 0.1%
Conoco, Inc. (Class "B" Stock)..... 229,757 5,643,406
--------------
OIL & GAS SERVICES -- 0.9%
Apache Corp. ...................... 42,100 2,476,006
Baker Hughes, Inc. ................ 122,130 3,908,160
Halliburton Co. ................... 164,100 7,743,469
McDermott International, Inc. ..... 20,700 182,419
ONEOK, Inc. ....................... 13,000 337,188
PG&E Corp. ........................ 140,000 3,447,500
Rowan Companies, Inc.(a)........... 28,700 871,762
Schlumberger, Ltd. ................ 204,300 15,245,887
Tosco Corp. ....................... 49,000 1,387,312
Transocean Sedco Forex Inc. ....... 70,333 3,758,420
--------------
39,358,123
--------------
PRECIOUS METALS -- 0.1%
Barrick Gold Corp. ................ 145,300 2,642,644
Freeport-McMoRan Copper & Gold,
Inc. (Class "B" Stock)(a)........ 66,200 612,350
Newmont Mining Corp. .............. 61,503 1,330,002
Placer Dome, Inc. ................. 121,000 1,157,062
--------------
5,742,058
--------------
RAILROADS -- 0.3%
Burlington Northern Sante Fe
Corp. ........................... 167,226 3,835,746
CSX Corp. ......................... 80,612 1,707,967
Kansas City Southern Industries,
Inc. ............................ 40,200 3,565,237
Norfolk Southern Corp. ............ 141,300 2,101,838
Union Pacific Corp. ............... 92,100 3,424,969
--------------
14,635,757
--------------
RESTAURANTS -- 0.4%
Darden Restaurants, Inc. .......... 50,300 817,375
McDonald's Corp. .................. 491,200 16,178,900
Tricon Global Restaurants,
Inc.(a).......................... 56,650 1,600,362
Wendy's International, Inc. ....... 44,800 798,000
--------------
19,394,637
--------------
RETAIL -- 5.3%
Albertson's, Inc. ................. 156,644 5,208,413
AutoZone, Inc.(a).................. 51,900 1,141,800
Bed Bath & Beyond, Inc.(a)......... 49,000 1,776,250
Best Buy Co., Inc.(a).............. 75,000 4,743,750
Circuit City Stores, Inc. ......... 75,200 2,495,700
Consolidated Stores Corp.(a)....... 40,200 482,400
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
RETAIL (CONT'D.)
Costco Wholesale Corp.(a).......... 164,432 $ 5,426,256
CVS Corp. ......................... 145,800 5,832,000
Dillard's, Inc. ................... 37,750 462,438
Dollar General Corp. .............. 109,803 2,141,158
Federated Department Stores,
Inc.(a).......................... 76,500 2,581,875
Great Atlantic & Pacific Tea Co.,
Inc. ............................ 12,400 206,150
Harcourt General, Inc. ............ 27,006 1,468,451
Home Depot, Inc. .................. 845,919 42,243,080
IKON Office Solutions, Inc. ....... 52,476 203,345
J.C. Penney Co., Inc. ............. 100,500 1,852,969
Kmart Corp.(a)..................... 181,400 1,235,788
Kohl's Corp.(a).................... 121,600 6,764,000
Kroger Co.(a)...................... 308,000 6,795,250
Liz Claiborne, Inc. ............... 23,400 824,850
Longs Drug Stores, Inc. ........... 13,700 297,975
May Department Stores Co. ......... 119,700 2,872,800
Nordstrom, Inc. ................... 52,300 1,261,738
Office Depot, Inc.(a).............. 124,000 775,000
RiteAid Corp. ..................... 94,600 620,813
Safeway,Inc.(a).................... 183,100 8,262,387
Sears, Roebuck & Co. .............. 132,200 4,313,025
Sherwin-Williams Co. .............. 64,700 1,370,831
Staples, Inc.(a)................... 171,200 2,632,200
Starbucks Corp. ................... 44,000 1,680,250
Supervalu, Inc. ................... 46,800 892,125
Target Corp. ...................... 161,184 9,348,672
The Gap, Inc. ..................... 316,587 9,893,344
The Limited, Inc. ................. 159,896 3,457,751
Tiffany & Co.(a)................... 11,000 742,500
TJX Companies, Inc. ............... 116,400 2,182,500
Toys 'R' Us, Inc.(a)............... 90,450 1,317,178
Wal-Mart Stores, Inc. ............. 1,632,900 94,095,862
Walgreen Co. ...................... 373,000 12,005,937
Winn-Dixie Stores, Inc. ........... 54,900 785,756
--------------
252,694,567
--------------
RUBBER -- 0.1%
B.F. Goodrich Co. ................. 38,600 1,314,813
Cooper Tire & Rubber Co. .......... 28,800 320,400
Goodyear Tire & Rubber Co. ........ 58,000 1,160,000
--------------
2,795,213
--------------
TELECOMMUNICATIONS -- 11.0%
ADC Telecommunications, Inc.(a).... 113,400 9,511,425
Alltel Corp. ...................... 114,000 7,060,875
Andrew Corp.(a).................... 29,112 977,072
AT&T Corp. ........................ 1,175,321 37,169,527
Bell Atlantic Corp. ............... 569,690 28,947,373
BellSouth Corp. ................... 691,000 29,453,875
CenturyTel, Inc. .................. 51,200 1,472,000
Global Crossing Ltd.(a)............ 289,105 7,607,075
GTE Corp. ......................... 354,220 22,050,195
Lucent Technologies, Inc. ......... 1,175,905 69,672,371
Motorola, Inc. .................... 786,795 22,866,230
Nextel Communications, Inc. (Class
"A" Stock) ...................... 270,000 16,520,625
Nortel Networks Corp. ............. 1,066,480 72,787,260
Qualcomm, Inc.(a).................. 270,100 16,206,000
SBC Communications, Inc. .......... 1,247,277 53,944,730
Scientific-Atlanta, Inc. .......... 60,600 4,514,700
Sprint Corp. ...................... 322,900 16,467,900
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B51
<PAGE> 61
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Sprint Corp. (PCS Group)(a)........ 319,000 $ 18,980,500
Tellabs, Inc.(a)................... 149,400 10,224,562
US West, Inc. ..................... 186,922 16,028,561
Worldcom Inc. ..................... 1,046,958 48,029,198
--------------
510,492,054
--------------
TEXTILES
National Service Industries,
Inc. ............................ 14,700 286,650
Russell Corp. ..................... 6,700 134,000
Springs Industries, Inc. .......... 8,700 278,400
VF Corp. .......................... 42,836 1,020,032
--------------
1,719,082
--------------
TOBACCO
UST, Inc. ......................... 59,100 868,031
--------------
TOY MANUFACTURER -- 0.1%
Hasbro, Inc. ...................... 64,150 966,259
Mattel, Inc. ...................... 152,381 2,009,525
--------------
2,975,784
--------------
TRUCKING & SHIPPING -- 0.1%
Federal Express Corp. ............. 106,640 4,052,320
Ryder System, Inc. ................ 20,600 390,113
--------------
4,442,433
--------------
UTILITIES - ELECTRIC & GAS
Florida Progress Corp. ............ 36,000 1,687,500
--------------
UTILITIES - ELECTRIC -- 1.3%
Ameren Corp. ...................... 53,900 1,819,125
American Electric Power Co.,
Inc. ............................ 118,940 3,523,597
CMS Energy Corp. .................. 43,100 953,588
Consolidated Edison, Inc. ......... 80,400 2,381,850
Constellation Energy Group......... 53,550 1,743,722
Dominion Resources, Inc. .......... 90,742 3,890,563
DTE Energy Co. .................... 53,600 1,638,150
Duke Energy Corp. ................. 136,531 7,696,935
Edison International............... 129,800 2,660,900
El Paso Energy Corp. .............. 80,900 4,120,844
Entergy Corp. ..................... 90,300 2,455,031
FirstEnergy Corp.(a)............... 87,200 2,038,300
FPL Group, Inc. ................... 68,100 3,370,950
GPU, Inc. ......................... 46,200 1,250,288
New Century Energies, Inc. ........ 40,900 1,227,000
Niagara Mohawk Holdings, Inc.(a)... 64,600 900,363
Northern States Power Co. ......... 53,900 1,088,106
PECO Energy Co. ................... 67,500 2,721,094
Public Service Enterprise Group,
Inc. ............................ 80,400 2,783,850
Reliant Energy, Inc. .............. 107,410 3,175,308
Southern Co. ...................... 239,400 5,581,012
Unicom Corp. ...................... 71,000 2,746,813
--------------
59,767,389
--------------
WASTE MANAGEMENT -- 0.1%
Allied Waste Industries, Inc.(a)... 68,000 680,000
Waste Management, Inc.(a).......... 230,230 4,374,370
--------------
5,054,370
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,357,867,825).......................... 4,568,423,395
--------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM (000) (NOTE 2)
INVESTMENTS -- 1.4% ---------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.3%
Joint Repurchase Agreement Account,
6.49%, 07/03/00 (Note 5)......... $ 59,383 $ 59,383,000
--------------
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
United States Treasury Bill,
5.64%, 09/21/00(b)............... 4,500 4,442,190
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $63,825,190)............................. 63,825,190
--------------
TOTAL INVESTMENTS -- 100.1%
(cost $2,421,693,015; Note 6).................. 4,632,248,585
VARIATION MARGIN ON OPEN FUTURES CONTRACTS(C)....
417,311
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.1)%......................... (3,738,810)
--------------
NET ASSETS -- 100.0%............................. $4,628,927,086
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
<TABLE>
<S> <C>
ADR American Depository Receipt.
NV Naamloze Vennootschap (Dutch Corporation).
PLC Public Limited Company (British Corporation).
SA Sociedad Anomia (Spanish Corporation) or Societe
Anonyme (French Corporation).
</TABLE>
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Open futures contracts as of June 30, 2000, are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 1999 DEPRECIATION
<C> <S> <C> <C> <C> <C>
187 S&P 500 Index Sept.00 $60,954,057 $59,825,075 $(1.128,982)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B52
<PAGE> 62
EQUITY INCOME PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 97.6% VALUE
SHARES (NOTE 2)
COMMON STOCKS -- 95.8% --------- --------------
<S> <C> <C>
AIRLINES -- 1.4%
AMR Corp.(a) ........................ 912,100 $ 24,113,644
--------------
APPAREL -- 0.9%
Kellwood Co. ........................ 731,300 15,448,713
--------------
AUTOMOBILES & TRUCKS -- 2.5%
Borg-Warner Automotive, Inc. ........ 116,700 4,099,087
Dana Corp. .......................... 244,300 5,176,106
Ford Motor Co. ...................... 333,100 14,323,300
General Motors Corp. ................ 295,667 18,270,175
Visteon Corp. ....................... 43,614 528,817
--------------
42,397,485
--------------
BANKING -- 5.7%
BankAmerica Corp. ................... 553,500 23,800,500
Bank One Corp. ...................... 443,500 11,780,469
Chase Manhattan Corp. ............... 584,000 26,900,500
Comerica, Inc. ...................... 425,200 19,080,850
PNC Bank Corp. ...................... 356,000 16,687,500
--------------
98,249,819
--------------
CHEMICALS -- 2.7%
Dow Chemical Co. .................... 658,500 19,878,469
Lyondell Chemical Co. ............... 707,100 11,843,925
Millennium Chemicals, Inc. .......... 833,798 14,174,566
--------------
45,896,960
--------------
COMPUTERS -- 2.4%
Compaq Computer Corp. ............... 343,900 8,790,944
International Business Machines
Corp. ............................. 298,400 32,693,450
--------------
41,484,394
--------------
COMPUTER SOFTWARE & SERVICES -- 1.5%
Computer Associates International,
Inc. .............................. 502,900 25,742,194
--------------
CONSTRUCTION -- 0.8%
Centex Corp. ........................ 627,200(b) 14,739,200
--------------
CONTAINERS -- 0.5%
Crown Cork & Seal Co., Inc. ......... 529,700 7,945,500
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 4.1%
Eastman Kodak Co. ................... 762,200 45,350,900
Philip Morris Co., Inc. ............. 926,400 24,607,500
--------------
69,958,400
--------------
DRUGS & MEDICAL SUPPLIES -- 0.6%
Merck & Co., Inc. ................... 129,400 9,915,275
--------------
ELECTRONICS -- 0.1%
Esterline Technologies Corp.(a) ..... 129,900 1,932,263
--------------
FINANCIAL SERVICES -- 16.6%
A.G. Edwards, Inc. .................. 768,000 29,952,000
Associates First Capital Corp. ...... 918,900 20,502,956
Bear, Stearns & Co., Inc. ........... 1,034,434 43,058,315
Countrywide Mortgage Investments,
Inc. .............................. 539,900 16,365,719
Lehman Brothers Holdings, Inc. ...... 1,038,200 98,174,787
PaineWebber Group, Inc. ............. 1,220,800 55,546,400
Washington Mutual, Inc. ............. 766,400 22,129,800
--------------
285,729,977
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) --------- --------------
<S> <C> <C>
FOOD & BEVERAGE -- 2.8%
Nabisco Group Holdings Corp. ........ 1,853,380 $ 48,072,044
--------------
FOREST PRODUCTS -- 4.0%
Georgia-Pacific Corp. ............... 972,200(b) 25,520,250
Longview Fibre Co. .................. 1,333,500 14,751,844
Louisiana-Pacific Corp. ............. 1,299,900 14,136,413
Rayonier, Inc. ...................... 401,000 14,385,875
--------------
68,794,382
--------------
HOSPITALS/HOSPITAL MANAGEMENT -- 5.4%
Columbia/HCA Healthcare Corp. ....... 1,287,000 39,092,625
Humana, Inc.(a)...................... 3,064,600 14,939,925
Tenet Healthcare Corp. (a)........... 1,461,300 39,455,100
--------------
93,487,650
--------------
HOUSING RELATED -- 4.6%
Hanson, PLC, ADR (United Kingdom).... 1,265,050 44,593,012
Kaufman & Broad Home Corp. .......... 940,000(b) 18,623,750
Ryland Group, Inc. .................. 693,100 15,334,838
--------------
78,551,600
--------------
INSURANCE -- 3.2%
Aetna, Inc. ......................... 324,200 20,809,587
Allstate Corp. ...................... 604,900 13,459,025
SAFECO Corp. ........................ 704,500 14,001,938
Selective Insurance Group, Inc. ..... 401,900 7,636,100
--------------
55,906,650
--------------
MACHINERY -- 1.7%
Cascade Corp. ....................... 115,900 1,383,556
Ingersoll-Rand Co. .................. 200,000 8,050,000
Snap-On, Inc. ....................... 722,800 19,244,550
--------------
28,678,106
--------------
MEDIA -- 1.1%
Donnelley (R.R.) & Sons Co. ......... 860,800 19,421,800
--------------
METALS - FERROUS -- 2.5%
AK Steel Holding Corp. .............. 789,200 6,313,600
USX -- U.S. Steel Group.............. 1,975,400 36,668,362
--------------
42,981,962
--------------
METALS - NON FERROUS -- 3.2%
ALCOA, Inc. ......................... 1,905,206 55,250,974
--------------
OIL & GAS -- 5.1%
Anadarko Petroleum Corp. ............ 245,100(b) 12,086,494
ENSCO International, Inc............. 188,600 6,754,237
Noble Affiliates, Inc. .............. 824,000 30,694,000
Pioneer Natural Resources Co. ....... 2,582,617 32,928,367
USX-Marathon Corp. .................. 233,100 5,842,069
--------------
88,305,167
--------------
OIL & GAS SERVICES -- 1.5%
McDermott International, Inc. ....... 2,938,100 25,892,006
--------------
PRECIOUS METALS -- 1.1%
Stillwater Mining Co. (a)............ 712,500 19,860,937
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B53
<PAGE> 63
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) --------- --------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST -- 7.9%
Crescent Real Estate Equities Co. ... 1,738,000 $ 35,629,000
Equity Office Properties Trust....... 550,178 15,164,281
Equity Residential Properties
Trust.............................. 987,800 45,438,800
Manufactured Home Communities,
Inc. .............................. 220,200 5,271,038
Vornado Realty Trust................. 1,002,500 34,836,875
--------------
136,339,994
--------------
RETAIL -- 1.2%
CVS Corp. ........................... 110,900 4,436,000
Heilig-Meyers Co. ................... 550,100 653,244
The Limited, Inc. ................... 726,432 15,709,092
--------------
20,798,336
--------------
TELECOMMUNICATIONS -- 5.9%
AT&T Corp. .......................... 635,900(b) 20,110,337
CenturyTel, Inc. .................... 81,800 2,374,016
GTE Corp. ........................... 639,500 39,808,875
Motorola, Inc. ...................... 267,600 7,777,125
SBC Communications, Inc. ............ 203,400 8,797,050
Sprint Corp. ........................ 446,100 22,751,100
--------------
101,618,503
--------------
TOBACCO -- 1.4%
R.J. Reynolds Tobacco Holdings,
Inc. .............................. 851,560 23,790,457
--------------
TRANSPORTATION -- 1.3%
Sabre Group Holdings, Inc. (Class "A"
Stock)............................. 770,967 21,972,559
--------------
UTILITIES -- 2.1%
Nisource Incorporated................ 925,800 17,243,025
PECO Energy Co. ..................... 450,200 18,148,687
--------------
35,391,712
--------------
TOTAL COMMON STOCKS
(cost $1,610,355,556)........................... 1,648,668,663
--------------
<CAPTION>
PREFERRED
STOCKS -- 1.4%
<S> <C> <C>
METALS - NON FERROUS -- 0.3%
Bethlehem Steel Corp., (Cum. Conv.),
$3.50.............................. 256,500 4,488,750
Hecla Mining Co. (Cum. Conv.),
7.00%, Ser. B...................... 60,600 1,166,550
--------------
5,655,300
--------------
RETAIL -- 1.1%
Kmart Corp. (Cum. Conv.), 7.75%...... 523,700 19,082,319
--------------
REAL ESTATE DEVELOPMENT
Union Pacific Capital Trust, 6.25%... 4,900 194,775
--------------
TOTAL PREFERRED STOCKS
(cost $46,106,438).............................. 24,932,394
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
CONVERTIBLE RATING (000) (NOTE 2)
BONDS -- 0.4% ------- --------- --------------
<S> <C> <C> <C>
OIL & GAS SERVICES -- 0.3%
Baker Hughes, Inc.,
Zero Coupon 05/05/08..... A3 $ 5,900 $ 4,527,188
--------------
REAL ESTATE INVESTMENT
TRUST -- 0.1%
Malan Realty Investors,
Inc., 9.50%, 07/15/04.... A2 2,930 2,658,975
--------------
TOTAL CONVERTIBLE BONDS
(cost $7,186,099)............................... 7,186,163
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,663,648,093)........................... 1,680,787,220
--------------
SHORT-TERM INVESTMENTS -- 4.3%
COMMERCIAL PAPER -- 1.4%
Keyspan Corp., 7.00%
07/28/00................. P2 3,240(c) 3,224,250
Phillips Pete Co., 7.30%
07/03/00................. P2 16,000(c) 16,000,000
TRW, Inc., 6.90% 08/15/00.. P2 5,000(c) 4,958,792
--------------
24,183,042
--------------
TIME DEPOSIT -- 1.7%
Deutsche Bank AG, 7.125%
07/03/00................. P1 3,611(c) 3,611,000
Dexia Bank, 7.062%
07/03/00................. P1 26,000(c) 26,000,000
--------------
29,611,000
--------------
REPURCHASE AGREEMENT -- 1.2%
Joint Repurchase
Agreement Account,
6.49%, 07/03/00
(cost $21,298,000; Note
5)....................... 21,298 21,298,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $75,092,042).............................. 75,092,042
--------------
TOTAL INVESTMENTS -- 101.9%
(cost $1,738,797,093; Note 6)....... 1,755,879,262
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.9)%.................... (33,724,021)
--------------
NET ASSETS -- 100.0%.................. $1,722,155,241
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt.
PLC Public Limited Company (British Corporation).
SA Sociedad Anomia (Spanish Corporation) or Societe Anonyme (French
Corporation).
(a) Non-income producing security.
(b) Portion of securities on loan with an aggregate market value of $50,735,826;
cash collateral of $53,524,300 was received with which the portfolio
purchased securities.
(c) Represents security purchased with cash collateral received for securities
on loan.
SEE NOTES TO FINANCIAL STATEMENTS.
B54
<PAGE> 64
EQUITY PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 84.1% VALUE
SHARES (NOTE 2)
COMMON STOCKS ---------- --------------
<S> <C> <C>
AUTOMOBILES & TRUCKS -- 1.1%
Delphi Automotive Systems Corp. ... 440,325 $ 6,412,233
General Motors Corp. .............. 473,826 27,511,522
Navistar International Corp. (a)... 395,200 12,275,900
PACCAR Inc. ....................... 279,400 11,088,687
--------------
57,288,342
--------------
CHEMICALS -- 1.4%
Eastman Chemical Co. .............. 941,550 44,959,012
Potash Corp. of Saskatchewan, Inc.
(Canada)......................... 380,000 20,971,250
Wellman, Inc. ..................... 798,200 12,920,863
--------------
78,851,125
--------------
CONSTRUCTION & HOUSING -- 0.5%
Centex Corp. ...................... 1,200,000 28,200,000
--------------
CONSUMER SERVICES -- 3.7%
CKE Restaurants, Inc. ............. 1,933,700 5,801,100
Darden Restaurants, Inc. .......... 7,922,700 128,743,875
Hilton Hotels Corp. ............... 3,470,600 32,536,875
Waste Management, Inc. ............ 1,882,292 35,763,548
--------------
202,845,398
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 8.2%
Eastman Kodak Co. ................. 3,368,600 200,431,700
Nabisco Group Holdings Corp. ...... 3,710,000 96,228,125
Philip Morris Co., Inc. ........... 2,025,000 53,789,063
R.J. Reynolds Tobacco Holdings,
Inc. ............................ 1,236,666 34,549,356
Sara Lee Corp. .................... 2,497,500 48,232,969
Service Corp. International (a).... 3,712,100 11,832,319
--------------
445,063,532
--------------
DIVERSIFIED MANUFACTURING -- 0.8%
American Standard Co., Inc.(a)..... 1,050,000 43,050,000
--------------
FINANCIAL SERVICES -- 13.8%
American Financial Group, Inc. .... 552,700 13,713,869
American General Corp. ............ 879,704 53,661,944
AXA Financial, Inc. ............... 2,373,800 79,009,200
Bank of America Corp. ............. 1,789,856 76,963,808
Bank of New York Co., Inc. ........ 1,265,600 58,850,400
Chubb Corp. ....................... 2,206,400 135,693,600
John Hancock Financial Services,
Inc.(a).......................... 1,748,100 41,408,119
Loews Corp. ....................... 1,775,000 106,500,000
Mellon Financial Corp. ............ 540,200 19,683,537
Mercantile Bankshares Corp. ....... 419,400 12,503,363
Old Republic International
Corp. ........................... 3,198,327 52,772,395
SAFECO Corp. ...................... 2,855,800 56,759,025
St. Paul Companies, Inc. .......... 1,320,100 45,048,412
--------------
752,567,672
--------------
HEALTHCARE SERVICE -- 16.4%
Foundation Health Systems,
Inc.(a).......................... 4,724,610 61,419,930
HCA - The Healthcare Company....... 5,790,100 175,874,287
HEALTHSOUTH Corp.(a)............... 5,787,800 41,599,813
PacifiCare Health Systems,
Inc.(a).......................... 1,143,900 68,848,481
Tenet Healthcare Corp.(a).......... 7,321,732 197,686,764
UnitedHealth Group, Inc. .......... 1,914,900 164,202,675
Wellpoint Health Networks,
Inc.(a).......................... 2,570,900 186,229,569
--------------
895,861,519
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
HEALTHCARE SERVICE (CONT'D.)
INDUSTRIAL TECHNOLOGY -- 0.1%
Gerber Scientific, Inc............. 419,800 $ 4,827,700
--------------
METAL & MINERALS -- 4.9%
Alcoa, Inc. ....................... 3,764,000 109,156,000
Birmingham Steel Corp. (a)......... 1,492,400 5,783,050
Freeport-McMoRan Copper & Gold,
Inc. (Class "A" Stock)(a)........ 3,853,300 35,161,362
Freeport-McMoRan Copper & Gold,
Inc. (Class "B" Stock)(a)........ 319,600 2,956,300
Newmont Mining Corp. .............. 3,057,000 66,107,625
Phelps Dodge Corp. ................ 1,263,900 47,001,281
--------------
266,165,618
--------------
OIL & GAS -- 6.2%
Amerada Hess Corp. ................ 325,000 20,068,750
BP Amoco PLC, ADR (United
Kingdom)......................... 1,804,000 102,038,750
Kerr-McGee Corp. .................. 590,400 34,796,700
Occidental Petroleum Corp. ........ 1,100,000 23,168,750
Total Fina Elf SA, ADR (France).... 2,075,275 159,407,061
--------------
339,480,011
--------------
PAPER & FOREST PRODUCTS -- 9.2%
Fort James Corp. .................. 664,000 15,355,000
Georgia-Pacific Corp. (Timber
Group)........................... 1,158,000 25,041,750
Georgia-Pacific Group.............. 3,875,800 101,739,750
International Paper Co. ........... 2,261,200 67,412,025
Mead Corp. ........................ 2,690,300 67,930,075
Rayonier, Inc. .................... 830,400 29,790,600
Temple-Inland, Inc. ............... 1,516,600 63,697,200
Weyerhaeuser Co. .................. 1,522,500 65,467,500
Willamette Industries, Inc. ....... 2,500,000 68,125,000
--------------
504,558,900
--------------
RETAIL -- 5.9%
Consolidated Stores Corp.(a)....... 2,023,800 24,285,600
Dillard's, Inc. ................... 3,649,000 44,700,250
IKON Office Solutions, Inc. ....... 5,193,000 20,122,875
J.C. Penney Co., Inc. ............. 1,098,800 20,259,125
Jones Apparel Group, Inc.(a)....... 716,973 16,848,866
Kmart Corp.(a)..................... 6,500,000 44,281,250
Pep Boys - Manny, Moe & Jack....... 1,594,900 9,569,400
RadioShack Corp. .................. 2,166,900 102,656,887
Sears, Roebuck & Co. .............. 138,900 4,531,613
Toys 'R' Us, Inc.(a)............... 2,350,000 34,221,875
--------------
321,477,741
--------------
TECHNOLOGY -- 5.1%
Arrow Electronics, Inc.(a)......... 2,145,500 66,510,500
Avnet, Inc......................... 887,600 52,590,300
Compaq Computer Corp............... 4,533,150 115,878,647
Computer Associates International,
Inc.............................. 791,300 40,504,669
Lanier Worldwide, Inc.(a).......... 2,884,000 2,884,000
--------------
278,368,116
--------------
TELECOMMUNICATIONS -- 4.4%
ALLTEL Corp. (a)................... 1,129,588 69,963,857
AT&T Corp. ........................ 1,448,700 45,815,137
General Motors Corp. (Class "H"
Stock)(a)........................ 166,325 14,595,019
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B55
<PAGE> 65
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Harris Corp. ...................... 2,884,000 $ 94,451,000
Loral Space & Communications, Ltd.
(a).............................. 2,600,000 18,037,500
--------------
242,862,513
--------------
UTILITY -- ELECTRIC -- 2.4%
American Electric Power Co,
Inc. ............................ 180,000 5,332,500
GPU, Inc. ......................... 500,000 13,531,250
KeySpan Corp....................... 1,356,432 41,710,284
Reliant Energy, Inc. .............. 974,519 28,809,218
Unicom Corp. ...................... 1,112,900 43,055,319
--------------
132,438,571
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,101,340,677).......................... 4,593,906,758
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT
INVESTMENTS -- RATING (000)
15.8% ------- ----------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 14.6%
American Express Co.,
6.63%, 07/11/00........ P1 $ 5,350 5,340,147
Bank of Montreal,
6.58%, 07/17/00........ P2 26,537 26,537,000
Barton Capital Corp.,
6.58%, 07/25/00........ P1 25,194 25,083,482
6.60%, 08/07/00........ P1 28,308 28,115,978
BCI Funding Corp.,
6.58%, 07/11/00........ P1 14,963 14,935,651
Black Forest Corp.,
6.57%, 07/05/00........ P1 20,800 20,784,816
6.56%, 07/10/00........ P1 35,000 34,942,600
Blue Ridge Asset,
6.58%, 07/19/00........ P1 25,000 24,917,750
Canadian Imperial Bank of
Commerce,
6.58%, 07/12/00........ P2 56,000 56,000,000
Centric Capital Corp.,
6.65%, 08/08/00........ P1 4,800 4,766,307
Citicorp,
6.62%, 08/14/00........ P1 27,000 26,781,540
Dexia Bank,
7.13%, 07/03/00........ P2 30,000 30,000,000
Edison Asset
Securitization LLC,
6.65%, 08/10/00........ P1 50,000 49,630,555
Enterprise Funding Corp.,
6.60%, 07/19/00........ P1 31,000 30,897,700
6.55%, 07/28/00........ P1 25,000 24,877,187
Falcon Asset
Securitization Corp.,
6.55%, 07/25/00........ P1 57,000 56,751,100
General Motors Acceptance
Corp.,
6.63%, 07/12/00........ P1 4,500 4,490,884
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM MOODY'S AMOUNT VALUE
INVESTMENTS RATING (000) (NOTE 2)
(CONTINUED) ------- ---------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
GTE Corp.,
6.62%, 07/26/00........ P1 $ 5,600 $ 5,574,255
Hartford Financial
Services,
6.60%, 08/18/00........ P1 55,000 54,516,000
Kimberly Clark Corp.,
6.54%, 07/28/00........ P1 13,000 12,936,235
Morgan Stanley Dean
Witter & Co.,
6.58%, 07/27/00........ P1 20,000 19,904,956
Old Line Funding Corp.,
6.57%, 07/17/00........ P1 50,000 49,854,000
Salomon Smith Barney
Holdings, Inc.,
6.54%, 07/28/00........ P1 28,000 27,862,660
Sony Capital Corp.,
6.60%, 07/07/00........ P1 50,000 49,945,000
Target Corp.,
6.64%, 08/07/00........ P1 20,000 19,863,511
Thunder Bay Funding,
Inc.,
6.58%, 07/17/00........ P1 7,000 6,979,529
6.56%, 07/18/00........ P1 32,981 32,878,832
6.56%, 07/20/00........ P1 16,300 16,243,566
TransAmerica Financial
Corp.,
6.60%, 07/17/00........ P1 15,000 14,956,000
Windmill Funding Corp.,
6.60%, 07/26/00........ P1 20,000 19,908,333
--------------
796,275,574
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM AMOUNT VALUE
INVESTMENTS (000) (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 1.2%
Joint Repurchase Agreement Account
6.49%, 07/03/00 (Note 5)........ 67,436 67,436,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $863,711,574)............................ 863,711,574
--------------
TOTAL INVESTMENTS -- 99.9%
(cost $4,965,052,251; Note 6).................. 5,457,618,332
ASSETS IN EXCESS OF OTHER
LIABILITIES -- 0.1%............................ 6,425,993
--------------
NET ASSETS -- 100.0%............................. $5,464,044,325
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt.
PLC Public Limited Company (British Corporation).
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation).
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B56
<PAGE> 66
JENNISON PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 95.9% VALUE
SHARES (NOTE 2)
COMMON STOCKS ---------- --------------
<S> <C> <C>
ADVERTISING -- 1.1%
Omnicom Group Inc. ................ 420,200 $ 37,424,063
--------------
COMPUTERS -- 8.9%
Compaq Computer Corp. ............. 1,348,100 34,460,806
Dell Computer Corp.(a)............. 775,300 38,231,981
EMC Corp.(a)....................... 968,000 74,475,500
Hewlett-Packard Co. ............... 965,500 120,566,812
Sun Microsystems, Inc.(a).......... 471,800 42,904,313
--------------
310,639,412
--------------
COMPUTER SOFTWARE & SERVICES -- 7.2%
ASM Lithography Holding N.V.(a).... 555,100 24,493,787
Cisco Systems, Inc.(a)............. 1,854,000 117,844,875
Juniper Networks, Inc.(a).......... 142,200 20,698,988
Microsoft Corp.(a)................. 758,600 60,688,000
VERITAS Software Corp.(a).......... 229,050 25,886,229
--------------
249,611,879
--------------
COSMETICS & SOAPS -- 0.6%
Estee Lauder Companies (Class
"A")............................. 414,500 20,491,844
--------------
DIVERSIFIED OPERATIONS -- 3.2%
Corning, Inc. ..................... 154,200 41,614,725
General Electric Co. .............. 1,330,000 70,490,000
--------------
112,104,725
--------------
DRUGS & MEDICAL SUPPLIES -- 12.8%
American Home Products Corp. ...... 1,061,300 62,351,375
Amgen, Inc.(a)..................... 744,300 52,287,075
Genetech, Inc.(a).................. 232,800 40,041,600
Lilly (Eli) & Co. ................. 270,200 26,986,225
Merck & Co., Inc. ................. 714,200 54,725,575
Pfizer, Inc. ...................... 2,819,300 135,326,400
Pharmacia Corp. ................... 1,373,994 71,018,315
--------------
442,736,565
--------------
ELECTRONICS -- 8.5%
Applied Materials, Inc.(a)......... 532,600 48,266,875
Applied Micro Circuits Corp.(a).... 232,800 22,989,000
Broadcom Corp.(a).................. 90,200 19,748,162
Intel Corp. ....................... 954,800 127,644,825
Texas Instruments, Inc. ........... 1,122,100 77,074,244
--------------
295,723,106
--------------
FINANCIAL SERVICES -- 10.0%
American Express Co. .............. 1,278,600 66,647,025
Citigroup, Inc. ................... 1,927,200 116,113,800
Merrill Lynch & Co., Inc. ......... 638,600 73,439,000
Morgan Stanley Dean Witter &
Co. ............................. 1,111,340 92,519,055
--------------
348,718,880
--------------
INSURANCE -- 2.2%
American International Group,
Inc. ............................ 636,425 74,779,937
--------------
INTERNET SOFTWARE -- 1.7%
America Online, Inc.(a)............ 706,600 37,273,150
Verisign, Inc. .................... 128,000 22,592,000
--------------
59,865,150
--------------
MEDIA -- 8.2%
AT&T Corp. -- Liberty Media Group
(Class "A" Stock)................ 2,239,000 54,295,750
Clear Channel Communications,
Inc.(a).......................... 779,100 58,432,500
Time Warner, Inc. ................. 476,900 36,244,400
Univision Communications Inc(a).... 338,300 35,014,050
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
MEDIA (CONT'D.)
Viacom, Inc.(a).................... 1,477,119 $ 100,721,052
--------------
284,707,752
--------------
OIL & GAS SERVICES -- 1.0%
Schlumberger, Ltd. ................ 479,600 35,790,150
--------------
RETAIL -- 9.7%
Costco Wholesale Corp.(a).......... 137,500 4,537,500
Gap, Inc. (The).................... 1,228,850 38,401,562
Home Depot, Inc. .................. 2,269,700 113,343,144
Kohl's Corp.(a).................... 1,277,200 71,044,250
Tiffany & Co. ..................... 525,900 35,498,250
Wal-Mart Stores, Inc. ............. 1,273,400 73,379,675
--------------
336,204,381
--------------
TELECOMMUNICATIONS -- 20.8%
Allegiance Telecom, Inc.(a)........ 475,150 30,409,600
Ericsson (L.M.) Telephone Co., Inc.
(ADR) (Sweden)................... 2,318,900 46,378,000
General Motors Corp (Class "H"
Stock)........................... 508,300 44,603,325
Global Crossing Ltd.(a)............ 1,580,000 41,573,750
JDS Uniphase Corp.(a).............. 307,800 36,897,525
Level 3 Communications, Inc.(a).... 173,300 15,250,400
Metromedia Fiber Network, Inc. .... 709,200 28,146,375
Motorola, Inc. .................... 1,026,100 29,821,031
Nextel Communications, Inc. ....... 502,400 30,740,600
Nextlink Communications(a)......... 501,600 19,029,450
Nokia Corp. (ADR) (Finland)(a)..... 2,331,500 116,429,281
Nortel Networks Corp............... 576,100 39,318,825
NTL, Inc.(a)(b).................... 740,850 44,358,394
Qwest Communications International,
Inc.(a)(b)....................... 1,896,100 94,212,469
Vodafone AirTouch Group PLC, ADR
(United Kingdom)................. 2,574,581 106,684,217
--------------
723,853,242
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,573,842,030).......................... 3,332,651,086
--------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM (000) (NOTE 2)
INVESTMENTS -- 4.2% ---------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT
Joint Repurchase Agreement
Account 6.49%, 07/03/00
(cost $145,588,000; Note 5)...... $ 145,588 $ 145,588,000
--------------
TOTAL INVESTMENTS -- 100.1%
(cost $2,719,430,030; Note 6).................. 3,478,239,086
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.1%)............................... (5,109,135)
--------------
NET ASSETS -- 100.0%............................. $3,473,129,951
==============
</TABLE>
<TABLE>
<S> <C>
The following abbreviations are used in portfolio
descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
NV Naamloze Vennootschap (Dutch Corporation)
</TABLE>
(a) Non-income producing security.
(b) Portion of the security on loans: As of June 30, 2000, the Fund had
securities on loan with an aggregate market value of $113,899,238. As of this
date, the collateral held for securities on loan was comprised of U.S.
government securities with an aggregate market value of $119,174,485.
SEE NOTES TO FINANCIAL STATEMENTS.
B57
<PAGE> 67
GLOBAL PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 85.0% VALUE
SHARES (NOTE 2)
COMMON STOCKS ---------- --------------
<S> <C> <C>
AUSTRALIA -- 2.3%
Broken Hill Proprietary Co.,
Ltd.............................. 1,524,500 $ 18,009,628
Commonwealth Bank of Australia
(c).............................. 922,600 15,280,819
--------------
33,290,447
--------------
FINLAND -- 2.3%
Nokia Oy........................... 651,200 33,269,935
--------------
FRANCE -- 7.1%
Havas Advertising SA (c)........... 545,940 12,497,993
Lafarge SA......................... 97,931 7,619,640
Legrand SA......................... 64,200 14,420,912
Publicis SA(a) (c)................. 15,489 6,084,923
Thomson Multimedia................. 291,562 18,895,155
Total Fina SA...................... 192,938 29,617,825
Vivendi SA......................... 143,700 12,698,533
--------------
101,834,981
--------------
REPUBLIC OF GERMANY -- 1.3%
Infineon Technologies AG(a)........ 40,600 3,203,561
Siemens AG......................... 99,400 15,011,819
--------------
18,215,380
--------------
HONG KONG -- 2.1%
China Merchants Holdings
International Co., Ltd........... 11,010,400 7,556,268
China Mobile, Ltd.(a).............. 1,765,400 15,569,199
Guangzhou Investment Co.,
Ltd.(a).......................... 85,621,100 6,370,291
--------------
29,495,758
--------------
ITALY -- 1.2%
Banca Intesa SpA................... 3,806,500 17,064,302
--------------
JAPAN -- 6.2%
Canon, Inc......................... 304,000 15,119,107
Nippon Telegraph & Telephone
Corp.(a)......................... 1,958 26,004,615
NTT Mobile Communications Network,
Inc.............................. 870 23,519,050
Softbank Corp...................... 36,400 4,937,220
Sony Corp. (c)..................... 217,100 20,244,808
--------------
89,824,800
--------------
MEXICO -- 2.5%
Grupo Televisa SA (GDR)(a)......... 219,100 15,104,206
Telefonos de Mexico, SA
(Class "L" Shares) (ADR)......... 355,300 20,296,513
--------------
35,400,719
--------------
NETHERLANDS -- 1.5%
ING Groep N.V...................... 328,800 22,251,276
--------------
SINGAPORE -- 0.9%
Singapore Airlines, Ltd............ 1,251,700 12,383,031
--------------
SOUTH KOREA -- 1.3%
Samsung Electronics Co., Ltd....... 55,070 18,224,551
--------------
SPAIN -- 3.2%
Banco Santander SA(a).............. 1,881,000 19,867,395
Telefonica SA...................... 1,191,808 25,631,774
--------------
45,499,169
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES (NOTE 2)
(CONTINUED) ---------- --------------
<S> <C> <C>
SWEDEN -- 3.7%
Hennes & Mauritz AB................ 788,400 $ 16,503,951
Skanska AB (Class "B" Shares)...... 435,200 15,472,567
Telefonaktiebolaget LM Ericsson
AB............................... 1,094,400 21,726,761
--------------
53,703,279
--------------
UNITED KINGDOM -- 7.9%
Bank of Scotland................... 1,407,200 13,410,094
Canary Wharf Finance PLC........... 1,601,000 8,993,946
GKN PLC............................ 1,084,800 13,865,897
Hays PLC........................... 2,026,045 11,320,283
Vodafone AirTouch PLC.............. 10,986,851 44,479,020
Barclays PLC....................... 887,991 22,121,615
--------------
114,190,855
--------------
UNITED STATES -- 41.5%
American Home Products Corp........ 221,000 12,983,750
AT&T Corp.......................... 363,500 10,132,563
Atmel Corp.(a) (c)................. 408,000 15,045,000
Cablevision Systems Corp.
(Class "A" Shares)(a)............ 132,000 8,959,500
Citigroup Inc...................... 664,600 40,042,150
Clear Channel Communications,
Inc.(a).......................... 196,200 14,715,000
Comcast Corp. (Class "A"
Shares)(a)....................... 315,700 12,785,850
Electronic Arts, Inc.(a)........... 464,200 33,857,587
Fox Entertainment Group, Inc.
(Class "A" Stock)(a)............. 564,800 17,155,800
Intertrust Technologies Corp....... 215,100 4,422,994
JDS Uniphase Corp.(a).............. 162,200 19,443,725
Juniper Networks, Inc.(a).......... 130,600 19,010,462
Mediaone Group, Inc. (c)........... 97,500 6,447,188
Micron Technology, Inc............. 306,200 26,964,737
Omnicom Group, Inc................. 238,500 21,241,406
Ondisplay, Inc..................... 73,800 6,010,088
Oracle Systems Corp.(a)............ 517,600 43,510,750
Pharmacia Corp..................... 388,200 20,065,087
PMC-Sierra, Inc.(a)................ 166,700 29,620,506
Portal Software, Inc............... 207,300 13,241,288
Quest Software, Inc. (c)........... 83,600 4,629,350
SCI Systems, Inc.(a)............... 488,400 19,139,175
Solectron Corp.(a) (c)............. 1,147,400 48,047,375
Target Corp........................ 316,800 18,374,400
Texas Instruments, Inc............. 311,200 21,375,550
Time Warner, Inc. (c).............. 681,400 51,786,400
USA Networks, Inc.(a).............. 1,440,300 31,146,487
Wal-Mart Stores, Inc............... 192,500 11,092,813
Williams-Sonoma, Inc.(a)........... 472,900 15,339,694
--------------
596,586,675
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $931,781,068)................ 1,221,235,158
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B58
<PAGE> 68
GLOBAL PORTFOLIO (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM RATING (000) (NOTE 2)
INVESTMENTS -- 15.0% ----------- --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 7.3%
American Electric Power
6.83%, 07/21/00(b)....... P1 $ 8,000 $ 7,969,644
Bombardier Capital, Inc.
6.82, 07/21/00(b)........ P1 4,200 4,184,087
CitiCorp 6.55%,
07/10/00(b).............. P1 20,000 19,967,250
Conagra, Inc. 6.85%,
07/7/00(b)............... P1 8,600 8,590,182
General Electric Capital
International 6.52%,
07/14/00(b).............. P1 24,000 23,943,493
GPU Capital, Inc. 6.89%,
07/14/00(b).............. P1 8,900 8,877,856
Hartford Financial Services
6.60%, 08/18/00(b)....... P1 3,041 3,014,239
Keyspan Corp. 6.82%,
07/19/00(b).............. P1 6,124 6,103,117
Suntrust Grand Cayman
7.00%, 07/03/00(b)....... P1 13,782 13,782,000
TRW, Inc. 6.90%,
08/15/00(b).............. P1 8,000 7,931,000
--------------
104,362,868
--------------
U.S. GOVERNMENT OBLIGATIONS -- 5.9%
United States Treasury Bills,
5.61%, 08/17/00....................... 11,800 11,713,575
5.59%, 08/17/00....................... 5,310 5,271,420
5.74%, 09/14/00....................... 68,804 67,981,219
--------------
84,966,214
--------------
REPURCHASE AGREEMENT -- 1.8%
Joint Repurchase Agreement Account,
6.49%, 07/03/00
(cost $25,850,000; Note 5)............ 25,850 25,850,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $215,179,082)................................. 215,179,082
--------------
TOTAL INVESTMENTS -- 100.0%
(cost $1,146,960,150; Note 6)....................... 1,436,414,240
FORWARD CURRENCY CONTRACTS -- AMOUNT
PAYABLE TO COUNTERPARTIES(d)........................ (418,608)
ASSETS IN EXCESS OF OTHER
LIABILITIES......................................... 542,913
--------------
TOTAL NET ASSETS -- 100.0%............................ $1,436,538,545
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
AB Aktiebolag (Swedish Stock Company)
AG Aktiengesellschaft (German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
Oy Osokehio (Finnish Corporation)
PLC Public Limited Company (British Corporation)
SA Sociedad Anomia (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Represents security purchased with cash collateral received for securities
on loan.
(c) Portion of securities on loan with an aggregate market value of
$101,658,341; cash collateral of $103,874,453 was received with which the
portfolio purchased securities.
(d) Outstanding forward currency contract as of June 30, 2000 was as follows:
<TABLE>
<CAPTION>
FOREIGN CURRENCY VALUE AT CURRENT APPRECIATION
CONTRACT SETTLEMENT DATE VALUE (DEPRECIATION)
---------------- --------------- ----------- --------------
<S> <C> <C> <C>
Purchase Contract:
Japanese Yen,
expiring 8/15/00 $17,611,196 $17,629,352 $ 18,156
Sale Contract:
Japanese Yen,
expiring 8/15/00 $17,192,588 $17,629,352 $(436,764)
---------
$(418,608)
=========
</TABLE>
The industry classification of portfolio of holdings shown as a percentage of
net assets as of June 30, 2000 were as follows:
<TABLE>
<S> <C>
Telecommunications 20.0%
Electronics 15.1%
Media 9.5%
Computer Software & Services 5.7%
Commercial Banking 4.9%
Financial Services 4.8%
Retail 4.3%
Diversified Operations 2.9%
Advertising 2.8%
Pharmaceuticals 2.3%
Oil & Gas Services 2.1%
Telephones 1.4%
Manufacturing 1.3%
Banks 1.2%
Construction 1.1%
Diversified Manufacturing 1.1%
Automobiles & Manufacturing 1.0%
Electrical Equipment 1.0%
Airlines 0.9%
Real Estate-Development 0.6%
Building Materials & Components 0.5%
Materials 0.5%
Commercial Paper 7.3%
U.S. Government Securities 5.9%
Repurchase Agreement 1.8%
------
100.0%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B59
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
(UNAUDITED)
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland
corporation, organized on November 15, 1982, is a diversified open-end
management investment company registered under the Investment Company
Act of 1940, as amended. The Series Fund is composed of seventeen
Portfolios ("Portfolio" or "Portfolios"), each with a separate series of
capital stock. The information presented in these financial statements
pertains to only eleven Portfolios: Money Market Portfolio, Diversified
Bond Portfolio, Government Income Portfolio, Conservative Balanced
Portfolio, Flexible Managed Portfolio, High Yield Bond Portfolio, Stock
Index Portfolio, Equity Income Portfolio, Equity Portfolio, Prudential
Jennison Portfolio and Global Portfolio.
The Portfolios of the Series Fund have the following as investment
objectives:
MONEY MARKET PORTFOLIO: Current income, stability of capital and
maintenance of liquidity by investing in short-term money market
securities that generally mature in 13 months or less. The ability of
the issuers of the securities held by the Money Market Portfolio to meet
their obligations may be affected by economic developments in a specific
industry or region.
DIVERSIFIED BOND PORTFOLIO: High level of income over the long term by
investing in U.S. government securities, mortgage-backed bonds, both
investment-grade and high yield corporate debt, and foreign securities.
GOVERNMENT INCOME PORTFOLIO: High level of income over the long term by
investing primarily in intermediate and longer-term U.S. government
bonds, including U.S. Treasuries and agencies, mortgage-backed
securities and foreign government securities.
CONSERVATIVE BALANCED PORTFOLIO: Favorable total return consistent with
a more conservatively managed diversified portfolio by investing in
money market instruments, bonds and common stocks of both established
and smaller companies.
FLEXIBLE MANAGED PORTFOLIO: High total return by investing in money
market instruments, bonds and common stocks.
HIGH YIELD BOND PORTFOLIO: High total return by investing primarily in
noninvestment-grade bonds.
STOCK INDEX PORTFOLIO: Results that correspond to the price and yield
performance of the S&P 500 Index by investing primarily in stocks in the
S&P 500 Index.
EQUITY INCOME PORTFOLIO: Current income and capital appreciation by
investing primarily in stocks and convertible securities with prospects
for income returns above those of the S&P 500 Index.
EQUITY PORTFOLIO: Capital appreciation by investing primarily in stocks
of major, established companies.
PRUDENTIAL JENNISON PORTFOLIO: Long-term growth of capital by investing
primarily in common stocks of established companies with above-average
growth prospects.
GLOBAL PORTFOLIO: Long-term growth of capital by investing primarily in
common stock and common stock equivalents of U.S. and foreign companies.
NOTE 2: ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Series Fund and the Portfolios in preparation of their financial
statements. These policies are in conformity with generally accepted
accounting principles.
SECURITIES VALUATION: Equity securities traded on an exchange or NASDAQ
(whether domestic or foreign) are valued at the last reported sales
price on the primary exchange on which they are traded, or if there is
not a sale, at the mean of the last reported bid and asked prices or at
the bid price on such day in the absence of an asked price. Equity
securities that are not sold on an exchange or NASDAQ are valued by an
independent pricing agent or a principal market maker. Debt securities,
in general, are valued using an independent pricing service or a
principal market maker. Options on stock or stock indices are valued at
the average of the last reported bid and asked prices on the exchange on
which they are traded. Futures contracts and options on futures
contracts are valued at the last reported sale price, or if there is not
a sale, at the mean between the last reported bid and asked prices on
the commodity exchange or the board of trade on which they are traded.
Any security for which a reliable market quotation is unavailable is
valued at fair value by The Prudential Insurance Company of America
("The Prudential") under the direction of the Series Fund's Board of
Directors.
The Money Market, Conservative Balanced and Flexible Managed Portfolios
use amortized cost to value short-term securities. Short-term securities
that are held in the other Portfolios which mature in more than 60 days
are valued at current market quotations and those short-term securities
which mature in 60 days or less are valued at amortized cost.
The High Yield Bond Portfolio may hold up to 15% of its net assets in
illiquid securities, including those which are restricted as to
disposition under securities law ("restricted securities"). Certain
issues of restricted securities held by the High Yield Bond Portfolio at
June 30, 2000 include registration rights, none of which are currently
under contract to be registered. Restricted securities, sometimes
referred to as private placements, are valued pursuant to the valuation
procedures noted above.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements with U.S. financial institutions, it is the Series Fund's
policy that its custodian or designated subcustodians, as the case may
be under triparty repurchase agreements, take possession of the
underlying collateral securities, the value of which exceeds the
principal amount of the repurchase transaction including accrued
interest. If the seller defaults and the value of the collateral
declines or if bankruptcy proceedings are commenced with respect to the
seller of the security, realization of the collateral by the Series Fund
may by delayed or limited.
C1
<PAGE>
FOREIGN CURRENCY TRANSLATION: The books and records of the Series Fund
are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities -- at the current rates of exchange.
(ii) purchases and sales of investment securities, income and
expenses -- at the rate of exchange prevailing on the respective
dates of such transactions.
Although the net assets of the Series Fund are presented at the foreign
exchange rates and market values at the close of the fiscal period, the
Series Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of securities
held at the end of the fiscal period. Similarly, the Series Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term
portfolio securities sold during the fiscal period. Accordingly, these
realized and unrealized foreign currency gains (losses) are included in
the reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent
net foreign exchange gains or losses from holdings of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on security transactions, and the difference between
the amounts of dividends, interest and foreign taxes recorded on the
Series Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized currency gains or losses from valuing
foreign currency denominated assets and liabilities (other than
investments) at fiscal period end exchange rates are reflected as a
component of net unrealized appreciation (depreciation) on investments
and foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic
origin as a result of, among other factors, the possibility of political
and economic instability and the level of governmental supervision and
regulation of foreign securities markets.
FORWARD CURRENCY CONTRACTS: A forward currency contract is a commitment
to purchase or sell a foreign currency at a future date at a negotiated
forward rate. Certain portfolios of the Series Fund may enter into
forward currency contracts in order to hedge their exposure to changes
in foreign currency exchange rates on their foreign portfolio holdings
or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and
any unrealized gain or loss is included in net unrealized appreciation
or depreciation on investments and foreign currencies. Gain or loss is
realized on the settlement date of the contract equal to the difference
between the settlement value of the original and renegotiated forward
contracts. This gain or loss, if any, is included in net realized gain
(loss) on foreign currencies. Risks may arise upon entering into these
contracts from the potential inability of the counterparties to meet the
terms of their contracts.
SHORT SALES: Certain portfolios of the Series Fund may sell a security
it does not own in anticipation of a decline in the market value of that
security (short sale). When a Portfolio makes a short sale, it must
borrow the security sold short and deliver it to the buyer. The proceeds
of the short sale will be retained by the broker-dealer through which it
made the short sale as collateral for its obligation to deliver the
security upon conclusion of the sale. The Portfolio may have to pay a
fee to borrow the particular security and may be obligated to remit any
interest or dividends received on such borrowed securities. A gain,
limited to the price at which the Portfolio sold the security short, or
a loss, unlimited in magnitude, will be recognized upon the termination
of a short sale if the market price at termination is less than or
greater than, respectively, the proceeds originally received.
OPTIONS: The Series Fund may either purchase or write options in order
to hedge against adverse market movements or fluctuations in value with
respect to securities which the Series Fund currently owns or intends to
purchase. The Series Fund's principal reason for writing options is to
realize, through receipts of premiums, a greater current return than
would be realized on the underlying security alone. When the Series Fund
purchases an option, it pays a premium and an amount equal to that
premium is recorded as an investment. When the Series Fund writes an
option, it receives a premium and an amount equal to that premium is
recorded as a liability. The investment or liability is adjusted daily
to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of
the premium received or paid. If an option is exercised, the premium
received or paid is an adjustment to the proceeds from the sales or the
cost of the purchase in determining whether the Series Fund has realized
a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is
also treated as a realized gain or loss. Gain or loss on purchased
options is included in net realized gain (loss) on investment
transactions. Gain or loss on written options is presented separately as
net realized gain (loss) on written option transactions.
The Series Fund, as writer of an option, may have no control over
whether the underlying securities may be sold (called) or purchased
(put). As a result, the Series Fund bears the market risk of an
unfavorable change in the price of the security underlying the written
option. The Series Fund, as purchaser of an option, bears the risk of
the potential inability of the counterparties to meet the terms of their
contracts.
FINANCIAL FUTURES CONTRACTS: A financial futures contract is an
agreement to purchase (long) or sell (short) an agreed amount of
securities at a set price for delivery on a future date. Upon entering
into a financial futures contract, the Series Fund is required to pledge
to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount. This amount is known as the "initial
margin". Subsequent payments, known as "variation margin", are made or
received by the Series Fund each day, depending on the daily
fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the
gain or loss is realized and is presented in the statement of operations
as net realized gain (loss) on financial futures contracts.
The Series Fund invests in financial futures contracts in order to hedge
its existing portfolio securities or securities the Series Fund intends
to purchase, against fluctuations in value. Under a variety of
circumstances, the Series Fund may not achieve the anticipated benefits
of the financial futures contracts and may realize a loss. The use of
futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts and the underlying assets.
C2
<PAGE>
SECURITIES LENDING: The Series Fund (excluding the Money Market
Portfolio) may lend its portfolio securities to broker-dealers,
qualified banks and certain institutional investors. The loans are
secured by collateral in an amount equal to at least the market value at
all times of the loaned securities plus any accrued interest and
dividends. During the time the securities are on loan, the Series Fund
will continue to receive the interest and dividends or amounts
equivalent thereto, on the loaned securities while receiving a fee from
the borrower or earning interest on the investment of the cash
collateral. Loans are subject to termination at the option of the
borrower or the Series Fund. Upon termination of the loan, the borrower
will return to the lender securities identical to the loaned securities.
The Series Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan of its securities and may share
the interest earned on the collateral with the borrower. The Series Fund
bears the risk of delay in recovery of, or even loss of rights in, the
securities loaned should the borrower of the securities fail
financially. Prudential Securities Incorporated ("PSI") is the
securities lending agent for the Series Fund. PSI is an indirect, wholly
owned subsidiary of The Prudential. For the six months ended June 30,
2000, PSI has been compensated by the following amounts:
Conservative Balanced Portfolio ........ $ 313,795
Flexible Managed Portfolio ............. 359,455
High Yield Bond Portfolio .............. 12,876
Stock Index Portfolio .................. 6,743
Equity Income Portfolio ................ 56,215
Prudential Jennison Portfolio .......... 175,958
Global Portfolio ....................... 91,526
----------
$1,016,568
==========
SWAPS: Certain portfolios of the Series Fund may enter into swap
agreements. A swap agreement is an agreement between two parties to
exchange a series of cash flows at specified intervals. Based on a
notional amount, each party pays an interest rate or the change in the
value of a security. Dividends and interest on the securities in the
swap are included in the value of the exchange. The swaps are valued
daily at current market value and any unrealized gain or loss is
included in net unrealized appreciation or depreciation on investments.
Gain or loss is realized on the termination date of the swap and is
equal to the difference between a Portfolio's basis in the swap and the
proceeds of the closing transaction, including any fees. During the
period that the swap agreement is open, the Portfolio may be subject to
risk from the potential inability of the counterparty to meet the terms
of the agreement.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on the trade date. Realized gains and losses on sales of
securities are calculated on the identified cost basis. Dividend income
is recorded on the ex-dividend date; interest income, which is comprised
of four elements: stated coupon, original issue discount, market
discount and market premium is recorded on the accrual basis. Certain
portfolios own shares of real estate investment trusts ("REITs") which
report information on the source of their distributions annually. A
portion of distributions received from REITs during the year is
estimated to be a return of capital and is recorded as a reduction of
their costs. These estimates are adjusted when the actual source of the
distributions is disclosed. Expenses are recorded on the accrual basis
which may require the use of certain estimates by management. The Series
Fund's expenses are allocated to the respective Portfolios on the basis
of relative net assets except for Portfolio specific expenses, which are
attributable directly at a Portfolio or class level.
For Portfolio's with multiple classes and shares, net investment income,
other than administration and distribution fees, and unrealized and
realized gains or losses are allocated daily to each class of shares
based upon the relative proportion of net assets of each class at the
beginning of the day.
CUSTODY FEE CREDITS: The Series Fund has an arrangement with its
custodian bank, whereby uninvested monies earn credits, which reduce the
fees charged by the custodian. Such custody fee credits are presented as
a reduction of gross expenses in the accompanying statements of
operations.
TAXES: For federal income tax purposes, each portfolio in the Series
Fund is treated as a separate taxpaying entity. It is the intent of each
Portfolio of the Series Fund to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute all of its net income to shareholders. Therefore, no
federal income tax provision is required.
Withholding taxes on foreign dividends, interest and capital gains have
been provided for in accordance with the Series Fund's understanding of
the applicable country's tax rules and regulations.
DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions of each
Portfolio are declared in cash and automatically reinvested in
additional shares of the same Portfolio. The Money Market Portfolio will
declare and reinvest dividends from net investment income and net
realized capital gain (loss) daily. Each other Portfolio will declare
and distribute dividends from net investment income, if any, quarterly
and distributions from net capital gains, if any, at least annually.
Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
RECLASSIFICATION OF CAPITAL ACCOUNTS: The Series Fund accounts for and
reports distributions to shareholders in accordance with the American
Institute of Certified Public Accountants' Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of
Income, Capital Gains, and Return of Capital Distributions by Investment
Companies. As a result of this statement, the Series Fund changed the
classification of distributions to shareholders to disclose the amounts
of undistributed net investment income and accumulated net realized gain
(loss) on investments available for distributions determined in
accordance with income tax regulations. For the six months ended June
30, 2000, the application
C3
<PAGE>
of this statement increased (decreased) undistributed net investment
income ("UNI") and accumulated net realized gain (loss) on investments
("G/L") by the following amounts:
UNI G/L
---------- ------------
Equity Income Portfolio(a) ......... $ 50 $ (50)
Equity Portfolio(a) ................ 2,338,357 (2,338,357)
Global Portfolio(a) ................ 363,522 (363,522)
(a) Reclassification of net foreign currency gain (loss).
Net investment income, net realized gains and net assets were not
affected by these reclassifications.
NOTE 3: AGREEMENTS
The Series Fund has an investment advisory agreement with The
Prudential. Pursuant to this agreement The Prudential has responsibility
for all investment advisory services and supervises the subadvisers'
performance of such services. The Prudential has entered into a service
agreement with The Prudential Investment Corporation ("PIC"), which
provides that PIC will furnish to The Prudential such services as The
Prudential may require in connection with the performance of its
obligations under the investment advisory agreement with the Series
Fund. In addition, The Prudential has entered into a subadvisory
agreement with Jennison Associates LLC ("Jennison"), under which
Jennison furnishes investment advisory services in connection with the
management of the Prudential Jennison Portfolio. The Prudential pays for
the services of PIC and Jennison, compensation of officers of the Series
Fund, occupancy and certain clerical and administrative expenses of the
Series Fund. The Series Fund bears all other costs and expenses.
The investment advisory fee paid to The Prudential is computed daily and
payable quarterly, at the annual rates specified below, of the value of
each of the Portfolio's average daily net assets.
Investment Advisory Fee
-----------------------
Money Market Portfolio ..................... 0.40%
Diversified Bond Portfolio ................. 0.40
Government Income Portfolio ................ 0.40
Conservative Balanced Portfolio ............ 0.55
Flexible Managed Portfolio ................. 0.60
High Yield Bond Portfolio .................. 0.55
Stock Index Portfolio ...................... 0.35
Equity Income Portfolio .................... 0.40
Equity Portfolio ........................... 0.45
Prudential Jennison Portfolio .............. 0.60
Global Portfolio ........................... 0.75
The Prudential compensates Jennison for its services as follows: 0.75%
on the first $10 million of the Prudential Jennison Portfolio's average
daily net assets, 0.50% on the next $30 million, 0.35% on the next $25
million, 0.25% on the next $335 million, 0.22% on the next $600 million
and 0.20% thereafter.
The Series Fund has a distribution agreement with Prudential Investment
Management Services LLC ("PIMS") which acts as the distributor of the
Class I and Class II shares of the Series Fund. The Series Fund
compensates PIMS for distributing and servicing the Series Fund's Class
II shares pursuant to a plan of distribution (the "Class II Plan"),
regardless of expenses actually incurred by PIMS. The distribution fees
are accrued daily and payable quarterly. No distribution or service fees
are paid to PIMS as distributor of the Class I shares of the Series
Fund. Pursuant to the Class II Plan, the Class II shares of each
Portfolio compensate PIMS for distribution-related activities at an
annual rate of 0.25% of the average daily net assets of the Class II
shares.
The Series Fund has an administration agreement with Prudential
Investments Fund Management LLC ("PIFM") which acts as the administrator
of the Class II shares of the Series Fund. The administration fee paid
to PIFM is accrued daily and payable quarterly, at the annual rate of
0.15% of the average daily net assets of the Class II shares.
The Prudential has agreed to reimburse each Portfolio (other than the
Global Portfolio), the portion of the investment advisory fee for that
Portfolio equal to the amount that the aggregate annual ordinary
operating expenses (excluding interest, taxes and brokerage commissions)
exceeds 0.75% of the Portfolio's average daily net assets. No
reimbursement was required for the six months ended June 30, 2000.
PIC, PIMS, PIFM and Jennison are wholly-owned subsidiaries of The
Prudential.
The Series Fund, along with other affiliated registered investment
companies (the "Funds"), entered into a syndicated credit agreement
("SCA") with an unaffiliated lender. The maximum commitment under the
SCA is $1 billion. Interest on any such borrowings outstanding will be
at market rates. The purpose of the agreement is to serve as an
alternative source of funding for capital share redemptions. The Funds
pays a commitment fee at an annual rate of 0.080 of 1% on the unused
portion of the credit facility. The commitment fee is accrued and paid
quarterly on a pro rata basis by the Funds. The expiration date of the
SCA is March 9, 2001. Prior to March 9, 2000, the commitment fee was
0.065 of 1% of the unused portion of the facility. The Series Fund did
not borrow any amounts pursuant to the SCA during the six months ended
June 30, 2000.
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ("PMFS"), a wholly owned subsidiary
of PIFM, serves as the Series Fund's transfer agent. Transfer agent fees
and expenses in the statements of operations include certain
out-of-pocket expense paid to
C4
<PAGE>
nonaffiliates. During the six months ended June 30, 2000, the Series
Fund incurred fees for the services of PMFS and as of June 30, 2000 fees
were due to PMFS as follows:
Amount Incurred
for the Amount Due
Six Months Ended as of
June 30, 2000 June 30, 2000
---------------- -------------
Money Market Portfolio ............. $ 4,800 $ 800
Diversified Bond Portfolio ......... 4,900 800
Government Income Portfolio ........ 3,400 600
Conservative Balanced Portfolio .... 4,000 700
Flexible Managed portfolio ......... 5,000 800
High Yield Bond Portfolio .......... 4,800 800
Stock Index Portfolio .............. 5,000 800
Equity Income Portfolio ............ 4,600 800
Equity Portfolio ................... 5,000 900
Prudential Jennison Portfolio ...... 5,100 900
Global Portfolio ................... 4,700 800
------- ------
$51,300 $8,700
======= ======
For the six months ended June 30, 2000, PSI, earned $315,929 in
brokerage commissions from transactions executed on behalf of the
following Portfolios:
Commission
----------
Conservative Balanced Portfolio .......... $ 3,837
Flexible Managed portfolio ............... 20,378
Equity Income Portfolio .................. 54,004
Equity Portfolio ......................... 99,440
Prudential Jennison Portfolio ............ 138,270
--------
$315,929
========
NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT
The Series Fund may transfer uninvested cash balances into a single
joint repurchase agreement account, the daily aggregate balance of which
is invested in one or more repurchase agreements collateralized by U.S.
Government obligations. The Series Fund's undivided interest in the
joint repurchase agreement account represented $631,671,000 as of June
30, 2000. The Portfolios of the Series Fund with cash invested in the
joint accounts had the following principal amounts and percentage
participation in the account:
Principal Percentage
Amount Interest
------------ ----------
Diversified Bond Portfolio ......... $ 34,236,000 5.42%
Government Income Portfolio ........ 14,963,000 2.37
Conservative Balanced Portfolio .... 57,017,000 9.03
Flexible Managed Portfolio ......... 97,471,000 15.43
High Yield Bond Portfolio .......... 41,437,000 6.56
Stock Index Portfolio .............. 59,383,000 9.40
Equity Income Portfolio ............ 21,298,000 3.37
Equity Portfolio ................... 67,436,000 10.67
Prudential Jennison Portfolio ...... 145,588,000 23.05
Global Portfolio ................... 25,850,000 4.09
All other Portfolios ............... 66,992,000 10.61
------------ ------
$631,671,000 100.00%
============ ======
ABN AMRO Inc., 6.60%, in the principal amount of $130,000,000,
repurchase price $130,071,500, due 7/3/00. The value of the collateral
including accrued interest was $132,600,710.
ABN AMRO Inc., 6.20%, in the principal amount of $76,455,000, repurchase
price $76,494,502, due 7/3/00. The value of the collateral including
accrued interest was $77,984,334.
Bear, Stearns & Co., Inc., 6.55%, in the principal amount of
$125,000,000, repurchase price $125,068,229, due 7/3/00. The value of
the collateral including accrued interest was $127,935,940.
Credit Suisse First Boston Corp., 6.65%, in the principal amount of
$125,000,000, repurchase price $125,069,271, due 7/3/00. The value of
the collateral including accrued interest was $130,618,178.
UBS Warburg, 6.55%, in the principal amount of $100,000,000, repurchase
price $100,054,583, due 7/3/00. The value of the collateral including
accrued interest was $102,001,028.
UBS Warburg, 6.25%, in the principal amount of $75,216,000, repurchase
price $75,255,175, due 7/3/00. The value of the collateral including
accrued interest was $76,721,755.
C5
<PAGE>
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchase and proceeds from sales of securities
(excluding short-term issues) for the six months ended June 30, 2000
were as follows:
Cost of Purchases:
Government Non-Government
Securities Securities
-------------- --------------
Diversified Bond Portfolio ............ $ 341,777,415 $ 247,515,370
Government Income Portfolio ........... 350,848,552 0
Conservative Balanced Portfolio ....... 794,806,228 1,096,759,509
Flexible Managed Portfolio ............ 669,592,038 1,674,359,362
High Yield Bond Portfolio ............. 0 288,699,800
Stock Index Portfolio ................. 0 133,703,961
Equity Income Portfolio ............... 0 765,025,163
Equity Portfolio ...................... 0 251,721,501
Prudential Jennison Portfolio ......... 0 1,842,685,398
Global Portfolio ...................... 0 376,923,599
Proceeds from Sales:
Government Non-Government
Securities Securities
-------------- --------------
Diversified Bond Portfolio ............ $ 273,669,937 $ 332,157,325
Government Income Portfolio ........... 393,492,453 0
Conservative Balanced Portfolio ....... 1,078,594,082 1,478,115,288
Flexible Managed Portfolio ............ 340,750,236 2,274,589,749
High Yield Bond Portfolio ............. 0 263,848,234
Stock Index Portfolio ................. 0 105,636,662
Equity Income Portfolio ............... 0 887,894,500
Equity Portfolio ...................... 0 842,655,641
Prudential Jennison Portfolio ......... 0 1,266,685,655
Global Portfolio ...................... 0 355,097,058
The federal income tax basis and unrealized appreciation (depreciation)
of the Series Fund's investments as of were as follows:
<TABLE>
<CAPTION>
Total Net
Unrealized Gross Gross
Tax Appreciation Unrealized Unrealized
Basis (Depreciation) Appreciation Depreciation
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Diversified Bond Portfolio ............ $1,251,783,832 $ (36,057,203) $ 5,834,834 $ 41,892,037
Government income Portfolio ........... 313,671,938 (6,640,003) 434,284 7,074,287
Conservative Balanced Portfolio ....... 4,224,893,396 306,700,826 513,043,451 206,342,625
Flexible Managed Portfolio ............ 5,087,503,758 307,146,880 594,772,598 287,625,718
High Yield Bond Portfolio ............. 874,482,573 (116,206,186) 15,876,945 132,083,131
Stock Index Portfolio ................. 2,421,693,015 2,210,555,510 2,370,266,248 159,710,678
Equity Income Portfolio ............... 1,738,740,135 17,139,127 253,827,943 236,688,816
Equity Portfolio ...................... 4,965,052,251 492,566,081 1,138,419,652 645,853,571
Prudential Jennison Portfolio ......... 2,724,954,392 753,284,694 852,783,794 99,499,100
Global Portfolio ...................... 1,147,863,512 288,550,728 320,547,370 31,996,642
</TABLE>
The Global Portfolio entered into 3 swap agreements with Merrill Lynch
International. The Portfolio receives the change in the market value of
shares of Taiwan Semiconductor including dividends and the Global
Portfolio pays 3 month LIBOR plus 0.75% based on the value of the shares
of Taiwan Semiconductor on the date the contract was entered into. In
addition, the Global Portfolio will pay a fee at termination of the swap
equal to the number of shares of Taiwan Semiconductor times the market
price on termination date times 0.0075. Details of the swap agreements
are as follows:
<TABLE>
<CAPTION>
Termination Current Current Appreciation
Open Date Date Shares Value Basis (Depreciation)
--------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
8/16/99 8/18/00 1,874,689 $ 8,828,956 $10,165,688 $(1,336,732)
11/16/99 8/18/00 1,253,632 5,904,053 6,797,945 (893,892)
11/16/99 8/18/00 1,367,896 6,442,186 7,417,553 (975,367)
----------- ----------- -----------
$21,175,195 $24,381,186 $(3,205,991)
=========== =========== ===========
</TABLE>
The Global Portfolio also entered into a future swap agreement with
Merrill Lynch International having the following description. The Global
Portfolio receives the positive change in the market value of Dow Jones
Euro Stoxx 50 Sept '00
C6
<PAGE>
future and pays the negative change in the market value of the Dow Jones
Euro Stoxx 50 Sept '00. The Global Portfolio paid a transaction fee for
the agreement. The Portfolio will pay a fee at termination of the swap.
Details of the swap are as follows:
<TABLE>
<CAPTION>
Termination Current Current
Open Date Date Contracts Value Basis Appreciation
--------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
6/1/00 9/20/00 1,350 $67,061,974 $66,774,997 $286,977
</TABLE>
For federal income tax purposes, the following Portfolios had
post-October losses deferred and capital loss carryforwards as of
December 31, 1999. Accordingly no capital gain distributions are
expected to be paid to shareholders until net gains have been realized
in excess of such amounts:
<TABLE>
<CAPTION>
Post-October Post-October Capital Loss
Currency Capital Carryforwards
Losses Deferred Losses Deferred Available Expiration Date
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Conservative Balanced Portfolio ............ -- $ 8,302,364 -- --
Flexible Managed Portfolio ................. -- 16,235,978 -- --
High Yield Bond Portfolio .................. -- 4,418,508 $ (2,841,700) 2003
(43,467,300) 2007
-------------
(46,309,000)
Global Portfolio ........................... $262,338 -- -- --
</TABLE>
NOTE 7: CAPITAL
The Series Fund offers Class I and Class II shares. Both Class I and
Class II shares of a Portfolio are not subject to any sales charge or
redemption charge and are sold at the net asset value of the Portfolio.
Class I shares are sold only to certain separate accounts of The
Prudential to fund benefits under certain variable life insurance and
variable annuity contracts ("contracts"). Class II shares are sold only
to separate accounts of non-Prudential insurance companies as investment
options under certain contracts. The accounts invest in shares of the
Series Fund through subaccounts that correspond to the portfolios. The
accounts will redeem shares of the Series Fund to the extent necessary
to provide benefits under the contracts or for such other purposes as
may be consistent with the contracts. As of June 30, 2000, the Equity
and Prudential Jennison Portfolios have Class II shares outstanding.
Transactions in shares of common stock of the Equity and Prudential
Jennison Portfolios were as follows:
EQUITY PORTFOLIO:
Class I Shares Amount
------- ------------ --------------
Six months ended June 30, 2000:
Capital stock sold .................... 3,146,069 $ 86,587,014
Capital stock issued in reinvestment
of dividends and distributions ...... 6,358,428 165,952,214
Capital stock repurchased ............. (19,064,840) (516,323,539)
----------- --------------
Net decrease in shares outstanding .... (9,560,343) $ (263,784,311)
=========== ==============
Shares Amount
------------ --------------
Year ended December 31, 1999:
Capital stock sold .................... 8,671,360 $ 269,536,387
Capital stock issued in reinvestment
of dividends and distributions ...... 29,303,403 742,957,463
Capital stock repurchased ............. (33,039,026) (1,018,930,728)
----------- --------------
Net increase in shares outstanding .... 4,935,737 $ 93,563,122
=========== ==============
Class II Shares Amount
-------- ------------ --------------
Six months ended June 30, 2000:
Capital stock sold .................... 41,625 $ 1,144,430
Capital stock issued in reinvestment
of dividends and distributions ...... 486 15,453
Capital stock repurchased ............. (30,644) (840,234)
----------- --------------
Net increase in shares outstanding .... 11,467 $ 319,649
=========== ==============
C7
<PAGE>
Shares Amount
------------ --------------
May 3, 1999(a) through December 31, 1999:
Capital stock sold .................... 14,063 $ 457,113
Capital stock issued in reinvestment
of dividends and distributions ...... 1,186 33,511
Capital stock repurchased ............. (4,199) (135,030)
----------- --------------
Net increase in shares outstanding .... 11,050 $ 355,594
=========== ==============
(a) Commencement of offering of
Equity Portfolio Class II shares.
PRUDENTIAL JENNISON PORTFOLIO:
Class I Shares Amount
------- ------------ --------------
Six months ended June 30, 2000:
Capital stock sold .................... 22,342,715 $ 749,265,516
Capital stock issued in reinvestment
of dividends and distributions ........ 1,630,628 49,620,027
Capital stock repurchased ............... (4,759,602) (157,150,860)
----------- --------------
Net increase in shares outstanding ...... 19,213,741 $ 641,734,683
=========== ==============
Class II Shares Amount
-------- ------------ --------------
February 10, 2000(b) through June 30, 2000:
Capital stock sold ...................... 87,950 $ 2,840,721
Capital stock issued in reinvestment
of dividends and distributions ........ 73 2,217
Capital stock repurchased ............... (4,108) (132,434)
----------- --------------
Net increase in shares outstanding ...... 83,915 $ 2,710,504
=========== ==============
(b) Commencement of offering of Prudential
Jennison Portfolio Class II shares.
C8
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income and realized and
unrealized gains........................ 0.29 0.49 0.52 0.54 0.51 0.56
Dividends and distributions............... (0.29) (0.49) (0.52) (0.54) (0.51) (0.56)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ 2.94% 4.97% 5.39% 5.41% 5.22% 5.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $1,166.8 $1,335.5 $ 920.2 $ 657.5 $ 668.8 $ 613.3
Ratios to average net assets:
Expenses................................ 0.43%(b) 0.42% 0.41% 0.43% 0.44% 0.44%
Net investment income................... 5.79%(b) 4.90% 5.20% 5.28% 5.10% 5.64%
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED BOND
-----------------------------------------------------------------------
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 10.95 $ 11.06 $ 11.02 $ 11.07 $ 11.31 $ 10.04
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.41 0.67 0.69 0.80 0.76 0.76
Net realized and unrealized gains (losses)
on investments.......................... (0.11) (0.75) 0.08 0.11 (0.27) 1.29
-------- -------- -------- -------- -------- --------
Total from investment operations...... 0.30 (0.08) 0.77 0.91 0.49 2.05
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.17) -- (0.69) (0.83) (0.73) (0.75)
Distributions from net realized gains..... --(d) (0.03) (0.04) (0.13) -- (0.03)
-------- -------- -------- -------- -------- --------
Total distributions................... (0.17) (0.03) (0.73) (0.96) (0.73) (0.78)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 11.08 $ 10.95 $ 11.06 $ 11.02 $ 11.07 $ 11.31
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ 2.80% (0.74)% 7.15% 8.57% 4.40% 20.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $1,210.7 $1,253.8 $1,122.6 $ 816.7 $ 720.2 $ 655.8
Ratios to average net assets:
Expenses................................ 0.43%(b) 0.43% 0.42% 0.43% 0.45% 0.44%
Net investment income................... 6.85%(b) 6.25% 6.40% 7.18% 6.89% 7.00%
Portfolio turnover rate................... 51% 171% 199% 224% 210% 199%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
(d) Less than $0.002 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
D1
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT INCOME PORTFOLIO
---------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(C)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 11.55 $ 11.87 $ 11.52 $ 11.22 $ 11.72 $ 10.46
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.52 0.76 0.67 0.75 0.75 0.74
Net realized and unrealized gains (losses)
on investments.......................... (0.01) (1.08) 0.36 0.30 (0.51) 1.28
-------- -------- -------- -------- -------- --------
Total from investment operations...... 0.51 (0.32) 1.03 1.05 0.24 2.02
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.22) -- (0.68) (0.75) (0.74) (0.76)
Distributions from net realized gains..... (0.03) -- --(d) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions................... (0.25) -- (0.68) (0.75) (0.74) (0.76)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 11.81 $ 11.55 $ 11.87 $ 11.52 $ 11.22 $ 11.72
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ 4.43% (2.70)% 9.09% 9.67% 2.22% 19.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $ 285.7 $ 335.5 $ 443.2 $ 429.6 $ 482.0 $ 501.8
Ratios to average net assets:
Expenses................................ 0.45%(b) 0.44% 0.43% 0.44% 0.46% 0.45%
Net investment income................... 6.07%(b) 5.72% 5.71% 6.40% 6.38% 6.55%
Portfolio turnover rate................... 116% 106% 109% 88% 95% 195%
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE BALANCED PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 15.36 $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.32 0.62 0.66 0.76 0.66 0.63
Net realized and unrealized gains (losses)
on investments.......................... (0.12) 0.37 1.05 1.26 1.24 1.78
-------- -------- -------- -------- -------- --------
Total from investment operations...... 0.20 0.99 1.71 2.02 1.90 2.41
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.17) (0.62) (0.66) (0.76) (0.66) (0.64)
Distributions from net realized gains..... -- (0.06) (0.94) (1.81) (1.03) (0.56)
Distributions in excess from net realized
gains................................... -- (0.03) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions................... (0.17) (0.71) (1.60) (2.57) (1.69) (1.20)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 15.39 $ 15.36 $ 15.08 $ 14.97 $ 15.52 $ 15.31
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ 1.39% 6.69% 11.74% 13.45% 12.63% 17.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $3,998.2 $4,387.1 $4,796.0 $4,744.2 $4,478.8 $3,940.8
Ratios to average net assets:
Expenses................................ 0.58%(b) 0.57% 0.57% 0.56% 0.59% 0.58%
Net investment income................... 4.11%(b) 4.02% 4.19% 4.48% 4.13% 4.19%
Portfolio turnover rate................... 48% 109% 167% 295% 295% 201%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
(d) Less than $0.005 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
D2
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE MANAGED PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 17.64 $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.33 0.58 0.58 0.59 0.57 0.56
Net realized and unrealized gains (losses)
on investments.......................... (0.23) 0.69 1.14 2.52 1.79 3.15
-------- -------- -------- -------- -------- --------
Total from investment operations...... 0.10 1.27 1.72 3.11 2.36 3.71
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.15) -- (0.59) (0.58) (0.58) (0.56)
Distributions from net realized gains..... (0.24) (0.19) (1.85) (3.04) (1.85) (0.79)
-------- -------- -------- -------- -------- --------
Total distributions................... (0.39) (0.19) (2.44) (3.62) (2.43) (1.35)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 17.35 $ 17.64 $ 16.56 $ 17.28 $ 17.79 $ 17.86
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ 0.64% 7.78% 10.24% 17.96% 13.64% 24.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $4,754.3 $5,125.3 $5,410.0 $5,490.1 $4,896.9 $4,261.2
Ratios to average net assets:
Expenses................................ 0.63%(b) 0.62% 0.61% 0.62% 0.64% 0.63%
Net investment income................... 3.39%(b) 3.20% 3.21% 3.02% 3.07% 3.30%
Portfolio turnover rate................... 52% 76% 138% 227% 233% 173%
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 7.52 $ 7.21 $ 8.14 $ 7.87 $ 7.80 $ 7.37
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.42 0.79 0.77 0.78 0.80 0.81
Net realized and unrealized gains (losses)
on investments.......................... (0.56) (0.46) (0.94) 0.26 0.06 0.46
-------- -------- -------- -------- -------- --------
Total from investment operations...... (0.14) 0.33 (0.17) 1.04 0.86 1.27
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.21) (0.02) (0.76) (0.77) (0.78) (0.84)
Dividends in excess of net investment
income.................................. -- -- -- -- (0.01) --
-------- -------- -------- -------- -------- --------
Total distributions................... (0.21) (0.02) (0.76) (0.77) (0.79) (0.84)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 7.17 $ 7.52 $ 7.21 $ 8.14 $ 7.87 $ 7.80
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ (1.90)% 4.61% (2.36)% 13.78% 11.39% 17.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $ 736.4 $ 802.2 $ 789.3 $ 568.7 $ 432.9 $ 367.9
Ratios to average net assets:
Expenses................................ 0.59%(b) 0.60% 0.58% 0.57% 0.63% 0.61%
Net investment income................... 10.38%(b) 10.48% 10.31% 9.78% 9.89% 10.34%
Portfolio turnover rate................... 37% 58% 63% 106% 88% 139%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
D3
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK INDEX PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 44.45 $ 37.74 $ 30.22 $ 23.74 $ 19.96 $ 14.96
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.18 0.44 0.42 0.43 0.40 0.40
Net realized and unrealized gains (losses)
on investments.......................... (0.43) 7.23 8.11 7.34 4.06 5.13
-------- -------- -------- -------- -------- --------
Total from investment operations...... (0.25) 7.67 8.53 7.77 4.46 5.53
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.10) (0.43) (0.42) (0.42) (0.40) (0.38)
Distributions from net realized gains..... (0.04) (0.53) (0.59) (0.87) (0.28) (0.15)
-------- -------- -------- -------- -------- --------
Total distributions................... (0.14) (0.96) (1.01) (1.29) (0.68) (0.53)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 44.06 $ 44.45 $ 37.74 $ 30.22 $ 23.74 $ 19.96
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ (0.54)% 20.54% 28.42% 32.83% 22.57% 37.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $4,628.9 $4,655.0 $3,548.1 $2,448.2 $1,581.4 $1,031.3
Ratios to average net assets:
Expenses................................ 0.38%(b) 0.39% 0.37% 0.37% 0.40% 0.38%
Net investment income................... 0.84%(b) 1.09% 1.25% 1.55% 1.95% 2.27%
Portfolio turnover rate................... 2% 2% 3% 5% 1% 1%
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
--------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 19.52 $ 20.03 $ 22.39 $ 18.51 $ 16.27 $ 14.48
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.25 0.51 0.56 0.61 0.58 0.64
Net realized and unrealized gains (losses)
on investments.......................... (1.29) 1.89 (1.03) 6.06 2.88 2.50
-------- -------- -------- -------- -------- --------
Total from investment operations...... (1.04) 2.40 (0.47) 6.67 3.46 3.14
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.16) (0.50) (0.59) (0.57) (0.71) (0.62)
Distributions from net realized gains..... (0.04) (2.41) (1.30) (2.22) (0.51) (0.73)
-------- -------- -------- -------- -------- --------
Total distributions................... (0.20) (2.91) (1.89) (2.79) (1.22) (1.35)
-------- -------- -------- -------- -------- --------
Net Asset Value, end of period............ $ 18.28 $ 19.52 $ 20.03 $ 22.39 $ 18.51 $ 16.27
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(a)................ (5.31)% 12.52% (2.38)% 36.61% 21.74% 21.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $1,722.2 $2,024.0 $2,142.3 $2,029.8 $1,363.5 $1,110.0
Ratios to average net assets:
Expenses................................ 0.42%(b) 0.42% 0.42% 0.41% 0.45% 0.43%
Net investment income................... 2.63%(b) 2.34% 2.54% 2.90% 3.36% 4.00%
Portfolio turnover rate................... 43% 16% 20% 38% 21% 64%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
D4
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY PORTFOLIO
---------------------------------------------------------------------------------
CLASS I CLASS II
-------------------------------------------------------------------- ----------
SIX SIX
MONTHS YEAR ENDED MONTHS
ENDED DECEMBER 31, ENDED
JUNE 30, ---------------------------------------------------- JUNE 30,
2000 1999 1998 1997 1996 1995(c) 2000
---------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of
period............................. $ 28.90 $ 29.64 $ 31.07 $ 26.96 $ 25.64 $ 20.66 $28.92
-------- -------- -------- -------- -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ 0.27 0.54 0.60 0.69 0.71 0.55 0.15
Net realized and unrealized gains
(losses) on investments............ (1.86) 3.02 2.21 5.88 3.88 5.89 (1.80)
-------- -------- -------- -------- -------- -------- ------
Total from investment
operations..................... (1.61) 3.56 2.81 6.57 4.59 6.44 (1.65)
-------- -------- -------- -------- -------- -------- ------
LESS DISTRIBUTIONS:
Dividends from net investment
income............................. (0.14) (0.63) (0.60) (0.70) (0.67) (0.52) (0.11)
Distributions from net realized
gains.............................. (0.67) (3.77) (3.64) (1.76) (2.60) (0.94) (0.67)
-------- -------- -------- -------- -------- -------- ------
Total distributions.............. (0.81) (4.30) (4.24) (2.46) (3.27) (1.46) (0.78)
-------- -------- -------- -------- -------- -------- ------
Net Asset Value, end of period....... $ 26.50 $ 28.90 $ 29.64 $ 31.07 $ 26.96 $ 25.64 $26.49
======== ======== ======== ======== ======== ======== ======
TOTAL INVESTMENT RETURN(a)........... (5.47)% 12.49% 9.34% 24.66% 18.52% 31.29% (5.67)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions).......................... $5,463.4 $6,235.0 $6,247.0 $6,024.0 $4,814.0 $3,813.8 $ 0.6
Ratios to average net assets:
Expenses........................... 0.47%(b) 0.47% 0.47% 0.46% 0.50% 0.48% 0.87%(b)
Net investment income.............. 1.98%(b) 1.72% 1.81% 2.27% 2.54% 2.28% 1.65%(b)
Portfolio turnover rate.............. 5% 9% 25% 13% 20% 18% 5%
<CAPTION>
EQUITY PORTFOLIO
-----------------
CLASS II
-----------------
MAY 3, 1999(e)
THROUGH
DECEMBER 31,
1999
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of
period............................. $32.79
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ 0.28
Net realized and unrealized gains
(losses) on investments............ (0.60)
------
Total from investment
operations..................... (0.32)
------
LESS DISTRIBUTIONS:
Dividends from net investment
income............................. (0.34)
Distributions from net realized
gains.............................. (3.21)
------
Total distributions.............. (3.55)
------
Net Asset Value, end of period....... $28.92
======
TOTAL INVESTMENT RETURN(a)........... (0.68)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions).......................... $ 0.3
Ratios to average net assets:
Expenses........................... 0.87%(b)
Net investment income.............. 1.33%(b)
Portfolio turnover rate.............. 9%
</TABLE>
<TABLE>
<CAPTION>
PRUDENTIAL JENNISON PORTFOLIO
-------------------------------------------------------------------------------------------
CLASS I CLASS II
--------------------------------------------------------------------------- ------------
SIX APRIL 25, FEBRUARY 10,
MONTHS YEAR ENDED 1995(d) 2000(e)
ENDED DECEMBER 31, THROUGH THROUGH
JUNE 30, ---------------------------------------- DECEMBER 31, JUNE 30,
2000 1999 1998 1997 1996 1995(c) 2000
---------- -------- -------- ------ ------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of
period............................ $ 32.39 $ 23.91 $ 17.73 $14.32 $12.55 $10.00 $ 34.25
-------- -------- -------- ------ ------ ------ --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.01 0.05 0.04 0.04 0.02 0.02 --(f)
Net realized and unrealized gains
(losses) on investments........... 1.23 9.88 6.56 4.48 1.78 2.54 (0.68)
-------- -------- -------- ------ ------ ------ --------
Total from investment
operations.................... 1.24 9.93 6.60 4.52 1.80 2.56 (0.68)
-------- -------- -------- ------ ------ ------ --------
LESS DISTRIBUTIONS:
Dividends from net investment
income............................ -- (0.05) (0.04) (0.04) (0.03) (0.01) --
Distributions from net realized
gains............................. (0.50) (1.40) (0.38) (1.07) -- -- (0.50)
-------- -------- -------- ------ ------ ------ --------
Total distributions............. (0.50) (1.45) (0.42) (1.11) (0.03) (0.01) (0.50)
-------- -------- -------- ------ ------ ------ --------
Net Asset Value, end of period...... $ 33.13 $ 32.39 $ 23.91 $17.73 $14.32 $12.55 $ 33.08
======== ======== ======== ====== ====== ====== ========
TOTAL INVESTMENT RETURN(a).......... 3.98% 41.76% 37.46% 31.71% 14.41% 24.20% (1.81)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)......................... $3,470.3 $2,770.7 $1,198.7 $495.9 $226.5 $ 63.1 $2,775.9
Ratios to average net assets:
Expenses.......................... 0.62%(b) 0.63% 0.63% 0.64% 0.66% 0.79%(c) 1.02%(b)
Net investment income............. 0.06%(b) 0.17% 0.20% 0.25% 0.20% 0.15%(c) (0.34)%(b)
Portfolio turnover rate............. 41% 58% 54% 60% 46% 37% 41%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
(d) Commencement of offering of Class I shares.
(e) Commencement of offering of Class II shares.
(f) Less than ($0.003) per share.
SEE NOTES TO FINANCIAL STATEMENTS.
D5
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
GLOBAL PORTFOLIO
----------------------------------------------------------
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
June 30, ---------------------------------------------
2000 1999 1998 1997 1996 1995(c)
---------- -------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period...... $ 30.98 $ 21.16 $17.92 $17.85 $15.53 $13.88
-------- -------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.06 0.06 0.07 0.09 0.11 0.06
Net realized and unrealized gains (losses)
on investments.......................... (0.49) 10.04 4.38 1.11 2.94 2.14
-------- -------- ------ ------ ------ ------
Total from investment operations...... (0.43) 10.10 4.45 1.20 3.05 2.20
-------- -------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income...... (0.05) -- (0.16) (0.13) (0.11) (0.24)
Dividends in excess of net investment
income.................................. -- (0.10) (0.12) (0.10) -- --
Distributions from net realized gains..... (1.94) (0.18) (0.93) (0.90) (0.62) (0.31)
-------- -------- ------ ------ ------ ------
Total distributions................... (1.99) (0.28) (1.21) (1.13) (0.73) (0.55)
-------- -------- ------ ------ ------ ------
Net Asset Value, end of period............ $ 28.56 $ 30.98 $21.16 $17.92 $17.85 $15.53
======== ======== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(a)................ (0.99)% 48.27% 25.08% 6.98% 19.97% 15.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)... $1,436.5 $1,298.3 $844.5 $638.4 $580.6 $400.1
Ratios to average net assets:
Expenses................................ 0.81%(b) 0.84% 0.86% 0.85% 0.92% 1.06%
Net investment income................... 0.37%(b) 0.21% 0.29% 0.47% 0.64% 0.44%
Portfolio turnover rate................... 56% 76% 73% 70% 41% 59%
</TABLE>
(a) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(b) Annualized.
(c) Calculations are based on average month-end shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
D6
<PAGE>
SEMIANNUAL REPORT/JUNE 30, 2000
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. Growth and Income Fund seeks growth of capital with a secondary
objective of current income by investing primarily in securities of established
companies that have long-term above-average growth in earnings and dividends,
and growth companies the portfolio managers believe have the potential for
above-average growth in earnings and dividends.
[Graphic Omitted]
FUNDS(R)
<PAGE>
SEMIANNUAL REPORT/MANAGERS' OVERVIEW
<TABLE>
<S> <C> <C>
AIM V.I. GROWTH AND INCOME FUND
VOLATILITY CREATES CHALLENGING
ENVIRONMENT FOR FUND
HOW DID AIM V.I. GROWTH AND INCOME increase in May, the biggest increase in in terms of their earnings--we focus
FUND PERFORM OVER THE SIX-MONTH more than five years--to 6.50% in an on companies in growth industries
REPORTING PERIOD? effort to cool what it feared was a or sectors, and we strive to understand
Despite volatile markets, AIM V.I. Growth too-hot growth rate for the U.S. economy. what's behind the numbers, what factors
and Income Fund finished in positive With consumers spending more and drive a company's earnings and if those
territory for the reporting period. For companies struggling to hire enough factors are sustainable. This allows us
the six months ended June 30, 2000, the employees, the U.S. economy's record to make buy and sell decisions based
fund produced a total return of 1.11%. expansion appeared poised to set off on concrete research rather than on
This performance beat the S&P 500 Index, inflation. Investors and analysts alike market sentiment.
which had a return of -0.43% for the wondered how much farther the Fed
same period. would continue its tightening cycle--in WHAT WERE THE FUND'S TOP
progress since June 1999--before being SECTOR WEIGHTINGS?
WHAT WERE MARKET CONDITIONS LIKE OVER satisfied that inflation remained under Technology, financials and health care
THE REPORTING PERIOD? control. Many investors chose to wait continue to have the heaviest weightings
The watchwords for the first six months things out, evidenced in the general in the fund's portfolio. Our technology
of 2000 were volatility and inflation. decline of trading volumes late in the weighting is about 36%, with an emphasis
Coming off remarkable returns for 1999, reporting period. on software and services, communications
markets--particularly the technology ________________________________________ equipment and semiconductors. Technol-
sector--experienced pronounced volatility | WE MAINTAINED OUR BIAS TOWARD ogy continues to see tremendous growth
during the first quarter of 2000 and | LARGER, MORE ESTABLISHED COMPANIES. as a result of the proliferation of the
into the second quarter as some global wireless boom and increased
companies' sky-high valuations came into DID YOU MANAGE THE FUND DIFFERENTLY, spending by large corporations shifting
question. The sell-off that ensued caused GIVEN THE MARKET ENVIRONMENT? business models to compete in the
many such stocks to plummet in the Nasdaq We maintained our bias toward larger, Internet economy.
shakeout in April. more established companies. Our The financial and health-care sectors
Added to that were rising interest rates investment discipline holds that we do had a mixed first half of the year.
and investors' concerns regarding poten- not try to time the market by moving Financial stocks tend to get punished
tial inflation, both of which shook in and out of stocks that go in and out whenever inflation fears surface
market confidence across the board. Since of favor for various reasons. among investors, as happened over the
the beginning of the year, the Federal Instead, we look at companies last six months. Health-care stocks,
Reserve Board (the Fed) has raised the particularly drug companies, benefited
federal funds rate three times--including from the excitement
a 0.50%
____________________________________________________________________________________________________________________________________
|
| THE DECLINE OF DIVIDENDS
|
| For the first time in recent history, a quarter of dividends, and increasing numbers of major companies
| the value of the S&P 500 comes from companies that do are not paying them at all.
| not pay dividends. (A dividend is a distribution What does this mean for AIM V.I. Growth and Income
| of earnings to shareholders.) Twenty years ago, only 2% Fund? In February, the fund's investment policy was
| of the index's value came from such companies. changed to allow it to respond to market conditions
| What has changed? such as this downward dividend trend. Companies that pay
| A company previously used dividends to convince or raise their dividends will continue to be an important
| investors that it was successful and worthy of investment. part of the fund's portfolio, but so will high-quality
| Today, many investors consider stocks less risky than they growth companies.
| used to, so the demand for dividends has decreased. Fewer
| companies are raising
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
SEMIANNUAL REPORT/MANAGERS' OVERVIEW
<TABLE>
<S> <C> <C>
PORTFOLIO COMPOSITION WHAT IS YOUR NEAR-TERM OUTLOOK?
While there are signs that the economy
As of 6/30/00, based on total net assets may at last be slowing to a sustainable
growth level, the Fed deems it too early
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES to say with finality that its rate hikes
---------------------------------------- ---------------------------------------- have indeed halted inflation. The fact
1. Tyco International Ltd. 1. Computers that the Fed did not raise interest
(Bermuda) 5.17% (Software & Services) 9.89% rates at its June meeting may indicate
---------------------------------------- ---------------------------------------- that its tightening cycle is winding
2. Pfizer Inc. 4.68 2. Communications Equipment 8.75 down.
---------------------------------------- ---------------------------------------- However, uncertainty over the Fed's
3. Target Corp. 4.11 3. Health Care (Diversified) 6.78 actions and other factors could
---------------------------------------- ---------------------------------------- perpetuate the volatility that has
4. Morgan Stanley 4. Electronics (Semiconductors) 6.18 characterized markets in recent months.
Dean Witter & Co. 3.63 ---------------------------------------- Although we believe that the environment
---------------------------------------- 5. Investment Banking/Brokerage 5.92 for equities remains largely favorable,
5. Cisco Systems, Inc. 3.47 ---------------------------------------- investors would be well advised to
---------------------------------------- 6. Financial (Diversified) 5.24 maintain a long-term perspective on
6. VERITAS Software Corp. 3.08 ---------------------------------------- their investment.
---------------------------------------- 7. Manufacturing (Diversified) 5.17
7. Chase Manhattan Corp. (The) 3.02 ---------------------------------------- FUND PERFORMANCE
---------------------------------------- 8. Computers (Hardware) 4.97
8. Citigroup Inc. 2.63 ---------------------------------------- AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------- 9. Retail (General Merchandise) 4.53
9. American Express Co. 2.61 ---------------------------------------- As of 6/30/00
---------------------------------------- 10. Computers (Networking) 3.47
10. General Electric Co. 2.60 ---------------------------------------- -------------------------------------
---------------------------------------- Inception (5/2/94) 22.54%
-------------------------------------
The fund's portfolio is subject to change, and there is no assurance that the 5 years 23.83
fund will continue to hold any particular security. -------------------------------------
1 year 18.48
surrounding the mapping of the human tomer relationship management software, -------------------------------------
genome. A rough draft of the genetic and e-business software and services.
makeup of the human body has been Past performance cannot guarantee
completed, which may lead to new block- WHAT OTHER HOLDINGS BENEFITED comparable future results. MARKET
buster drugs for the treatment of THE FUND? VOLATILITY CAN SIGNIFICANTLY IMPACT
disease. Pharmaceutical giant Pfizer, the fund's SHORT-TERM PERFORMANCE. RESULTS OF AN
second-largest holding, recently merged INVESTMENT MADE TODAY MAY DIFFER
WHAT TECH-RELATED COMPANIES with Warner-Lambert to become one of SUBSTANTIALLY FROM THE HISTORICAL
DID YOU FAVOR? the world's largest and fastest-growing PERFORMANCE SHOWN.
The fund's technology holdings are drug companies. The acquisition allows
earnings-momentum stocks with solid Pfizer to add Lipitor, a leading The performance figures in this report,
company fundamentals. For example, cholesterol-lowering drug, to its stable which represent AIM V.I. Growth and
VERITAS Software is a market leader in of successful medications, which Income Fund, are not intended to reflect
the storage-management software includes Celebrex (for arthritis), actual annuity values, and they do
business. Its products are embedded in Norvasc (for heart disease) and Zoloft not reflect charges at the separate-
most of the leading server systems (an anti-depressant). account level which (if applied) would
being sold to large corporations and Fund holding General Electric is a lower them. AIM V.I. Growth and Income
telecommunications service providers, dominant force in a wide range of indus- Fund's performance figures are historical,
as spending on Internet infrastructure tries. GE manufactures everything from and they reflect the reinvestment of
increases. household appliances to light bulbs to distributions and changes in net asset
Other tech-related holdings include medical imaging equipment--as well as value. The fund's investment return and
Cisco Systems and Nortel Networks. Cisco the power plants to run them. GE Capital principal value will fluctuate, so an
is the leading maker of routers, Services, which accounts for half the investor's shares, when redeemed, may
switches and other equipment used to company's sales, is among the largest be worth more or less than their
create Internet connections. Nortel is financial-services companies in the original cost.
a leader in fiber-optic systems for United States. The unmanaged National Association of
high-capacity data and voice networks, Securities Dealers Automated Quotation
and it has flourished by buying into System Composite Index (the Nasdaq) is
computer telephony, cus- a market-value-weighted index comprising
all domestic and non-U.S.-based common
stocks listed on the Nasdaq system. It
includes more than 5,000 companies, and
it is often considered representative
of the small and medium-sized company stock
universe. While it includes many small
and mid-sized company stocks,
large-capitalization technology companies
tend to dominate the index.
The unmanaged Standard & Poor's
Composite Index of 500 Stocks
(the S&P 500) represents the performance
of the stock market in general. An
investment cannot be made in an index.
Unless otherwise indicated, index
results include reinvested dividends.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC STOCKS & OTHER EQUITY
INTERESTS - 77.92%
BANKS (MONEY CENTER) - 3.02%
Chase Manhattan Corp. (The) 1,800,000 $82,912,500
-------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.83%
AT&T Corp. - Liberty Media Group-Class A(a) 1,500,000 36,375,000
-------------------------------------------------------------------
Comcast Corp. - Class A(a) 1,025,000 41,512,500
-------------------------------------------------------------------
77,887,500
-------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.41%
Monsanto Co. - $2.60 Conv. Pfd. 250,000 11,312,500
-------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.86%
JDS Uniphase Corp.(a) 300,000 35,962,500
-------------------------------------------------------------------
QUALCOMM Inc.(a) 255,000 15,300,000
-------------------------------------------------------------------
51,262,500
-------------------------------------------------------------------
COMPUTERS (HARDWARE) - 4.66%
Dell Computer Corp.(a) 900,000 44,381,250
-------------------------------------------------------------------
Gateway, Inc.(a) 274,700 15,589,225
-------------------------------------------------------------------
Sun Microsystems, Inc.(a) 750,000 68,203,125
-------------------------------------------------------------------
128,173,600
-------------------------------------------------------------------
COMPUTERS (NETWORKING) - 3.47%
Cisco Systems, Inc.(a) 1,500,000 95,343,750
-------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.68%
EMC Corp.(a) 600,000 46,162,500
-------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 7.65%
Microsoft Corp.(a) 175,000 14,000,000
-------------------------------------------------------------------
Novell, Inc.(a) 1,080,000 9,990,000
-------------------------------------------------------------------
Oracle Corp.(a) 750,000 63,046,875
-------------------------------------------------------------------
VERITAS Software Corp.(a) 750,000 84,761,719
-------------------------------------------------------------------
Vitria Technology, Inc.(a) 325,000 19,865,625
-------------------------------------------------------------------
Yahoo! Inc.(a) 150,000 18,581,250
-------------------------------------------------------------------
210,245,469
-------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.21%
General Electric Co. 1,350,000 71,550,000
-------------------------------------------------------------------
Solectron Corp.(a) 400,000 16,750,000
-------------------------------------------------------------------
88,300,000
-------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 4.55%
Intel Corp. 525,000 70,185,937
-------------------------------------------------------------------
Linear Technology Corp. 215,000 13,746,562
-------------------------------------------------------------------
Texas Instruments Inc. 600,000 41,212,500
-------------------------------------------------------------------
125,144,999
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ENTERTAINMENT - 2.32%
Time Warner Inc. 454,520 $ 34,543,520
----------------------------------------------------------------------
Walt Disney Co. (The) 750,000 29,109,375
----------------------------------------------------------------------
63,652,895
----------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.99%
Applied Materials, Inc.(a) 300,000 27,187,500
----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.24%
American Express Co. 1,375,000 71,671,875
----------------------------------------------------------------------
Citigroup Inc. 1,200,000 72,300,000
----------------------------------------------------------------------
143,971,875
----------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 6.78%
Allergan, Inc. 300,000 22,350,000
----------------------------------------------------------------------
American Home Products Corp. 600,000 35,250,000
----------------------------------------------------------------------
Pfizer Inc. 2,681,250 128,700,000
----------------------------------------------------------------------
186,300,000
----------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.94%
Genentech, Inc.(a) 150,000 25,800,000
----------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 0.71%
Pharmacia Corp. 375,000 19,382,813
----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.53%
Health Management Associates, Inc.-Class A(a) 1,116,000 14,577,750
----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.94%
UnitedHealth Group Inc. 300,000 25,725,000
----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.89%
Guidant Corp.(a) 225,000 11,137,500
----------------------------------------------------------------------
Medtronic, Inc. 270,000 13,449,375
----------------------------------------------------------------------
24,586,875
----------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.56%
American International Group, Inc. 600,000 70,500,000
----------------------------------------------------------------------
INSURANCE BROKERS - 0.67%
Marsh & McLennan Cos., Inc. 175,000 18,276,563
----------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 5.92%
Goldman Sachs Group, Inc. (The) 300,000 28,462,500
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 300,000 34,500,000
----------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 1,200,000 99,900,000
----------------------------------------------------------------------
162,862,500
----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.86%
Schlumberger Ltd. 400,000 29,850,000
----------------------------------------------------------------------
Transocean Sedco Forex Inc. 400,000 21,375,000
----------------------------------------------------------------------
51,225,000
----------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED) - 0.86%
Exxon Mobil Corp. 300,000 $ 23,550,000
--------------------------------------------------------------------------------
RAILROADS - 0.97%
Kansas City Southern Industries, Inc. 300,000 26,606,250
--------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.82%
Home Depot, Inc. (The) 450,000 22,471,875
--------------------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.94%
Best Buy Co., Inc.(a) 450,000 28,462,500
--------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 750,000 24,890,625
--------------------------------------------------------------------------------
53,353,125
--------------------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.91%
Kohl's Corp.(a)(b) 450,000 25,031,250
--------------------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.70%
Walgreen Co. 600,000 19,312,500
--------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 4.53%
Target Corp. 1,950,000 113,100,000
--------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 200,000 11,525,000
--------------------------------------------------------------------------------
124,625,000
--------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.40%
Amazon.com, Inc.(a) 300,000 10,893,750
--------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.39%
Cendant Corp.-$3.75 Conv. PRIDES 300,000 10,695,660
--------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.04%
First Data Corp. 575,000 28,534,375
--------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.67%
Nextel Communications, Inc.-Class A(a) 750,000 45,890,625
--------------------------------------------------------------------------------
Total Domestic Stocks & Other Equity Interests (Cost
$1,517,847,055) 2,141,758,499
--------------------------------------------------------------------------------
FOREIGN STOCKS - 12.95%
BERMUDA - 5.17%
Tyco International Ltd. (Manufacturing - Diversified) 3,000,000 142,125,000
--------------------------------------------------------------------------------
CANADA - 3.86%
Celestica Inc. (Electronics - Semiconductors)(a) 900,000 44,662,500
--------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 900,000 61,425,000
--------------------------------------------------------------------------------
106,087,500
--------------------------------------------------------------------------------
FINLAND - 2.50%
Nokia Oyj - ADR (Communications Equipment) 1,377,600 68,793,900
--------------------------------------------------------------------------------
SWEDEN - 1.42%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 1,950,000 39,000,000
--------------------------------------------------------------------------------
Total Foreign Stocks (Cost $259,939,237) 356,006,400
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES - 3.74%
COMMUNICATIONS EQUIPMENT - 0.73%
Juniper Networks, Inc., Unsec. Conv. Notes, 4.75%,
03/15/07 $18,000,000 $ 19,980,000
-------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.31%
Candescent Technology Corp., Sr. Conv. Sub. Deb.,
8.00%, 05/01/03 (Acquired 04/17/98-03/07/00; Cost
$10,738,438)(c) 12,000,000 8,700,000
-------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 2.24%
Redback Networks Inc., Conv. Notes, 5.00%, 04/01/07
(Acquired 04/13/00-04/17/00; Cost $10,036,550)(c) 15,000,000 17,156,250
-------------------------------------------------------------------------------
VERITAS Software Corp., Conv. Unsec. Notes, 5.25%,
11/01/04 3,750,000 44,376,562
-------------------------------------------------------------------------------
61,532,812
-------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.46%
Amazon.com, Inc., Conv. Sub. Deb., 4.75%, 02/01/09 20,000,000 12,675,000
-------------------------------------------------------------------------------
Total Corporate Bonds & Notes (Cost $63,470,015) 102,887,812
-------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 5.36%
STIC Liquid Assets Portfolio(d) 73,713,889 73,713,889
-------------------------------------------------------------------------------
STIC Prime Portfolio(d) 73,713,889 73,713,889
-------------------------------------------------------------------------------
Total Money Market Funds (Cost $147,427,778) 147,427,778
-------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.97%
(Cost $1,988,684,085) 2,748,080,489
-------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.03% 747,675
-------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,748,828,164
===============================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 6.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 06/30/00 was $25,856,250
which represented 0.94% of the Fund's net assets.
(d) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,988,684,085) $2,748,080,489
------------------------------------------------------------------------
Receivables for:
Investments sold 9,194,715
------------------------------------------------------------------------
Fund shares sold 1,630,010
------------------------------------------------------------------------
Dividends and Interest 2,128,407
------------------------------------------------------------------------
Investment for deferred compensation plan 34,616
------------------------------------------------------------------------
Other assets 94,010
------------------------------------------------------------------------
Total assets 2,761,162,247
------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,550,935
------------------------------------------------------------------------
Fund shares reacquired 909,247
------------------------------------------------------------------------
Options written (premiums received $297,990) 228,125
------------------------------------------------------------------------
Deferred compensation plan 34,616
------------------------------------------------------------------------
Accrued advisory fees 1,353,520
------------------------------------------------------------------------
Accrued administrative services fees 1,254,550
------------------------------------------------------------------------
Accrued trustees' fees 3,090
------------------------------------------------------------------------
Total liabilities 12,334,083
------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,748,828,164
========================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE:
Outstanding 86,073,747
========================================================================
Net asset value, offering and redemption price per share $ 31.94
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax $62,266) $ 8,887,356
----------------------------------------------------------------------------
Interest 1,781,413
----------------------------------------------------------------------------
Total investment income 10,668,769
----------------------------------------------------------------------------
EXPENSES:
Advisory fees 7,809,155
----------------------------------------------------------------------------
Administrative services fee 2,660,343
----------------------------------------------------------------------------
Custodian fees 118,102
----------------------------------------------------------------------------
Trustees' fees 7,217
----------------------------------------------------------------------------
Other 378,893
----------------------------------------------------------------------------
Total expenses 10,973,710
----------------------------------------------------------------------------
Less: Expenses paid indirectly (2,367)
----------------------------------------------------------------------------
Net expenses 10,971,343
----------------------------------------------------------------------------
Net investment income (loss) (302,574)
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS
Net realized gain from:
Investment securities 68,935,933
----------------------------------------------------------------------------
Option contracts written 1,072,868
----------------------------------------------------------------------------
70,008,801
----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (39,913,305)
----------------------------------------------------------------------------
Foreign currencies (1,550)
----------------------------------------------------------------------------
Option contracts written 69,865
----------------------------------------------------------------------------
(39,844,990)
----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
option contracts 30,163,811
----------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 29,861,237
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2000 and the year ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (302,574) $ 3,782,645
------------------------------------------------------------------------------
Net realized gain from investment securities
and option contracts 70,008,801 71,650,427
------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities,
foreign currencies and option contracts (39,844,990) 487,767,671
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 29,861,237 563,200,743
------------------------------------------------------------------------------
Distributions to shareholders from net
investment income -- (11,988,578)
------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains -- (8,277,648)
------------------------------------------------------------------------------
Share transactions-net 275,702,947 638,270,694
------------------------------------------------------------------------------
Net increase in net assets 305,564,184 1,181,205,211
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,443,263,980 1,262,058,769
------------------------------------------------------------------------------
End of period $ 2,748,828,164 $2,443,263,980
==============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 1,849,889,064 $1,574,186,117
------------------------------------------------------------------------------
Undistributed net investment income 3,108,472 3,411,046
------------------------------------------------------------------------------
Undistributed net realized gain from
investment securities and option contracts 136,369,819 66,361,018
------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 759,460,809 799,305,799
------------------------------------------------------------------------------
$ 2,748,828,164 $2,443,263,980
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Growth and Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds (the "Trust"). The Trust is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. At a meeting held on February 3, 2000, the Board
of Directors of AIM Variable Insurance Funds, Inc. approved an Agreement and
Plan of Reorganization which was approved by shareholders of the Fund on April
10, 2000. Effective May 1, 2000, pursuant to the Agreement and Plan of
Reorganization, AIM Variable Insurance Funds, Inc. was reorganized from a
Maryland Corporation to a Delaware business trust. Matters affecting each
portfolio will be voted on exclusively by the shareholders of such portfolio.
The assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is growth of
capital with a secondary objective of current income.
The preparation of 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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of the
customary trading session on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the closing bid price on that day. Each security reported on the NASDAQ
National Market System is valued at the last sales price as of the close of
the customary trading session on the valuation date or absent a last sales
price, at the closing bid price. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
based upon quotes furnished by independent sources and are valued at the
last bid price in the case of equity securities and in the case of debt
obligations, the mean between the last bid and asked prices. Securities for
which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and option contracts
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
generally will be valued 15 minutes after the close of the customary trading
session of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Covered Call Options - The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset
and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement with AIM, the Fund has
agreed to pay AIM a fee for costs incurred in providing accounting services
and certain administrative services to the Fund and to reimburse AIM for
administrative services fees paid to insurance companies that have agreed to
provide administrative services to the Fund. For the six months ended June 30,
2000, the Fund paid AIM $2,660,343 of which AIM retained $82,352 for
accounting services provided.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and trustees of the Trust are officers of AIM and AIM
Distributors.
During the six months ended June 30, 2000, the Fund paid legal fees of $3,462
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3 - INDIRECT EXPENSES
For the six months ended June 30, 2000, the Fund received reductions in
custodian fees of $2,367 under an expense offset arrangement which resulted in
a reduction of the Fund's total expenses of $2,367.
NOTE 4 - TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, in mutual fund shares in accordance with a deferred compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A.. The Fund may borrow up to the lesser
of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings.
The Fund and other funds advised by AIM which are parties to the line of credit
may borrow on a first come, first served basis. During the six months ended June
30, 2000, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
NOTE 6 - CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2000
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------
<S> <C> <C>
Beginning of period -- $ --
-------------------------------------------
Written 7,500 4,210,934
-------------------------------------------
Closed (2,119) (1,461,184)
-------------------------------------------
Exercised (2,131) (749,192)
-------------------------------------------
Expired (2,750) (1,702,568)
-------------------------------------------
End of period 500 $ 297,990
===========================================
</TABLE>
Open call option contracts written at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
JUNE 30,
CONTRACT STRIKE NUMBER OF PREMIUMS 2000 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
----- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kohl's Corp. Jul-00 $53 500 $297,990 $228,125 $69,865
==========================================================================
</TABLE>
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 2000 was
$1,281,392,566 and $1,029,828,800, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of June 30, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $788,843,149
---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (32,894,106)
---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $755,949,043
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,992,131,446.
NOTE 8 - SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 2000 and the
year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 9,970,233 $314,764,915 27,157,175 $712,881,530
------------------------------------------------------------------------------
Issued as reinvestment of
dividends -- -- 704,177 20,266,226
------------------------------------------------------------------------------
Reacquired (1,234,950) (39,061,968) (3,653,912) (94,877,062)
------------------------------------------------------------------------------
8,735,283 $275,702,947 24,207,440 $638,270,694
==============================================================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
NOTE 9 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MAY 2, 1994
ENDED YEAR ENDED DECEMBER 31, MONTHS ENDED (DATE OPERATIONS
JUNE 30, ------------------------------------------ DECEMBER 31, COMMENCED) TO
2000 1999(a) 1998(a) 1997 1996 1995 JANUARY 31, 1995
---------- ---------- ---------- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
----------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.01) 0.06 0.26 0.13 0.16 0.14 0.11
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.36 8.05 4.95 3.74 2.36 3.11 (0.02)
----------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.35 8.11 5.21 3.87 2.52 3.25 0.09
----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
----------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.11) (0.24) (0.02) (0.03) (0.41) --
----------------------------------------------------------------------------------------------------------------------
Total distributions -- (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 31.94 $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
======================================================================================================================
Total return(b) 1.11% 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
======================================================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $2,748,828 $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
======================================================================================================================
Ratio of expenses to
average net assets 0.85%(c) 0.77% 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
======================================================================================================================
Ratio of net investment
income (loss) to
average net assets (0.02)%(c) 0.22% 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
======================================================================================================================
Portfolio turnover rate 41% 93% 140% 135% 148% 145% 96%
======================================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are annualized and based on average net assets of $2,590,887,455.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.72% (annualized).
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM V.I. Growth and Income Fund (the
"Fund"), a portfolio of AIM Variable Insurance Funds, Inc. (the "Company"),
reorganized as AIM Variable Insurance Funds, a Delaware business trust (the
"Trust"), was held on April 10, 2000. The meeting was held for the following
purposes:
(1)* To elect ten directors as follows: Charles T. Bauer, Bruce L. Crockett,
Owen Daly II, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling,
Robert H. Graham, Prema Mathai-Davis, Lewis F. Pennock and Louis S.
Sklar.
(2)* To approve an Agreement and Plan of Reorganization which provided for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To approve changing the investment objective of the Fund so that it is
non-fundamental.
(6) To ratify the selection of Tait, Weller & Baker as independent accountants
of the Fund for the fiscal year ending in 2000.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES VOTES WITHHELD/
DIRECTORS/MATTER FOR AGAINST ABSTENTIONS
------------------------------------- -----------------------------
<C> <S> <C> <C> <C>
(1)* Charles T. Bauer................... 336,558,177 N/A 9,129,703
Bruce L. Crockett.................. 337,513,648 N/A 8,174,232
Owen Daly II....................... 336,754,219 N/A 8,933,661
Edward K. Dunn, Jr. ............... 337,481,093 N/A 8,206,787
Jack M. Fields..................... 337,574,973 N/A 8,112,907
Carl Frischling.................... 337,177,860 N/A 8,510,020
Robert H. Graham................... 337,319,248 N/A 8,368,632
Prema Mathai-Davis................. 337,262,043 N/A 8,425,837
Lewis F. Pennock................... 337,440,897 N/A 8,246,983
Louis S. Sklar..................... 337,447,894 N/A 8,239,986
(2)* Approval of an Agreement and Plan
of Reorganization which provided
for the reorganization of AIM
Variable Insurance Funds, Inc. as a
Delaware business trust............ 318,213,444 8,412,798 19,061,638
(3) Approval of a new Investment
Advisory Agreement................. 71,570,581 1,924,160 5,027,462
(4)(a) Change to Fundamental Restriction
on Issuer Diversification.......... 69,168,631 2,869,760 6,483,812
(4)(b) Change to Fundamental Restriction
on Borrowing Money and Issuing
Senior Securities.................. 68,609,341 3,358,060 6,554,802
(4)(c) Change to Fundamental Restriction
on Underwriting Securities......... 69,643,515 2,827,728 6,050,960
(4)(d) Change to Fundamental Restriction
on Industry Concentration.......... 69,607,197 2,745,331 6,169,675
(4)(e) Change to Fundamental Restriction
on Purchasing or Selling Real
Estate............................. 68,993,727 3,421,142 6,107,334
(4)(f) Change to Fundamental Restriction
on Purchasing or Selling
Commodities........................ 68,919,694 3,520,901 6,081,608
(4)(g) Change to Fundamental Restriction
on Making Loans.................... 68,539,395 3,819,587 6,163,221
(4)(h) Elimination of Fundamental
Restriction on Investing for the
Purpose of Control................. 68,289,716 3,771,235 6,461,252
(5) Approval of changing the Investment
Objective so that it is Non-
Fundamental........................ 67,976,340 3,792,344 6,753,519
(6) Ratification of the selection of
Tait, Weller & Baker as Independent
Accountants of the Fund............ 72,850,056 1,017,822 4,654,325
</TABLE>
------
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Variable Insurance Funds, Inc.
AIM V.I. GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<S> <C> <C> <C>
TRUSTEES, OFFICERS, AND BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
OTHER SERVICE PROVIDERS Charles T. Bauer
OF AIM VARIABLE INSURANCE Director and Chairman Charles T. Bauer 11 Greenway Plaza
FUNDS, INC. A I M Management Group Inc. Chairman Suite 100
Houston, TX 77046
Bruce L. Crockett Robert H. Graham (800) 347-1919
Director President
ACE Limited; INVESTMENT ADVISOR
Formerly Director, President, and Carol F. Relihan
Chief Executive Officer Senior Vice President and A I M Advisors, Inc.
COMSAT Corporation Secretary 11 Greenway Plaza
Suite 100
Owen Daly II Gary T. Crum Houston, TX 77046
Formerly Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT AND CUSTODIAN
Dana R. Sutton
Edward K. Dunn Jr. Vice President and State Street Bank and Trust Company
Chairman, Mercantile Mortgage Corp.; Treasurer 225 Franklin Street
Formerly Vice Chairman, President Boston, MA 02110
and Chief Operating Officer, Robert G. Alley
Mercantile-Safe Deposit & Trust Co.; Vice President COUNSEL TO THE FUNDS
and President, Mercantile Bankshares
Stuart W. Coco Freedman, Levy, Kroll &
Jack Fields Vice President Simonds
Chief Executive Officer 1050 Conn. Avenue, N.W.
Texana Global Inc. and Twenty First Melville B. Cox Washington, D.C. 20036
Century Group, Inc.; Vice President
Formerly, Member of the COUNSEL TO THE TRUSTEES
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
Director, President and Chief Assistant Vice President A I M Distributors, Inc.
Executive Officer and Assistant Treasurer 11 Greenway Plaza
A I M Management Group Inc. Suite 100
Sheri Morris Houston, TX 77046
Prema Mathai-Davis Assistant Vice President
Formerly, Chief Executive Officer, and Assistant Treasurer
YMCA of the U.S.A.
Renee A. Friedli
Lewis F. Pennock Assistant Secretary
Attorney
P. Michelle Grace
Louis S. Sklar Assistant Secretary
Executive Vice President, Development
and Operations, Nancy L. Martin
Hines Interests Assistant Secretary
Limited Partnership
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
</TABLE>
<PAGE>
SEMIANNUAL REPORT/JUNE 30, 2000
AIM V.I. VALUE FUND
AIM V.I. Value Fund seeks long-term capital growth by investing primarily in
undervalued stocks. Income is a secondary objective.
[Graphic Omitted]
FUNDS(R)
<PAGE>
SEMIANNUAL REPORT/MANAGERS' OVERVIEW
<TABLE>
<CAPTION>
<S> <C> <C>
AIM V.I. VALUE FUND
FUND WEATHERS VOLATILE MARKET
HOW DID AIM V.I. VALUE FUND PERFORM OVER IN THIS ENVIRONMENT, | at good prices were difficult to find over
THE REPORTING PERIOD? WE TENDED TO FOCUS MORE ON | the past few months. In this environment,
AIM V.I. Value Fund reported flat results EARNINGS GROWTH. | we tended to focus more on earnings
for the six months ended June 30, 2000, _________________________________________| growth.
with a -0.27% return. The fund's To concentrate on our best-performing
performance was in line with that of its WHAT WERE MARKET CONDITIONS LIKE companies, we kept the number of holdings
benchmark, the S&P 500, which produced a DURING THE PAST SIX MONTHS? at about 50. The fund's major sectors
return of -0.43% during the same time The past six months saw extreme market continued to be broadcasting, technology,
frame. volatility. During the first three months retail and finance.
While the fund and its benchmark were of 2000, market indexes such as the Dow
both relatively flat on a six-month basis, and the Nasdaq rose to new heights in a BESIDES MARKET VOLATILITY, WHAT OTHER
AIM V.I. Value Fund beat the S&P 500's rally dominated by technology stocks. But FACTORS AFFECTED FUND PERFORMANCE?
performance over the year ended June 30, near the end of March, market sentiment Our holdings in cable TV hurt performance
2000. The fund reported average annual soured as investors worried whether tech in the second quarter of 2000. Cable-TV
total returns of 13.20%, compared to the stocks were overpriced. A sharp sell-off stocks such as fund holdings Comcast and
7.24% return of the S&P 500. in the technology sector ensued, Cox Communications took a hit near the end
particularly for Internet companies with of the reporting period because of
no earnings. concerns over cash-flow growth and
Interest-rate concerns also roiled the competition from satellite companies.
FUND PERFORMANCE markets during the reporting period. The Even though short-term performance
Federal Reserve Board (the Fed) continued disappointed, we believe that the long-
AVERAGE ANNUAL TOTAL RETURNS to raise interest rates in an effort to term prospects for these firms and cable
slow the economy and prevent inflation. stocks in general are strong, especially
As of 6/30/00 In May, the Fed raised the federal funds as cable companies enter the telephone
rate to 6.50%, its highest level in nine business.
------------------------------------------ years. Since June 1999, the Fed has In addition, the fund was under-
Inception (5/5/93) 21.26% increased interest rates six times for a weighted in health-care stocks,
------------------------------------------ total of 1.75%. At its June 2000 meeting, particularly drug manufacturers, an area
5 years 21.82 the Fed chose to leave rates unchanged but that performed well during the past six
------------------------------------------ hinted that more increases may occur later months. We were cautious about this
1 year 13.20 in the summer. industry because of political risks:
For all the intense market activity of Congress and President Clinton continue
RESULTS OF A $10,000 INVESTMENT the past six months, the S&P 500 ended the to dicker over how to inject a Medicare
period flat, with the Dow down 8.44% and drug benefit into the current system. In
5/5/93-6/30/00 the Nasdaq down 2.54%. addition, drug companies face increasing
pressure from consumers to lower costs.
AIM V.I. Value Fund......... $39,718 HOW DID YOU MANAGE THE FUND DURING
S&P 500 Index............... $38,261 THESE CONDITIONS? WHAT STOCKS PERFORMED WELL FOR
Volatility hurt the fund's performance THE FUND?
Index's performance figures are for the during the second quarter of 2000. The Our semiconductor holdings such as Analog
period 4/30/93 through 6/30/00. Past fund invests in companies with strong Devices and Applied Materials benefited
performance cannot guarantee comparable earnings growth and reasonable stock from strong demand for computer chips,
future results. MARKET VOLATILITY CAN prices; however, good companies selling increased earnings and rising stock
SIGNIFICANTLY IMPACT SHORT-TERM prices. Cellular-phone maker Nokia and
PERFORMANCE. RESULTS OF AN INVESTMENT mobile-phone service provider Nextel also
MADE TODAY MAY DIFFER SUBSTANTIALLY reported excellent earnings, propelled by
FROM THE HISTORICAL PERFORMANCE SHOWN.
AIM V.I. Value Fund
</TABLE>
<PAGE>
SEMIANNUAL REPORT/MANAGERS' OVERVIEW
<TABLE>
<CAPTION>
<S> <C> <C>
PORTFOLIO COMPOSITION
As of 6/30/00, based on total net assets
TOP 10 HOLDINGS TOP 10 INDUSTRIES
------------------------------------------ 1. Broadcasting (Television, Radio
1. Comcast Corp.-Class A 5.95% & Cable) 10.16%
------------------------------------------ ------------------------------------------
2. Nextel Communications, Inc.- 2. Computers (Hardware) 8.19
Class A 5.60 ------------------------------------------
------------------------------------------ 3. Communications Equipment 7.12
3. Nokia Oyj-ADR (Finland) 4.89 ------------------------------------------
------------------------------------------ 4. Retail (General Merchandise) 6.35
4. Target Corp. 4.38 ------------------------------------------
------------------------------------------ 5. Telecommunications (Cellular/
5. Cox Communications, Inc.-Class A 4.21 Wireless) 5.60
------------------------------------------ ------------------------------------------
6. Tyco International Ltd. (Bermuda)3.89 6. Electronics (Semiconductors) 4.61
------------------------------------------ ------------------------------------------
7. Morgan Stanley Dean Witter & Co. 3.47 7. Investment Banking/Brokerage 4.21
------------------------------------------ ------------------------------------------
8. Apple Computer, Inc. 3.45 8. Equipment (Semiconductor) 4.03
------------------------------------------ ------------------------------------------
9. Analog Devices, Inc. 2.93 9. Manufacturing (Diversified) 3.89
------------------------------------------ ------------------------------------------
10. First Data Corp. 2.92 10. Services (Data Processing) 3.68
------------------------------------------ ------------------------------------------
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
THE NEAR-TERM OUTLOOK FOR STOCKS | vindicating the company. The diversified ------------------------------------------
COULD DEPEND TO A LARGE EXTENT | corporation has interests in electronics,
ON THE FED'S ABILITY TO BRING THE | plastics, valves and pipes, and fire and The performance figures shown represent
ECONOMY TO A "SOFT LANDING." | security products. AIM V.I. Value Fund; they are not intended
________________________________________| to reflect actual annuity values, and they
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM? do not reflect charges at the separate-
The near-term outlook for stocks could account level which (if applied) would
depend to a large extent on the Fed's lower the performance results.
the explosive growth of the wireless- ability to bring the economy to a "soft
telecommunications market. landing." There are signs that the economy The fund's performance figures are
We also continued to hold Target could be slowing. Consequently, the Fed historical, and they reflect the
because the company shows strong earnings may wind down its tightening cycle, reinvestment of distributions and changes
growth, and its stock is selling at a although the central bank could approve in net asset value.
reasonable price. Formerly Dayton Hudson, one or two more rate hikes in the months
the company changed its name in January to ahead. If the Fed succeeds in slowing The fund's investment return and principal
Target. We anticipate that the name change economic growth to a more sustainable rate value will fluctuate, so fund shares, when
will benefit the stock as more investors and in keeping inflation under control, it redeemed, may be worth more or less than
connect the stock name with the successful could prolong the current record economic their original cost.
retailer. expansion. Such an environment could prove
Another long-time fund holding, Tyco favorable for stocks. The unmanaged Dow Jones Industrial Average
International, continues to show earnings However, uncertainty over the Fed's (the Dow) is a price-weighted average of
growth. After the end of the reporting actions and other factors could perpetuate 30 actively traded primarily industrial
period, its stock price jumped on news the volatility that has characterized stocks.
that the Securities and Exchange markets in recent months. In such an
Commission had dropped its inquiry into environment, investors would be well The unmanaged National Association of
Tyco's accounting practices, essentially advised to take a long-term perspective Securities Dealers Automated Quotation
on their investment. System Composite Index (the Nasdaq) is a
market-value-weighted index comprising all
domestic and non-U.S. based common stocks
listed on the Nasdaq system. It includes
more than 5,000 companies, and it is often
considered representative of the small and
medium-sized company stock universe. While
it includes many small and mid-sized
company stocks, large capitalization
companies tend to dominate the index.
The unmanaged Standard & Poor's Composite
Index of 500 Stocks (the S&P 500)
represents the performance of the stock
market.
An investment cannot be made in an index.
Index results include reinvested dividends.
</TABLE>
AIM V.I. VALUE FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 75.46%
BANKS (MONEY CENTER) - 1.73%
Chase Manhattan Corp. (The) 1,065,000 $ 49,056,562
--------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 10.16%
Comcast Corp. - Class A(a) 4,170,000 168,885,000
--------------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 2,624,000 119,556,000
--------------------------------------------------------------------------
288,441,000
--------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 8.19%
Apple Computer, Inc.(a) 1,870,000 97,941,250
--------------------------------------------------------------------------
Dell Computer Corp.(a) 1,191,700 58,765,706
--------------------------------------------------------------------------
Gateway, Inc.(a) 693,100 39,333,425
--------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 401,000 36,465,937
--------------------------------------------------------------------------
232,506,318
--------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.35%
EMC Corp.(a) 107,000 8,232,312
--------------------------------------------------------------------------
Lexmark International Group, Inc. - Class A(a) 871,700 58,621,825
--------------------------------------------------------------------------
66,854,137
--------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 1.87%
At Home Corp. - Series A(a) 1,500,000 31,125,000
--------------------------------------------------------------------------
Citrix Systems, Inc.(a) 188,000 3,560,250
--------------------------------------------------------------------------
Oracle Corp.(a) 145,000 12,189,062
--------------------------------------------------------------------------
Unisys Corp.(a) 428,000 6,232,750
--------------------------------------------------------------------------
53,107,062
--------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.74%
Solectron Corp.(a) 505,000 21,146,875
--------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 3.39%
Analog Devices, Inc.(a) 1,096,200 83,311,200
--------------------------------------------------------------------------
Texas Instruments Inc. 187,000 12,844,562
--------------------------------------------------------------------------
96,155,762
--------------------------------------------------------------------------
ENTERTAINMENT - 0.12%
Time Warner Inc. 45,700 3,473,200
--------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 4.03%
Applied Materials, Inc.(a) 807,100 73,143,438
--------------------------------------------------------------------------
Teradyne, Inc.(a) 562,300 41,329,050
--------------------------------------------------------------------------
114,472,488
--------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.77%
American Express Co. 753,000 39,250,125
--------------------------------------------------------------------------
Citigroup Inc. 652,000 39,283,000
--------------------------------------------------------------------------
78,533,125
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED) - 1.41%
Johnson & Johnson 393,300 $ 40,067,438
-----------------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR
PHARMACEUTICALS) - 2.29%
Pfizer Inc. 1,356,600 65,116,800
-----------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES) - 1.97%
Guidant Corp.(a) 1,133,000 56,083,500
-----------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.11%
Colgate-Palmolive Co. 110,000 6,586,250
-----------------------------------------------------------------------------
Kimberly-Clark Corp. 434,000 24,900,750
-----------------------------------------------------------------------------
31,487,000
-----------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.78%
American International Group, Inc. 632,000 74,260,000
-----------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 85,000 4,754,688
-----------------------------------------------------------------------------
79,014,688
-----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 4.21%
Merrill Lynch & Co., Inc. 184,000 21,160,000
-----------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 1,183,000 98,484,750
-----------------------------------------------------------------------------
119,644,750
-----------------------------------------------------------------------------
NATURAL GAS - 1.52%
Williams Cos., Inc. (The) 1,038,000 43,271,625
-----------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.38%
Schlumberger Ltd. 145,000 10,820,625
-----------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.25%
Weyerhaeuser Co. 162,000 6,966,000
-----------------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.36%
Eastman Kodak Co. 172,600 10,269,700
-----------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.06%
Lowe's Cos., Inc. 39,500 1,621,969
-----------------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 2.11%
Best Buy Co., Inc.(a) 946,000 59,834,500
-----------------------------------------------------------------------------
RETAIL (DRUG STORES) - 1.83%
Walgreen Co. 1,618,000 52,079,375
-----------------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 2.38%
Kroger Co. (The)(a) 1,108,000 24,445,250
-----------------------------------------------------------------------------
Safeway Inc.(a) 956,000 43,139,500
-----------------------------------------------------------------------------
67,584,750
-----------------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE) - 6.35%
Costco Wholesale Corp.(a) 1,700,000 $ 56,100,000
-------------------------------------------------------------------------------
Target Corp. 2,144,000 124,352,000
-------------------------------------------------------------------------------
180,452,000
-------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 1.82%
Omnicom Group Inc. 581,000 51,745,313
-------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 3.68%
Automatic Data Processing, Inc. 400,000 21,425,000
-------------------------------------------------------------------------------
First Data Corp. 1,672,000 82,973,000
-------------------------------------------------------------------------------
104,398,000
-------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 5.60%
Nextel Communications, Inc. - Class A(a) 2,600,000 159,087,500
-------------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $1,742,846,294) 2,143,292,062
-------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER
EQUITY INTERESTS - 12.32%
BERMUDA - 3.89%
Tyco International Ltd. (Manufacturing - Diversified) 2,330,000 110,383,750
-------------------------------------------------------------------------------
CANADA - 3.54%
360networks Inc. (Telecommunications - Long
Distance)(a) 162,300 2,475,075
-------------------------------------------------------------------------------
Celestica Inc. (Electronics - Semiconductors)(a) 701,000 34,787,125
-------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 927,500 63,301,875
-------------------------------------------------------------------------------
100,564,075
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINLAND - 4.89%
Nokia Oyj - ADR (Communications Equipment) 2,783,000 $ 138,976,063
--------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests
(Cost $195,746,424) 349,923,888
--------------------------------------------------------------------------
MONEY MARKET FUNDS - 12.62%
STIC Liquid Assets Portfolio(b) 179,242,405 179,242,405
--------------------------------------------------------------------------
STIC Prime Portfolio(b) 179,242,405 179,242,405
--------------------------------------------------------------------------
Total Money Market Funds
(Cost $358,484,810) 358,484,810
--------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.40%
(Cost $2,297,077,528) 2,851,700,760
--------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.40%) (11,533,376)
--------------------------------------------------------------------------
NET ASSETS - 100.00% $2,840,167,384
==========================================================================
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. VALUE FUND
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $2,297,077,528) $2,851,700,760
------------------------------------------------------------------------
Receivables for:
Investments sold 50,005,091
------------------------------------------------------------------------
Fund shares sold 4,117,476
------------------------------------------------------------------------
Dividends 1,937,380
------------------------------------------------------------------------
Investment for deferred compensation plan 39,724
------------------------------------------------------------------------
Other assets 124,235
------------------------------------------------------------------------
Total assets 2,907,924,666
------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 60,570,394
------------------------------------------------------------------------
Fund shares reacquired 485,515
------------------------------------------------------------------------
Foreign currency contracts - closed 1,877,130
------------------------------------------------------------------------
Foreign currency contracts outstanding 1,519,487
------------------------------------------------------------------------
Deferred compensation plan 39,724
------------------------------------------------------------------------
Accrued advisory fees 1,394,233
------------------------------------------------------------------------
Accrued administrative services fees 1,782,203
------------------------------------------------------------------------
Accrued trustees' fees 3,119
------------------------------------------------------------------------
Accrued operating expenses 85,477
------------------------------------------------------------------------
Total liabilities 67,757,282
------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,840,167,384
========================================================================
SHARES OUTSTANDING, $0.001 PAR VALUE PER SHARE:
Outstanding 85,000,452
========================================================================
Net asset value, offering and redemption price per share $ 33.41
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $103,785) $ 11,496,234
-----------------------------------------------------------------------------
EXPENSES:
Advisory fees 7,923,757
-----------------------------------------------------------------------------
Administrative services fee 2,581,721
-----------------------------------------------------------------------------
Custodian fees 119,068
-----------------------------------------------------------------------------
Trustees' fees 3,840
-----------------------------------------------------------------------------
Other 292,912
-----------------------------------------------------------------------------
Total expenses 10,921,298
-----------------------------------------------------------------------------
Less: Expenses paid indirectly (4,380)
-----------------------------------------------------------------------------
Net expenses 10,916,918
-----------------------------------------------------------------------------
Net investment income 579,316
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS AND OPTION
CONTRACTS
Net realized gain from:
Investment securities 112,298,575
-----------------------------------------------------------------------------
Foreign currency contracts 14,369,233
-----------------------------------------------------------------------------
Option contracts written 184,917
-----------------------------------------------------------------------------
126,852,725
-----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (131,660,860)
-----------------------------------------------------------------------------
Foreign currencies (69)
-----------------------------------------------------------------------------
Foreign currency contracts (7,198,624)
-----------------------------------------------------------------------------
(138,859,553)
-----------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies,
foreign currency contracts and option contracts (12,006,828)
-----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ (11,427,512)
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2000 and the year ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, 2000 1999
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 579,316 $ 3,440,737
------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, foreign currency
contracts and option contracts 126,852,725 111,811,218
------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities,
foreign currencies, foreign currency
contracts and option contracts (138,859,553) 360,547,238
------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (11,427,512) 475,799,193
------------------------------------------------------------------------------
Distributions to shareholders from net
investment income -- (6,235,364)
------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains -- (32,606,763)
------------------------------------------------------------------------------
Share transactions - net 468,228,325 725,025,960
------------------------------------------------------------------------------
Net increase in net assets 456,800,813 1,161,983,026
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,383,366,571 1,221,383,545
------------------------------------------------------------------------------
End of period $2,840,167,384 $2,383,366,571
==============================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,048,218,292 $1,579,989,967
------------------------------------------------------------------------------
Undistributed net investment income 3,962,918 3,383,602
------------------------------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
foreign currency contracts and option
contracts 234,882,834 108,030,109
------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, foreign
currency contracts and option contracts 553,103,340 691,962,893
------------------------------------------------------------------------------
$2,840,167,384 $2,383,366,571
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Value Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds (the "Trust"). The Trust is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. At a meeting held on February 3, 2000, the
Board of Directors of AIM Variable Insurance Funds, Inc. approved an Agreement
and Plan of Reorganization which was approved by shareholders of the Fund on
April 10, 2000. Effective May 1, 2000, pursuant to the Agreement and Plan of
Reorganization, AIM Variable Insurance Funds, Inc. was reorganized from a
Maryland Corporation to a Delaware business trust. Matters affecting each
portfolio will be voted on exclusively by the shareholders of such portfolio.
The assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to
achieve long-term growth of capital. Income is a secondary objective.
The preparation of 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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of
the customary trading session on the exchange where the security is
principally traded, or lacking any sales on a particular day, the security
is valued at the closing bid price on that day. Each security reported on
the NASDAQ National Market System is valued at the last sales price as of
the close of the customary trading session on the valuation date or absent
a last sales price, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the
above methods are valued based upon quotes furnished by independent
sources and are valued at the last bid price in the case of equity
securities and in the case of debt obligations, the mean between the last
bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and option contracts
generally will be valued 15 minutes after the close of the customary
trading session of the New York Stock Exchange ("NYSE").
AIM V.I. VALUE FUND
<PAGE>
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the
customary trading session of the NYSE which would not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Trustees.
B. Securities Transactions and Investment Income - Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for the portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between currencies. The Fund may also enter into a foreign
currency contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
Outstanding foreign currency contracts at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE CURRENCY DELIVER RECEIVE VALUE (DEPRECIATION)
---------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/29/00 CAD 92,300,000 $ 62,369,475 $ 62,542,020 $ (172,545)
08/28/00 EUR 97,850,000 92,326,752 93,583,251 (1,256,499)
10/03/00 EUR 54,500,000 52,148,700 52,239,143 (90,443)
-------------------------------------------------------------------------
244,650,000 $206,844,927 $208,364,414 $(1,519,487)
=========================================================================
</TABLE>
G. Covered Call Options - The Fund may write call options, on a covered
basis; that is, the Fund will own the underlying security. Options written
by the Fund normally will have expiration dates between three and nine
months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a
written call option expires on the stipulated expiration date, or if the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or a loss if the closing purchase transaction exceeds the premium
received when the option was written) without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option is extinguished. If a written option is exercised, the Fund
realizes a gain or a loss from the sale of the underlying security and the
proceeds of the sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement with AIM, the Fund has
agreed to pay AIM a fee for costs incurred in providing accounting services
and certain administrative services to the Fund and to reimburse AIM for
administrative services fees paid to insurance companies that have agreed to
provide administrative services to the Fund. For the six months ended June 30,
2000, the Fund paid AIM $2,581,721 of which AIM retained $81,468 for
accounting services provided.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and trustees of the Trust are officers of AIM and AIM
Distributors.
During the six months ended June 30, 2000, the Fund paid legal fees of $3,464
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Board of Trustees. A member of that firm is a trustee of the Trust.
AIM V.I. VALUE FUND
<PAGE>
NOTE 3 - INDIRECT EXPENSES
For the six months ended June 30, 2000, the Fund received reductions in
custodian fees of $4,380 under an expense offset arrangement which resulted in
a reduction of the Fund's total expenses of $4,380.
NOTE 4 - TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by
a trustee, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A.. The Fund may borrow up to the lesser
of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings.
The Fund and other funds advised by AIM which are parties to the line of
credit may borrow on a first come, first served basis. During the six months
ended June 30, 2000, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. The
commitment fee is allocated among the funds based on their respective average
net assets for the period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 2000 was $1,163,996,153 and $776,686,706, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of June 30, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $607,448,954
---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (54,997,717)
---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $552,451,237
===========================================================================
</TABLE>
Cost of investments for tax purposes is $2,299,249,523.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the six months ended June 30, 2000
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
--------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- $ --
----------------------------------------------------------------------------
Written 900 184,917
----------------------------------------------------------------------------
Expired (900) (184,917)
============================================================================
End of period -- $ --
============================================================================
</TABLE>
NOTE 8 - SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 2000 and
the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold 17,185,455 $ 581,596,937 30,095,501 $ 884,324,432
-----------------------------------------------------------------------------
Issued as reinvestment
of dividends -- -- 1,227,239 38,842,126
-----------------------------------------------------------------------------
Reacquired (3,330,806) (113,368,612) (6,712,560) (198,140,598)
-----------------------------------------------------------------------------
13,854,649 $ 468,228,325 24,610,180 $ 725,025,960
=============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
JUNE 30, ------------------------------------------ DECEMBER 31, JANUARY 31,
2000(a) 1999(a) 1998 1997 1996 1995 1995
---------- ---------- ---------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 33.50 $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
---------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.01 0.06 0.09 0.08 0.30 0.11 0.10
---------------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) (0.10) 7.76 6.59 4.05 2.09 4.18 (0.35)
---------------------------------------------------------------------------------------------------------------
Total from investment
operations (0.09) 7.82 6.68 4.13 2.39 4.29 (0.25)
---------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.09) (0.13) (0.19) (0.10) (0.01) (0.09)
---------------------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.48) (1.13) (0.59) (0.92) -- --
---------------------------------------------------------------------------------------------------------------
Total distributions -- (0.57) (1.26) (0.78) (1.02) (0.01) (0.09)
---------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 33.41 $ 33.50 $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83
===============================================================================================================
Total return(b) (0.27)% 29.90% 32.41% 23.69% 15.02% 36.25% (2.03)%
===============================================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $2,840,167 $2,383,367 $1,221,384 $690,841 $369,735 $257,212 $109,257
===============================================================================================================
Ratio of expenses to
average net assets 0.84%(c) 0.76% 0.66% 0.70% 0.73% 0.75%(d) 0.82%
===============================================================================================================
Ratio of net investment
income to average net
assets 0.04%(c) 0.20% 0.68% 1.05% 2.00% 1.11%(d) 1.17%
===============================================================================================================
Portfolio turnover rate 32% 62% 100% 127% 129% 145% 143%
===============================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are annualized and based on average net assets of $2,629,984,948.
(d) Annualized.
AIM V.I. VALUE FUND
<PAGE>
PROXY RESULTS (UNAUDITED)
A Special Meeting of Shareholders of AIM V.I. Value Fund (the "Fund"), a
portfolio of AIM Variable Insurance Funds, Inc. (the "Company"), reorganized
as AIM Variable Insurance Funds, a Delaware business trust (the "Trust"), was
held on April 10, 2000. The meeting was held for the following purposes:
(1)* To elect ten directors as follows: Charles T. Bauer, Bruce L. Crockett,
Owen Daly II, Edward K. Dunn, Jr., Jack M. Fields, Carl Frischling,
Robert H. Graham, Prema Mathai-Davis, Lewis F. Pennock and Louis S.
Sklar.
(2)* To approve an Agreement and Plan of Reorganization which provided for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of the Fund.
(5) To approve changing the investment objective of the Fund and making it
non-fundamental.
(6) To ratify the selection of Tait, Weller & Baker as independent accountants
of the Fund for the fiscal year ending in 2000.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
VOTES VOTES WITHHELD/
DIRECTORS/MATTER FOR AGAINST ABSTENTIONS
------------------------------------- -----------------------------
<C> <S> <C> <C> <C>
(1)* Charles T. Bauer................... 336,558,177 N/A 9,129,703
Bruce L. Crockett.................. 337,513,648 N/A 8,174,232
Owen Daly II....................... 336,754,219 N/A 8,933,661
Edward K. Dunn, Jr. ............... 337,481,093 N/A 8,206,787
Jack M. Fields..................... 337,574,973 N/A 8,112,907
Carl Frischling.................... 337,177,860 N/A 8,510,020
Robert H. Graham................... 337,319,248 N/A 8,368,632
Prema Mathai-Davis................. 337,262,043 N/A 8,425,837
Lewis F. Pennock................... 337,440,897 N/A 8,246,983
Louis S. Sklar..................... 337,447,894 N/A 8,239,986
(2)* Approval of an Agreement and Plan
of Reorganization which provided
for the reorganization of AIM
Variable Insurance Funds, Inc. as a
Delaware business trust............ 318,213,444 8,412,798 19,061,638
(3) Approval of a new Investment
Advisory Agreement................. 64,733,758 2,205,729 5,113,810
(4)(a) Change to Fundamental Restriction
on Issuer Diversification.......... 62,782,614 2,813,455 6,457,228
(4)(b) Change to Fundamental Restriction
on Borrowing Money and Issuing
Senior Securities.................. 62,191,461 3,539,461 6,322,375
(4)(c) Change to Fundamental Restriction
on Underwriting Securities......... 63,471,362 2,702,293 5,879,642
(4)(d) Change to Fundamental Restriction
on Industry Concentration.......... 63,583,770 2,670,769 5,798,758
(4)(e) Change to Fundamental Restriction
on Purchasing or Selling Real
Estate............................. 62,652,287 3,322,826 6,078,184
(4)(f) Change to Fundamental Restriction
on Purchasing or Selling
Commodities........................ 62,555,004 3,535,659 5,962,634
(4)(g) Change to Fundamental Restriction
on Making Loans.................... 62,377,925 3,654,650 6,020,722
(4)(h) Elimination of Fundamental
Restriction on Investing for the
Purpose of Control................. 62,190,684 3,602,146 6,260,467
(5) Approval of changing the Investment
Objective and Making it Non-
Fundamental........................ 61,885,484 3,747,177 6,420,636
(6) Ratification of the selection of
Tait, Weller & Baker as Independent
Accountants of the Fund............ 66,486,391 986,590 4,580,316
</TABLE>
------
* Proposals 1 and 2 required approval by a combined vote of all of the
portfolios of AIM Variable Insurance Funds, Inc.
AIM V.I. VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TRUSTEES, OFFICERS, AND BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
OTHER SERVICE PROVIDERS Charles T. Bauer
OF AIM VARIABLE INSURANCE Director and Chairman Charles T. Bauer 11 Greenway Plaza
FUNDS, INC. A I M Management Group Inc. Chairman Suite 100
Houston, TX 77046
Bruce L. Crockett Robert H. Graham (800) 347-1919
Director President
ACE Limited; INVESTMENT ADVISOR
Formerly Director, President, and Carol F. Relihan
Chief Executive Officer Senior Vice President and A I M Advisors, Inc.
COMSAT Corporation Secretary 11 Greenway Plaza
Suite 100
Owen Daly II Gary T. Crum Houston, TX 77046
Formerly Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT AND CUSTODIAN
Dana R. Sutton
Edward K. Dunn Jr. Vice President and State Street Bank and Trust Company
Chairman, Mercantile Mortgage Corp.; Treasurer 225 Franklin Street
Formerly Vice Chairman, President Boston, MA 02110
and Chief Operating Officer, Robert G. Alley
Mercantile-Safe Deposit & Trust Co.; Vice President COUNSEL TO THE FUNDS
and President, Mercantile Bankshares
Stuart W. Coco Freedman, Levy, Kroll &
Jack Fields Vice President Simonds
Chief Executive Officer 1050 Conn. Avenue, N.W.
Texana Global Inc. and Twenty First Melville B. Cox Washington, D.C. 20036
Century Group, Inc.; Vice President
Formerly, Member of the COUNSEL TO THE TRUSTEES
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
Director, President and Chief Assistant Vice President A I M Distributors, Inc.
Executive Officer and Assistant Treasurer 11 Greenway Plaza
A I M Management Group Inc. Suite 100
Sheri Morris Houston, TX 77046
Prema Mathai-Davis Assistant Vice President
Formerly, Chief Executive Officer, and Assistant Treasurer
YMCA of the U.S.A.
Renee A. Friedli
Lewis F. Pennock Assistant Secretary
Attorney
P. Michelle Grace
Louis S. Sklar Assistant Secretary
Executive Vice President, Development
and Operations, Nancy L. Martin
Hines Interests Assistant Secretary
Limited Partnership
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
</TABLE>
<PAGE>
(This page left intentionally blank)
<PAGE>
--------------------------------------------------------------------------------
Janus|Aspen Series
--------------------------------------------------------------------------------
2000 SEMIANNUAL REPORT
Janus Aspen Growth Portfolio
[LOGO] JANUS
--------------------------------------------------------------------------------
<PAGE>
Janus|Aspen Growth Portfolio
[PHOTO]
Blaine Rollins
portfolio manager
For the six-month period ended June 30, 2000, Janus Aspen Growth Portfolio
returned 1.72% for its Institutional Shares, 1.52% for its Retirement Shares and
1.61% for its Service Shares. By comparison, the Portfolio's benchmark, the S&P
500 Index, declined (0.43%).(1)
Our success over this period occurred in the face of a tremendous amount of
volatility in U.S. equity markets. This was caused by uncertainty over how
strong the economy would remain and whether or not rate hikes by the Federal
Reserve could actually moderate economic growth. After three rate increases in
the first six months of the year, including a half-point boost in mid-May, some
signs of mellowing sprouted in early June, aided by rising oil prices. By its
late-June meeting, the Fed decided further tightening wasn't necessary.
Nonetheless, policymakers' continued wariness over low unemployment suggests
future rate hikes may be in store.
In this unpredictable market, it's tough to pinpoint clear winners, but the
stocks that have been extremely strong are those that continue to see solid
underlying demand for their products and services. Three of our semiconductor
holdings - Linear Technology, Maxim Integrated Products and Texas Instruments -
illustrate this. These companies have graduated to our top 15 holdings as a
result of huge demand for their chips. Practical applications for their chips
include wireless products, networking products and mobile computing devices such
as laptops and handhelds.
Efficiently run businesses also breed success, as we've seen in Viacom. After it
finalizes its merger with CBS in early May, we're expecting to see some real
cost and revenue synergies emerge. Advertising gains at MTV remain impressive,
and CBS Television Network has had some great ratings improvements, which also
has led to high advertising gains. We're anticipating much more cash flow from
the combined company and remain excited about its long-term future.
Our long-term position in Bank of New York also posted solid gains during the
period. The bulk of the company's revenues are found in the security processing
business, which has remained extremely strong, while its global credit exposure
is far smaller than most other banks. Because of allegations about laundering
money for Russian interests, the stock price temporarily dropped during the
period, so we increased our position and have since been rewarded by a
significant price appreciation. We've held this stock for eight years, so it was
easy to stick to our story and profit from our conviction.
Stories can change, as well, and we certainly aren't adverse to reacting when
that happens. After some of our pharmaceutical holdings made a decent move in
the market's turn to safety during the period, we reduced our exposure.
Uncertain data points out of Washington led us to believe drug pricing may come
under pressure, so we thought it best to move to the sidelines and wait for the
next opportunity.
It may be a while before we see strong opportunities in cruise line companies
like Royal Caribbean Cruises and Carnival, which have been very disappointing in
2000. In that industry, capacity additions have led to lower per-person revenue
expectations, and, in turn, the stocks have dropped dramatically. Also dragging
on the Portfolio's performance was McDonald's, which was hurt by slow product
introductions and by the strong dollar in its international business.
Over the next six months, we're expecting market volatility to continue as
uncertainty over the pace of economic growth lingers. Although we're seeing data
that says the economy is slowing down, it needs to translate into lower
inflationary pressures.
While the economy sorts itself out, we're focusing on uncovering companies that
are finding ways to grow their earnings faster than their peers and the rest of
the market. There are a lot of opportunities to invest in dynamic companies in
many different industries - not just technology. And once we find those
companies, it comes down to having conviction in the names you own - not just
owning the winners, but also having the patience to buy names cheaper and take
profits in companies where the fundamentals appear to be slowing.
By knowing our companies inside and out, and standing by them through volatile
times, we believe we can eliminate surprises and increase our potential for
delivering positive long-term results.
Thank you for your continued investment in Janus Aspen Growth Portfolio.
<TABLE>
<CAPTION>
Portfolio Asset Mix (% of Assets) June 30, 2000 December 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Equities 89.7% 89.4%
Foreign 9.3% 9.5%
Europe 6.2% 6.0%
Top 10 Equities 34.9% 33.0%
Number of Stocks 90 75
Cash, Cash Equivalents
& Fixed-Income Securities 10.3% 10.6%
--------------------------------------------------------------------------------
</TABLE>
(1) All returns include reinvested dividends.
Past performance does not guarantee future results.
Janus Aspen Series / June 30, 2000 1
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
For the Periods Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Institutional Shares (Inception Date 9/13/93)
<S> <C>
1 Year 25.54%
5 Year 26.98%
From Inception 22.63%
--------------------------------------------------------------------------------
S&P 500 Index
1 Year 7.24%
5 Year 23.80%
From Inception Date of Institutional Shares 20.85%
--------------------------------------------------------------------------------
Retirement Shares (Inception Date 5/1/97)
1 Year 24.97%
5 Year 26.37%
From Portfolio Inception 21.87%
--------------------------------------------------------------------------------
Service Shares (Inception Date 12/31/99)
1 Year 24.84%
5 Year 26.62%
From Portfolio Inception 22.24%
--------------------------------------------------------------------------------
</TABLE>
Returns shown for Retirement and Service Shares for periods prior to their
inception are derived from the historical performance of Institutional Shares,
adjusted to reflect the higher operating expenses of Retirement and Service
Shares.
The Portfolio's returns may have been positively impacted by buying technology
companies in a period favorable for these stocks.
(1) All returns reflect reinvested dividends. The Portfolio's securities may
differ significantly from the securities in the Index. Index returns do not
include taxes or operating expenses necessary to maintain a portfolio
consisting of the same securities that are in the Index. These returns do
not reflect the charges and expenses of any particular insurance product or
qualified plan. Investment return and principal value will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. The adviser voluntarily waived a portion of the Portfolio's expenses
during certain periods. Without such waiver, the Portfolio's total returns
for each class would have been lower. Past performance does not guarantee
future results.
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Common Stock - 89.6%
Aerospace and Defense - 0.4%
663,530 Lockheed Martin Corp. .......................... $ 16,463,838
Beverages - Non-Alcoholic - 0.3%
660,735 Coca-Cola Enterprises, Inc. .................... 10,778,240
Broadcast Services and Programming - 3.0%
2,822,280 AT&T Corp./Liberty Media Group - Class A* ...... 68,440,290
728,360 Clear Channel Communications, Inc.* ............ 54,627,000
123,067,290
Cable Television - 5.2%
256,190 Adelphia Communications Corp. - Class A* ....... 12,008,906
392,280 Charter Communications, Inc. - Class A* ........ 6,448,103
4,339,430 Comcast Corp. - Special Class A* ............... 175,746,915
4,885,741 Telewest Communications PLC*,** ................ 17,068,816
211,272,740
Casino Hotels - 0.4%
1,285,680 Park Place Entertainment Corp.* ................ 15,669,225
Cellular Telecommunications - 2.8%
810,000 Nextel Communications, Inc. - Class A* ......... 49,561,875
1,204 NTT DoCoMo, Inc.** ............................. 32,660,027
228,395 Sprint Corp./PCS Group* ........................ 13,589,503
123,983 VoiceStream Wireless Corp.* .................... 14,418,835
109,283 Winstar Communications, Inc.* .................. 3,701,962
113,932,202
Circuits - 5.9%
100,185 Integrated Device Technology, Inc.* ............ $ 5,998,577
1,912,800 Linear Technology Corp. ........................ 122,299,650
1,683,400 Maxim Integrated Products, Inc.* ............... 114,365,988
242,664,215
Commercial Banks - 0.2%
18,395 M&T Bank Corp. ................................. 8,277,750
Commercial Services - 0.6%
583,032 Paychex, Inc. .................................. 24,487,344
Computer Data Security - 1.9%
447,158 VeriSign, Inc.* ................................ 78,923,387
Computers - Memory Devices - 2.4%
1,103,625 EMC Corp.* ..................................... 84,910,148
108,057 VERITAS Software Corp.* ........................ 12,212,129
97,122,277
Computers - Micro - 2.5%
350,540 Apple Computer, Inc.* .......................... 18,359,532
911,435 Sun Microsystems, Inc.* ........................ 82,883,620
101,243,152
Cosmetics and Toiletries - 0.9%
600,175 Colgate-Palmolive Co. .......................... 35,935,478
Cruise Lines - 0.6%
467,315 Carnival Corp. ................................. 9,112,642
746,830 Royal Caribbean Cruises, Ltd. .................. 13,816,355
22,928,997
</TABLE>
2 Janus Aspen Series / June 30, 2000
<PAGE>
Janus|Aspen Growth Portfolio
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Data Processing and Management - 0.6%
448,070 Automatic Data Processing, Inc. ................ $ 23,999,749
Distribution and Wholesale - 0.8%
936,835 Costco Wholesale Corp.* ........................ 30,915,555
Diversified Financial Services - 0.2%
189,705 Household International, Inc. .................. 7,884,614
Diversified Operations - 2.8%
2,147,095 General Electric Co. ........................... 113,796,035
E-Commerce - 0.3%
194,165 eBay, Inc.* .................................... 10,545,587
Electronic Components - 0.9%
99,000 Murata Manufacturing Company, Ltd.** ........... 14,241,574
683,000 NEC Corp.** .................................... 21,496,764
35,738,338
Electronic Components - Semiconductors - 3.6%
82,490 Advanced Micro Devices, Inc.* .................. 6,372,353
311,110 Conexant Systems, Inc.* ........................ 15,127,724
53,160 PMC-Sierra, Inc.* .............................. 9,445,868
1,722,210 Texas Instruments, Inc. ........................ 118,294,299
149,240,244
Enterprise Software and Services - 1.5%
724,435 BEA Systems, Inc.* ............................. 35,814,255
250,903 i2 Technologies, Inc.* ......................... 26,160,558
61,974,813
Fiber Optics - 0.7%
61,335 E-Tek Dynamics, Inc.* .......................... 16,180,940
37,860 SDL, Inc.* ..................................... 10,797,199
26,978,139
Finance - Credit Card - 1.9%
1,511,340 American Express Co. ........................... 78,778,598
Finance - Investment Bankers/Brokers - 4.9%
3,329,351 Charles Schwab Corp. ........................... 111,949,427
755,750 Merrill Lynch & Company, Inc. .................. 86,911,250
198,860,677
Identification Systems and Devices - 1.0%
782,667 Symbol Technologies, Inc. ...................... 42,264,018
Instruments - Scientific - 0.9%
1,065,570 Dionex Corp.* .................................. 28,503,998
154,780 PE Corp./PE Biosystems Group ................... 10,196,133
38,700,131
Internet Content - 0.2%
67,900 Softbank Corp.** ............................... 9,241,456
Internet Software - 2.3%
374,015 America Online, Inc.* .......................... 19,729,291
649,030 Exodus Communications, Inc.* ................... 29,895,944
157,620 Inktomi Corp.* ................................. 18,638,565
255,195 TIBCO Software, Inc.* .......................... 27,365,676
95,629,476
Leisure and Recreation Products - 0.6%
2,838,283 EMI Group PLC** ................................ 25,781,260
Life and Health Insurance - 2.3%
606,395 John Hancock Financial Services, Inc.* ......... 14,363,982
3,051,293 Prudential PLC** ............................... 44,715,332
1,042,260 StanCorp Financial Group, Inc. ................. 33,482,603
92,561,917
Medical - Biomedical and Genetic - 0.8%
189,205 Genentech, Inc.* ............................... $ 32,543,260
Medical Instruments - 0.2%
175,190 Medtronic, Inc. ................................ 8,726,652
Money Center Banks - 2.8%
2,286,415 Bank of New York Company, Inc. ................. 106,318,297
219,997 Chase Manhattan Corp. .......................... 10,133,612
116,451,909
Multimedia - 10.2%
3,899,011 Time Warner, Inc. .............................. 296,324,836
1,796,870 Viacom, Inc. - Class B* ........................ 122,524,073
418,848,909
Networking Products - 3.4%
96,915 3Com Corp.* .................................... 5,584,727
2,137,238 Cisco Systems, Inc.* ........................... 135,848,190
141,432,917
Oil Companies - Integrated - 0.1%
99,005 Coastal Corp. .................................. 6,026,929
Optical Supplies - 0.5%
276,445 Allergan, Inc. ................................. 20,595,153
Pipelines - 3.3%
297,555 El Paso Energy Corp. ........................... 15,156,708
1,846,720 Enron Corp. .................................... 119,113,440
134,270,148
Publishing - Newspapers - 0.2%
256,330 New York Times Co. - Class A ................... 10,125,035
Radio - 1.2%
66,850 Hispanic Broadcasting Corp.* ................... 2,214,406
1,270,825 Infinity Broadcasting Corp. - Class A* ......... 46,305,686
48,520,092
Retail - Apparel and Shoe - 0.2%
292,945 Gap, Inc. ...................................... 9,154,531
Retail - Building Products - 0.9%
709,000 Home Depot, Inc. ............................... 35,405,688
Retail - Office Supplies - 0.6%
1,548,905 Staples, Inc.* ................................. 23,814,414
Retail - Restaurants - 2.5%
3,138,125 McDonald's Corp. ............................... 103,361,992
Savings/Loan/Thrifts - 0.3%
496,375 Washington Mutual, Inc. ........................ 14,332,828
Super-Regional Banks - 0.4%
274,150 Northern Trust Corp. ........................... 17,836,884
Telecommunication Equipment - 3.0%
296,197 Nokia Oyj** .................................... 15,176,122
1,941,872 Nokia Oyj (ADR)** .............................. 96,972,233
185,605 Nortel Networks Corp. - New York Shares ........ 12,667,541
124,815,896
Telecommunication Services - 2.7%
1,326,218 Cox Communications, Inc. - Class A* ............ 60,425,808
328,670 Level 3 Communications, Inc.* .................. 28,922,960
372,447 NTL, Inc.* ..................................... 22,300,264
111,649,032
Telephone - Integrated - 2.3%
2,609,617 Telefonica S.A.*,** ............................ 56,284,878
626,020 Telefonos de Mexico S.A. (ADR) ................. 35,761,393
92,046,271
</TABLE>
See Notes to Schedules of Investments.
Janus Aspen Series / June 30, 2000 3
<PAGE>
Janus|Aspen Growth Portfolio
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Television - 1.0%
410,385 Univision Communications, Inc. - Class A* ...... $ 42,474,848
Wireless Equipment - 0.4%
81,135 Aether Systems, Inc.* .......................... 16,632,675
--------------------------------------------------------------------------------
Total Common Stock (cost $2,856,535,693) ..................... 3,674,722,805
--------------------------------------------------------------------------------
Corporate Bonds - 0.7%
Broadcast Services and Programming - 0.1%
$ 1,475,000 AT&T Corp./Liberty Media Group, 4.00%
convertible mortgage backed bonds
due 11/15/29 ................................ 2,124,000
Telecommunication Services - 0.6%
13,707,000 Cox Communications, Inc., 3.00%
convertible subordinated debentures
due 3/14/30 ................................. 14,306,681
14,000,000 NTL, Inc., 5.75%
convertible subordinated notes
due 12/15/09+ ............................... 10,990,000
25,296,681
--------------------------------------------------------------------------------
Total Corporate Bonds (cost $29,800,906) ..................... 27,420,681
--------------------------------------------------------------------------------
Preferred Stock - 0.1%
Cellular Telecommunications - 0.1%
Winstar Communications, Inc:
22,140 Series D, convertible, 7.00% ................ 1,245,375
2,005 Series F, convertible, 7.25% ................ 1,969,913
--------------------------------------------------------------------------------
Total Preferred Stock (cost $3,858,792) ...................... 3,215,288
--------------------------------------------------------------------------------
Repurchase Agreement - 1.4%
$ 60,000,000 Morgan Stanley Dean Witter & Co., 6.80%
dated 6/30/00, maturing 7/3/00, to be
repurchased at $60,034,000 collateralized
by $68,461,553 in Fannie Mae, 0.65%-
10.25%, 1/1/06-6/1/30; $82,884,520 in
Freddie Mac, 0%-8.40%, 7/15/10-12/1/29;
with respective values of $22,579,571
and $38,643,644 (cost $60,000,000) .......... 60,000,000
--------------------------------------------------------------------------------
Short-Term Corporate Note - 2.9%
CIT Holdings Group, Inc.
120,000,000 6.84%, 7/3/00
(amortized cost $119,954,400) ............... 119,954,400
--------------------------------------------------------------------------------
U.S. Government Agencies - 6.0%
Federal Home Loan Bank System:
50,000,000 5.78%, 7/19/00 .............................. 49,855,500
50,000,000 5.84%, 8/2/00 ............................... 49,740,444
50,000,000 6.36%, 8/18/00 .............................. 49,576,000
50,000,000 5.86%, 8/31/00 .............................. 49,465,500
50,000,000 6.41%, 9/11/00 .............................. 49,370,500
--------------------------------------------------------------------------------
Total U.S. Government Agencies (cost $248,034,472) ........... 248,007,944
--------------------------------------------------------------------------------
Total Investments (total cost $3,318,184,263) - 100.7% ....... 4,133,321,118
--------------------------------------------------------------------------------
Liabilities, net of Cash, Receivables and Other Assets - (0.7%) (30,400,824)
--------------------------------------------------------------------------------
Net Assets - 100% ............................................ $4,102,920,294
--------------------------------------------------------------------------------
</TABLE>
SUMMARY OF INVESTMENTS BY COUNTRY, JUNE 30, 2000
<TABLE>
<CAPTION>
COUNTRY % OF INVESTMENT SECURITIES MARKET VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Canada 0.3% $ 12,667,541
Finland 2.7% 112,148,355
Japan 1.9% 77,639,821
Mexico 0.9% 35,761,393
Spain 1.4% 56,284,878
United Kingdom 2.1% 87,565,408
United States++ 90.7% 3,751,253,722
--------------------------------------------------------------------------------
Total 100.0% $ 4,133,321,118
</TABLE>
++ Includes Short-Term Securities (80.4% excluding Short-Term Securities)
FORWARD CURRENCY CONTRACTS, OPEN AT JUNE 30, 2000
<TABLE>
<CAPTION>
CURRENCY SOLD AND CURRENCY CURRENCY UNREALIZED
SETTLEMENT DATE UNITS SOLD VALUE IN $ U.S. GAIN/(LOSS)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
British Pound 9/8/00 8,900,000 $ 13,520,880 $ 185,743
British Pound 1/26/01 7,100,000 10,818,980 47,570
Euro 1/26/01 40,000,000 38,644,000 103,800
Japanese Yen 9/1/00 200,000,000 1,909,840 (20,925)
Japanese Yen 9/8/00 3,520,000,000 33,654,871 383,030
Japanese Yen 9/14/00 2,890,000,000 27,660,823 (198,009)
Japanese Yen 10/5/00 450,000,000 4,323,398 46,297
--------------------------------------------------------------------------------
Total $ 130,532,792 $ 547,506
</TABLE>
See Notes to Schedules of Investments.
4 Janus Aspen Series / June 30, 2000
<PAGE>
Statements of|Operations
<TABLE>
<CAPTION>
Janus Aspen
For the six months or period ended June 30, 2000 (unaudited) Growth
(all numbers in thousands) Portfolio
----------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest $ 10,216
Dividends 5,385
Foreign tax withheld (121)
----------------------------------------------------------------------------------------
Total Investment Income 15,480
----------------------------------------------------------------------------------------
Expenses:
Advisory fees 11,673
Transfer agent expenses 3
Registration fees 160
System fees 10
Custodian fees 195
Insurance expense 2
Audit fees 7
Distribution fees - Retirement Shares 146
Distribution fees - Service Shares 2
Administrative fees - Retirement Shares 146
Other expenses 9
----------------------------------------------------------------------------------------
Total Expenses 12,353
----------------------------------------------------------------------------------------
Expense and Fee Offsets (24)
----------------------------------------------------------------------------------------
Net Expenses 12,329
----------------------------------------------------------------------------------------
Excess Expense Reimbursement --
----------------------------------------------------------------------------------------
Net Expenses After Reimbursement 12,329
----------------------------------------------------------------------------------------
Net Investment Income/(Loss) 3,151
----------------------------------------------------------------------------------------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) from securities transactions 132,939
Net realized gain/(loss) from foreign currency transactions 2,055
Net realized gain/(loss) from futures contracts --
Change in net unrealized appreciation or depreciation of
investments and foreign currency (88,520)
----------------------------------------------------------------------------------------
Net Gain/(Loss) on Investments 46,474
----------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 49,625
----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 5
<PAGE>
Statements of|Assets & Liabilities
<TABLE>
<CAPTION>
Janus Aspen
As of June 30, 2000 (unaudited) (all numbers in thousands Growth
except net asset value per share) Portfolio
----------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at cost $3,318,184
Investments at value: $4,133,321
Cash 925
Receivables:
Investments sold 31,449
Portfolio shares sold 7,484
Dividends 292
Interest 177
Due from Advisor --
Other assets --
Variation margin --
Forward currency contracts 548
----------------------------------------------------------------------------------------
Total Assets 4,174,196
----------------------------------------------------------------------------------------
Liabilities:
Payables:
Investments purchased 67,056
Portfolio shares repurchased 1,903
Advisory fees 2,158
Accrued expenses 159
----------------------------------------------------------------------------------------
Total Liabilities 71,276
----------------------------------------------------------------------------------------
Net Assets $4,102,920
----------------------------------------------------------------------------------------
Net Assets - Institutional Shares $3,910,688
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 118,891
----------------------------------------------------------------------------------------
Net Asset Value Per Share $ 32.89
----------------------------------------------------------------------------------------
Net Assets - Retirement Shares $ 179,748
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 5,478
----------------------------------------------------------------------------------------
Net Asset Value Per Share $ 32.82
----------------------------------------------------------------------------------------
Net Assets - Service Shares $ 12,484
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 381
----------------------------------------------------------------------------------------
Net Asset Value Per Share $ 32.74
----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6 Janus Aspen Series / June 30, 2000
<PAGE>
Statements of|Changes in Net Assets
<TABLE>
<CAPTION>
Janus Aspen
For the six months or period ended June 30 (unaudited) Growth
and for the fiscal year ended December 31 Portfolio
(all numbers in thousands) 2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income/(loss) $ 3,151 $ 5,209
Net realized gain/(loss) from investment transactions 134,994 155,359
Change in unrealized net appreciation or depreciation
of investments and foreign currency (88,520) 582,872
----------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 49,625 743,440
----------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders:
Net investment income* (2,283) (4,543)
Net realized gain from investment transactions* (155,582) (9,036)
Distributions (in excess of realized gains)* -- --
----------------------------------------------------------------------------------------------------
Net Decrease from Dividends and Distributions (157,865) (13,579)
----------------------------------------------------------------------------------------------------
Capital Share Transactions:
Shares sold
Institutional Shares 1,028,062 1,298,997
Retirement Shares 135,521 52,393
Service Shares 12,287 --
Reinvested dividends and distributions
Institutional Shares 150,647 13,566
Retirement Shares 6,777 13
Service Shares 441 --
Shares repurchased
Institutional Shares (108,963) (194,056)
Retirement Shares (15,566) (2,358)
Service Shares (29) --
----------------------------------------------------------------------------------------------------
Net Increase/(Decrease) from Capital Share Transactions 1,209,177 1,168,555
----------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets 1,100,937 1,898,416
Net Assets:
Beginning of period 3,001,983 1,103,567
----------------------------------------------------------------------------------------------------
End of period $ 4,102,920 $ 3,001,983
----------------------------------------------------------------------------------------------------
Net Assets Consist of:
Capital (par value and paid-in surplus)* $ 3,150,734 $ 1,941,557
Undistributed net investment income/(loss)* 1,732 864
Undistributed net realized gain/(loss) from investments* 134,775 155,363
Unrealized appreciation/(depreciation) of investments
and foreign currency 815,679 904,199
----------------------------------------------------------------------------------------------------
$ 4,102,920 $ 3,001,983
----------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Institutional Shares
Shares sold 29,976 47,425
Reinvested dividends and distributions 4,651 486
----------------------------------------------------------------------------------------------------
Total 34,627 47,911
----------------------------------------------------------------------------------------------------
Shares Repurchased (3,193) (7,339)
Net Increase/(Decrease) in Portfolio Shares 31,434 40,572
Shares Outstanding, Beginning of Period 87,457 46,885
----------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 118,891 87,457
----------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Retirement Shares(2)
Shares sold 3,960,649 1,844,663
Reinvested dividends and distributions 209,753 475
----------------------------------------------------------------------------------------------------
Total 4,170,402 1,845,138
----------------------------------------------------------------------------------------------------
Shares Repurchased (457,410) (81,361)
Net Increase/(Decrease) in Portfolio Shares 3,712,992 1,763,777
Shares Outstanding, Beginning of Period 1,764,531 754
----------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 5,477,523 1,764,531
----------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Service Shares(2)
Shares sold 368,491 --
Reinvested dividends and distributions 13,688 --
----------------------------------------------------------------------------------------------------
Total 382,179 --
----------------------------------------------------------------------------------------------------
Shares Repurchased (911) --
Net Increase/(Decrease) in Portfolio Shares 381,268 --
Shares Outstanding, Beginning of Period -- --
----------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 381,268 --
----------------------------------------------------------------------------------------------------
Purchases and Sales of Investment Securities:
(excluding short-term securities)
Purchases of securities $ 1,786,089 $ 1,792,760
Proceeds from sales of securities 834,347 845,225
Purchases of long-term U.S. government obligations -- --
Proceeds from sales of long-term U.S. government obligations -- --
</TABLE>
* See Note 3 in Notes to Financial Statements.
(1) Transactions in Portfolio Shares - Retirement and Service Shares numbers are
not in thousands
See Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 7
<PAGE>
Financial|Highlights - Institutional Shares
<TABLE>
<CAPTION>
For a share outstanding during the six months ended June 30 (unaudited) Janus Aspen Growth Portfolio
or through each fiscal year ended December 31 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 33.65 $ 23.54 $ 18.48 $ 15.51 $ 13.45 $ 10.57
------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .03 .07 .05 .15 .17 .28
Net gains/(losses) on securities
(both realized and unrealized) .53 10.24 6.36 3.34 2.29 2.90
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .56 10.31 6.41 3.49 2.46 3.18
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) (.02) (.06) (.05) (.15) (.17) (.30)
Distributions (from capital gains) (1.30) (.14) (1.30) (.37) (.23) --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.32) (.20) (1.35) (.52) (.40) (.30)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 32.89 $ 33.65 $ 23.54 $ 18.48 $ 15.51 $ 13.45
------------------------------------------------------------------------------------------------------------------------------------
Total Return* 1.72% 43.98% 35.66% 22.75% 18.45% 30.17%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 3,910,688 $ 2,942,649 $ 1,103,549 $ 608,281 $ 325,789 $ 126,911
Average Net Assets for the Period (in thousands) $ 3,492,998 $ 1,775,373 $ 789,454 $ 477,914 $ 216,125 $ 77,344
Ratio of Gross Expenses to Average Net Assets**(1) 0.67% 0.67% 0.68% 0.70% 0.69% 0.78%
Ratio of Net Expenses to Average Net Assets**(1) 0.67% 0.67% 0.68% 0.69% 0.69% 0.76%
Ratio of Net Investment Income to Average Net Assets** 0.19% 0.30% 0.26% 0.91% 1.39% 1.24%
Portfolio Turnover Rate** 51% 53% 73% 122% 87% 185%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) See footnote #5 in Notes to Financial Statements.
See Notes to Financial Statements.
8 Janus Aspen Series / June 30, 2000
<PAGE>
Financial|Highlights - Retirement Shares
<TABLE>
<CAPTION>
For a share outstanding during the six months Janus Aspen Growth Portfolio
ended June 30 (unaudited) or through
each fiscal year or period ended December 31 2000 1999 1998 1997(1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 33.63 $ 23.45 $ 18.46 $ 16.18
---------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) (.02) .07 (.03) .04
Net gains/(losses) on securities (both realized and unrealized) .51 10.25 6.32 2.71
---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations .49 10.32 6.29 2.75
---------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) -- -- -- (.10)
Distributions (from capital gains) (1.30) (.14) (1.30) (.37)
---------------------------------------------------------------------------------------------------------------------
Total Distributions (1.30) (.14) (1.30) (.47)
---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 32.82 $ 33.63 $ 23.45 $ 18.46
---------------------------------------------------------------------------------------------------------------------
Total Return* 1.52% 44.12% 34.99% 17.22%
---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 179,748 $ 59,334 $ 18 $ 12
Average Net Assets for the Period (in thousands) $ 117,244 $ 12,209 $ 13 $ 11
Ratio of Gross Expenses to Average Net Assets**(2) 1.17% 1.17% 1.18% 1.20%
Ratio of Net Expenses to Average Net Assets**(2) 1.17% 1.17% 1.18% 1.20%
Ratio of Net Investment Income/(Loss) to Average Net Assets** (0.33%) (0.25)% (0.23)% 0.29%
Portfolio Turnover Rate** 51% 53% 73% 122%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) Period May 1, 1997 (inception) to December 31, 1997.
(2) See footnote #5 in Notes to Financial Statements.
See Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 9
<PAGE>
Financial|Highlights - Service Shares
<TABLE>
<CAPTION>
For a share outstanding during the six months Janus Aspen Growth Portfolio
ended June 30 (unaudited) 2000
---------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 33.52
---------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) --
Net gains/(losses) on securities (both realized and unrealized) .52
---------------------------------------------------------------------------------------------
Total from Investment Operations .52
---------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) --
Distributions (from capital gains) (1.30)
---------------------------------------------------------------------------------------------
Total Distributions (1.30)
---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 32.74
---------------------------------------------------------------------------------------------
Total Return* 1.61%
---------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 12,484
Average Net Assets for the Period (in thousands) $ 1,666
Ratio of Gross Expenses to Average Net Assets**(1) 0.95%
Ratio of Net Expenses to Average Net Assets**(1) 0.95%
Ratio of Net Investment Income/(Loss) to Average Net Assets** (0.08%)
Portfolio Turnover Rate** 51%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) See footnote #5 in Notes to Financial Statements.
See Notes to Financial Statements.
10 Janus Aspen Series / June 30, 2000
<PAGE>
Notes to|Schedules of Investments
ADR - American Depository Receipt
EUR - Euro
GBP - British Pound
GDR - Global Depository Receipt
* Non-income-producing security
** A portion of this security has been segregated to cover margin or
segregation requirements on open futures contracts and/or forward currency
contracts.
+ Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale.
Variable Rate Notes. The interest rate, which is based on specific, or an index
of, market interest rates, is subject to change. Rates in the security
description are as of June 30, 2000.
Money market funds may hold securities with stated maturities of greater than
397 days when those securities have features that allow a fund to "put" back the
security to the issuer or to a third party within 397 days of acquisition. The
maturity dates shown in the security descriptions are the stated maturity dates.
Repurchase Agreements held by a Portfolio are fully collateralized, and such
collateral is in the possession of the Portfolio's custodian. The collateral is
evaluated daily to ensure its market value equals or exceeds the current market
value of the repurchase agreements including accrued interest. In the event of
default on the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
Janus Aspen Series / June 30, 2000 11
<PAGE>
Notes to|Financial Statements
The following section describes the organization and significant accounting
policies of the Portfolios and provides more detailed information about the
schedules and tables that appear throughout this report. In addition, the Notes
explain how the Portfolios operate and the methods used in preparing and
presenting this report.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Janus Aspen Series (the "Trust") was organized as a Delaware Trust on May
20, 1993, and is registered under the Investment Company Act of 1940 (the
"1940 Act") as a no-load, open-end management investment company. The Trust
offers fourteen Portfolios or series of shares with differing investment
objectives and policies. Eleven Portfolios invest primarily in equity
securities: Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth
Portfolio, Janus Aspen Capital Appreciation Portfolio, Janus Aspen Balanced
Portfolio, Janus Aspen Equity Income Portfolio, Janus Aspen Growth and
Income Portfolio, Janus Aspen Strategic Value Portfolio, Janus Aspen
International Growth Portfolio, Janus Aspen Worldwide Growth Portfolio,
Janus Aspen Global Life Sciences Portfolio and Janus Aspen Global
Technology Portfolio. Two Portfolios invest primarily in income-producing
securities: Janus Aspen Flexible Income Portfolio and Janus Aspen
High-Yield Portfolio. Janus Aspen Money Market Portfolio invests in
short-term money market securities. Each Portfolio is diversified as
defined in the 1940 Act, with the exception of the Aggressive Growth
Portfolio, Capital Appreciation Portfolio, Global Life Sciences Portfolio,
Global Technology Portfolio and Strategic Value Portfolio, which are
nondiversified.
Institutional Shares of the Trust are issued and redeemed only in
connection with investment in and payments under variable annuity contracts
and variable life insurance contracts (collectively "variable insurance
contracts"), as well as certain qualified retirement plans. Effective May
1, 1997, the Trust issued the Retirement Shares. Retirement Shares of the
Trust are issued and redeemed only in connection with certain qualified
retirement plans.
A Special Meeting of Shareholders of the Retirement Shares class (the
"Retirement Shares") of each portfolio other than High-Yield Portfolio will
be held on July 20, 2000 to approve a reorganization that would transfer
the assets relating to the Retirement Shares class of each Janus Aspen
Series Portfolio to a corresponding Fund of Janus Adviser Series.
Effective December 31, 1999, the Trust issued a new class of shares, the
Service Shares. Service Shares of the Trust are issued and redeemed only in
connection with investment in and payments under variable annuity contracts
and variable life insurance contracts (collectively "variable insurance
contracts"), as well as certain qualified retirement plans.
The following accounting policies have been consistently followed by the
Trust and are in conformity with accounting principles generally accepted
in the investment company industry.
INVESTMENT VALUATION
Securities are valued at the closing price for securities traded on a
principal securities exchange (U.S. or foreign) and on the NASDAQ National
Market. Securities traded on over-the-counter markets and listed securities
for which no sales are reported are valued at the latest bid price (or
yield equivalent thereof) obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Trustees.
Short-term investments maturing within 60 days and all money market
securities in the Money Market Portfolio are valued at amortized cost,
which approximates market value. Foreign securities are converted to U.S.
dollars using exchange rates at the close of the New York Stock Exchange.
When market quotations are not readily available, securities are valued at
fair value as determined in good faith under procedures established by the
Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for as of the date purchased or sold.
Dividend income is recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded as soon as the Trust is informed of the
dividend if such information is obtained subsequent to the ex-dividend
date. Interest income is recorded on the accrual basis and includes
amortization of discounts and premiums. Gains and losses are determined on
the identified cost basis, which is the same basis used for federal income
tax purposes. Income and gains and losses are allocated daily to each class
of shares based upon the ratio of net assets represented by each class as a
percentage of total net assets.
FORWARD CURRENCY TRANSACTIONS
AND FUTURES CONTRACTS
The Portfolios enter into forward currency contracts in order to hedge
their exposure to changes in foreign currency exchange rates on their
foreign portfolio holdings and to lock in the U.S. dollar cost of firm
purchase and sales commitments denominated in foreign currencies. A forward
currency contract is a commitment to purchase or sell a foreign currency at
a future date at a negotiated forward rate. The gain or loss arising from
the difference between the U.S. dollar cost of the original contract and
the value of the foreign currency in U.S. dollars upon closing such a
contract is included in net realized gain or loss on foreign currency
transactions. Forward currency contracts held by the Portfolios are fully
collateralized by other securities, in possession at the Portfolio's
custodian, which are denoted in the accompanying Schedule of Investments.
The market value of these securities is evaluated daily to ensure that it
is equal to or exceeds the current market value of the corresponding
forward currency contract.
Currency gain and loss are also calculated on payables and receivables that
are denominated in foreign currencies. The payables and receivables are
generally related to security transactions and income.
12 Janus Aspen Series / June 30, 2000
<PAGE>
Futures contracts are marked to market daily, and the variation margin is
recorded as an unrealized gain or loss. When a contract is closed, a
realized gain or loss is recorded equal to the difference between the
opening and closing value of the contract. Generally, open forward and
futures contracts are marked to market (i.e., treated as realized and
subject to distribution) for federal income tax purposes at fiscal
year-end.
Foreign-denominated assets and forward currency contracts may involve more
risks than domestic transactions, including: currency risk, political and
economic risk, regulatory risk and market risk. Risks may arise from the
potential inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies relative to
the U.S. dollar.
The Portfolios may enter into futures contracts and options on securities,
financial indexes and foreign currencies, forward contracts and
interest-rate swaps and swap-related products. The Portfolios intend to use
such derivative instruments primarily to hedge or protect from adverse
movements in securities prices, currency rates or interest rates. The use
of futures contracts and options may involve risks such as the possibility
of illiquid markets or imperfect correlation between the value of the
contracts and the underlying securities or that the counterparty will fail
to perform its obligations.
INITIAL PUBLIC OFFERINGS
The Portfolios may invest in initial public offerings (IPOs). IPOs and
other investment techniques may have a magnified performance impact on a
fund with a small asset base. The Portfolios may not experience similar
performance as its assets grow.
ADDITIONAL INVESTMENT RISK
A portion of the Flexible Income and High-Yield Portfolios may be invested
in lower-rated debt securities that have a higher risk of default or loss
of value because of changes in the economy or in their respective industry.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
DIVIDEND DISTRIBUTIONS AND EXPENSES
Each Portfolio, except the Money Market Portfolio, makes at least
semiannual distributions of substantially all of its investment income and
at least an annual distribution of its net realized capital gains, if any.
The Money Market Portfolio makes daily distributions of its income. All
dividends and capital gains distributions from a Portfolio will be
automatically reinvested into additional shares of that Portfolio.
Expenses are allocated daily to each class of shares based upon the ratio
of net assets represented by each class as a percentage of total net
assets. Expenses directly attributable to a specific class of shares are
charged against the operations of such class.
FEDERAL INCOME TAXES
No provision for income taxes is included in the accompanying financial
statements as the Portfolios intend to distribute to shareholders all
taxable investment income and realized gains and otherwise comply with the
Internal Revenue Code applicable to regulated investment companies.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The management fee for each equity Portfolio decreased to an annual rate of
.65% of average net assets, effective May 1, 2000. The management fee for
the corresponding Janus retail fund corresponding to each equity Portfolio
also decreased to this rate, effective January 31, 2000. Due to the fee
reductions described above, this had the effect of lowering each equity
Portfolio's management fee on January 31, 2000, also.
Prior to May 1, 2000, investment advisory fees for eight of the Portfolios
were payable to Janus Capital based upon annual rates of .75% of the first
$300 million of average net assets, .70% of the next $200 million of
average net assets, and .65% of the average net assets in excess of $500
million. However, Janus Capital had voluntarily agreed to reduce each
Portfolio's advisory fee to the extent that such fee exceeded the effective
rate of the Janus retail fund corresponding to such Portfolio. The
effective rate is the advisory fee calculated by the corresponding retail
fund as of the last day of each calendar quarter (expressed as an annual
rate). Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth
Portfolio, Janus Aspen Capital Appreciation Portfolio, Janus Aspen
International Growth Portfolio, Janus Aspen Worldwide Growth Portfolio,
Janus Aspen Balanced Portfolio, Janus Aspen Equity Income Portfolio and
Janus Aspen Growth and Income Portfolio advisory fees were reduced to the
effective rates of Janus Fund, Janus Enterprise Fund, Janus Twenty Fund,
Janus
Janus Aspen Series / June 30, 2000 13
<PAGE>
Notes to|Financial Statements (continued)
Overseas Fund, Janus Worldwide Fund, Janus Balanced Fund, Janus Equity
Income Fund and Janus Growth and Income Fund, respectively. The effective
rate for each Portfolio for the period ended December 31, 1999, was .65%,
.66%, .65%, .65%, .65%, .66%, .69% and .65%, respectively. The Flexible
Income Portfolio is subject to advisory fees payable to Janus Capital based
upon annual rates of .65% of the first $300 million of average net assets
plus .55% of average net assets in excess of $300 million. The High-Yield
Portfolio's advisory fee rate is payable at rates of .75% of the first $300
million of average net assets plus .65% of average net assets in excess of
$300 million. The Money Market Portfolio's advisory fee rate is .25% of
average net assets. For additional information on the specific fees for the
Retirement Shares, please refer to note 4 of the financial statements.
Janus Capital has agreed to reduce its fee to the extent normal operating
expenses exceed 1% of the average net assets of the Flexible Income and
High-Yield Portfolios and .50% of the average net assets of the Money
Market Portfolio for a fiscal year.
Janus Capital has agreed to continue these fee waivers and reductions until
at least the next annual renewal of the advisory contracts. The participant
administration fee and distribution fee applicable to the Retirement
Shares, as well as the distribution fee applicable to the Service Shares,
are not included in these expense limits.
Officers and certain trustees of the Trust are also officers and/or
directors of Janus Capital; however, they receive no compensation from the
Trust.
Janus Service Corporation ("Janus Service"), a wholly owned subsidiary of
Janus Capital, receives certain out-of-pocket expenses for transfer agent
services. Janus Service also receives an administrative fee at an annual
rate of up to .25% of the average daily net assets of the Retirement Shares
of each Portfolio for providing or procurring recordkeeping, subaccounting
and other administrative services to plan participants who invest in the
Retirement Shares.
Janus Distributors, Inc., a wholly owned subsidiary of Janus Capital, is a
distributor of the Portfolios. The Retirement and Service Shares have
adopted a Distribution and Shareholder Servicing Plan (The "Plan") pursuant
to Rule 12b-1 under The 1940 Act. The Plan authorizes payments by the
Portfolios in connection with the distribution of the Retirement and
Service Shares at an annual rate, as determined from time to time by the
Board of Trustees, of up to .25% of the Retirement and Service Shares'
average daily net assets.
DST Systems, Inc. (DST), an affiliate of Janus Capital through a degree of
common ownership, provides accounting systems to the Portfolios. DST
Securities, Inc., a wholly owned subsidiary of DST, provides brokerage
services on certain portfolio transactions. Brokerage commissions paid to
DST Securities, Inc. serve to reduce fees and expenses. Brokerage
commissions paid, fees reduced and the net fees paid to DST for the period
ended June 30, 2000, are noted below:
<TABLE>
<CAPTION>
DST Securities, Inc. Portfolio Expense DST Systems
Portfolio Commissions Paid* Reduction* Costs
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Growth Portfolio -- -- $11,013
------------------------------------------------------------------------------------------------------
</TABLE>
* The difference between commissions paid to DST Securities, Inc. and
expenses reduced constituted commissions paid to an unaffiliated clearing
broker.
14 Janus Aspen Series / June 30, 2000
<PAGE>
3. FEDERAL INCOME TAX
The Portfolios have elected to treat gains and losses on forward foreign
currency contracts as capital gains and losses. Other foreign currency
gains and losses on debt instruments are treated as ordinary income for
federal income tax purposes pursuant to Section 988 of the Internal Revenue
Code. As of June 30, 2000, the net capital loss carryovers noted below are
available to offset future realized capital gains and thereby reduce future
taxable gains distributions. These carryovers expire between December 31,
2006, and December 31, 2007.
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investments for federal income tax
purposes as of June 30, 2000, are also noted below.
<TABLE>
<CAPTION>
Post-October
Net Capital Loss Capital Currency Federal Tax Unrealized
Portfolio Carryovers Losses Losses Cost Appreciation
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Aspen Growth Portfolio -- -- $ (60) $ 3,318,621,127 $ 1,027,813,836
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Unrealized Net Appreciation/
Portfolio (Depreciation) (Depreciation)
---------------------------------------------------------------------------
<S> <C> <C>
Janus Aspen Growth Portfolio $ (213,113,845) $ 814,699,991
---------------------------------------------------------------------------
</TABLE>
4. EXPENSES
The Portfolios' expenses may be reduced through expense reduction
arrangements. Those arrangements include the use of broker commissions paid
to DST Securities, Inc. and uninvested cash balances earning interest with
the Portfolios' custodian. The Statements of Operations reflect the total
expenses before any offset, the amount of the offset and the net expenses.
The expense ratios listed in the Financial Highlights reflect expenses
prior to any expense offset (gross expense ratio) and after expense offsets
(net expense ratio).
Janus Aspen Series Retirement Shares incur a pro rata share of operating
expenses. In addition, the Retirement Shares pay a distribution fee of up
to .25% of average net assets and a participant administration fee of up to
.25% of average net assets.
Janus Aspen Series Service Shares incur a pro rata share of operating
expenses. In addition, the Service Shares pay a distribution fee of up to
.25% of average net assets.
5. EXPENSE RATIOS
Listed below are the gross expense ratios for the various Portfolios that
would be in effect, absent the waiver of certain fees, offsets and/or
voluntary reduction of the adviser's fee to the effective rate of the
corresponding Janus retail fund. Expense ratios are annualized for all
periods less than one year.
<TABLE>
<CAPTION>
Service
Institutional Shares Retirement Shares Shares
Portfolio 2000 1999 1998 1997 1996 1995 2000 1999 1998 1997(1) 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen Growth Portfolio 0.67% 0.69% 0.75% 0.78% 0.83% 0.98% 1.18% 1.19% 1.25% 1.28% 0.95%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997, (inception) to December 31, 1997.
Janus Aspen Series / June 30, 2000 15
<PAGE>
Explanations of|Charts, Tables and Financial Statements
1. PERFORMANCE OVERVIEWS
When comparing the performance of a Portfolio with an index, keep in mind
that market indexes do not include brokerage commissions that would be
incurred if you purchased the individual securities in the index. They also
do not include taxes payable on dividends and interest or operating
expenses incurred if you maintained a Portfolio invested in the index.
Average annual total returns are also quoted for each class of Portfolio.
Average annual total return is calculated by taking the growth or decline
in value of an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual compounded
percentage rate that would have produced the same result had the rate of
growth been constant throughout the period.
2. SCHEDULES OF INVESTMENTS
Following the performance overview section is each Portfolio's Schedule of
Investments. This schedule reports the industry concentrations and types of
securities held in each Portfolio on the last day of the reporting period.
Securities are usually listed by type (common stock, corporate bonds, U.S.
government obligations, etc.) and by industry classification (banking,
communications, insurance, etc.).
The market value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign currencies
is converted into U.S. dollars.
Portfolios that invest in foreign securities also provide a summary of
investments by country. This summary reports the Portfolio's exposure to
different countries by providing the percentage of securities invested in
each country.
2a. FORWARD CURRENCY CONTRACTS
A table listing forward currency contracts follows each Portfolio's
Schedule of Investments (if applicable). Forward currency contracts are
agreements to deliver or receive a preset amount of currency at a future
date. Forward currency contracts are used to hedge against foreign currency
risk in the Portfolio's long-term holdings.
The table provides the name of the foreign currency, the settlement date of
the contract, the amount of the contract, the value of the currency in U.S.
dollars and the amount of unrealized gain or loss. The amount of unrealized
gain or loss reflects the change in currency exchange rates from the time
the contract was opened to the last day of the reporting period.
3. STATEMENT OF OPERATIONS
This statement details the Portfolios' income, expenses, gains and losses
on securities and currency transactions, and appreciation or depreciation
of current Portfolio holdings.
The first section in this statement, titled "Investment Income," reports
the dividends earned from stocks and interest earned from interest-bearing
securities in the Portfolio.
The next section reports the expenses and expense offsets incurred by the
Portfolios, including the advisory fee paid to the investment adviser,
transfer agent fees, shareholder servicing expenses, and printing and
postage for mailing statements, financial reports and prospectuses.
The last section lists the increase or decrease in the value of securities
held in the Portfolios. Portfolios realize a gain (or loss) when they sell
their position in a particular security. An unrealized gain (or loss)
refers to the change in net appreciation or depreciation of the Portfolios
during the period. "Net Gain/(Loss) on Investments" is affected both by
changes in the market value of Portfolio holdings and by gains (or losses)
realized during the reporting period.
16 Janus Aspen Series / June 30, 2000
<PAGE>
4. STATEMENT OF ASSETS AND LIABILITIES
This statement is often referred to as the "balance sheet." It lists the
assets and liabilities of the Portfolios on the last day of the reporting
period.
The Portfolios' assets are calculated by adding the value of the securities
owned, the receivable for securities sold but not yet settled, the
receivable for dividends declared but not yet received on stocks owned and
the receivable for Portfolio shares sold to investors but not yet settled.
The Portfolios' liabilities include payables for securities purchased but
not yet settled, Portfolio shares redeemed but not yet paid and expenses
owed but not yet paid. Additionally, there may be other assets and
liabilities such as forward currency contracts.
The last section of this statement reports the net asset value (NAV) per
share on the last day of the reporting period for each class of the
Portfolio. The NAV is calculated by dividing the Portfolios' net assets
(assets minus liabilities) by the number of shares outstanding.
5. STATEMENT OF CHANGES IN NET ASSETS
This statement reports the increase or decrease in the Portfolios' net
assets during the reporting period. Changes in the Portfolios' net assets
are attributable to investment operations, dividends, distributions and
capital share transactions. This is important to investors because it shows
exactly what caused the Portfolios' net asset size to change during the
period.
The first section summarizes the information from the Statement of
Operations regarding changes in net assets due to the Portfolios'
investment performance. The Portfolios' net assets may also change as a
result of dividend and capital gains distributions to investors. If
investors receive their dividends in cash, money is taken out of the
Portfolio to pay the distribution. If investors reinvest their dividends,
the Portfolios' net assets will not be affected. If you compare each
Portfolio's "Net Decrease from Dividends and Distributions" to the
"Reinvested dividends and distributions," you'll notice that dividend
distributions had little effect on each Portfolio's net assets. This is
because all of Janus investors reinvest their distributions.
The reinvestment of dividends is included under "Capital Share
Transactions." "Capital Shares" refers to the money investors contribute to
the Portfolios through purchases or withdrawal via redemptions. Each
Portfolio's net assets will increase and decrease in value as investors
purchase and redeem shares from a Portfolio.
The section entitled "Net Assets Consist of" breaks down the components of
the Portfolios' net assets. Because Portfolios must distribute
substantially all earnings, you'll notice that a significant portion of net
assets is shareholder capital.
Janus Aspen Series / June 30, 2000 17
<PAGE>
Explanations of|Charts, Tables and Financial Statements (continued)
6. FINANCIAL HIGHLIGHTS
This schedule provides a per-share breakdown of the components that affect
the net asset value (NAV) for current and past reporting periods for each
class of the Portfolio. Not only does this table provide you with total
return, it also reports total distributions, asset size, expense ratios and
portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of
the reporting period. The next line reports the net investment income per
share, which comprises dividends and interest income earned on securities
held by the Portfolios. Following is the total of gains, realized and
unrealized. Dividends and distributions are then subtracted to arrive at
the NAV per share at the end of the period.
Also included are the expense ratios, or the percentage of net assets that
was used to cover operating expenses during the period. Expense ratios vary
across the Portfolios for a number of reasons, including the differences in
management fees, average shareholder account size, the frequency of
dividend payments and the extent of foreign investments, which entail
greater transaction costs.
The Portfolios' expenses may be reduced through expense-reduction
arrangements. These arrangements include the use of brokerage commissions,
uninvested cash balances earning interest or balance credits. The Statement
of Operations reflects total expenses before any such offset, the amount of
offset and the net expenses. The expense ratios listed in the Financial
Highlights reflect total expenses both prior to any expense offset and
after the offsets.
The ratio of net investment income summarizes the income earned divided by
the average net assets of a Portfolio during the reporting period. Don't
confuse this ratio with a Portfolio's yield. The net investment income
ratio is not a true measure of a Portfolio's yield because it doesn't take
into account the dividends distributed to the Portfolio's investors.
The next ratio is the portfolio turnover rate, which measures the buying
and selling activity in a Portfolio. Portfolio turnover is affected by
market conditions, changes in the size of a Portfolio, the nature of the
Portfolio's investments and the investment style of the portfolio manager.
A 100% rate implies that an amount equal to the value of the entire
Portfolio is turned over in a year; a 50% rate means that an amount equal
to the value of half the Portfolio is traded in a year; and a 200% rate
means that an amount equal to the value of the Portfolio is sold every six
months.
18 Janus Aspen Series / June 30, 2000
<PAGE>
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<PAGE>
--------------------------------------------------------------------------------
Janus|Aspen Series
--------------------------------------------------------------------------------
2000 SEMIANNUAL REPORT
Janus Aspen International Growth Portfolio
[LOGO] JANUS
--------------------------------------------------------------------------------
<PAGE>
Janus|Aspen International Growth Portfolio
[PHOTO]
Helen Young Hayes
portfolio manager
[PHOTO]
Laurence Chang
portfolio manager
For the six months ended June 30, 2000, Janus Aspen International Growth
Portfolio returned 2.90% for its Institutional Shares, 2.67% for its Retirement
Shares and 2.77% for its Service Shares. This performance compared favorably
with the Portfolio's benchmark, the Morgan Stanley Capital International EAFE
Index, which declined (4.06%).(1)
Our performance notwithstanding, the environment for international equities
proved increasingly challenging. Throughout the period, European markets
struggled with uneven economic growth and weakness in the euro currency, which
fueled inflation fears. In an attempt to contain inflation below the European
Union's self-imposed 2% limit, the European Central Bank initiated a series of
interest rate hikes. Meanwhile, Asia and Latin America fared better, bolstered
by improving economic fundamentals. In Japan, a growing budget deficit and
lackluster economy held back most equities, as technology and telecommunications
stocks led the Nikkei 225 Index below 17,000 for the first time this year.
Volatility, which has come to characterize the market's behavior, intensified
throughout the period. While a number of market indices rose to all-time highs,
the breadth of the advance had been markedly narrow. Since March, however, the
very same stocks that fueled the bull market, namely technology and other
so-called "new economy" issues, ignited several broad sell-offs as investors
engaged in a round of profit-taking. Attention was then redirected to "old
economy" companies, including pharmaceuticals, financials and some select
cyclical or economically sensitive stocks. For the most part, though, the
markets appeared to settle into a trading range, moving abruptly in either
direction from one day to the next.
In this type of market environment, we believe it is particularly important to
identify individual opportunities capable of transcending short-term
fluctuations. While we acknowledge the impact of economic and market events, our
focus continues to be on companies that combine dominant franchises, outstanding
products and forward-thinking management. Optical networking has proven to be a
fertile area for us, and in this group, Canada's Nortel Networks was a standout.
The boom in global Internet usage has created numerous opportunities for
companies providing the basic networking infrastructure. Nortel is a leader in
photonics technology, which employs dense wave division multiplexing to increase
the capacity of existing fiber-optic lines. With its optical division expected
to make up nearly half the company's revenues by year end and with strong growth
in wireless infrastructure and access, Nortel is developing a dominant franchise
across the most promising areas of the telecom equipment universe.
As businesses continue to embrace the power of the Internet, the need for
products that safeguard communications and e-commerce transactions becomes more
and more critical. Our holdings in Israel's Check Point Software Technologies,
which dominates firewall software, advanced following a significant new-product
announcement. Although Check Point is perceived as an Internet-related company,
it nimbly navigated extreme market volatility.
Another positive contributor was longtime holding, Philips Electronics. The
company's semiconductor division continued to experience robust demand for its
chips, particularly from manufacturers of telephones and digital TVs. In
addition, its 1999 acquisition of chip-maker VLSI has raised its profile in
semiconductors for digital and wireless devices.
Despite these successes, several of our holdings fell short of expectations.
Sony, one of Japan's most visible companies, fell significantly despite its
dominance in the video-game console business. NTT DoCoMo, another Japanese
bellwether, also declined even as the company's international strategy for its
wireless Internet business gained momentum and growth continued to accelerate.
We believe much of the selling in Sony and NTT DoCoMo was related to
profit-taking after long periods of strength, and, as a result, our optimism
surrounding both companies remains intact.
Looking ahead, we remain generally optimistic regarding the future of
international markets. Although impacted by liquidity issues related to rising
U.S. interest rates, prospects for Asia and emerging markets appear considerably
brighter. Europe, however, while experiencing solid economic growth, will likely
see further volatility until the euro stabilizes. In anticipation, we have let
our cash position build in order to increase our flexibility as compelling
investment opportunities arise. Still, we will stay focused on the fundamentals
of individual companies, carefully watching valuation levels and investing in
businesses we believe can generate strong results in any economic environment.
In closing, we would like to thank you for your investment and confidence in
Janus Aspen International Growth Portfolio.
<TABLE>
<CAPTION>
Portfolio Asset Mix (% of Assets) June 30, 2000 December 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Equities 78.7% 90.3%
Foreign 74.3% 82.0%
Top 10 Equities 28.7% 31.8%
Number of Stocks 138 123
Cash, Cash Equivalents
& Fixed-Income Securities 21.3% 9.7%
--------------------------------------------------------------------------------
</TABLE>
(1) All returns include reinvested dividends. Net dividends reinvested are the
dividends that remain to be reinvested after foreign tax obligations have
been met. Such obligations vary from country to country.
Past performance does not guarantee future results.
Janus Aspen Series / June 30, 2000 1
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
For the Periods Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Institutional Shares (Inception Date 5/2/94)
<S> <C>
1 Year 70.41%
5 Year 32.44%
From Inception 26.23%
--------------------------------------------------------------------------------
Morgan Stanley Capital International EAFE Index(2)
1 Year 17.16%
5 Year 11.33%
From Inception Date of Institutional Shares 9.53%
--------------------------------------------------------------------------------
Retirement Shares (Inception Date 5/1/97)
1 Year 69.58%
5 Year 31.23%
From Portfolio Inception 25.23%
--------------------------------------------------------------------------------
Service Shares (Inception Date 12/31/99)
1 Year 67.81%
5 Year 32.16%
From Portfolio Inception 26.23%
--------------------------------------------------------------------------------
</TABLE>
Returns shown for Retirement and Service Shares for periods prior to their
inception are derived from the historical performance of Institutional Shares,
adjusted to reflect the higher operating expenses of Retirement and Service
Shares.
(1) All returns reflect reinvested dividends. The Portfolio's securities may
differ significantly from the securities in the Index. Index returns do not
include taxes or operating expenses necessary to maintain a portfolio
consisting of the same securities that are in the Index. These returns do
not reflect the charges and expenses of any particular insurance product or
qualified plan. Investment return and principal value will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. The adviser voluntarily waived a portion of the Portfolio's expenses
for certain periods. Without such waiver, the Portfolio's total returns for
each class would have been lower. Net dividends reinvested are the
dividends that remain to be reinvested after foreign tax obligations have
been met. Such obligations vary from country to country. EAFE stands for
Europe, Australasia and the Far East. Neither the U.S. market nor the
emerging markets of Latin America and Eastern Europe are represented in
EAFE. Foreign investing involves special risks such as currency fluctuation
and political uncertainty. Past performance does not guarantee future
results.
The Portfolio's returns may have been positively impacted by buying technology
companies in a period favorable for these stocks.
This Portfolio may invest in initial public offerings (IPO's). IPO's and other
investment techniques may have a magnified performance impact on a portfolio
with a small asset base. The Portfolio may not experience similar performance as
its assets grow.
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Common Stock - 77.3%
Advertising Sales - 0.8%
559,598 Havas Advertising S.A.** ....................... $ 12,847,366
Aerospace and Defense - 0.1%
1,332,500 Finmeccanica S.p.A.*,** ........................ 1,831,677
Agricultural Biotechnology - 0.5%
162,110 Pharmacia Corp. ................................ 8,379,061
Applications Software - 0.3%
597,031 Sage Group PLC** ............................... 4,799,418
Audio and Video Products - 1.9%
298,400 Sony Corp.** ................................... 27,921,720
35,520 Sony Corp. (ADR)** ............................. 3,349,980
31,271,700
Broadcast Services and Programming - 1.5%
90,486 EM.TV & Merchandising A.G.** ................... 5,351,789
286,130 Grupo Televisa S.A. (GDR)* ..................... 19,725,087
25,076,876
Cable Television - 1.2%
21,285 Globo Cabo S.A. (ADR) .......................... 295,329
310,702 Le Groupe Videotron ltee.** .................... 7,213,583
324,696 Rogers Communications, Inc. - Class B*,** ...... 9,193,003
23,075 Rogers Communications, Inc. - Class B
- New York Shares*,** ....................... 657,638
571,878 Telewest Communications PLC*,** ................ 1,997,912
19,357,465
Cellular Telecommunications - 10.6%
1,096,000 China Mobile, Ltd.*,** ......................... $ 9,666,412
298,450 China Telecom, Ltd. (ADR)*,** .................. 53,068,141
119,578 Egyptian Mobile Service Co.* ................... 3,891,692
1,677 NTT DoCoMo, Inc.** ............................. 45,490,751
560,210 Partner Communications
Company, Ltd. (ADR)* ........................ 5,321,995
191,050 Telesp Celular Participacoes S.A. (ADR) ........ 8,573,369
10,765,033 Vodafone AirTouch PLC** ........................ 43,066,937
101,310 Vodafone AirTouch PLC (ADR)** .................. 4,198,033
173,277,330
Computer Data Security - 2.1%
477,632 Baltimore Technologies PLC*,** ................. 3,615,435
146,525 Check Point Software Technologies, Ltd.* ....... 31,026,669
34,642,104
Computer Services - 1.1%
529,850 Adcore A.B.* ................................... 4,107,961
20,720 Atos S.A.*,** .................................. 1,946,472
20,745 Cap Gemini S.A.** .............................. 3,668,954
305,067 Getronics N.V.** ............................... 4,722,807
176,503 Logica PLC** ................................... 4,179,131
18,625,325
Computer Software - 0.5%
48,600 Software A.G.** ................................ 4,495,687
132,029 Tietoenator Oyj** .............................. 4,423,326
8,919,013
</TABLE>
See Notes to Schedules of Investments.
2 Janus Aspen Series / June 30, 2000
<PAGE>
Janus|Aspen International Growth Portfolio
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Computers - Integrated Systems - 1.6%
81,937 ASM Lithography Holding N.V.*,** ............... $ 3,536,047
42,537 ASM Lithography Holding N.V. (ADR)*,** ......... 1,876,945
1,377,200 Dimension Data Holdings, Ltd. .................. 11,395,796
86,000 Fujitsu, Ltd.** ................................ 2,983,133
406,900 Psion PLC** .................................... 3,936,278
160,735 SEMA Group PLC** ............................... 2,287,365
26,015,564
Computers - Micro - 0.9%
15,368,000 Legend Holdings, Ltd.** ........................ 14,884,915
Containers - Paper and Plastic - 0%
6,923 IFCO Systems N.V.*,** .......................... 185,153
8,465 IFCO Systems N.V. (ADR)*,** .................... 215,858
401,011
Data Processing and Management - 0.2%
7,520 Autonomy Corp. PLC*,** ......................... 902,400
14,855 Autonomy Corp. PLC (ADR)*,** ................... 1,827,165
2,729,565
Distribution and Wholesale - 0.1%
974,000 Global Tech Holdings, Ltd.** ................... 1,124,562
Diversified Financial Services - 0.1%
709,917 Egg PLC*,**,+ .................................. 1,837,811
Diversified Operations - 1.0%
175,194 Bombardier, Inc. - Class B** ................... 4,753,284
2,042,000 Citic Pacific, Ltd.** .......................... 10,688,037
264,069 Hays PLC** ..................................... 1,477,657
16,918,978
Electric Products - 1.8%
74,670 Samsung Electronics** .......................... 24,711,678
51,200 Samsung Electronics (GDR)**,+ .................. 4,631,040
29,342,718
Electronic Components - 6.1%
5,726 Celestica, Inc.*,** ............................ 278,635
276,100 Celestica, Inc. - New York Shares*,** .......... 13,701,463
45,090 Flextronics International, Ltd.*,** ............ 3,097,119
376,158 Koninklijke (Royal) Philips Electronics N.V.** . 17,812,698
633,983 Koninklijke (Royal) Philips Electronics N.V.
- New York Shares** ......................... 30,114,193
97,000 Murata Manufacturing Company, Ltd.** ........... 13,953,866
664,000 NEC Corp.** .................................... 20,898,757
99,856,731
Electronic Components - Semiconductors - 4.0%
114,520 Chartered Semiconductor
Manufacturing, Ltd. (ADR)*,** ............... 10,306,800
4,200 Rohm Company, Ltd.** ........................... 1,230,606
96,045 St Assembly Test Services, Ltd. (ADR)*,** ...... 2,473,159
124,441 STMicroelectronics N.V. ** ..................... 7,872,993
257,625 STMicroelectronics N.V .........................
- New York Shares** ......................... 16,536,305
119,601 Taiwan Semiconductor Manufacturing
Company, Ltd. (ADR)* ........................ 4,634,539
556,630 Taiwan Semiconductor Manufacturing
Company, Ltd. (ADR)*,+ ...................... 21,604,202
64,658,604
Electronic Connectors - 0.2%
25,400 Hirose Electric Company, Ltd.** ................ 3,963,592
Electronic Safety Devices - 0.3%
815,426 Williams PLC** ................................. $ 4,752,723
Fiber Optics - 1.3%
392,225 Completel Europe N.V ........................... 4,887,773
6,070 E-Tek Dynamics, Inc.* .......................... 1,601,342
128,084 JDS Uniphase Corp.* ............................ 15,354,070
21,843,185
Food - Catering - 0.3%
372,740 Compass Group PLC** ............................ 4,912,154
Food - Dairy Products - 0.3%
91,915 Koninklijke Numico N.V.** ...................... 4,379,003
Food - Diversified - 0.2%
77,159 Unilever N.V.** ................................ 3,553,959
Human Resources - 0.3%
220,552 Capita Group PLC** ............................. 5,399,061
Internet Content - 0.6%
169,295 Melbourne IT Ltd.* ............................. 852,523
63,600 Softbank Corp.** ............................... 8,656,209
9,508,732
Internet Software - 0.3%
27,420 Commtouch Software, Ltd.* ...................... 891,150
59,475 GEO Interactive Media Group PLC*,**,+ .......... 1,134,494
805,926 Interactive Investor International PLC*,** ..... 567,342
4,907 Intershop Communications A.G.*,** .............. 2,224,896
4,817,882
Life and Health Insurance - 0.4%
476,771 Prudential PLC** ............................... 6,986,865
Machinery - Electrical - 0.3%
63,939 Schneider Electric S.A.** ...................... 4,474,259
Medical - Biomedical and Genetic - 1.3%
281,780 Cambridge Antibody Technology
Group PLC*,** ............................... 12,754,944
298,174 Oxford GlycoSciences PLC*,** ................... 8,463,855
21,218,799
Medical - Drugs - 2.6%
352,842 AstraZeneca Group PLC** ........................ 16,479,067
1,885 AstraZeneca Group PLC (ADR)** .................. 87,653
8,524 Serono S.A. - Class B** ........................ 7,129,260
451,000 Shionogi & Company, Ltd.** ..................... 8,589,339
129,000 Takeda Chemical Industries, Ltd.** ............. 8,486,080
35,000 Yamanouchi Pharmaceutical Company, Ltd.** ...... 1,915,379
42,686,778
Medical Products - 0.2%
6,080 Synthes-Stratec, Inc.*,**,+ .................... 2,766,400
Metal Processors and Fabricators - 0.6%
487,273 Assa Abloy A.B. - Class B ...................... 9,833,545
Money Center Banks - 2.0%
1,743,295 Banco Bilbao Vizcaya Argentaria S.A.** ......... 26,152,768
203,525 DBS Group Holdings, Ltd.** ..................... 2,613,252
474,000 Fuji Bank, Ltd.** .............................. 3,610,950
32,376,970
Multimedia - 0.7%
99,002 Corus Entertainment, Inc. - Class B*,** ........ 2,639,305
9,630 News Corporation, Ltd. (ADR) ................... 524,835
328,524 Shaw Communications, Inc. - Class B** .......... 8,092,980
11,257,120
</TABLE>
See Notes to Schedules of Investments.
Janus Aspen Series / June 30, 2000 3
<PAGE>
Janus|Aspen International Growth Portfolio
SCHEDULE OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
<S> <C>
Oil Companies - Integrated - 2.9%
579,010 Petroleo Brasileiro S.A. (ADR) ................. $ 17,080,332
201,530 Total Fina Elf S.A.** .......................... 31,025,421
48,105,753
Petrochemicals - 0.6%
616,349 Reliance Industries, Ltd. ...................... 4,703,569
252,960 Reliance Industries, Ltd. (GDR)+ ............... 5,375,400
10,078,969
Property and Casualty Insurance - 0.1%
189,000 Tokio Marine & Fire Insurance
Company, Ltd.** ............................. 2,186,510
Publishing - Newspapers - 0.1%
154,000 Singapore Press Holdings, Ltd.** ............... 2,404,889
Recycling - 0.5%
295,504 Tomra Systems A.S.A ............................ 7,865,162
Retail - Diversified - 0.1%
33,000 Ito-Yokado Company, Ltd.** ..................... 1,989,953
Security Services - 0.8%
578,488 Securitas A.B. - Class B ....................... 12,333,901
Telecommunication Equipment - 12.6%
2,805 ADVA A.G. Optical Networking** ................. 1,599,861
181,735 Alcatel S.A.** ................................. 11,968,170
143,187 Alcatel S.A. (ADR)** ........................... 9,521,936
76,815 Comverse Technology, Inc.* ..................... 7,143,795
955,760 Datacraft Asia, Ltd.** ......................... 8,410,688
504,291 Nokia Oyj** .................................... 25,838,147
1,118,025 Nokia Oyj (ADR)** .............................. 55,831,373
42,309 Nortel Networks Corp.** ........................ 2,932,592
615,223 Nortel Networks Corp. - New York Shares** ...... 41,988,970
1,098,056 Telefonaktiebolaget L.M. Ericsson A.B. (ADR) ... 21,961,120
920,512 Telefonaktiebolaget L.M. Ericsson A.B
- Class B ................................... 18,314,261
205,510,913
Telecommunication Services - 4.5%
283,210 Amdocs, Ltd.* .................................. 21,736,368
179,405 China Unicom, Ltd. (ADR)*,** ................... 3,812,356
283,235 COLT Telecom Group PLC*,** ..................... 9,433,368
27,220 Dacom Corp. .................................... 3,942,669
95,786 Energis PLC*,** ................................ 3,593,358
84,360 FirstCom Corp.* ................................ 1,270,673
125,000 GT Group Telecom, Inc. - Class B
- New York Shares*,** ....................... 1,976,563
183,450 Infonet Services Corp. - Class B* .............. 2,189,934
142,951 NTL, Inc.* ..................................... 8,559,191
465,760 SK Telecom Company, Ltd. (ADR) ................. 16,912,910
73,427,390
Telephone - Integrated - 5.6%
545 Nippon Telegraph & Telephone Corp.** ........... 7,263,129
972,439 Telefonica S.A.*,** ............................ 20,973,810
62,200 Telefonica S.A. (ADR)*,** ...................... 3,984,688
834,875 Telefonos de Mexico S.A. (ADR) ................. 47,692,234
200,134 Versatel Telecom International N.V.*,** ........ 8,441,235
97,810 Viatel, Inc.* .................................. 2,793,698
91,148,794
Television - 0.2%
16,327 Canal Plus S.A.** .............................. 2,754,555
Tobacco - 0.3%
578 Japan Tobacco, Inc.** .......................... 5,086,109
Wire and Cable Products - 0.7%
521,000 Furukawa Electric Company, Ltd.** .............. $ 10,907,359
--------------------------------------------------------------------------------
Total Common Stock (cost $998,902,560) ....................... 1,265,329,078
--------------------------------------------------------------------------------
Corporate Bonds - 0%
Cable Television - 0%
$ 330,000 United Pan-Europe Communications N.V.
11.25%, senior notes, due 2/1/10**
(cost $327,600) ............................. 293,700
--------------------------------------------------------------------------------
Preferred Stock - 1.4%
Automotive - Cars and Light Trucks - 0.4%
2,367 Porsche A.G.** ................................. 6,466,593
Insurance Brokers - 0.4%
15,022 Marschollek, Lautenschlaeger und
Partner A.G.** .............................. 7,545,560
Multimedia - 0.1%
19,160 News Corporation, Ltd. (ADR) ................... 910,100
Telephone - Integrated - 0.5%
83,365 Telecomunicacoes Brasileiras S.A. (ADR) ........ 8,096,826
--------------------------------------------------------------------------------
Total Preferred Stock (cost $15,839,708) ..................... 23,019,079
--------------------------------------------------------------------------------
Repurchase Agreement - 2.6%
$ 42,600,000 Morgan Stanley Dean Witter & Co., 6.75%
dated 6/30/00, maturing 7/3/00, to be
repurchased at $42,623,963 collateralized
by $48,607,703 in Fannie Mae, 0.65%-
10.25%, 1/1/06-6/1/30; $58,848,009 in
Freddie Mac, 0%-8.40%, 7/15/10-12/1/29;
with respective values of $16,031,495
and $27,436,987 (cost $42,600,000) .......... 42,600,000
--------------------------------------------------------------------------------
U.S. Government Agencies - 18.2%
Federal Home Loan Bank System:
25,000,000 5.82%, 7/14/00 .............................. 24,947,458
50,000,000 5.78%, 7/19/00 .............................. 49,855,500
25,000,000 5.94%, 7/21/00 .............................. 24,917,500
50,000,000 6.36%, 8/18/00 .............................. 49,576,000
50,000,000 5.87%, 9/8/00 ............................... 49,397,500
50,000,000 6.40%, 9/18/00 .............................. 49,308,000
50,000,000 6.02%, 9/22/00 .............................. 49,272,000
--------------------------------------------------------------------------------
Total U.S. Government Agencies (cost $297,337,722) ........... 297,273,958
--------------------------------------------------------------------------------
Total Investments (total cost $1,355,007,590) - 99.5% ........ 1,628,515,815
--------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 0.5% 8,725,249
--------------------------------------------------------------------------------
Net Assets - 100% ............................................ $ 1,637,241,064
--------------------------------------------------------------------------------
</TABLE>
See Notes to Schedules of Investments.
4 Janus Aspen Series / June 30, 2000
<PAGE>
SUMMARY OF INVESTMENTS BY COUNTRY, JUNE 30, 2000
<TABLE>
<CAPTION>
COUNTRY % OF INVESTMENT SECURITIES MARKET VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Australia 0.2% $ 2,287,458
Brazil 2.1% 34,045,856
Canada 5.7% 93,428,016
Egypt 0.2% 3,891,692
Finland 5.3% 86,092,846
France 6.3% 102,616,443
Germany 1.7% 27,684,386
Hong Kong 5.7% 93,244,421
India 0.6% 10,078,969
Israel 2.4% 38,374,308
Italy 0.1% 1,831,677
Japan 11.0% 178,483,423
Mexico 4.1% 67,417,321
Netherlands 4.9% 80,019,369
Norway 0.5% 7,865,162
Singapore 1.6% 26,208,788
South Africa 0.7% 11,395,796
South Korea 3.1% 50,198,297
Spain 3.1% 51,111,266
Sweden 4.1% 66,550,788
Switzerland 0.6% 9,895,660
Taiwan 1.6% 26,238,741
United Kingdom 9.1% 147,555,933
United States++ 25.3% 411,999,199
--------------------------------------------------------------------------------
Total 100.0% $ 1,628,515,815
</TABLE>
++ Includes Short-Term Securities (4.4% excluding Short-Term Securities)
FORWARD CURRENCY CONTRACTS, OPEN AT JUNE 30, 2000
<TABLE>
<CAPTION>
CURRENCY SOLD AND CURRENCY CURRENCY UNREALIZED
SETTLEMENT DATE UNITS SOLD VALUE IN $ U.S. GAIN/(LOSS)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
British Pound 9/22/00 5,500,000 $ 8,357,800 $ 403,838
British Pound 9/29/00 17,500,000 26,596,500 1,186,500
British Pound 10/5/00 9,500,000 14,440,000 594,700
British Pound 1/26/01 800,000 1,219,040 5,360
Canadian Dollar 9/22/00 8,900,000 6,028,177 104,172
Canadian Dollar 11/17/00 6,100,000 4,138,118 (12,315)
Euro 9/8/00 13,200,000 12,650,880 (456,068)
Euro 9/22/00 8,800,000 8,440,960 51,128
Euro 9/29/00 26,300,000 25,237,480 230,125
Euro 11/17/00 14,200,000 13,664,660 (671,944)
Euro 1/19/01 3,000,000 2,897,400 (62,040)
Euro 1/26/01 18,300,000 17,679,630 135,343
Hong Kong Dollar
3/16/01 241,000,000 30,931,143 723
Hong Kong Dollar
5/7/01 169,000,000 21,694,480 (150,419)
Hong Kong Dollar
5/10/01 166,000,000 21,309,371 (67,134)
Hong Kong Dollar
6/27/01 60,400,000 7,754,028 (866)
Japanese Yen 9/1/00 1,400,000,000 13,368,882 (146,478)
Japanese Yen 9/8/00 4,720,000,000 45,128,123 509,105
Japanese Yen 9/14/00 700,000,000 6,699,853 43,040
Japanese Yen 9/29/00 160,000,000 1,535,487 22,449
Japanese Yen 10/5/00 405,000,000 3,891,058 110,918
Japanese Yen 11/17/00 850,700,000 8,239,329 (209,312)
Japanese Yen 1/19/01 35,000,000 342,990 (2,026)
Singapore Dollar 7/16/01 2,300,000 1,387,214 35,629
South Korean Won
1/26/01 420,000,000 375,402 (1,071)
South Korean Won
2/8/01 1,247,000,000 1,114,487 (955)
South Korean Won
2/15/01 1,750,000,000 1,563,896 349
Swiss Franc 9/8/00 1,900,000 1,171,899 5,666
Swiss Franc 10/5/00 950,000 587,362 (4,182)
--------------------------------------------------------------------------------
Total $ 308,445,649 $ 1,654,235
</TABLE>
See Notes to Schedules of Investments.
Janus Aspen Series / June 30, 2000 5
<PAGE>
Statements of|Operations
<TABLE>
<CAPTION>
Janus Aspen
International
For the six months or period ended June 30, 2000 (unaudited) Growth
(all numbers in thousands) Portfolio
-------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest $ 7,743
Dividends 17,794
Foreign tax withheld (452)
-------------------------------------------------------------------------------------
Total Investment Income 25,085
-------------------------------------------------------------------------------------
Expenses:
Advisory fees 4,165
Transfer agent expenses 2
Registration fees 79
System fees 9
Custodian fees 341
Insurance expense 1
Audit fees 5
Distribution fees - Retirement Shares 38
Distribution fees - Service Shares 134
Administrative fees - Retirement Shares 38
Other expenses 5
-------------------------------------------------------------------------------------
Total Expenses 4,817
-------------------------------------------------------------------------------------
Expense and Fee Offsets (12)
-------------------------------------------------------------------------------------
Net Expenses 4,805
-------------------------------------------------------------------------------------
Excess Expense Reimbursement --
-------------------------------------------------------------------------------------
Net Expenses After Reimbursement 4,805
-------------------------------------------------------------------------------------
Net Investment Income/(Loss) 20,280
-------------------------------------------------------------------------------------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) from securities transactions 59,457
Net realized gain/(loss) from foreign currency transactions 14,649
Net realized gain/(loss) from futures contracts --
Change in net unrealized appreciation or depreciation of
investments and foreign currency (114,297)
-------------------------------------------------------------------------------------
Net Gain/(Loss) on Investments (40,191)
-------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $(19,911)
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6 Janus Aspen Series / June 30, 2000
<PAGE>
Statements of|Assets & Liabilities
<TABLE>
<CAPTION>
Janus Aspen
Internationa
As of June 30, 2000 (unaudited) (all numbers in thousands Growth
except net asset value per share) Portfolio
-------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at cost $1,355,008
Investments at value: $1,628,516
Cash 1,887
Receivables:
Investments sold 13,040
Portfolio shares sold 16,292
Dividends 1,350
Interest 25
Due from Advisor --
Other assets --
Variation margin --
Forward currency contracts 1,654
-------------------------------------------------------------------------------------
Total Assets 1,662,764
-------------------------------------------------------------------------------------
Liabilities:
Payables:
Investments purchased 23,202
Portfolio shares repurchased 1,296
Advisory fees 847
Accrued expenses 178
-------------------------------------------------------------------------------------
Total Liabilities 25,523
-------------------------------------------------------------------------------------
Net Assets $1,637,241
-------------------------------------------------------------------------------------
Net Assets - Institutional Shares $1,307,787
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 32,948
-------------------------------------------------------------------------------------
Net Asset Value Per Share $ 39.69
-------------------------------------------------------------------------------------
Net Assets - Retirement Shares $ 44,259
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 1,118
-------------------------------------------------------------------------------------
Net Asset Value Per Share $ 39.58
-------------------------------------------------------------------------------------
Net Assets - Service Shares $ 285,195
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) 7,247
-------------------------------------------------------------------------------------
Net Asset Value Per Share $ 39.35
-------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 7
<PAGE>
Statements of|Changes in Net Assets
<TABLE>
<CAPTION>
For the six months or period ended June 30 (unaudited) Janus Aspen
and for the fiscal year ended December 31 International Growth
(all numbers in thousands) Portfolio
2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income/(loss) $ 20,280 $ 1,093
Net realized gain/(loss) from investment transactions 74,106 9,375
Change in unrealized net appreciation or depreciation of
investments and foreign currency (114,297) 333,771
---------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations (19,911) 344,239
---------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders:
Net investment income* (3,284) (1,019)
Net realized gain from investment transactions* -- --
Distributions (in excess of realized gains)* -- --
---------------------------------------------------------------------------------------------------
Net Decrease from Dividends and Distributions (3,284) (1,019)
---------------------------------------------------------------------------------------------------
Capital Share Transactions:
Shares sold
Institutional Shares 1,049,036 438,134
Retirement Shares 35,792 12,225
Service Shares 355,221 --
Reinvested dividends and distributions
Institutional Shares 3,284 1,018
Retirement Shares -- 1
Service Shares -- --
Shares repurchased
Institutional Shares (543,505) (277,609)
Retirement Shares (8,553) (738)
Service Shares (58,217) --
---------------------------------------------------------------------------------------------------
Net Increase/(Decrease) from Capital Share Transactions 833,058 173,031
---------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets 809,863 516,251
Net Assets:
Beginning of period 827,378 311,127
---------------------------------------------------------------------------------------------------
End of period $ 1,637,241 $ 827,378
---------------------------------------------------------------------------------------------------
Net Assets Consist of:
Capital (par value and paid-in surplus)* $ 1,279,301 $ 446,243
Undistributed net investment income/(loss)* 17,165 169
Undistributed net realized gain/(loss) from investments* 65,624 (8,482)
Unrealized appreciation/(depreciation) of investments
and foreign currency 275,151 389,448
---------------------------------------------------------------------------------------------------
$ 1,637,241 $ 827,378
---------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Institutional Shares
Shares sold 25,295 17,341
Reinvested dividends and distributions 83 44
---------------------------------------------------------------------------------------------------
Total 25,378 17,385
---------------------------------------------------------------------------------------------------
Shares Repurchased (13,385) (11,053)
Net Increase/(Decrease) in Portfolio Shares 11,993 6,332
Shares Outstanding, Beginning of Period 20,955 14,623
---------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 32,948 20,955
---------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Retirement Shares(2)
Shares sold 889,679 466,618
Reinvested dividends and distributions -- 40
---------------------------------------------------------------------------------------------------
Total 889,679 466,658
---------------------------------------------------------------------------------------------------
Shares Repurchased (212,006) (26,923)
Net Increase/(Decrease) in Portfolio Shares 677,673 439,735
Shares Outstanding, Beginning of Period 440,543 808
---------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 1,118,216 440,543
---------------------------------------------------------------------------------------------------
Transactions in Portfolio Shares - Service Shares(2)
Shares sold 8,716,166 --
Reinvested dividends and distributions -- --
---------------------------------------------------------------------------------------------------
Total 8,716,166 --
---------------------------------------------------------------------------------------------------
Shares Repurchased (1,468,904) --
Net Increase/(Decrease) in Portfolio Shares 7,247,262 --
Shares Outstanding, Beginning of Period -- --
---------------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 7,247,262 --
---------------------------------------------------------------------------------------------------
Purchases and Sales of Investment Securities:
(excluding short-term securities)
Purchases of securities $ 875,551 $ 446,784
Proceeds from sales of securities 295,081 325,107
Purchases of long-term U.S. government obligations -- --
Proceeds from sales of long-term U.S. government obligations -- --
</TABLE>
* See Note 3 in Notes to Financial Statements.
(1) Transactions in Portfolio Shares - Retirement and Service Shares numbers
are not in thousands.
See Notes to Financial Statements.
8 Janus Aspen Series / June 30, 2000
<PAGE>
Financial|Highlights - Institutional Shares
<TABLE>
<CAPTION>
For a share outstanding during the six months ended June 30 (unaudited) Janus Aspen International Growth Portfolio
or through each fiscal year ended December 31 2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 38.67 $ 21.27 $ 18.48 $ 15.72 $ 11.95 $ 9.72
------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .51 .06 .13 .11 .05 .09
Net gains/(losses) on securities
(both realized and unrealized) .61 17.40 3.07 2.80 4.06 2.16
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.12 17.46 3.20 2.91 4.11 2.25
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) (.10) (.06) (.14) (.11) (.11) (.02)
Distributions (from capital gains) -- -- -- (.01) (.23) --
Distributions (in excess of realized gains) -- -- (.27) (.03) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.10) (.06) (.41) (.15) (.34) (.02)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 39.69 $ 38.67 $ 21.27 $ 18.48 $ 15.72 $ 11.95
------------------------------------------------------------------------------------------------------------------------------------
Total Return* 2.90% 82.27% 17.23% 18.51% 34.71% 23.15%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 1,307,787 $ 810,392 $ 311,110 $ 161,091 $ 27,192 $ 1,608
Average Net Assets for the Period (in thousands) $ 1,149,487 $ 425,876 $ 234,421 $ 96,164 $ 7,437 $ 1,792
Ratio of Gross Expenses to Average Net Assets**(2) 0.72% 0.77% 0.86% 0.96% 1.26% 2.69%
Ratio of Net Expenses to Average Net Assets**(2) 0.72% 0.76% 0.86% 0.96% 1.25% 2.50%
Ratio of Net Investment Income to Average Net Assets** 2.94% 0.26% 0.73% 0.70% 0.62% (.80)%
Portfolio Turnover Rate** 57% 80% 93% 86% 65% 211%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) See footnote #5 in Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 9
<PAGE>
Financial|Highlights - Retirement Shares
<TABLE>
<CAPTION>
For a share outstanding during the six months Janus Aspen International
ended June 30 (unaudited) or through Growth Portfolio
each fiscal year or period ended December 31 2000 1999 1998 1997(1)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 38.56 $ 21.27 $ 18.44 $ 16.80
--------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .42 -- .05 .04
Net gains/(losses) on securities (both realized and unrealized) .60 17.30 3.07 1.73
--------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.02 17.30 3.12 1.77
--------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) -- (.01) (.01) (.09)
Distributions (from capital gains) -- -- (.28) (.04)
--------------------------------------------------------------------------------------------------------------------
Total Distributions -- (.01) (.29) (.13)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 39.58 $ 38.56 $ 21.27 $ 18.44
--------------------------------------------------------------------------------------------------------------------
Total Return* 2.67% 81.32% 16.86% 10.53%
--------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 44,259 $ 16,986 $ 17 $ 11
Average Net Assets for the Period (in thousands) $ 30,848 $ 3,738 $ 13 $ 11
Ratio of Gross Expenses to Average Net Assets**(2) 1.22% 1.25% 1.35% 1.45%
Ratio of Net Expenses to Average Net Assets**(2) 1.22% 1.24% 1.35% 1.45%
Ratio of Net Investment Income/(Loss) to Average Net Assets** 3.04% (0.29)% 0.26% 0.26%
Portfolio Turnover Rate** 57% 80% 93% 86%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) Period May 1, 1997 (inception) to December 31, 1997.
(2) See footnote #5 in Notes to Financial Statements.
See Notes to Financial Statements.
10 Janus Aspen Series / June 30, 2000
<PAGE>
Financial|Highlights - Service Shares
<TABLE>
<CAPTION>
Janus Aspen International
For a share outstanding during the six months Growth Portfolio
or period ended June 30 (unaudited) 2000
--------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 38.29
--------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .42
Net gains/(losses) on securities (both realized and unrealized) .64
--------------------------------------------------------------------------------------------
Total from Investment Operations 1.06
--------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income) --
Distributions (from capital gains) --
--------------------------------------------------------------------------------------------
Total Distributions --
--------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 39.35
--------------------------------------------------------------------------------------------
Total Return* 2.77%
--------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 285,195
Average Net Assets for the Period (in thousands) $ 107,597
Ratio of Gross Expenses to Average Net Assets**(1) 0.98%
Ratio of Net Expenses to Average Net Assets**(1) 0.98%
Ratio of Net Investment Income/(Loss) to Average Net Assets** 5.64%
Portfolio Turnover Rate** 57%
</TABLE>
* Total return not annualized for periods of less than one full year.
** Annualized for periods of less than one full year.
(1) See footnote #5 in Notes to Financial Statements.
See Notes to Financial Statements.
Janus Aspen Series / June 30, 2000 11
<PAGE>
Notes to|Schedules of Investments
ADR - American Depository Receipt
EUR - Euro
GBP - British Pound
GDR - Global Depository Receipt
* Non-income-producing security
** A portion of this security has been segregated to cover margin or
segregation requirements on open futures contracts and/or forward currency
contracts.
+ Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale.
Variable Rate Notes. The interest rate, which is based on specific, or an index
of, market interest rates, is subject to change. Rates in the security
description are as of June 30, 2000.
Money market funds may hold securities with stated maturities of greater than
397 days when those securities have features that allow a fund to "put" back the
security to the issuer or to a third party within 397 days of acquisition. The
maturity dates shown in the security descriptions are the stated maturity dates.
Repurchase Agreements held by a Portfolio are fully collateralized, and such
collateral is in the possession of the Portfolio's custodian. The collateral is
evaluated daily to ensure its market value equals or exceeds the current market
value of the repurchase agreements including accrued interest. In the event of
default on the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
12 Janus Aspen Series / June 30, 2000
<PAGE>
Notes to|Financial Statements
The following section describes the organization and significant accounting
policies of the Portfolios and provides more detailed information about the
schedules and tables that appear throughout this report. In addition, the Notes
explain how the Portfolios operate and the methods used in preparing and
presenting this report.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Janus Aspen Series (the "Trust") was organized as a Delaware Trust on May
20, 1993, and is registered under the Investment Company Act of 1940 (the
"1940 Act") as a no-load, open-end management investment company. The Trust
offers fourteen Portfolios or series of shares with differing investment
objectives and policies. Eleven Portfolios invest primarily in equity
securities: Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth
Portfolio, Janus Aspen Capital Appreciation Portfolio, Janus Aspen Balanced
Portfolio, Janus Aspen Equity Income Portfolio, Janus Aspen Growth and
Income Portfolio, Janus Aspen Strategic Value Portfolio, Janus Aspen
International Growth Portfolio, Janus Aspen Worldwide Growth Portfolio,
Janus Aspen Global Life Sciences Portfolio and Janus Aspen Global
Technology Portfolio. Two Portfolios invest primarily in income-producing
securities: Janus Aspen Flexible Income Portfolio and Janus Aspen
High-Yield Portfolio. Janus Aspen Money Market Portfolio invests in
short-term money market securities. Each Portfolio is diversified as
defined in the 1940 Act, with the exception of the Aggressive Growth
Portfolio, Capital Appreciation Portfolio, Global Life Sciences Portfolio,
Global Technology Portfolio and Strategic Value Portfolio, which are
nondiversified.
Institutional Shares of the Trust are issued and redeemed only in
connection with investment in and payments under variable annuity contracts
and variable life insurance contracts (collectively "variable insurance
contracts"), as well as certain qualified retirement plans. Effective May
1, 1997, the Trust issued the Retirement Shares. Retirement Shares of the
Trust are issued and redeemed only in connection with certain qualified
retirement plans.
A Special Meeting of Shareholders of the Retirement Shares class (the
"Retirement Shares") of each portfolio other than High-Yield Portfolio will
be held on July 20, 2000 to approve a reorganization that would transfer
the assets relating to the Retirement Shares class of each Janus Aspen
Series Portfolio to a corresponding Fund of Janus Adviser Series.
Effective December 31, 1999, the Trust issued a new class of shares, the
Service Shares. Service Shares of the Trust are issued and redeemed only in
connection with investment in and payments under variable annuity contracts
and variable life insurance contracts (collectively "variable insurance
contracts"), as well as certain qualified retirement plans.
The following accounting policies have been consistently followed by the
Trust and are in conformity with accounting principles generally accepted
in the investment company industry.
INVESTMENT VALUATION
Securities are valued at the closing price for securities traded on a
principal securities exchange (U.S. or foreign) and on the NASDAQ National
Market. Securities traded on over-the-counter markets and listed securities
for which no sales are reported are valued at the latest bid price (or
yield equivalent thereof) obtained from one or more dealers making a market
for such securities or by a pricing service approved by the Trustees.
Short-term investments maturing within 60 days and all money market
securities in the Money Market Portfolio are valued at amortized cost,
which approximates market value. Foreign securities are converted to U.S.
dollars using exchange rates at the close of the New York Stock Exchange.
When market quotations are not readily available, securities are valued at
fair value as determined in good faith under procedures established by the
Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for as of the date purchased or sold.
Dividend income is recorded on the ex-dividend date. Certain dividends from
foreign securities will be recorded as soon as the Trust is informed of the
dividend if such information is obtained subsequent to the ex-dividend
date. Interest income is recorded on the accrual basis and includes
amortization of discounts and premiums. Gains and losses are determined on
the identified cost basis, which is the same basis used for federal income
tax purposes. Income and gains and losses are allocated daily to each class
of shares based upon the ratio of net assets represented by each class as a
percentage of total net assets.
FORWARD CURRENCY TRANSACTIONS
AND FUTURES CONTRACTS
The Portfolios enter into forward currency contracts in order to hedge
their exposure to changes in foreign currency exchange rates on their
foreign portfolio holdings and to lock in the U.S. dollar cost of firm
purchase and sales commitments denominated in foreign currencies. A forward
currency contract is a commitment to purchase or sell a foreign currency at
a future date at a negotiated forward rate. The gain or loss arising from
the difference between the U.S. dollar cost of the original contract and
the value of the foreign currency in U.S. dollars upon closing such a
contract is included in net realized gain or loss on foreign currency
transactions. Forward currency contracts held by the Portfolios are fully
collateralized by other securities, in possession at the Portfolio's
custodian, which are denoted in the accompanying Schedule of Investments.
The market value of these securities is evaluated daily to ensure that it
is equal to or exceeds the current market value of the corresponding
forward currency contract.
Currency gain and loss are also calculated on payables and receivables that
are denominated in foreign currencies. The payables and receivables are
generally related to security transactions and income.
Janus Aspen Series / June 30, 2000 13
<PAGE>
Notes to|Financial Statements (continued)
Futures contracts are marked to market daily, and the variation margin is
recorded as an unrealized gain or loss. When a contract is closed, a
realized gain or loss is recorded equal to the difference between the
opening and closing value of the contract. Generally, open forward and
futures contracts are marked to market (i.e., treated as realized and
subject to distribution) for federal income tax purposes at fiscal
year-end.
Foreign-denominated assets and forward currency contracts may involve more
risks than domestic transactions, including: currency risk, political and
economic risk, regulatory risk and market risk. Risks may arise from the
potential inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of foreign currencies relative to
the U.S. dollar.
The Portfolios may enter into futures contracts and options on securities,
financial indexes and foreign currencies, forward contracts and
interest-rate swaps and swap-related products. The Portfolios intend to use
such derivative instruments primarily to hedge or protect from adverse
movements in securities prices, currency rates or interest rates. The use
of futures contracts and options may involve risks such as the possibility
of illiquid markets or imperfect correlation between the value of the
contracts and the underlying securities or that the counterparty will fail
to perform its obligations.
INITIAL PUBLIC OFFERINGS
The Portfolios may invest in initial public offerings (IPOs). IPOs and
other investment techniques may have a magnified performance impact on a
fund with a small asset base. The Portfolios may not experience similar
performance as its assets grow.
ADDITIONAL INVESTMENT RISK
A portion of the Flexible Income and High-Yield Portfolios may be invested
in lower-rated debt securities that have a higher risk of default or loss
of value because of changes in the economy or in their respective industry.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
DIVIDEND DISTRIBUTIONS AND EXPENSES
Each Portfolio, except the Money Market Portfolio, makes at least
semiannual distributions of substantially all of its investment income and
at least an annual distribution of its net realized capital gains, if any.
The Money Market Portfolio makes daily distributions of its income. All
dividends and capital gains distributions from a Portfolio will be
automatically reinvested into additional shares of that Portfolio.
Expenses are allocated daily to each class of shares based upon the ratio
of net assets represented by each class as a percentage of total net
assets. Expenses directly attributable to a specific class of shares are
charged against the operations of such class.
FEDERAL INCOME TAXES
No provision for income taxes is included in the accompanying financial
statements as the Portfolios intend to distribute to shareholders all
taxable investment income and realized gains and otherwise comply with the
Internal Revenue Code applicable to regulated investment companies.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The management fee for each equity Portfolio decreased to an annual rate of
.65% of average net assets, effective May 1, 2000. The management fee for
the corresponding Janus retail fund corresponding to each equity Portfolio
also decreased to this rate, effective January 31, 2000. Due to the fee
reductions described above, this had the effect of lowering each equity
Portfolio's management fee on January 31, 2000, also.
Prior to May 1, 2000, investment advisory fees for eight of the Portfolios
were payable to Janus Capital based upon annual rates of .75% of the first
$300 million of average net assets, .70% of the next $200 million of
average net assets, and .65% of the average net assets in excess of $500
million. However, Janus Capital had voluntarily agreed to reduce each
Portfolio's advisory fee to the extent that such fee exceeded the effective
rate of the Janus retail fund corresponding to such Portfolio. The
effective rate is the advisory fee calculated by the corresponding retail
fund as of the last day of each calendar quarter (expressed as an annual
rate). Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth
Portfolio, Janus Aspen Capital Appreciation Portfolio, Janus Aspen
International Growth Portfolio, Janus Aspen Worldwide Growth Portfolio,
Janus Aspen Balanced Portfolio, Janus Aspen Equity Income Portfolio and
Janus Aspen Growth and Income Portfolio advisory fees were reduced to the
effective rates of Janus Fund, Janus Enterprise Fund, Janus Twenty Fund,
Janus
14 Janus Aspen Series / June 30, 2000
<PAGE>
Overseas Fund, Janus Worldwide Fund, Janus Balanced Fund, Janus Equity
Income Fund and Janus Growth and Income Fund, respectively. The effective
rate for each Portfolio for the period ended December 31, 1999, was .65%,
.66%, .65%, .65%, .65%, .66%, .69% and .65%, respectively. The Flexible
Income Portfolio is subject to advisory fees payable to Janus Capital based
upon annual rates of .65% of the first $300 million of average net assets
plus .55% of average net assets in excess of $300 million. The High-Yield
Portfolio's advisory fee rate is payable at rates of .75% of the first $300
million of average net assets plus .65% of average net assets in excess of
$300 million. The Money Market Portfolio's advisory fee rate is .25% of
average net assets. For additional information on the specific fees for the
Retirement Shares, please refer to note 4 of the financial statements.
Janus Capital has agreed to reduce its fee to the extent normal operating
expenses exceed 1% of the average net assets of the Flexible Income and
High-Yield Portfolios and .50% of the average net assets of the Money
Market Portfolio for a fiscal year.
Janus Capital has agreed to continue these fee waivers and reductions until
at least the next annual renewal of the advisory contracts. The participant
administration fee and distribution fee applicable to the Retirement
Shares, as well as the distribution fee applicable to the Service Shares,
are not included in these expense limits.
Officers and certain trustees of the Trust are also officers and/or
directors of Janus Capital; however, they receive no compensation from the
Trust.
Janus Service Corporation ("Janus Service"), a wholly owned subsidiary of
Janus Capital, receives certain out-of-pocket expenses for transfer agent
services. Janus Service also receives an administrative fee at an annual
rate of up to .25% of the average daily net assets of the Retirement Shares
of each Portfolio for providing or procurring recordkeeping, subaccounting
and other administrative services to plan participants who invest in the
Retirement Shares.
Janus Distributors, Inc., a wholly owned subsidiary of Janus Capital, is a
distributor of the Portfolios. The Retirement and Service Shares have
adopted a Distribution and Shareholder Servicing Plan (The "Plan") pursuant
to Rule 12b-1 under The 1940 Act. The Plan authorizes payments by the
Portfolios in connection with the distribution of the Retirement and
Service Shares at an annual rate, as determined from time to time by the
Board of Trustees, of up to .25% of the Retirement and Service Shares'
average daily net assets.
DST Systems, Inc. (DST), an affiliate of Janus Capital through a degree of
common ownership, provides accounting systems to the Portfolios. DST
Securities, Inc., a wholly owned subsidiary of DST, provides brokerage
services on certain portfolio transactions. Brokerage commissions paid to
DST Securities, Inc. serve to reduce fees and expenses. Brokerage
commissions paid, fees reduced and the net fees paid to DST for the period
ended June 30, 2000, are noted below:
<TABLE>
<CAPTION>
DST Securities, Inc. Portfolio Expense DST Systems
Portfolio Commissions Paid* Reduction* Costs
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen International Growth Portfolio 1,241 931 9,385
------------------------------------------------------------------------------------------------------
</TABLE>
* The difference between commissions paid to DST Securities, Inc. and
expenses reduced constituted commissions paid to an unaffiliated clearing
broker.
Janus Aspen Series / June 30, 2000 15
<PAGE>
Notes to|Financial Statements (continued)
3. FEDERAL INCOME TAX
The Portfolios have elected to treat gains and losses on forward foreign
currency contracts as capital gains and losses. Other foreign currency
gains and losses on debt instruments are treated as ordinary income for
federal income tax purposes pursuant to Section 988 of the Internal Revenue
Code. As of June 30, 2000, the net capital loss carryovers noted below are
available to offset future realized capital gains and thereby reduce future
taxable gains distributions. These carryovers expire between December 31,
2006, and December 31, 2007.
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investments for federal income tax
purposes as of June 30, 2000, are also noted below.
<TABLE>
<CAPTION>
Post-October
Net Capital Loss Capital Currency Federal Tax Unrealized
Portfolio Carryovers Losses Losses Cost Appreciation
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Aspen International Growth
Portfolio $ (6,761,112) -- -- 1,355,850,119 352,226,999
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unrealized Net Appreciation/
Portfolio (Depreciation) (Depreciation)
---------------------------------------------------------------------------
Janus Aspen International Growth
Portfolio (79,561,303) 272,665,696
---------------------------------------------------------------------------
4. EXPENSES
The Portfolios' expenses may be reduced through expense reduction
arrangements. Those arrangements include the use of broker commissions paid
to DST Securities, Inc. and uninvested cash balances earning interest with
the Portfolios' custodian. The Statements of Operations reflect the total
expenses before any offset, the amount of the offset and the net expenses.
The expense ratios listed in the Financial Highlights reflect expenses
prior to any expense offset (gross expense ratio) and after expense offsets
(net expense ratio).
Janus Aspen Series Retirement Shares incur a pro rata share of operating
expenses. In addition, the Retirement Shares pay a distribution fee of up
to .25% of average net assets and a participant administration fee of up to
.25% of average net assets.
Janus Aspen Series Service Shares incur a pro rata share of operating
expenses. In addition, the Service Shares pay a distribution fee of up to
.25% of average net assets.
5. EXPENSE RATIOS
Listed below are the gross expense ratios for the various Portfolios that
would be in effect, absent the waiver of certain fees, offsets and/or
voluntary reduction of the adviser's fee to the effective rate of the
corresponding Janus retail fund. Expense ratios are annualized for all
periods less than one year.
<TABLE>
<CAPTION>
Service
Institutional Shares Retirement Shares Shares
Portfolio 2000 1999 1998 1997 1996 1995 2000 1999 1998 1997(1) 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen International Growth
Portfolio 0.72% 0.84% 0.95% 1.08% 2.21% 3.57% 1.22% 1.32% 1.44% 1.57% 0.98%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Period May 1, 1997, (inception) to December 31, 1997.
16 Janus Aspen Series / June 30, 2000
<PAGE>
Explanations of|Charts, Tables and Financial Statements
1. PERFORMANCE OVERVIEWS
When comparing the performance of a Portfolio with an index, keep in mind
that market indexes do not include brokerage commissions that would be
incurred if you purchased the individual securities in the index. They also
do not include taxes payable on dividends and interest or operating
expenses incurred if you maintained a Portfolio invested in the index.
Average annual total returns are also quoted for each class of Portfolio.
Average annual total return is calculated by taking the growth or decline
in value of an investment over a period of time, including reinvestment of
dividends and distributions, then calculating the annual compounded
percentage rate that would have produced the same result had the rate of
growth been constant throughout the period.
2. SCHEDULES OF INVESTMENTS
Following the performance overview section is each Portfolio's Schedule of
Investments. This schedule reports the industry concentrations and types of
securities held in each Portfolio on the last day of the reporting period.
Securities are usually listed by type (common stock, corporate bonds, U.S.
government obligations, etc.) and by industry classification (banking,
communications, insurance, etc.).
The market value of each security is quoted as of the last day of the
reporting period. The value of securities denominated in foreign currencies
is converted into U.S. dollars.
Portfolios that invest in foreign securities also provide a summary of
investments by country. This summary reports the Portfolio's exposure to
different countries by providing the percentage of securities invested in
each country.
2a. FORWARD CURRENCY CONTRACTS
A table listing forward currency contracts follows each Portfolio's
Schedule of Investments (if applicable). Forward currency contracts are
agreements to deliver or receive a preset amount of currency at a future
date. Forward currency contracts are used to hedge against foreign currency
risk in the Portfolio's long-term holdings.
The table provides the name of the foreign currency, the settlement date of
the contract, the amount of the contract, the value of the currency in U.S.
dollars and the amount of unrealized gain or loss. The amount of unrealized
gain or loss reflects the change in currency exchange rates from the time
the contract was opened to the last day of the reporting period.
3. STATEMENT OF OPERATIONS
This statement details the Portfolios' income, expenses, gains and losses
on securities and currency transactions, and appreciation or depreciation
of current Portfolio holdings.
The first section in this statement, titled "Investment Income," reports
the dividends earned from stocks and interest earned from interest-bearing
securities in the Portfolio.
The next section reports the expenses and expense offsets incurred by the
Portfolios, including the advisory fee paid to the investment adviser,
transfer agent fees, shareholder servicing expenses, and printing and
postage for mailing statements, financial reports and prospectuses.
The last section lists the increase or decrease in the value of securities
held in the Portfolios. Portfolios realize a gain (or loss) when they sell
their position in a particular security. An unrealized gain (or loss)
refers to the change in net appreciation or depreciation of the Portfolios
during the period. "Net Gain/(Loss) on Investments" is affected both by
changes in the market value of Portfolio holdings and by gains (or losses)
realized during the reporting period.
Janus Aspen Series / June 30, 2000 17
<PAGE>
Explanations of|Charts, Tables and Financial Statements (continued)
4. STATEMENT OF ASSETS AND LIABILITIES
This statement is often referred to as the "balance sheet." It lists the
assets and liabilities of the Portfolios on the last day of the reporting
period.
The Portfolios' assets are calculated by adding the value of the securities
owned, the receivable for securities sold but not yet settled, the
receivable for dividends declared but not yet received on stocks owned and
the receivable for Portfolio shares sold to investors but not yet settled.
The Portfolios' liabilities include payables for securities purchased but
not yet settled, Portfolio shares redeemed but not yet paid and expenses
owed but not yet paid. Additionally, there may be other assets and
liabilities such as forward currency contracts.
The last section of this statement reports the net asset value (NAV) per
share on the last day of the reporting period for each class of the
Portfolio. The NAV is calculated by dividing the Portfolios' net assets
(assets minus liabilities) by the number of shares outstanding.
5. STATEMENT OF CHANGES IN NET ASSETS
This statement reports the increase or decrease in the Portfolios' net
assets during the reporting period. Changes in the Portfolios' net assets
are attributable to investment operations, dividends, distributions and
capital share transactions. This is important to investors because it shows
exactly what caused the Portfolios' net asset size to change during the
period.
The first section summarizes the information from the Statement of
Operations regarding changes in net assets due to the Portfolios'
investment performance. The Portfolios' net assets may also change as a
result of dividend and capital gains distributions to investors. If
investors receive their dividends in cash, money is taken out of the
Portfolio to pay the distribution. If investors reinvest their dividends,
the Portfolios' net assets will not be affected. If you compare each
Portfolio's "Net Decrease from Dividends and Distributions" to the
"Reinvested dividends and distributions," you'll notice that dividend
distributions had little effect on each Portfolio's net assets. This is
because all of Janus investors reinvest their distributions.
The reinvestment of dividends is included under "Capital Share
Transactions." "Capital Shares" refers to the money investors contribute to
the Portfolios through purchases or withdrawal via redemptions. Each
Portfolio's net assets will increase and decrease in value as investors
purchase and redeem shares from a Portfolio.
The section entitled "Net Assets Consist of" breaks down the components of
the Portfolios' net assets. Because Portfolios must distribute
substantially all earnings, you'll notice that a significant portion of net
assets is shareholder capital.
18 Janus Aspen Series / June 30, 2000
<PAGE>
6. FINANCIAL HIGHLIGHTS
This schedule provides a per-share breakdown of the components that affect
the net asset value (NAV) for current and past reporting periods for each
class of the Portfolio. Not only does this table provide you with total
return, it also reports total distributions, asset size, expense ratios and
portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of
the reporting period. The next line reports the net investment income per
share, which comprises dividends and interest income earned on securities
held by the Portfolios. Following is the total of gains, realized and
unrealized. Dividends and distributions are then subtracted to arrive at
the NAV per share at the end of the period.
Also included are the expense ratios, or the percentage of net assets that
was used to cover operating expenses during the period. Expense ratios vary
across the Portfolios for a number of reasons, including the differences in
management fees, average shareholder account size, the frequency of
dividend payments and the extent of foreign investments, which entail
greater transaction costs.
The Portfolios' expenses may be reduced through expense-reduction
arrangements. These arrangements include the use of brokerage commissions,
uninvested cash balances earning interest or balance credits. The Statement
of Operations reflects total expenses before any such offset, the amount of
offset and the net expenses. The expense ratios listed in the Financial
Highlights reflect total expenses both prior to any expense offset and
after the offsets.
The ratio of net investment income summarizes the income earned divided by
the average net assets of a Portfolio during the reporting period. Don't
confuse this ratio with a Portfolio's yield. The net investment income
ratio is not a true measure of a Portfolio's yield because it doesn't take
into account the dividends distributed to the Portfolio's investors.
The next ratio is the portfolio turnover rate, which measures the buying
and selling activity in a Portfolio. Portfolio turnover is affected by
market conditions, changes in the size of a Portfolio, the nature of the
Portfolio's investments and the investment style of the portfolio manager.
A 100% rate implies that an amount equal to the value of the entire
Portfolio is turned over in a year; a 50% rate means that an amount equal
to the value of half the Portfolio is traded in a year; and a 200% rate
means that an amount equal to the value of the Portfolio is sold every six
months.
Janus Aspen Series / June 30, 2000 19
<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) JUNE 30, 2000
[Graphic Omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) RESEARCH
SERIES
<PAGE>
<TABLE>
MFS(R) RESEARCH SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* Chairman and Chief Executive Massachusetts Financial Services Company
Officer, MFS Investment Management(R) 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.+ Private investor and
trustee DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow+ Private investor and real 500 Boylston Street
estate consultant; Vice Chairman, Capitol Boston, MA 02116-3741
Entertainment Management Company (video franchise)
INVESTOR SERVICE
CHAIRMAN AND PRESIDENT MFS Service Center, Inc.
Jeffrey L. Shames* P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGER
Alec C. Murray* For additional information,
contact your investment professional.
TREASURER
James O. Yost* CUSTODIAN
State Street Bank and Trust Company
ASSISTANT TREASURERS
Mark E. Bradley* WORLD WIDE WEB
Ellen Moynihan* www.mfs.com
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
</TABLE>
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did this past spring, there's a flurry of information on "how
to deal with market volatility" -both in the popular press and from those of
us in the investment business. Our own thinking on this is that, first, for
long-term investors volatility is not necessarily something to be feared;
occasional volatility may in fact be healthy for the markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high stock prices, relative to their earnings, or with business concepts
that looked great in the euphoria of a booming market but in the end appeared
to have no fundamental backing. It has always been our view that one of the
best protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good
times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -5, 10, 20 years, and more -stock and bond
returns, as represented by most common indices, have been positive and have
considerably outpaced inflation. Investing is the best way we know of to make
your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted to simply stay on
the sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan --how much to invest, how often, and into which
portfolios --in a calm, rational manner, working with your investment
professional. Second, with this approach you invest regularly without
agonizing over the decision each time you buy shares. And, third, if you
invest equal amounts of money at regular intervals, you'll be taking advantage
of a strategy called dollar-cost averaging: by investing a fixed amount while
the share cost fluctuates, you end up with an average share cost to you that
is lower than the average share price over your investment period.(1) If all
this sounds familiar, it's probably because you're already taking advantage of
dollar-cost averaging by investing regularly for retirement through a 401(k)
or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment --
1
<PAGE>
LETTER FROM THE CHAIRMAN -- continued
small, mid, or large cap; growth or value; United States or international;
stocks or bonds. The problem with this approach is that by the time a particular
area is generally recognized as "hot," you may have already missed some of the
best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out
of 10 years.(2) For the decade, the MSCI EAFE's average annual performance was
23%, compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom --deregulation, restructuring, and
increased adoption of technology --have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We
would suggest that one way to potentially profit from swings in the market --
to potentially be invested in various asset classes before the market shifts
in their favor --is with a diversified portfolio covering several asset
classes.
If you haven't already done so, we encourage you to discuss these thoughts
with your investment professional and factor them into your long-range
financial planning. Hopefully, the next time the markets appear to be going
wild, you'll feel confident enough in your plan to view periods of volatility
as a time of potential opportunity --or perhaps just a time to sit back and
do nothing.
As always, we appreciate your confidence and welcome any questions or comments
you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
July 17, 2000
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Source: Lipper Inc. Decade performance: '80s --12/31/79--12/31/89,
'90s --12/31/89--12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investments in variable products will fluctuate and may be worth more or less
upon redemption. Please see your investment professional for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
2
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended June 30, 2000, the series' Initial Class shares
provided a total return of 6.31% and Service Class 6.27%, including the
reinvestment of any distributions. This compares to a -0.42% return for the
series' benchmark, the Standard & Poor's 500 Composite Index (the S&P 500), a
popular, unmanaged index of common stock total return performance, for the
same period.
Historically, investment trends and styles have gone in and out of favor with
investors. Consequently, we don't spend too much time trying to determine when
value or growth, small-cap or large-cap stocks will move in and out of the
spotlight. Instead, we focus on finding dominant business franchises with
outstanding management driving accelerating earnings growth. It's a bottom-up
approach that's based on intensive hands-on research and the best ideas of our
analysts. This approach has led us to some very rewarding growth
opportunities, and the series has held on to its favorable returns during the
six-month period despite the weakness we've seen in the market over the past
four months.
We're finding opportunities in a wide range of areas, but some industries that
have recently performed well for the portfolio are energy, insurance, and
pharmaceuticals. In the energy sector, exploration and production companies
such as Global Marine and Transocean have rallied significantly due to the
rebound in oil and natural gas prices. Higher prices have spurred demand for
drilling services, resulting in strong revenue and earnings growth at many
energy services companies. Despite a fairly long stretch of weak performance
from insurance stocks such as Hartford Financial, we held on to these
companies because we believed in their long-term prospects and the possibility
of consolidation in the industry. Recently, we've seen an increase in merger
and acquisition activity in this group, which has boosted the performance of
these holdings. In the first quarter of 2000, we took advantage of weakness in
pharmaceutical stocks to increase our holdings in what we believe are top-
notch companies with strong track records, such as Pharmacia, American Home
Products, and Bristol-Myers Squibb. Some of these stocks have come back strong
in the second quarter, and we believe they still offer attractive growth
prospects.
We've also increased the portfolio's exposure to wireless communications
stocks because we see tremendous growth opportunities for these companies. A
few years ago, roughly 3% of worldwide communications were handled over
wireless networks. Now that percentage has mushroomed to double-digits, and we
believe similar growth lies ahead. We expect revenue growth for many wireless
companies to rise 25% to 50% per year and international revenues could be even
higher. Given our outlook for dramatic growth in this industry, we like the
risk/reward profile of these stocks.
Despite what we think may be a somewhat less robust environment for consumer
spending, we also like companies such as CVS and Safeway because they're
noncyclical. People have to buy prescriptions, household products, and
groceries, regardless of the economic environment. We also happen to think
these are two of the best-run companies in their respective industries.
Additionally, we've increased our positions in Intel and EMC Corp. because we
see demand for their products and services accelerating, their fundamental
business prospects are strong, and we ultimately believe they can maintain
their leadership positions in their markets.
Respectfully,
/s/ Alec C. Murray
Alec C. Murray
Associate Director of Equity Research
The committee of MFS research analysts is responsible for the day-to-day
management of the series under the general supervision of Mr. Murray.
The opinions expressed in this report are those of the Associate Director of
Equity Research and are current only through the end of the period of the
report as stated on the cover. His views are subject to change at any time
based on market and other conditions, and no forecasts can be guaranteed.
The portfolio is actively managed, and current holdings may be different.
It is not possible to invest directly in an index.
3
<PAGE>
SERIES FACTS
Objective: Seeks long-term growth of capital and future income.
Commencement of investment operations: July 26, 1995
Class inception: Initial Class July 26, 1995
Service Class May 1, 2000
Size: $991.2 million as of June 30, 2000
PERFORMANCE SUMMARY
Because the series is designed for investors with long-term goals, we have
provided the cumulative as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in
net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
INITIAL CLASS
<CAPTION>
6 Months 1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +6.31% +21.16% +72.21% +164.82%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +21.16% +19.86% + 21.83%
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
SERVICE CLASS
6 Months 1 Year 3 Years Life*
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +6.27% +21.10% +72.13% +164.70%
-----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +21.10% +19.84% + 21.82%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period from the commencement of the series' investment operations,
July 26, 1995, through June 30, 2000.
NOTES TO PERFORMANCE SUMMARY
Initial Class and Service Class shares have no sales charge; however, Service
Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share
performance includes the performance of the series' Initial Class shares for
periods prior to the inception of Service Class shares (blended performance).
These blended performance figures have not been adjusted to take into account
differences in the class-specific operating expenses (such as Rule 12b-1
fees). Because operating expenses of Service Class shares are higher than
those of Initial Class shares, the blended Service Class share performance is
higher than it would have been had Service Class shares been offered for the
entire period.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the variable product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
4
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- June 30, 2000
<TABLE>
<CAPTION>
Stocks 94.1%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks 84.8%
Aerospace 1.6%
Boeing Co. 194,100 $ 8,115,806
General Dynamics Corp. 44,500 2,325,125
United Technologies Corp. 96,300 5,669,663
------------
$ 16,110,594
-------------------------------------------------------------------------------------------------------
Banks and Credit Companies 2.1%
Capital One Financial Corp. 88,100 $ 3,931,463
Chase Manhattan Corp. 131,496 6,057,034
PNC Bank Corp. 77,600 3,637,500
Providian Financial Corp. 54,900 4,941,000
U.S. Bancorp 129,500 2,492,875
------------
$ 21,059,872
-------------------------------------------------------------------------------------------------------
Biotechnology 2.1%
Pharmacia Corp. 400,626 $ 20,707,356
-------------------------------------------------------------------------------------------------------
Business Machines 5.0%
Hewlett-Packard Co. 82,900 $ 10,352,138
International Business Machines Corp. 72,300 7,921,369
Seagate Technology, Inc.* 99,700 5,483,500
Sun Microsystems, Inc.* 281,000 25,553,437
------------
$ 49,310,444
-------------------------------------------------------------------------------------------------------
Business Services 2.5%
Automatic Data Processing, Inc. 172,000 $ 9,212,750
Bea Systems, Inc.* 28,200 1,394,137
Computer Sciences Corp.* 144,900 10,822,219
Digimarc Corp.* 4,970 191,345
Fiserv, Inc.* 64,177 2,775,655
------------
$ 24,396,106
-------------------------------------------------------------------------------------------------------
Cellular Telephones 2.2%
Motorola, Inc. 296,860 $ 8,627,494
Sprint Corp. (PCS Group)* 227,700 13,548,150
------------
$ 22,175,644
-------------------------------------------------------------------------------------------------------
Chemicals 0.3%
Rohm & Haas Co. 92,600 $ 3,194,700
-------------------------------------------------------------------------------------------------------
Computer Hardware Systems 0.7%
Compaq Computer Corp. 130,700 $ 3,341,019
Dell Computer Corp.* 72,800 3,589,950
------------
$ 6,930,969
-------------------------------------------------------------------------------------------------------
Computer Software Personal Computers 3.2%
America Online, Inc.* 149,600 $ 7,891,400
Microsoft Corp.* 295,200 23,616,000
------------
$ 31,507,400
-------------------------------------------------------------------------------------------------------
Computer Software Services 2.4%
EMC Corp.* 312,000 $ 24,004,500
-------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- continued
<TABLE>
<CAPTION>
Stocks continued
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks continued
Computer Software Systems 4.5%
BMC Software, Inc.* 94,900 $ 3,462,367
Computer Associates International, Inc. 66,225 3,389,892
Comverse Technology, Inc.* 85,200 7,923,600
E.piphany, Inc.* 13,800 1,479,187
I2 Technologies, Inc.* 26,100 2,721,333
Liberate Technologies* 32,850 962,916
Oracle Corp.* 172,100 14,467,156
Rational Software Corp.* 21,500 1,998,156
Siebel Systems, Inc.* 12,300 2,011,819
VERITAS Software Corp.* 55,100 6,227,161
------------
$ 44,643,587
-------------------------------------------------------------------------------------------------------
Conglomerates 2.5%
Tyco International Ltd. 520,048 $ 24,637,274
-------------------------------------------------------------------------------------------------------
Consumer Products
Energizer Holdings, Inc. 16,666 $ 304,155
-------------------------------------------------------------------------------------------------------
Consumer Goods and Services 1.3%
Clorox Co. 122,600 $ 5,494,013
Colgate-Palmolive Co. 120,500 7,214,937
------------
$ 12,708,950
-------------------------------------------------------------------------------------------------------
Containers 0.1%
Owens Illinois, Inc.* 114,300 $ 1,335,881
-------------------------------------------------------------------------------------------------------
Electrical Equipment 2.6%
General Electric Co. 479,400 $ 25,408,200
-------------------------------------------------------------------------------------------------------
Electronics 9.0%
Analog Devices, Inc.* 67,532 $ 5,132,432
Atmel Corp.* 101,300 3,735,437
Fairchild Semiconductor International Co.* 48,800 1,976,400
Flextronics International Ltd.* 91,364 6,275,565
Intel Corp. 291,700 38,996,644
Lam Research Corp.* 125,800 4,717,500
LSI Logic Corp.* 72,600 3,929,475
Micron Technology, Inc.* 155,500 13,693,719
SCI Systems, Inc. 31,100 1,218,731
Solectron Corp.* 113,600 4,757,000
Teradyne, Inc.* 66,600 4,895,100
------------
$ 89,328,003
-------------------------------------------------------------------------------------------------------
Energy 0.2%
Devon Energy Corp. 35,200 $ 1,977,800
-------------------------------------------------------------------------------------------------------
Entertainment 2.8%
Infinity Broadcasting Corp., "A"* 190,225 $ 6,931,324
Macromedia, Inc.* 35,200 3,403,400
Time Warner, Inc. 104,800 7,964,800
Viacom, Inc., "B"* 138,486 9,443,014
------------
$ 27,742,538
-------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- continued
<TABLE>
<CAPTION>
Stocks continued
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks continued
Financial Institutions 3.6%
Associates First Capital Corp., "A" 296,892 $ 6,624,403
Citigroup, Inc. 208,650 12,571,163
Federal Home Loan Mortgage Corp. 131,200 5,313,600
Lehman Brothers Holdings, Inc. 24,500 2,316,781
Merrill Lynch & Co., Inc. 52,700 6,060,500
Morgan Stanley Dean Witter & Co. 29,600 2,464,200
State Street Corp. 3,300 350,006
------------
$ 35,700,653
-------------------------------------------------------------------------------------------------------
Financial Services 0.5%
AXA Financial, Inc. 147,000 $ 4,998,000
-------------------------------------------------------------------------------------------------------
Food and Beverage Products 1.0%
Anheuser-Busch Cos., Inc. 103,800 $ 7,752,562
Quaker Oats Co. 14,400 1,081,800
Ralston-Ralston Purina Co. 50,000 996,875
------------
$ 9,831,237
-------------------------------------------------------------------------------------------------------
Forest and Paper Products 0.2%
Bowater, Inc. 41,500 $ 1,831,188
-------------------------------------------------------------------------------------------------------
Insurance 2.3%
American International Group, Inc. 80,375 $ 9,444,063
Hartford Financial Services Group, Inc. 85,500 4,782,656
Marsh & McLennan Cos., Inc. 34,900 3,644,869
MetLife, Inc.* 162,450 3,421,603
St. Paul Cos., Inc. 44,600 1,521,975
------------
$ 22,815,166
-------------------------------------------------------------------------------------------------------
Internet 0.9%
InterWorld Corp.* 8,700 $ 178,350
Selectica, Inc.* 8,080 566,105
VeriSign, Inc.* 46,400 8,189,600
------------
$ 8,934,055
-------------------------------------------------------------------------------------------------------
Machinery 0.9%
Deere & Co., Inc. 139,600 $ 5,165,200
Ingersoll Rand Co. 104,600 4,210,150
------------
$ 9,375,350
-------------------------------------------------------------------------------------------------------
Medical and Health Products 4.1%
American Home Products Corp. 133,200 $ 7,825,500
Bausch & Lomb, Inc. 65,000 5,029,375
Bristol-Myers Squibb Co. 289,800 16,880,850
Pfizer, Inc. 232,650 11,167,200
------------
$ 40,902,925
-------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services 0.8%
Medtronic, Inc. 148,600 $ 7,402,137
-------------------------------------------------------------------------------------------------------
Metals and Minerals 0.2%
Alcoa, Inc. 70,800 $ 2,053,200
-------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- continued
<TABLE>
<CAPTION>
Stocks continued
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks continued
Oil Services 2.2%
Baker Hughes, Inc. 104,400 $ 3,340,800
Cooper Cameron Corp.* 14,000 924,000
Global Marine, Inc.* 293,600 8,275,850
Noble Drilling Corp.* 117,000 4,818,938
Weatherford International, Inc.* 103,300 4,112,631
------------
$ 21,472,219
-------------------------------------------------------------------------------------------------------
Oils 4.2%
Conoco, Inc. 424,700 $ 10,431,693
EOG Resources, Inc. 124,300 4,164,050
Exxon Mobil Corp. 199,000 15,621,500
Santa Fe International Corp. 100,800 3,521,700
Transocean Sedco Forex, Inc. 150,500 8,042,344
------------
$ 41,781,287
-------------------------------------------------------------------------------------------------------
Printing and Publishing 0.4%
Tribune Co. 104,800 $ 3,668,000
-------------------------------------------------------------------------------------------------------
Retail 3.4%
CVS Corp. 405,200 $ 16,208,000
Office Depot, Inc.* 428,650 2,679,063
Radioshack Corp.* 171,600 8,129,550
Wal-Mart Stores, Inc. 121,500 7,001,437
------------
$ 34,018,050
-------------------------------------------------------------------------------------------------------
Special Products and Services 0.3%
SPX Corp.* 26,400 $ 3,192,750
-------------------------------------------------------------------------------------------------------
Supermarkets 1.6%
Albertsons, Inc. 693 $ 23,042
Safeway, Inc.* 343,900 15,518,488
------------
$ 15,541,530
-------------------------------------------------------------------------------------------------------
Telecommunications 11.5%
Allegiance Telecom, Inc.* 11,500 $ 736,000
Ancor Communications, Inc.* 24,950 892,352
Bell Atlantic Corp. 79,300 4,029,431
Cabletron Systems, Inc.* 113,100 2,855,775
CIENA Corp.* 70,400 11,734,800
Cisco Systems, Inc.* 483,700 30,745,181
Corning, Inc. 61,555 16,612,156
Intermedia Communications, Inc.* 17,800 529,550
Level 3 Communications, Inc.* 28,200 2,481,600
Metromedia Fiber Network, Inc., "A"* 278,400 11,049,000
Qwest Communications International, Inc.* 135,900 6,752,531
Sprint Corp.* 206,700 10,541,700
Tellabs, Inc.* 43,800 2,997,563
Time Warner Telecom, Inc.* 17,100 1,100,813
Winstar Communications, Inc.* 15,750 533,531
WorldCom, Inc.* 235,161 10,788,011
------------
$114,379,994
-------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- continued
<TABLE>
<CAPTION>
Stocks continued
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks continued
Telecommunications and Cable 0.5%
Comcast Corp., "A"* 123,000 $ 4,981,500
-------------------------------------------------------------------------------------------------------
Utilities Electric 0.7%
AES Corp.* 152,800 $ 6,971,500
-------------------------------------------------------------------------------------------------------
Utilities Gas 0.4%
Williams Cos., Inc. 83,100 $ 3,464,231
-------------------------------------------------------------------------------------------------------
Total U.S. Stocks $840,798,945
-------------------------------------------------------------------------------------------------------
Foreign Stocks 9.3%
Bermuda 1.1%
FLAG Telecom Holdings Ltd. (Telecommunications)* 142,540 $ 2,120,283
Global Crossing Ltd. (Telecommunications)* 345,800 9,098,862
------------
$ 11,219,145
-------------------------------------------------------------------------------------------------------
Canada 2.0%
Nortel Networks Corp. (Telecommunications) 286,400 $ 19,546,800
-------------------------------------------------------------------------------------------------------
France 0.3%
Business Objects S.A., ADR (Computer Software Systems)* 7,400 $ 652,125
Total S.A., "B" (Oils) 12,500 1,916,360
------------
$ 2,568,485
-------------------------------------------------------------------------------------------------------
Ireland 0.1%
Trintech Group PLC, ADR (Computer Software Products)* 54,350 $ 1,070,865
-------------------------------------------------------------------------------------------------------
Japan 1.3%
AFLAC, Inc. (Insurance) 40,400 $ 1,855,875
Fast Retailing Co. (Retail) 7,000 2,929,864
Hitachi Ltd. (Electronics) 172,000 2,480,769
Nippon Telegraph & Telephone Co. (Utilities Telephone) 414 5,502,828
------------
$ 12,769,336
-------------------------------------------------------------------------------------------------------
Netherlands 1.5%
KPN N.V. (Telecommunications)* 123,162 $ 5,508,176
Royal Dutch Petroleum Co. (Oils) 149,200 9,271,955
------------
$ 14,780,131
-------------------------------------------------------------------------------------------------------
United Kingdom 3.0%
BAE Systems PLC (Aerospace)* 921,100 $ 5,740,217
BP Amoco PLC, ADR (Oils) 239,254 13,532,804
HSBC Holdings PLC (Banks and Credit Cos.)* 248,700 2,842,069
Lloyds TSB Group PLC (Banks and Credit Cos.)* 1,180 11,138
Vodafone AirTouch PLC (Telecommunications)* 926,165 3,740,451
Zeneca Group PLC (Medical and Health Products) 89,600 4,181,070
------------
$ 30,047,749
-------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 92,002,511
-------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $783,247,215) $932,801,456
-------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- continued
<TABLE>
<CAPTION>
Short-Term Obligations 5.1%
-------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corp., due 7/03/00 $ 42,735 $ 42,719,402
Federal Home Loan Mortgage Corp., due 7/05/00 8,000 7,994,355
-------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 50,713,757
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $833,960,972) $983,515,213
Other Assets, Less Liabilities 0.8% 7,671,215
-------------------------------------------------------------------------------------------------------
Net Assets 100.0% $991,186,428
-------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
See notes to financial statements.
10
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (Unaudited)
--------------------------------------------------------------------------------
JUNE 30, 2000
--------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $833,960,972) $ 983,515,213
Investments of cash collateral for securities loaned, at
identified cost and value 39,959,666
Cash 5,630
Receivable for series shares sold 1,015,645
Receivable for investments sold 12,079,683
Interest and dividends receivable 300,541
Deferred organization expenses 130
Other assets 4,619
--------------
Total assets $1,036,881,127
--------------
Liabilities:
Payable for series shares reacquired $ 467,569
Payable for investments purchased 5,130,061
Collateral for securities loaned, at value 39,959,666
Payable to affiliates -
Management fee 20,175
Shareholder servicing agent fee 941
Administrative fee 471
Accrued expenses and other liabilities 115,816
--------------
Total liabilities $ 45,694,699
--------------
Net assets $ 991,186,428
==============
Net assets consist of:
Paid-in capital $ 732,594,333
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 149,556,966
Accumulated undistributed net realized gain on investments
and foreign currency transactions 108,854,802
Accumulated undistributed net investment income 180,327
--------------
Total $ 991,186,428
==============
Shares of beneficial interest outstanding 42,652,040
==============
Initial Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $991,155,001 / 42,650,688
shares of beneficial interest outstanding) $23.24
======
Service Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $31,427 / 1,352 shares of
beneficial interest outstanding) $23.24
======
</TABLE>
See notes to financial statements.
11
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Operations (Unaudited)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<S> <C>
Net investment income:
Income -
Dividends $ 3,026,571
Interest 1,074,345
Foreign taxes withheld (56,924)
------------
Total investment income $ 4,043,992
------------
Expenses -
Management fee $ 3,443,512
Trustees' compensation 6,940
Shareholder servicing agent fee 160,697
Distribution fee (Service Class) 9
Administrative fee 74,821
Custodian fee 162,765
Auditing fees 19,150
Legal fees 770
Amortization of organization expenses 916
Miscellaneous 56,274
------------
Total expenses $ 3,925,854
Fees paid indirectly (54,346)
------------
Net expenses $ 3,871,508
------------
Net investment income $ 172,484
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $109,875,025
Foreign currency transactions (42,879)
------------
Net realized gain on investments and foreign currency
transactions $109,832,146
------------
Change in unrealized appreciation (depreciation) -
Investments $(52,761,853)
Translation of assets and liabilities in foreign currency 5,349
------------
Net unrealized loss on investments and foreign currency
translation $(52,756,504)
------------
Net realized and unrealized gain on investments and
foreign currency $ 57,075,642
------------
Increase in net assets from operations $ 57,248,126
============
</TABLE>
See notes to financial statements.
12
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 172,484 $ 533,376
Net realized gain on investments and foreign currency
transactions 109,832,146 66,796,406
Net unrealized gain (loss) on investments and foreign
currency translation (52,756,504) 98,811,362
----------- ------------
Increase in net assets from operations $ 57,248,126 $166,141,144
----------- ------------
Distributions declared to shareholders -
From net investment income (Initial Class) $ (346,734) $ (1,317,597)
From net realized gain on investments and foreign
currency transactions (Initial Class) (59,516,402) (6,962,893)
----------- ------------
Total distributions declared to shareholders $(59,863,136) $ (8,280,490)
----------- ------------
Net increase in net assets from series share transactions $110,223,766 $157,939,466
----------- ------------
Total increase in net assets $107,608,756 $315,800,120
Net assets:
At beginning of period 883,577,672 567,777,552
----------- ------------
At end of period (including accumulated
undistributed net investment income of
$180,327 and $354,577, respectively) $991,186,428 $883,577,672
============ ============
</TABLE>
See notes to financial statements.
13
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
-----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED -------------------------------------------------------- DECEMBER 31,
JUNE 30, 2000 1999 1998 1997 1996 1995*
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------
INITIAL CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value beginning
of period $23.34 $19.05 $15.80 $13.13 $10.89 $10.00
----- ----- ----- ----- ----- ------
Income from investment operations#-
Net investment income(S) $ -- $ 0.02 $ 0.06 $ 0.05 $ 0.06 $ 0.05
Net realized and unrealized
gain on investments and
foreign currency 1.45 4.52 3.59 2.62 2.37 1.01
----- ----- ----- ----- ----- ------
Total from investment operations $ 1.45 $ 4.54 $ 3.65 $ 2.67 $ 2.43 $ 1.06
----- ----- ----- ----- ----- ------
Less distributions declared to shareholders -
From net investment income $(0.01) $(0.04) $(0.03) $ -- $(0.02) $(0.03)
From net realized gain on
investments and foreign
currency transactions (1.54) (0.21) (0.37) -- (0.16) (0.14)
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- -- (0.01) --
----- ----- ----- ----- ----- ------
Total distributions
declared to shareholders $(1.55) $(0.25) $(0.40) $ -- $(0.19) $(0.17)
----- ----- ----- ----- ----- ------
Net asset value end of period $23.24 $23.34 $19.05 $15.80 $13.13 $10.89
====== ====== ====== ====== ====== ======
Total return 6.31%++ 24.05% 23.39% 20.26% 22.33% 10.62%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.86%+ 0.86% 0.86% 0.92% 1.01% 1.02%+
Net investment income 0.04%+ 0.08% 0.33% 0.34% 0.47% 1.15%+
Portfolio turnover 58% 91% 83% 99% 56% 28%
Net assets at end of period
(000 Omitted) $991,155 $883,578 $567,778 $285,845 $35,710 $2,530
(S) Prior to January 1, 1998, subject to reimbursement by the series, the investment adviser agreed to maintain the expenses of
the series, exclusive of management fees, at not more than 0.25% of average daily net assets. To the extent actual expenses
were over or under this limitation, the net investment income (loss) per share and the ratios would have been:
Net investment income (loss) $ 0.06 $ -- $(0.08)
Ratios (to average net assets):
Expenses## 0.88% 1.48% 3.90%+
Net investment income (loss) 0.38% -- (1.73)%+
</TABLE>
* For the period from the commencement of the series' investment operations,
July 26, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
See notes to financial statements.
14
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights -- continued
--------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2000*
(UNAUDITED)
--------------------------------------------------------------------------------
SERVICE CLASS SHARES
--------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value beginning of period $23.13
------
Income from investment operations# -
Net investment loss $ 0.00**
Net realized and unrealized gain on investments and foreign
currency 0.11
------
Total from investment operations $ 0.11
------
Net asset value end of period $23.24
======
Total return 0.48%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.10%+
Net investment loss (0.08)%+
Portfolio turnover 58%
Net assets at end of period (000 Omitted) $31
</TABLE>
* For the period from the inception of Service Class shares, May 1, 2000,
through June 30, 2000.
** Per share amount was less than $0.01.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Research Series (the series) is a diversified series of MFS Variable
Insurance Trust (the trust). The trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The shareholders of the
series are separate accounts of insurance companies which offer variable
annuity and/or life insurance products. As of June 30, 2000, there were 85
shareholders of the series.
(2) Significant Accounting Policies
General The preparation of 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 and
disclosure of contingent 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. The series
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued in good faith, at
fair value, by the Trustees.
Foreign Currency Translation Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Organization Expenses Costs incurred by the series in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of series operations.
Security Loans State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, may loan the securities of
the series to certain qualified institutions (the "Borrowers") approved by the
series. The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street and Chase provides the series with indemnification
against Borrower default. The series bears the risk of loss with respect to
the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the series and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agents. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) -- continued
At June 30, 2000, the value of securities loaned was $38,819,229. These loans
were collateralized by cash of $39,959,666 which was invested in the following
short-term obligations:
<TABLE>
<CAPTION>
SHARES/ AMORTIZED COST
PRINCIPAL AMOUNT AND VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Navigator Securities Lending Prime Portfolio 39,959,576 $39,959,576
Salomon Smith Barney, Inc., 6.85%, 7/3/00 $ 90 90
---------- -----------
Total investments of cash collateral for
securities loaned $39,959,666
===========
</TABLE>
Forward Foreign Currency Exchange Contracts -- The series may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
series may enter into forward contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, the series may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The series may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to unfavorable exchange rate movements.
For non-hedging purposes, the series may enter into contracts with the intent
of changing the relative exposure of the series' portfolio of securities to
different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded as unrealized
until the contract settlement date. On contract settlement date, the gains or
losses are recorded as realized gains or losses on foreign currency
transactions.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly -- The series' custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the series. During the period, the series' custodian fees were reduced by
$39,787 under this arrangement. The series has entered into a directed
brokerage agreement, under which the broker will credit the series' a portion
of the commissions generated, to offset certain expenses of the series. For
the period, the series' custodian fees were reduced by $14,559 under this
agreement. These amounts are shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions -- The series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The series
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest -- The series offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the series based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) -- continued
(3) Transactions with Affiliates
Investment Adviser -- The series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the series' average daily net assets.
The trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the series, all of whom receive
remuneration for their services to the series from MFS. Certain officers and
Trustees of the series are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator -- The series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series incurs an administrative fee
at the following annual percentages of the series' average daily net assets:
<TABLE>
<S> <C>
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
</TABLE>
Distributor -- The Trustees have adopted a distribution plan for the Service
Class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The series' distribution plan provides that the series will pay MFD a
distribution fee up to 0.25% per annum of its average daily net assets
attributable to Service Class shares in order that MFD may pay expenses on
behalf of the series related to the distribution of its shares. A portion of
this distribution fee is currently being paid by the series; payment of the
remaining 0.05% per annum of the Service Class distribution fee will become
payable on such date as the Trustees of the trust may determine. Fees incurred
under the distribution plan during the six months ended June 30, 2000, were
0.20% of average daily net assets attributable to Service Class shares on an
annualized basis.
Shareholder Servicing Agent -- MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the series' average daily net assets at an annual rate of
0.035%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $534,469,760 and $512,475,993,
respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the series, as computed on a federal income tax basis,
are as follows:
<TABLE>
<S> <C>
Aggregate cost $833,960,972
------------
Gross unrealized appreciation $189,069,988
Gross unrealized depreciation (39,515,747)
------------
Net unrealized appreciation $149,554,241
============
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) -- continued
(5) Shares of Beneficial Interest
The series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<TABLE>
<CAPTION>
Initial Class shares SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,215,811 $121,959,593 12,734,866 $251,415,629
Shares issued to shareholders in
reinvestment of distributions 2,616,395 59,863,128 422,259 8,280,488
Shares reacquired (3,039,348) (71,630,276) (5,105,366) (101,756,651)
---------- ------------ ---------- ------------
Net increase 4,792,858 $110,192,445 8,051,759 $157,939,466
========== ============ ========== ============
<CAPTION>
Service Class shares PERIOD ENDED JUNE 30, 2000*
----------------------------------
SHARES AMOUNT
-------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,352 $31,321
========== ============
</TABLE>
* For the period from the inception of Service Class shares, May 1, 2000,
through June 30, 2000.
(6) Line of Credit
The series and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the series for the
six months ended June 30, 2000, was $3,371. The series had no significant
borrowings during the period.
--------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including all charges and expenses, for any MFS product is available from your
investment professional, or by calling MFS at 1-800-225-2606. Please read it
carefully before investing or sending money.
19
<PAGE>
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
VFR-3 8/00 84M
<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT SEMIANNUAL REPORT
We invented the mutual fund(R) JUNE 30, 2000
[Graphic Omitted]
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS(R) EMERGING
GROWTH SERIES
<PAGE>
<TABLE>
MFS(R) EMERGING GROWTH SERIES
A SERIES OF MFS(R) VARIABLE INSURANCE TRUST(SM)
<S> <C>
TRUSTEES INVESTMENT ADVISER
Jeffrey L. Shames* - Chairman and Chief Executive Massachusetts Financial Services Company
Officer, MFS Investment Management(R) 500 Boylston Street
Boston, MA 02116-3741
Nelson J. Darling, Jr.+ - Private investor and
trustee DISTRIBUTOR
MFS Fund Distributors, Inc.
William R. Gutow+ - Private investor and real 500 Boylston Street
estate consultant; Vice Chairman, Capitol Boston, MA 02116-3741
Entertainment Management Company (video franchise)
INVESTOR SERVICE
CHAIRMAN AND PRESIDENT MFS Service Center, Inc.
Jeffrey L. Shames* P.O. Box 2281
Boston, MA 02107-9906
PORTFOLIO MANAGERS
John W. Ballen* For additional information,
Toni Y. Shimura* contact your investment professional.
TREASURER CUSTODIAN
James O. Yost* State Street Bank and Trust Company
ASSISTANT TREASURERS WORLD WIDE WEB
Mark E. Bradley* www.mfs.com
Ellen Moynihan*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
* MFS Investment Management
+ Independent Trustee
</TABLE>
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did this past spring, there's a flurry of information on "how
to deal with market volatility" -- both in the popular press and from those of
us in the investment business. Our own thinking on this is that, first, for
long-term investors volatility is not necessarily something to be feared;
occasional volatility may in fact be healthy for the markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high stock prices, relative to their earnings, or with business concepts
that looked great in the euphoria of a booming market but in the end appeared
to have no fundamental backing. It has always been our view that one of the
best protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good
times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- 5, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and have
considerably outpaced inflation. Investing is the best way we know of to make
your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted to simply stay on
the sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and into which
portfolios -- in a calm, rational manner, working with your investment
professional. Second, with this approach you invest regularly without
agonizing over the decision each time you buy shares. And, third, if you
invest equal amounts of money at regular intervals, you'll be taking advantage
of a strategy called dollar-cost averaging: by investing a fixed amount while
the share cost fluctuates, you end up with an average share cost to you that
is lower than the average share price over your investment period.(1) If all
this sounds familiar, it's probably because you're already taking advantage of
dollar-cost averaging by investing regularly for retirement through a 401(k)
or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment --
1
<PAGE>
LETTER FROM THE CHAIRMAN--continued
small, mid, or large cap; growth or value; United States or international;
stocks or bonds. The problem with this approach is that by the time a particular
area is generally recognized as "hot," you may have already missed some of the
best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out
of 10 years.(2) For the decade, the MSCI EAFE's average annual performance was
23%, compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom -- deregulation, restructuring, and
increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We
would suggest that one way to potentially profit from swings in the market --
to potentially be invested in various asset classes before the market shifts
in their favor -- is with a diversified portfolio covering several asset
classes.
If you haven't already done so, we encourage you to discuss these thoughts
with your investment professional and factor them into your long-range
financial planning. Hopefully, the next time the markets appear to be going
wild, you'll feel confident enough in your plan to view periods of volatility
as a time of potential opportunity -- or perhaps just a time to sit back and
do nothing.
As always, we appreciate your confidence and welcome any questions or comments
you may have.
Respectfully,
/s/ Jeffrey L. Shames
-------------------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
July 17, 2000
(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Source: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89,
'90s -- 12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Investments in variable products will fluctuate and may be worth more or less
upon redemption. Please see your investment professional for more information.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
2
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended June 30, 2000, the series' Initial Class and Service
Class shares each provided total returns of -2.29%, including the reinvestment
of any distributions. This compares to returns of -0.42% and 3.04%,
respectively, over the same period for the series' benchmarks, the Standard &
Poor's 500 Composite Index (the S&P 500) and the Russell 2000 Total Return Index
(the Russell 2000). The S&P 500 is a popular, unmanaged index of common stock
total return performance. The Russell 2000 is an unmanaged index comprised of
2,000 of the smallest U.S.-domiciled company common stocks that are traded on
the New York Stock Exchange, the American Stock Exchange, and NASDAQ.
Late in the first quarter, there was a global correction in the high-growth
segments of the market in which we invest. Fueled by investor concerns over
further Federal Reserve Board (Fed) interest rate increases, this correction
in the valuations of technology, media, telecommunications, and biotechnology
stocks continued into the first two months of the second quarter.
In early June, we began to see some signs that the Fed's six interest rate
increases since last summer may have begun to slow the economy. Some key
economic indicators, including a modest rise in unemployment, a slowing in
housing starts, and lower-than-expected wage gains, gave us hope that there
will be fewer or no increases going forward. We have also seen more attractive
valuations in the high-growth areas of the market, and we believe we may have
seen the lows in the NASDAQ Composite Index (an unmanaged, market-weighted
index of all over-the-counter common stocks traded on the National Association
of Securities Dealers Automated Quotation System) following the correction
earlier this year. While we anticipate further market volatility as investors
adjust to the latest news on the economy and interest rates, we believe we may
be entering a more favorable investment environment.
In light of the rising interest rate environment we had earlier this year, we
reduced our positions in some of our highest-valuation stocks that we felt had
limited upside potential, and selectively added more defensive holdings such
as generic drug and pharmaceutical companies, as well as food and drug
retailers. However, we still expect to find our best investment ideas in
technology, telecommunications, and health care. Particularly in an
environment where interest rates stabilize or drop, these high-growth segments
of the market could continue to deliver superior revenue and earnings growth.
We continue to focus on technology as our core sector because we believe these
companies offer the most attractive growth characteristics that we can
identify across a range of industries. Although we have shifted our technology
weightings from time to time, we believe we are well positioned to take
advantage of what we expect to be much narrower leadership than we've seen in
the past. We expect to see certain core, high-quality technology companies
emerge as leaders in their respective markets, and we hope to own those
companies that are first to market with new products and services.
Among our technology holdings are several companies that enable e-commerce,
both business to business and business to consumer. We believe the most
successful will be those with the scale to meet the demands of corporations
eagerly buying the latest business technologies in order to stay competitive.
Our technology holdings also include select Internet infrastructure and
software companies such as VeriSign and Check Point, in addition to
semiconductor companies such as Micron Technology and Intel.
With respect to telecommunications, we have reduced our holdings in telecom
service providers because changes taking place in the industry -- most
notably, the cost of doing business, particularly in terms of licensing and
capital spending -- are expected to go higher and make these companies less
profitable. Our largest telecom holdings currently are in equipment companies
such as Nortel Networks, Corning, CIENA, and ADC Telecom. Despite some good
investment opportunities, we probably won't see significant upside earnings
surprises among the handset delivery companies.
In health care, we have targeted quality names like the emerging
pharmaceutical company Sepracor and companies like PE Biosystems that make
equipment used in genetics research. Among the thousands of health care
companies available, we're focusing on the biotechnology and emerging
pharmaceutical companies that we believe have the best intellectual property
and product pipelines, both of which should
3
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK--continued
help them better meet shareholder expectations. Finally, we're somewhat cautious
on retail because rising interest rates tend to dampen consumer confidence and
slow the pace of consumer spending.
We are in a volatile period where we need to see how much further interest
rates must rise in order to cool off the economy. We remain optimistic on the
long-term outlook for growth stocks, and believe the market leadership will
continue to be in technology, telecommunications, and health care. Within
these sectors, we are working to build positions in companies that we think
can become leaders in their industries and deliver growth over long periods of
time, thus creating value for shareholders.
Respectfully,
/s/ John W. Ballen /s/ Toni Y. Shimura
--------------------------- ----------------------------
John W. Ballen Toni Y. Shimura
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
4
<PAGE>
PORTFOLIO MANAGERS' PROFILES
John W. Ballen is President, Chief Investment Officer, and a member of the
Management Committee and Board of Directors of MFS Investment Management(R).
He is a portfolio manager of MFS(R) Emerging Growth Fund, MFS(R) Emerging
Growth Series (part of MFS(R) Variable Insurance Trust(SM)), the Emerging
Growth Series offered through MFS(R)/Sun Life annuity products, MFS(R) Global
Growth Fund, and the Global Growth Series offered through MFS(R)/Sun Life
annuity products. In addition, Mr. Ballen oversees the portfolio management of
MFS(R) Institutional Mid Cap Growth Fund and MFS(R) Institutional Emerging
Equities Fund. He joined the MFS Research Department in 1984 as a research
analyst. He was named Investment Officer and portfolio manager in 1986, Vice
President in 1987, Director of Research in 1988, Senior Vice President in
1990, Director of Equity Portfolio Management in 1993, Chief Equity Officer in
1995, Executive Vice President in 1997, and President, Chief Investment
Officer, and a member of the Board in 1998. Mr. Ballen is a graduate of
Harvard College and earned a Master of Commerce degree from the University of
New South Wales in Australia and an M.B.A. degree from Stanford University.
Toni Y. Shimura is Senior Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Managed Sectors Fund and the Managed Sectors
Series offered through MFS(R)/Sun Life annuity products. She is also a
portfolio manager of MFS(R) Global Growth Fund, MFS(R) Emerging Growth Series
(part of MFS(R) Variable Insurance Trust(SM)), and the Global Growth Series
and the Emerging Growth Series, both offered through MFS(R)/Sun Life annuity
products. Ms. Shimura joined MFS in 1987 as a research analyst. She was named
Investment Officer in 1990, Assistant Vice President in 1991, Vice President
in 1992, portfolio manager in 1993, and Senior Vice President in 1999. Ms.
Shimura is a graduate of Wellesley College and the Sloan School of Management
of the Massachusetts Institute of Technology.
All equity portfolio managers began their careers at MFS Investment
Management(R) as research analysts. Our portfolio managers are supported by an
investment staff of over 100 professionals utilizing MFS Original Research(R),
a global, company-oriented, bottom-up process of selecting securities.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including all charges and expenses, for any MFS product is available from your
investment professional, or by calling MFS at 1-800-225-2606. Please read it
carefully before investing or sending money.
5
<PAGE>
SERIES FACTS
Objective: Seeks long-term growth of capital.
Commencement of investment operations: July 24, 1995
Class inception: Initial Class July 24, 1995
Service Class May 1, 2000
Size: $2.6 billion as of June 30, 2000
PERFORMANCE SUMMARY
Because the series is designed for investors with long-term goals, we have
provided the cumulative as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in
net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH JUNE 30, 2000
INITIAL CLASS
<CAPTION>
6 Months 1 Year 3 Years Life*
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -2.29% +53.05% +154.85% +287.97%
---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +53.05% + 36.59% + 31.60%
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERVICE CLASS
6 Months 1 Year 3 Years Life*
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return -2.29% +53.05% +154.85% +287.97%
---------------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +53.05% + 36.59% + 31.60%
---------------------------------------------------------------------------------------------------------------------
* For the period from the commencement of the series' investment operations, July 24, 1995, through June 30, 2000.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Initial Class and Service Class shares have no sales charge; however, Service
Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share
performance includes the performance of the series' Initial Class shares for
periods prior to the inception of Service Class shares (blended performance).
These blended performance figures have not been adjusted to take into account
differences in the class-specific operating expenses (such as Rule 12b-1
fees). Because operating expenses of Service Class shares are higher than
those of Initial Class shares, the blended Service Class share performance is
higher than it would have been had Service Class shares been offered for the
entire period.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the variable product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
Investing in small or emerging growth companies involves greater risk than is
customarily associated with more-established companies. These risks may
increase share price volatility. See the prospectus for details.
6
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - June 30, 2000
<CAPTION>
Stocks - 95.7%
--------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 85.1%
Banks and Credit Companies - 0.4%
Comerica, Inc. 21,900 $ 982,763
First Tennessee National Corp. 1,600 26,500
PNC Bank Corp. 92,600 4,340,625
Providian Financial Corp. 45,300 4,077,000
--------------
$ 9,426,888
--------------------------------------------------------------------------------------------------------
Biotechnology - 1.4%
Abbott Laboratories, Inc. 286,100 $ 12,749,331
Abgenix, Inc.* 12,700 1,522,214
Alkermes, Inc.* 5,000 235,625
Genentech, Inc.* 84,700 14,568,400
Pharmacia Corp. 49,600 2,563,700
Waters Corp.* 27,100 3,382,419
--------------
$ 35,021,689
--------------------------------------------------------------------------------------------------------
Business Machines - 1.6%
Seagate Technology, Inc.* 60,300 $ 3,316,500
Sun Microsystems, Inc.* 386,400 35,138,250
Texas Instruments, Inc. 28,700 1,971,331
--------------
$ 40,426,081
--------------------------------------------------------------------------------------------------------
Business Services - 2.5%
Amgen, Inc.* 255,400 $ 17,941,850
Automatic Data Processing, Inc. 315,200 16,882,900
Bea Systems, Inc.* 12,400 613,025
Computer Sciences Corp.* 180,100 13,451,219
First Data Corp. 168,900 8,381,663
Fiserv, Inc.* 29,900 1,293,175
IMRglobal Corp.* 13,300 173,731
Insight Enterprises, Inc.* 1,550 91,934
Learning Tree International, Inc.* 92,600 5,671,750
Pegasus Systems, Inc.* 2,250 24,469
--------------
$ 64,525,716
--------------------------------------------------------------------------------------------------------
Cellular Telephones - 2.3%
Motorola, Inc. 33,150 $ 963,422
Sprint Corp. (PCS Group)* 469,900 27,959,050
Voicestream Wireless Corp.* 257,490 29,945,282
--------------
$ 58,867,754
--------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.5%
Compaq Computer Corp. 129,200 $ 3,302,675
Dell Computer Corp.* 174,100 8,585,306
--------------
$ 11,887,981
--------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 3.8%
Mercury Interactive Corp.* 45,300 $ 4,382,775
Microsoft Corp.* 1,159,400 92,752,000
--------------
$ 97,134,775
--------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
<CAPTION>
Stocks - continued
--------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Computer Software - Services - 1.8%
EMC Corp.* 592,100 $ 45,554,694
Internet Commerce Corp.* 5,800 84,100
Lightspan, Inc.* 3,440 18,920
--------------
$ 45,657,714
--------------------------------------------------------------------------------------------------------
Computer Software - Systems - 15.1%
Ariba, Inc.* 15,000 $ 1,470,703
BMC Software, Inc.* 502,480 18,332,669
Brocade Communications Systems, Inc.* 35,100 6,440,302
Cadence Design Systems, Inc.* 130,200 2,652,825
Computer Associates International, Inc. 232,600 11,906,212
Comverse Technology, Inc.* 72,600 6,751,800
E.piphany, Inc.* 16,200 1,736,437
Foundry Networks, Inc.* 15,500 1,705,000
I2 Technologies, Inc.* 33,900 3,534,605
Oracle Corp.* 3,345,150 281,201,672
Redback Networks, Inc.* 17,400 3,097,200
Siebel Systems, Inc.* 93,600 15,309,450
StorageNetworks, Inc.* 4,260 384,465
Sycamore Networks, Inc.* 121,300 13,388,487
VERITAS Software Corp.* 190,000 21,472,969
--------------
$ 389,384,796
--------------------------------------------------------------------------------------------------------
Conglomerates - 3.2%
Tyco International Ltd. 1,756,958 $ 83,235,885
--------------------------------------------------------------------------------------------------------
Consumer Goods and Services
Philip Morris Cos., Inc. 32,100 $ 852,656
Carson, Inc.,"A"* 65,300 293,850
--------------
$ 1,146,506
--------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.6%
Capstone Turbine Corp.* 2,770 $ 124,823
Emerson Electric Co. 22,100 1,334,288
General Electric Co. 255,800 13,557,400
Jabil Circuit, Inc.* 31,500 1,563,187
Micrel, Inc.* 4,600 199,813
--------------
$ 16,779,511
--------------------------------------------------------------------------------------------------------
Electronics - 17.0%
Altera Corp.* 653,100 $ 66,575,381
Analog Devices, Inc.* 492,200 37,407,200
Applied Materials, Inc.* 93,900 8,509,687
Atmel Corp.* 143,300 5,284,188
ATMI, Inc.* 2,200 102,300
Burr-Brown Corp.* 2,850 247,059
Conductus, Inc.* 8,400 165,900
Credence Systems Corp.* 4,600 253,863
Flextronics International Ltd.* 208,600 14,328,212
Intel Corp. 569,400 76,121,662
Lam Research Corp.* 186,700 7,001,250
Linear Technology Corp. 232,500 14,865,469
LSI Logic Corp.* 313,700 16,979,012
</TABLE>
8
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
<CAPTION>
Stocks - continued
--------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Electronics - continued
LTX Corp.* 5,900 206,131
Marvell Technology Group Ltd.* 2,300 131,100
Maxim Integrated Products, Inc.* 2,200 149,463
Microchip Technology, Inc.* 2,100 122,358
Micron Technology, Inc.* 968,800 85,314,950
National Semiconductor Corp.* 277,800 15,765,150
Novellus Systems, Inc.* 26,700 1,510,219
Photronics, Inc.* 2,300 65,263
PMC-Sierra, Inc.* 39,100 6,947,581
Quanta Services, Inc.* 3,600 198,000
Sanmina Corp.* 135,040 11,545,920
SDL, Inc.* 8,600 2,452,613
SIPEX Corp.* 13,400 371,013
Solectron Corp.* 177,300 7,424,437
Teradyne, Inc.* 144,400 10,613,400
Xilinx, Inc.* 548,500 45,285,531
--------------
$ 435,944,312
--------------------------------------------------------------------------------------------------------
Energy - 0.4%
Devon Energy Corp. 60,300 $ 3,388,106
Dynegy, Inc. 102,600 7,008,863
--------------
$ 10,396,969
--------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
Clear Channel Communications, Inc.* 88,500 $ 6,637,500
International Speedway Corp. 3,079 127,394
USA Networks, Inc.* 220,200 4,761,825
Viacom, Inc., "B"* 215,600 14,701,225
--------------
$ 26,227,944
--------------------------------------------------------------------------------------------------------
Financial Institutions - 1.8%
American Express Co. 82,800 $ 4,315,950
Charter One Financial, Inc. 52,400 1,205,200
Citigroup, Inc. 256,300 15,442,075
Golden West Financial Corp. 108,600 4,432,237
Household International, Inc. 90,800 3,773,875
Merrill Lynch & Co., Inc. 134,700 15,490,500
State Street Corp. 13,200 1,400,025
Waddell & Reed Financial, Inc., "A" 3,000 98,438
--------------
$ 46,158,300
--------------------------------------------------------------------------------------------------------
Financial Services - 0.4%
AXA Financial, Inc. 141,600 $ 4,814,400
Mellon Financial Corp. 117,100 4,266,831
--------------
$ 9,081,231
--------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.4%
Anheuser-Busch Cos., Inc. 63,500 $ 4,742,656
Coca-Cola Co. 94,200 5,410,613
--------------
$ 10,153,269
--------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
Stocks - continued
<CAPTION>
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Insurance - 0.5%
American International Group, Inc. 75,600 $ 8,883,000
Hartford Financial Services Group, Inc. 68,400 3,826,125
--------------
$ 12,709,125
-------------------------------------------------------------------------------------------------------
Internet - 2.2%
Art Technology Group, Inc.* 7,000 $ 706,563
Juniper Networks, Inc.* 87,200 12,693,050
VeriSign, Inc.* 245,387 43,310,805
--------------
$ 56,710,418
-------------------------------------------------------------------------------------------------------
Medical and Health Products - 2.0%
Allergan, Inc. 49,900 $ 3,717,550
Alza Corp.* 23,600 1,395,350
American Home Products Corp. 49,100 2,884,625
Bausch & Lomb, Inc. 61,800 4,781,775
Bristol-Myers Squibb Co. 120,100 6,995,825
Immunex Corp.* 147,400 7,287,087
Pfizer, Inc. 526,475 25,270,800
--------------
$ 52,333,012
-------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 1.5%
Allscripts, Inc.* 3,650 $ 83,950
BioSource International, Inc.* 26,700 594,075
BioSphere Medical, Inc.* 9,800 137,200
Cardinal Health, Inc. 86,100 6,371,400
Human Genome Sciences, Inc.* 3,800 506,825
MedImmune, Inc. 52,600 3,892,400
Merrill Lynch HOLDRs Trust* 55,400 9,861,200
PE Corp-PE Biosystems Group 245,000 16,139,375
Quest Diagnostics, Inc.* 18,500 1,382,875
--------------
$ 38,969,300
-------------------------------------------------------------------------------------------------------
Office Equipment
United Stationers, Inc.* 3,400 $ 110,075
-------------------------------------------------------------------------------------------------------
Oil Services - 1.0%
Baker Hughes, Inc. 298,600 $ 9,555,200
Global Marine, Inc.* 144,000 4,059,000
Halliburton Co. 83,600 3,944,875
Noble Affiliates, Inc. 27,800 1,035,550
Noble Drilling Corp.* 137,600 5,667,400
Weatherford International, Inc.* 51,000 2,030,438
--------------
$ 26,292,463
-------------------------------------------------------------------------------------------------------
Oils - 1.8%
Anadarko Petroleum Corp. 131,200 $ 6,469,800
Apache Corp. 77,400 4,552,087
Coastal Corp. 194,700 11,852,362
EOG Resources, Inc. 547,200 18,331,200
Grant Pride Co., Inc.* 51,000 1,275,000
Transocean Sedco Forex, Inc. 61,800 3,302,438
--------------
$ 45,782,887
-------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
Stocks - continued
<CAPTION>
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Pharmaceuticals - 1.5%
Andrx Corp.* 11,000 $ 703,141
Sepracor, Inc.* 274,300 33,087,437
Teva Pharmaceutical Industries Ltd. 83,000 4,601,313
--------------
$ 38,391,891
-------------------------------------------------------------------------------------------------------
Restaurants and Lodging
Cendant Corp.* 68,679 $ 961,506
-------------------------------------------------------------------------------------------------------
Retail - 1.4%
CVS Corp. 176,000 $ 7,040,000
Kohl's Corp.* 23,600 1,312,750
RadioShack Corp.* 224,600 10,640,425
Wal-Mart Stores, Inc. 287,700 16,578,713
--------------
$ 35,571,888
-------------------------------------------------------------------------------------------------------
Special Products and Services
Newport News Shipbuilding, Inc. 500 $ 18,375
-------------------------------------------------------------------------------------------------------
Supermarkets - 1.5%
Albertsons, Inc. 150,700 $ 5,010,775
Kroger Co.* 123,000 2,713,687
Safeway, Inc.* 672,600 30,351,075
--------------
$ 38,075,537
-------------------------------------------------------------------------------------------------------
Telecommunications - 15.6%
ADC Telecommunications, Inc.* 253,804 $ 21,287,810
Amdocs Ltd.* 6,900 529,575
AT&T Corp., "A"* 412,400 10,000,700
Cabletron Systems, Inc.* 119,900 3,027,475
CIENA Corp.* 307,400 51,239,737
Cisco Systems, Inc.* 2,100,812 133,532,863
Corning, Inc. 246,200 66,443,225
Emulex Corp.* 20,600 1,353,162
Intermedia Communications, Inc.* 4,500 133,875
ITC Deltacom, Inc.* 3,500 78,094
JDS Uniphase Corp.* 143,042 17,147,160
Lucent Technologies, Inc. 22,100 1,309,425
Metromedia Fiber Network, Inc., "A"* 804,970 31,947,247
MGC Communications, Inc.* 39,200 2,349,550
MRV Communications, Inc.* 21,600 1,452,600
New Focus, Inc.* 1,710 140,434
NEXTEL Communications, Inc.* 102,000 6,241,125
Nextlink Communications, Inc., "A"* 14,000 531,125
ONI Systems Corp.* 3,560 417,243
Scientific-Atlanta, Inc. 3,500 260,750
Sprint Corp.* 182,500 9,307,500
Tellabs, Inc.* 288,300 19,730,531
WorldCom, Inc.* 490,531 22,503,110
--------------
$ 400,964,316
-------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
Stocks - continued
<CAPTION>
-------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - continued
Utilities - Electric - 1.6%
AES Corp.* 194,600 $ 8,878,625
Calpine Corp.* 508,600 33,440,450
--------------
$ 42,319,075
-------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
Enron Corp. 112,600 $ 7,262,700
-------------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,187,929,889
-------------------------------------------------------------------------------------------------------
Foreign Stocks - 10.6%
Bermuda - 0.3%
Global Crossing Ltd. (Telecommunications)* 288,300 $ 7,585,894
-------------------------------------------------------------------------------------------------------
Canada - 3.8%
Call-Net Enterprises, Inc. (Telecommunications)* 5,000 $ 12,188
Nortel Networks Corp. (Telecommunications) 1,429,240 97,545,630
--------------
$ 97,557,818
-------------------------------------------------------------------------------------------------------
Finland - 1.8%
Nokia Corp., ADR (Telecommunications) 730,900 $ 36,499,319
Sonera Oyj (Telecommunications) 195,800 8,924,986
--------------
$ 45,424,305
-------------------------------------------------------------------------------------------------------
France - 1.0%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 85,900 $ 5,712,350
Bouygues S.A. (Telecommunications) 31,198 20,847,131
--------------
$ 26,559,481
-------------------------------------------------------------------------------------------------------
Germany
Medigene AG (Pharmaceuticals)* 3,350 $ 217,458
SAP AG, ADR (Computer Software - Systems) 9,700 455,294
--------------
$ 672,752
-------------------------------------------------------------------------------------------------------
Hong Kong
China Telecom Ltd. (Telecommunications) 1,000 $ 8,820
-------------------------------------------------------------------------------------------------------
Israel - 0.8%
Check Point Software Technologies Ltd.
(Computer Software - Services)* 100,600 $ 21,302,050
-------------------------------------------------------------------------------------------------------
Sweden - 0.9%
Ericsson LM, ADR (Telecommunications) 1,211,100 $ 24,222,000
-------------------------------------------------------------------------------------------------------
United Kingdom - 2.0%
ARM Holdings PLC (Electronics)* 138,500 $ 1,483,226
ARM Holdings PLC, ADR (Electronics)* 769,200 25,287,450
Vodafone AirTouch PLC (Telecommunications)* 3,511,253 14,180,700
Vodafone AirTouch PLC, ADR (Telecommunications) 218,500 9,054,094
--------------
$ 50,005,470
-------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 273,338,590
-------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,848,396,806) $2,461,268,479
-------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - continued
<CAPTION>
Short-Term Obligations - 4.6%
-------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Express Credit Corp., due 7/03/00 $ 100,000 $ 99,961,778
Federal Home Loan Mortgage Corp., due 7/03/00 18,297 18,290,321
-------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 118,252,099
-------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,966,648,905) $2,579,520,578
Other Assets, Less Liabilities - (0.3)% (8,524,354)
-------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,570,996,224
-------------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
</TABLE>
13
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
--------------------------------------------------------------------------------
JUNE 30, 2000
--------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,966,648,905) $2,579,520,578
Investments of cash collateral for securities loaned,
at identified cost and value 21,699,106
Cash 715,130
Receivable for series shares sold 5,452,840
Receivable for investments sold 50,238,827
Interest and dividends receivable 494,558
Deferred organization expenses 121
Other assets 6,736
--------------
Total assets $2,658,127,896
--------------
Liabilities:
Payable for series shares reacquired $ 1,506,578
Payable for investments purchased 63,620,432
Collateral for securities loaned, at value 21,699,106
Payable to affiliates -
Management fee 51,979
Shareholder servicing agent fee 2,426
Administrative fee 1,148
Accrued expenses and other liabilities 250,003
--------------
Total liabilities $ 87,131,672
--------------
Net assets $2,570,996,224
==============
Net assets consist of:
Paid-in capital $1,680,911,518
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 612,867,823
Accumulated net realized gain on investments and foreign
currency transactions 278,738,592
Accumulated net investment loss (1,521,709)
--------------
Total $2,570,996,224
==============
Shares of beneficial interest outstanding 73,340,864
==========
Initial Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $2,570,238,070 / 73,319,232
shares of beneficial interest outstanding) $35.06
======
Service Class shares:
Net asset value, offering price, and redemption price
per share (net assets of $758,154 / 21,632 shares of
beneficial interest outstanding) $35.05
======
See notes to financial statements.
14
<PAGE>
FINANCIAL STATEMENTS - continued
Statement of Operations (Unaudited)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 6,917,791
Dividends 1,724,955
Foreign taxes withheld (117,703)
--------------
Total investment income $ 8,525,043
--------------
Expenses -
Management fee $ 8,968,014
Trustees' compensation 11,100
Shareholder servicing agent fee 418,508
Distribution fee (Service Class) 105
Administrative fee 179,190
Custodian fee 371,718
Printing 92,722
Auditing fee 18,850
Legal fees 906
Amortization of organization expenses 916
Miscellaneous 84,934
--------------
Total expenses $ 10,146,963
Fees paid indirectly (100,211)
--------------
Net expenses $ 10,046,752
--------------
Net investment loss $ (1,521,709)
--------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 284,806,766
Foreign currency transactions (302,467)
--------------
Net realized gain on investments and foreign currency
transactions $ 284,504,299
--------------
Change in unrealized appreciation (depreciation) -
Investments $ (350,274,012)
Translation of assets and liabilities in foreign currency (12,722)
--------------
Net unrealized loss on investments and foreign currency
translation $ (350,286,734)
--------------
Net realized and unrealized loss on investments and
foreign currency $ (65,782,435)
--------------
Decrease in net assets from operations $ (67,304,144)
==============
See notes to financial statements.
15
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment loss $ (1,521,709) $ (2,876,317)
Net realized gain on investments and foreign
currency transactions 284,504,299 175,149,671
Net unrealized gain (loss) on investments and
foreign currency translation (350,286,734) 712,931,920
-------------- --------------
Increase (decrease) in net assets from operations $ (67,304,144) $ 885,205,274
-------------- --------------
Distributions declared to shareholders from net
realized gain on investments and foreign currency
transactions (Initial Class) $ (131,948,496) $ --
-------------- --------------
Net increase in net assets from series share
transactions $ 637,720,760 $ 338,336,291
-------------- --------------
Total increase in net assets $ 438,468,120 $1,223,541,565
Net assets:
At beginning of period 2,132,528,104 908,986,539
-------------- --------------
At end of period (including accumulated net
investment loss of $1,521,709 and $0,
respectively) $2,570,996,224 $2,132,528,104
============== ==============
See notes to financial statements.
</TABLE>
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS - continued
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
SIX MONTHS ENDED --------------------------------------------------------- DECEMBER 31,
JUNE 30, 2000 1999 1998 1997 1996 1995*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
INITIAL CLASS SHARES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $37.94 $21.47 $16.13 $13.24 $11.41 $10.00
------ ------ ------ ------ ------ ------
Income (loss) from investment operations# -
Net investment income (loss) $(0.02) $(0.06) $(0.05) $(0.06) $(0.01) $ 0.01
Net realized and unrealized
gain (loss) on investments
and foreign currency (0.85) 16.53 5.55 2.95 1.95 1.74
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.87) $16.47 $ 5.50 $ 2.89 $ 1.94 $ 1.75
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $ -- $ -- $ -- $ -- $ -- $(0.01)
From net realized gain on
investments and foreign
currency transactions (2.01) -- (0.05) -- (0.06) (0.26)
In excess of net realized gain
on investments and foreign
currency transactions -- -- (0.11) -- (0.05) --
From paid-in capital -- -- -- -- -- (0.07)
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(2.01) $ -- $(0.16) $ -- $(0.11) $(0.34)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $35.06 $37.94 $21.47 $16.13 $13.24 $11.41
====== ====== ====== ====== ====== ======
Total return (2.29)%++ 76.71% 34.16% 21.90% 17.02% 17.41%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.85%+ 0.84% 0.85% 0.90% 1.00% 1.00%+
Net investment income
(loss) (0.13)%+ (0.23)% (0.29)% (0.38)% (0.08)% 0.10%+
Portfolio turnover 101% 176% 71% 112% 96% 73%
Net assets at end of period
(000 Omitted) $2,570,239 $2,132,528 $908,987 $384,480 $104,956 $3,869
(S) Prior to January 1, 1998, subject to reimbursement by the series, the investment adviser voluntarily agreed to maintain the
expenses of the series at not more than 1.00% of average daily net assets. To the extent actual expenses were over or under
this limitation, the net investment loss per share and the ratios would have been:
Net investment loss# $(0.05) $(0.03) $(0.18)
Ratios (to average net assets):
Expenses## 0.87% 1.16% 2.91%+
Net investment loss (0.35)% (0.23)% (1.78)%+
* For the period from the commencement of the series' investment operations, July 24, 1995, through December 31, 1995.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
17
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
- ------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2000*
(UNAUDITED)
- ------------------------------------------------------------------------------
SERVICE CLASS SHARES
- ------------------------------------------------------------------------------
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $35.70
------
Income (loss) from investment operations# -
Net investment loss $(0.02)
Net realized and unrealized loss on investments and foreign
currency (0.63)
------
Total from investment operations $(0.65)
------
Net asset value - end of period $35.05
======
Total return (1.82)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.05%+
Net investment loss (0.42)%+
Portfolio turnover 101%
Net assets at end of period (000 Omitted) $758
* For the period from the inception of Service Class shares, May 1, 2000,
through June 30, 2000.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
See notes to financial statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Emerging Growth Series (the series) is a diversified series of MFS
Variable Insurance Trust (the trust). The trust is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
shareholders of the series are separate accounts of insurance companies which
offer variable annuity and/or life insurance products. As of June 30, 2000,
there were 124 shareholders of the series.
(2) SIGNIFICANT ACCOUNTING POLICIES
General - The preparation of 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 and
disclosure of contingent 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. The series
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last
sale prices. Unlisted equity securities or listed equity securities for which
last sale prices are not available are reported at market value using last
quoted bid prices. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value. Securities for
which there are no such quotations or valuations are valued in good faith, at
fair value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Organization Expenses - Costs incurred by the series in connection
with its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of series operations.
Security Loans - State Street Bank and Trust Company ("State Street") and
Chase Manhattan Bank ("Chase"), as lending agents, may loan the securities of
the series to certain qualified institutions (the "Borrowers") approved by the
series. The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street and Chase provide the series with indemnification against
Borrower default.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the series and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agents. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At June 30, 2000, the value of securities loaned was $70,879,659. These loans
were collateralized by U.S. Treasury securities of $50,233,799 and cash of
$21,699,106, which was invested in the following short-term obligations:
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
AMORTIZED COST
SHARES AND VALUE
--------------------------------------------------------------------------------
Bayerische- und Vereinsbank, 6.26%, due 7/20/00 $ 1,000,000 $ 999,813
Salomon Smith Barney, Inc., 7.13%, due 7/3/00 10,699,293 10,699,293
Salomon Smith Barney, Inc., 6.85%, due 7/3/00 10,000,000 10,000,000
----------- -----------
Total investments of cash collateral for
securities loaned $21,699,293 $21,699,106
=========== ===========
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend payments received in additional securities are
recorded on the ex-dividend date in an amount equal to the value of the
security on such date.
Fees Paid Indirectly - The series' custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the series. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The series
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes are classified, as
distributions in excess of net investment income or net realized gains.
Multiple Classes of Shares of Beneficial Interest - The series offers multiple
classes of shares that differ in their respective distribution and service
fees. All shareholders bear the common expenses of the series based on daily
net assets of each class, without distinction between share classes. Dividends
are declared separately for each class. Differences in per share dividend
rates are generally due to differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The series has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.75%
of the series' average daily net assets.
The trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the series, all of whom receive
remuneration for their services to the series from MFS. Certain officers and
Trustees of the series are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator - The series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series incurs an administrative fee
at the following annual percentages of the series' average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - The Trustees have adopted a distribution plan for the Service
Class shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
The series' distribution plan provides that the series will pay MFD up to
0.25% per annum of its average daily net assets attributable to Service Class
shares in order that MFD may pay expenses on behalf of the series related to
the distribution of its shares. A portion of this distribution fee is
currently being paid by the series; payment of the remaining 0.05% per annum
of the Service Class distribution fee will become payable on such date as the
Trustees of the trust may determine. Fees incurred under the distribution plan
during the six months ended June 30, 2000, were 0.20% of average daily net
assets attributable to Service Class shares on an annualized basis.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the series' average daily net assets at an annual rate of
0.035%.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
- ------------------------------------------------------------------------------
U.S. government securities $ 9,218,134 $ 8,359,927
-------------- --------------
Investments (non-U.S. government securities) $2,624,632,882 $2,180,628,133
-------------- --------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the series, as computed on a federal income tax basis,
are as follows:
Aggregate cost $1,966,648,905
--------------
Gross unrealized appreciation $ 687,426,324
Gross unrealized depreciation (74,554,651)
--------------
Net unrealized appreciation $ 612,871,673
==============
(5) SHARES OF BENEFICIAL INTEREST
The series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<TABLE>
Initial Class shares
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 YEAR ENDED DECEMBER 31, 1999
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 19,715,743 $ 742,653,169 30,176,209 $ 743,064,297
Shares issued to shareholders
in reinvestment of
distributions 3,782,927 131,948,486 -- --
Shares reacquired (6,387,180) (237,618,437) (16,305,783) (404,728,006)
---------- -------------- ---------- --------------
Net increase 17,111,490 $ 636,983,218 13,870,426 $ 338,336,291
========== ============== ========== ==============
Service Class shares
<CAPTION>
PERIOD ENDED JUNE 30, 2000*
--------------------------------
SHARES AMOUNT
- ------------------------------------------------------------------
<S> <C> <C>
Shares sold 22,118 $ 753,813
Shares reacquired (486) (16,271)
---------- --------------
Net increase 21,632 $ 737,542
========== ==============
* For the period from the inception of Service Class shares, May 1, 2000, through June 30, 2000.
</TABLE>
(6) LINE OF CREDIT
The series and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the series for the
six months ended June 30, 2000, was $9,462. The series had no borrowings
during the period.
21
<PAGE>
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
VEG-3 8/00 114M
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2000
MANAGED BY
[LOGO]
<PAGE>
(This page left intentionally blank)
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
MANAGED BY
[LOGO]
2000 SEMI-ANNUAL REPORT
The Small Cap Portfolio (the "Portfolio") enjoyed an excellent first half,
delivering a total return of 13.3% versus 3.0% for the Russell 2000 Index (the
"Russell 2000"). The Russell 2000 is a widely followed benchmark that includes
smaller capitalization stocks. Our strong performance reflected a resurgence of
small cap value stocks in the second quarter, as well as favorable stock
selection.
During the past few months, we have implemented a two-pronged strategy:
1) increase our holdings in lower valuation sectors such as transportation, real
estate investment trusts and utilities; 2) increase the Portfolio's weighting in
the higher valuation technology sector. We believe our favorable recent results
confirm that this strategy has improved performance while reducing risk.
The Portfolio's average annual total return of 7.4% for the twelve months ended
June 30, 2000 compared with 14.3% for the Russell 2000. For the three years
ended June 30, 2000, the Portfolio's average annual total return was 2.6% versus
10.6% for the Russell 2000. For the five years ended June 30, 2000, the
Portfolio provided an average annual total return of 9.8%, compared with 14.3%
for the Russell 2000. For the 10 years ended June 30, 2000, the Portfolio's
average annual total return of 12.4%* compared with 13.6% for the Russell 2000,
and from its inception on August 1, 1988 through June 30, 2000 the Portfolio
delivered an average annual total return of 12.1%* versus 12.8% for the Russell
2000. Returns for the Portfolio take into account expenses incurred by the
Portfolio, but not separate account charges imposed by the insurance company.
* Based on results of the OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust"),
was effectively divided into two investment funds--the Old Trust and the
present OCC Accumulation Trust (the "Present Trust")--at which time the
Present Trust commenced operations. The total net assets of the Small Cap
Portfolio immediately after the transaction were $139,812,573 in the Old
Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of
the Present Trust reflect the performance of the Small Cap Portfolio of the
Old Trust.
Our first priority in selecting stocks is to find quality management teams. When
small cap value stocks hit bottom in late February and early March 2000, we
added to our holdings of each of the five stocks that contributed most to the
Portfolio's performance in the first half of the year. In that difficult market
environment, it was easier to add to a position where we had confidence in
management. Our rationale was that these well-managed companies would lead the
market as small cap value stocks recovered, which indeed these companies did in
the second quarter.
The five top contributors to the Portfolio for the six months ended June 30,
2000 were:
- AMERISOURCE (wholesale pharmaceuticals distribution), which doubled in
price. The entire price gain occurred in the second quarter, as investor
concerns eased regarding the potential threat of the Internet and the
company's high level of variable-cost debt in a rising interest rate
environment. We reduced our position as the price rose.
- SHARED MEDICAL (information services for healthcare providers), which was
acquired in June by Siemens at a 72% premium to the market.
- MSC INDUSTRIAL (direct marketing of industrial products), which rose on
the basis of improved business growth after the company solved some
internal problems. We sold the stock on price strength.
<PAGE>
- PRECISION CASTPARTS (aerospace supplier), which rebounded on improving
earnings prospects. We maintained our position.
- TETRA TECH (management consulting and technical services), which advanced
as internal growth reaccelerated. We sold.
The five stocks that detracted most from performance during the first half of
the year were:
- DEL MONTE FOODS (consumer food products), a well-managed company that
suffered a revenue and earnings decline due to post-Year 2000 inventory
draw-downs. We added to our position on price weakness.
- WALLACE COMPUTER (business forms, labels, commercial printing and related
products and services), which experienced operational problems and top
management changes. We lost confidence and sold.
- POLICY MANAGEMENT (software and electronic commerce), which suffered from
post-Year 2000 weakening of software sales and a rapid move from a
licensing to an ASP (application service provider) model. We sold.
- DELTEK SYSTEMS (software), which struggled somewhat with a post-Year 2000
slowdown of software sales and slower-than-expected adoption of new
products. We maintained our position.
- E.W. BLANCH (insurance brokerage and risk management), which experienced
an earnings disappointment and the resignation of a senior officer. We
sold.
During the second quarter, in implementing our two-pronged strategy, we
established new positions in transportation companies Alaska AirGroup
(airlines), Kirby (marine transportation) and Midwest Express (airlines); real
estate investment trusts Brandywine Realty Trust (commercial and industrial
properties), Capital Automotive REIT (ownership of auto dealer real estate) and
Gables Residential Trust (apartments); and utilities Atmos Energy, IDACORP and
Piedmont Natural Gas. New tech holdings included CTS (electronic components),
GenRad (testing equipment for electronics manufacturers) and SBS Technologies
(computer components and other technology products).
At June 30, 2000, net assets were allocated 98.9% to common stock and 2.1% to
short-term investments. Our five largest equity positions were AmeriSource
Health, a wholesale pharmaceuticals distributor, representing 4.8% of the
Portfolio's net assets; Dentsply International, which provides equipment and
consumables to dentists, 3.7% of net assets; Teleflex, which supplies engineered
products and services for the automotive, marine, industrial, medical and
aerospace markets, 3.5% of net assets; RenaissanceRe Holdings, a Bermuda-based
insurance company, 3.3% of net assets; and G&K Services, which rents uniforms,
3.3% of net assets.
Major industry positions were in the manufacturing sector, representing 9.5% of
the Portfolio's net assets; drugs & medical products, 8.4% of net assets;
electronics, 7.1% of net assets; oil/gas, 7.1% of net assets; and insurance,
6.5% of net assets.
The Portfolio is "truly small, truly value." At the end of June, the weighted
average capitalization of the companies we own was $810 million, below the
average of $930 million for the Russell 2000. Our companies trade less
expensively than the market, with an average price to trailing twelve month
earnings of 13.0x versus 26.9x for the Russell 2000. However, they have superior
business characteristics, reflected in their 18.7% five-year average return on
equity, compared with 13.9% for the Russell 2000 stocks. We believe this
combination of inexpensive valuations and superior business fundamentals helps
control risk and provides opportunities for investment profit.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK -- 98.9%
AEROSPACE -- 6.0%
59,200 Alliant Techsystems, Inc.*.................................. $ 3,992,300
157,800 Teleflex, Inc............................................... 5,641,350
-----------
9,633,650
-----------
AIRLINES -- 1.6%
49,500 Alaska AirGroup, Inc.*...................................... 1,342,688
58,200 Midwest Express Holdings, Inc.*............................. 1,251,300
-----------
2,593,988
-----------
BANKING -- 1.3%
49,000 Wilmington Trust Corp....................................... 2,094,750
-----------
CHEMICALS -- 2.9%
103,300 Cambrex Corp................................................ 4,648,500
-----------
COMMERCIAL SERVICES -- 2.4%
51,800 Chemed Corp................................................. 1,460,112
80,500 Prepaid Legal Services, Inc................................. 2,404,937
-----------
3,865,049
-----------
COMPUTERS/COMPUTER SERVICES -- 4.4%
202,400 Analysts International Corp................................. 1,884,850
585,700 Genrad, Inc.*............................................... 5,271,300
-----------
7,156,150
-----------
CONSULTING SERVICES -- 2.0%
143,100 MAXIMUS, Inc.*.............................................. 3,166,088
-----------
DATA PROCESSING -- 0.7%
206,300 Deltek Systems, Inc.*....................................... 1,218,459
-----------
DRUGS & MEDICAL PRODUCTS -- 8.4%
247,300 Amerisource Health Corp..................................... 7,666,300
193,000 Dentsply International, Inc................................. 5,946,813
-----------
13,613,113
-----------
ELECTRONICS -- 7.1%
176,900 Baldor Electronic, Co....................................... 3,294,763
46,100 CTS Corp.*.................................................. 2,074,500
104,200 General Semiconductor, Inc.*................................ 1,536,950
184,000 Pioneer Standard Electronics, Inc........................... 2,714,000
137,600 UCAR International, Inc.*................................... 1,797,400
-----------
11,417,613
-----------
ENERGY -- 1.4%
70,400 IDACORP, Inc................................................ 2,270,400
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES -- 2.0%
134,400 Allied Capital Corp......................................... $ 2,284,800
60,000 American Financial Holdings, Inc............................ 952,500
-----------
3,237,300
-----------
FOOD SERVICES -- 3.5%
357,800 Del Monte Foods Co.*........................................ 2,437,513
100,800 Performance Food Group Co.*................................. 3,225,600
-----------
5,663,113
-----------
HEALTH & HOSPITALS -- 6.0%
99,800 Corvel Corp.*............................................... 2,463,813
39,300 Express Scripts, Inc.*...................................... 2,441,512
95,200 First Health Group Corp.*................................... 3,123,750
32,300 Trigon Healthcare, Inc.*.................................... 1,665,469
-----------
9,694,544
-----------
INDUSTRIAL MATERIALS -- 3.1%
122,000 SPS Technologies, Inc.*..................................... 5,009,625
-----------
INSURANCE -- 6.5%
139,600 Annuity & Life Re Holdings Ltd.............................. 3,420,200
122,700 RenaissanceRe Holdings Ltd.................................. 5,345,119
114,145 Trenwick Group, Inc. ....................................... 1,662,236
-----------
10,427,555
-----------
INVESTMENT COMPANY -- 1.7%
118,000 American Capital Strategies, Ltd............................ 2,817,250
-----------
MACHINERY/ENGINEERING -- 5.4%
92,254 Albany International Corp................................... 1,337,683
166,900 Kaydon Corp................................................. 3,504,900
193,000 Lindsay Manufacturing Co.................................... 3,787,625
-----------
8,630,208
-----------
MANUFACTURING -- 9.5%
115,900 Belden, Inc................................................. 2,969,937
82,900 Carlisle Cos., Inc.......................................... 3,730,500
93,600 Precision Castparts Corp.................................... 4,235,400
170,200 Roper Industries, Inc....................................... 4,361,375
-----------
15,297,212
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK--(CONCLUDED)
OIL/GAS -- 7.1%
205,800 Atmos Energy Corp........................................... $ 3,601,500
117,700 Cabot Oil & Gas Corp., Class A.............................. 2,493,769
82,500 Piedmont Natural Gas Company, Inc........................... 2,191,406
73,600 St. Mary Land & Exploration Co.............................. 3,095,800
-----------
11,382,475
-----------
REAL ESTATE -- 4.6%
130,800 Brandywine Realty Trust..................................... 2,501,550
171,800 Capital Automotive REIT..................................... 2,426,675
97,600 Gables Residential Trust.................................... 2,513,200
-----------
7,441,425
-----------
RETAIL -- 1.5%
65,400 Zale Corp.*................................................. 2,387,100
-----------
TECHNOLOGY -- 4.3%
45,300 Harman International Industries, Inc........................ 2,763,300
111,600 SBS Technologies, Inc.*..................................... 4,122,225
-----------
6,885,525
-----------
TEXTILES/APPAREL -- 3.3%
210,800 G & K Services, Inc......................................... 5,283,175
-----------
TRANSPORTATION -- 2.2%
211,650 Interpool, Inc.............................................. 2,063,587
68,800 Kirby Corp.*................................................ 1,462,000
-----------
3,525,587
-----------
Total Common Stock (cost-$148,379,022)...................... 159,359,854
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------------------
<C> <S> <C> <C>
$3,432 U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 2.1%
Federal Home Loan Bank, 6.57%, 7/3/00
(amortized cost-$3,430,747).......................................... 3,430,747
------------
Total Investments (cost-$151,809,769)...................... 101.0% 162,790,601
Liabilities in excess of other assets...................... (1.0) (1,615,972)
------ ------------
Net Assets................................................. 100.0% $161,174,629
====== ============
</TABLE>
------------------------------
* Non-income producing security
REIT - Real Estate Investment Trust
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost - $151,809,769)................. $162,790,601
Cash........................................................ 1,975
Receivable for investments sold............................. 402,835
Receivable for shares of beneficial interest sold........... 45,173
Dividends receivable........................................ 81,265
Prepaid expenses............................................ 2,237
------------
Total Assets.............................................. 163,324,086
------------
LIABILITIES:
Payable for investments purchased........................... 1,569,268
Payable for shares of beneficial interest redeemed.......... 413,718
Investment advisory fee payable............................. 107,583
Trustees' retirement plan payable........................... 14,583
Accrued expenses............................................ 44,305
------------
Total Liabilities......................................... 2,149,457
------------
Net Assets.............................................. $161,174,629
============
COMPOSITION OF NET ASSETS:
Beneficial interest of shares of $0.01 par value (unlimited
number authorized)........................................ $ 63,613
Paid-in-capital in excess of par............................ 151,406,879
Accumulated undistributed net investment income............. 465,283
Accumulated net realized loss on investments................ (1,741,978)
Net unrealized appreciation of investments.................. 10,980,832
------------
Net Assets.............................................. $161,174,629
============
Shares outstanding.......................................... 6,361,308
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $25.34
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................. $ 744,391
Interest.................................................. 408,922
-----------
Total investment income................................. 1,153,313
-----------
EXPENSES:
Investment advisory fees.................................. 601,437
Custodian fees............................................ 21,501
Audit and tax service fees................................ 10,875
Reports to shareholders................................... 9,550
Trustees' fees and expenses............................... 8,628
Legal fees................................................ 6,861
Transfer agent fees....................................... 6,298
Insurance expense......................................... 1,502
Miscellaneous............................................. 6,897
-----------
Total expenses.......................................... 673,549
Less: expense offset.................................... (421)
-----------
Net expenses.......................................... 673,128
-----------
Net investment income................................. 480,185
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.......................... 4,216,673
Net change in unrealized appreciation/depreciation of
investments............................................. 14,133,938
-----------
Net realized and unrealized gain on investments....... 18,350,611
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $18,830,796
===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................... $ 480,185 $ 917,419
Net realized gain (loss) on investments..................... 4,216,673 (4,521,338)
Net change in unrealized appreciation/depreciation of
investments............................................... 14,133,938 723,406
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................ 18,830,796 (2,880,513)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income....................................... (932,313) (978,623)
------------ ------------
SHARE TRANSACTIONS:
Net proceeds from the sale of shares........................ 25,487,276 45,603,776
Reinvestment of dividends and distributions................. 932,313 978,623
Cost of shares redeemed..................................... (34,433,322) (46,939,318)
------------ ------------
Net decrease in net assets from share transactions...... (8,013,733) (356,919)
------------ ------------
Total increase (decrease) in net assets............... 9,884,750 (4,216,055)
NET ASSETS
Beginning of year........................................... 151,289,879 155,505,934
------------ ------------
End of period (including undistributed net investment income
of $465,283 and $917,411, respectively)................... $161,174,629 $151,289,879
============ ============
SHARES ISSUED AND REDEEMED
Issued...................................................... 1,098,500 2,052,691
Issued in reinvestment of dividends and distributions....... 43,998 47,049
Redeemed.................................................... (1,499,961) (2,112,375)
------------ ------------
Net decrease.............................................. (357,463) (12,635)
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ----------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $22.52 $23.10 $26.37 $22.61 $19.91 $17.38
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.08 0.14 0.14 0.08 0.14 0.26
Net realized and unrealized gain
(loss)
on investments.................... 2.88 (0.57) (2.38) 4.73 3.45 2.37
-------- -------- -------- -------- ------- -------
Total income (loss) from
investment operations......... 2.96 (0.43) (2.24) 4.81 3.59 2.63
-------- -------- -------- -------- ------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................. (0.14) (0.15) (0.09) (0.13) (0.25) (0.05)
Net realized gains.................... -- -- (0.94) (0.92) (0.64) (0.05)
-------- -------- -------- -------- ------- -------
Total dividends and
distributions to
shareholders.................. (0.14) (0.15) (1.03) (1.05) (0.89) (0.10)
-------- -------- -------- -------- ------- -------
Net asset value, end of period........ $25.34 $22.52 $23.10 $26.37 $22.61 $19.91
======== ======== ======== ======== ======= =======
TOTAL RETURN (1)...................... 13.3% (1.8)% (9.0)% 22.2% 18.7% 15.2%
======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)..... $161,175 $151,290 $155,506 $110,565 $34,257 $16,004
Ratio of expenses to average net
assets (2).......................... 0.90%(4) 0.89% 0.88% 0.97% 0.93%(3) 0.74%(3)
Ratio of net investment income to
average net assets.................. 0.64%(4) 0.61% 0.72% 0.64% 1.03%(3) 1.75%(3)
Portfolio Turnover.................... 61% 99% 51% 68% 50% 69%
</TABLE>
------------------------------
(1) Assumes reinvestment of all dividends and distributions. Total return for a
period of less than one year is not annualized.
(2) Inclusive of expenses offset by earnings credits from custodian bank (See 1G
in Notes to Financial Statements).
(3) During the fiscal years indicated above, the Adviser waived a portion or all
of its fees and assumed a portion of the Portfolio's operating expenses. If
such waivers and assumptions had not been in effect, the ratios of expenses
to average net assets and the ratios of net investment income to average net
assets would have been 1.01% and 0.95%, respectively, for the year ended
December 31, 1996, and 0.99% and 1.50%, respectively, for the year ended
December 31, 1995.
(4) Annualized
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
OCC Accumulation Trust (the "Trust") was organized May 12, 1994 as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest at $0.01 par value. The Trust is comprised of: the Equity Portfolio,
the Small Cap Portfolio (the "Portfolio"), the Global Equity Portfolio, the
Managed Portfolio, the U.S. Government Income Portfolio, the Mid Cap Portfolio,
and the Science & Technology Portfolio. OpCap Advisors (the "Adviser"), a
wholly-owned subsidiary of Oppenheimer Capital, serves as the Trust's investment
adviser. The accompanying financial statement and notes thereto are those of the
Portfolio. The Trust is an investment vehicle for variable annuity and variable
life insurance contracts of various life insurance companies and qualified
pension and retirement plans.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Investment securities, other than debt securities, listed on a national
securities exchange or traded in the over-the-counter National Market System are
valued each business day at the last reported sale price; if there are no such
reported sales, securities are valued at their last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Debt securities (other than short-term
obligations) are valued each business day by an independent pricing service
(approved by the Board of Trustees) using methods which include current market
quotations from a major market maker and trader-reviewed "matrix" prices.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any securities or other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Trustees. The ability of issuers of debt instruments to meet their obligations
may be affected by economic developments in a specific industry or region.
(B) FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no federal
income tax provision is required.
(C) INVESTMENT TRANSACTIONS AND OTHER INCOME
Investment transactions are accounted for on the trade date. In determining the
gain or loss from the sale of investments, the cost of investments sold has been
determined on the basis of identified cost. Interest income is accrued as
earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over the lives of the respective securities using
the effective method.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders from net investment income and net
realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions is determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book-tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal income tax treatment; temporary differences do not
require reclassification. To the extent dividends and/or distributions exceed
current and
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES --CONTINUED
accumulated earnings and profits for federal income tax purposes, they are
reported as dividends and/or distributions of paid-in-capital or as a tax return
of capital.
(E) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular portfolio are borne by that
portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all applicable portfolios of the
Trust or another reasonable basis.
(F) USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
(G) EXPENSE OFFSET
The Portfolio benefits from an expense offset arrangement with its custodian
bank whereby uninvested cash balances earn credits that reduce custodian fees.
Had these cash balances been invested in income producing securities, they would
have generated income for the Portfolio.
(H) TRUSTEES' RETIREMENT PLAN
The Trustees have adopted a Retirement Plan (the "Plan") effective January 1,
1999. The Plan provides for payments upon retirement to independent Trustees
based on the average annual compensation paid to them during their five highest
paid years of service. An independent Trustee must serve for a minimum of seven
years (or such lessor period as may be approved by the Board of Trustees) to
become eligible to receive benefits. For the six months ended June 30, 2000, the
Portfolio accrued $6,432 in connection with the Plan.
(2) INVESTMENT ADVISORY FEE
The investment advisory fee is accrued daily and payable monthly to the Adviser,
and is computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of 0.80% on the first $400 million of net
assets, 0.75% on the next $400 million of net assets and 0.70% thereafter. The
Adviser is contractually obligated to waive that portion of the advisory fee and
to assume any necessary expense to limit total operating expenses of the
Portfolio to 1.00% of average net assets (net of any expense offset) on an
annual basis.
(3) INVESTMENTS IN SECURITIES
For federal income tax purposes the cost of securities owned at June 30, 2000
was $151,809,769. Accordingly, net unrealized appreciation of investments of
$10,980,832 was composed of gross appreciation of $22,243,904 for those
investments having an excess of value over cost and gross depreciation of
$11,263,072 for those investments having an excess of cost over value.
For the six months ended June 30, 2000, purchases and sales of investment
securities, other than short-term securities, aggregated $93,480,046 and
$86,131,434, respectively.
<PAGE>
OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONCLUDED)
(4) ACQUISITION OF INVESTMENT ADVISER
On May 5, 2000 the general partners of PIMCO Advisors closed the transactions
contemplated by the Implementation and Merger Agreement dated as of October 31,
1999 ("Implementation Agreement"), as amended March 3, 2000, with Allianz of
America, Inc., Pacific Asset Management LLC, PIMCO Partners LLC, PIMCO Holding
LLC, PIMCO Partners, G.P., and other parties to the Implementation Agreement. As
a result of completing these transactions, PIMCO Advisors is now majority-owned
indirectly by Allianz AG, with subsidiaries of Pacific Life Insurance Company
retaining a significant minority interest. Allianz AG is a German based insurer.
Pacific Life Insurance Company is a Newport Beach, California based insurer. For
the Portfolio, the change of control as a result of the closing of the
Implementation Agreement resulted in the automatic termination of the current
investment advisory agreement with OpCap Advisors. Prior to the closing of the
Implementation Agreement, the Board of Trustees and stockholders of the
Portfolio approved a new agreement with OpCap Advisors to become effective upon
the closing of the Implementation Agreement.
(5) SPECIAL MEETING OF SHAREHOLDERS
The Portfolio held a special meeting of shareholders on March 3, 2000.
Shareholders voted to: 1) approve a new investment advisory agreement between
OpCap Advisors and the Portfolio; 2) elect V. Lee Barnes, Paul Y. Clinton,
Thomas W. Courtney, Lacy B. Herrmann, Joseph M. La Motta and Theodore Mason as
Trustees of the Portfolio; and, 3) ratifiy the appointment of
PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending
December 31, 2000.
The resulting vote count for each proposal is indicated below.
<TABLE>
<CAPTION>
WITHHHOLD
AFFIRMATIVE AGAINST AUTHORITY
----------- -------- ---------
<S> <C> <C> <C>
1. Approval of new Investment Advisory Agreement between
OpCap Advisors and the Portfolio:......................... 6,221,270 131,221 276,448
2. Election of Trustees:
V. Lee Barnes............................................. 6,390,921 -- 238,018
Paul Y. Clinton........................................... 6,387,959 -- 240,980
Thomas W. Courtney........................................ 6,389,752 -- 239,187
Lacy B. Herrmann.......................................... 6,388,764 -- 240,175
Joseph M. La Motta........................................ 6,380,221 -- 248,718
Theodore T. Mason......................................... 6,388,640 -- 240,299
</TABLE>
<TABLE>
<S> <C> <C> <C>
3. Ratification of the appointment of PricewaterhouseCoopers LLP
as the Portfolio's independent accountants for the fiscal
year
ending December 31, 2000.................................. 6,317,785 42,382 268,772
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
<TABLE>
<S> <C>
TRUSTEES AND PRINCIPAL OFFICERS
Susan A. Murphy President
Joseph M. LaMotta Trustee & Chairman
V. Lee Barnes Trustee
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
Theodore T. Mason Trustee
Steven Calabria Vice President
Bernard H. Garil Vice President
Jeffrey J. Hughes Vice President
Eric V. Retzlaff Vice President
Kenneth W. Corba Vice President and Portfolio Manager
Mark F. Degenhart Vice President and Portfolio Manager
Michael F. Gaffney Vice President and Portfolio Manager
John C. Giusio, Jr. Vice President and Portfolio Manager
Richard J. Glasebrook, II Vice President and Portfolio Manager
Colin Glinsman Vice President and Portfolio Manager
Louis Goldstein Vice President and Portfolio Manager
William Gross Vice President and Portfolio Manager
Benjamin D. Gutstein Vice President and Portfolio Manager
Vikki Hanges Vice President and Portfolio Manager
Elisa A. Mazen Vice President and Portfolio Manager
Dennis McKechnie Vice President and Portfolio Manager
Jeffrey D. Parker Vice President and Portfolio Manager
Brian S. Shlissel Treasurer
Elliot M. Weiss Secretary
</TABLE>
INVESTMENT ADVISER
OpCap Advisors
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN AND TRANSFER AGENT
State Street Corp.
P.O. Box 1978
Boston, MA 02105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
This report is authorized for distribution only
to shareholders and to others who have received
a copy of this Trust's prospectus.
<PAGE>
(This page left intentionally blank)
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2000
MANAGED BY
[LOGO]
<PAGE>
(This page left intentionally blank)
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
MANAGED BY
[LOGO]
2000 SEMI-ANNUAL REPORT
The Managed Portfolio (the "Portfolio") declined 3.0% during the first half of
2000 in a generally declining stock market. This return exceeded the performance
of most value investing indices, including the 4.1% decrease in the S&P
500/BARRA Value Index and the 4.2% decline in the Russell 1000 Value Index.
However, we trailed our benchmark, the Standard & Poor's 500 Index (the "S&P
500"), which declined 0.4% for the six month period. The S&P 500 is an unmanaged
index of 500 of the largest corporations weighted by market capitalization.
The Portfolio's technology holdings were the largest detractor from performance
during the six months. Although we have significant investments in this sector,
the tech stocks we own--such as Computer Associates and Sabre Group--trailed by
wide margins the returns of the highly valued, more speculative tech stocks that
led the market, particularly in the first quarter. The Portfolio's holdings of
consumer non-durables and financial stocks were the primary contributors to
performance during the six months.
During the second quarter, in a continued volatile market environment, the
Portfolio did well relative to its benchmark, declining 2.0% versus a decrease
of 2.7% for the S&P 500 and larger declines for many value indices such as the
Russell 1000 Value Index, which was off by 4.7%. In this case, our careful
approach to investing in technology stocks paid off. In fact, tech stocks were
the biggest contributor to our results in the second quarter. Just as we did not
participate in the sharp rise of the highly valued, more speculative technology
stocks in the first quarter, we avoided the pitfalls of owning these stocks when
many of them plunged during the second quarter.
The Portfolio invests in stocks, bonds and cash equivalents. We seek to generate
excellent long-term performance by owning stocks with more upside potential than
downside risk and by preserving capital in periods of market turmoil.
We positioned the Portfolio defensively early in the year due to concerns
regarding the high valuations of many stocks. This decision helped protect
capital when the market fell in the second quarter. At the end of June, 67.7% of
net assets were allocated to common stocks, 16.2% to fixed income securities and
19.1% to short-term investments. Fixed income securities and short-term
investments provide a buffer against stock market volatility, generate income,
and represent a resource to buy quality stocks as they become available at
attractive prices.
The Portfolio decreased 5.0% during the twelve months ended June 30, 2000,
compared to an increase of 7.3% for the S&P 500. Our performance in the twelve
month period was dampened by our limited holdings of highly valued technology
stocks, which led the market's advance. For the three years ended June 30, 2000,
the Portfolio provided an average annual total return of 5.4%, compared with
19.7% for the S&P 500. For the five years ended June 30, 2000, the Portfolio's
average annual total return of 12.9% compared with 23.8% for the S&P 500. For
the 10 years ended June 30, 2000, the Portfolio delivered an average annual
total return of 15.9%*, versus 17.8% for the S&P 500. The Portfolio's average
annual total return from its inception on August 1, 1988 through June 30, 2000
was 16.6%*, compared with 18.1% for the S&P 500. We believe these longer-term
results are favorable in light of our risk-averse investment style and the fact
that the Portfolio invests in bonds and short-term securities, not just in
stocks. Returns for the Portfolio take into account expenses incurred by the
Portfolio, but not other charges imposed by the Variable Accounts.
* Based on results of the OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust"),
was effectively divided into two investment funds--the Old
<PAGE>
Trust and the present OCC Accumulation Trust (the "Present Trust")--at which
time the Present Trust commenced operations. The total net assets of the
Managed Portfolio immediately after the transaction were $682,601,380 in the
Old Trust and $51,345,102 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Managed Portfolio of the
Present Trust reflect the performance of the Managed Portfolio of the Old
Trust.
Our investment philosophy is based on the premise that companies create wealth
by generating cash flow at high rates. That wealth is delivered to shareholders
by managements who use this cash wisely, such as for share repurchase or astute
acquisitions. Our criteria in buying the stocks of these companies include:
- Good businesses with growing free cash flow
- Management motivated to create wealth for shareholders
- Securities that can be purchased inexpensively
The objective of our approach is to acquire stocks for substantially less than
they are worth. While our investment style sometimes requires patience, we
believe the intrinsic value of a company--which is based on cash flow, earnings,
strength of balance sheet, competitive strengths and other factors--almost
always ends up being reflected over time in its share price.
New positions established in the second quarter included Alcoa (manufacturing),
Bristol-Myers Squibb (drugs & medical products), Eli Lilly (drugs & medical
products) and Motorola (telecommunications). Each reflects our philosophy of
owning businesses that are well managed, have strong competitive positions,
enjoy favorable earnings prospects and use their cash flow to create shareholder
value. We also purchased oil and gas companies Chevron, Tosco and USX-Marathon
Group. Energy stocks are currently valued by the market to reflect a drop in the
price of oil that we believe is overestimated, and we find attractive investment
opportunities in well-managed companies in this sector.
Sales in the quarter just ended included Compaq (technology), IBM (technology),
Diageo (food services) and Champion International (paper products).
The Portfolio's five largest equity positions at June 30, 2000 were McDonald's,
a premier fast-food company with growing global markets, representing 5.2% of
the Portfolio's net assets; Freddie Mac, which originates and securitizes home
mortgages, 4.6% of net assets; Wells Fargo, a financial conglomerate comprising
one of the larger banks in the Midwest and West, together with national mortgage
and consumer finance companies, 4.1% of net assets; duPont (E.I.) de Nemours, a
diversified technology and industrial company, 3.9% of net assets; and Boeing, a
global leader in aircraft and aerospace, 3.9% of net assets.
Major common stock industry positions were: financial services, representing
9.9% of the Portfolio's net assets at June 30, 2000; banking, 7.8% of net
assets; drugs & medical products, 7.3% of net assets; food services, 5.2% of net
assets; and telecommunications, 4.5% of net assets.
Looking ahead, the volatility that has characterized the stock market in recent
months does not appear likely to abate in the near future. At times like these,
investing in quality companies that enjoy strong, sustainable track records in
growing the value of their businesses remains a proven strategy. Moreover,
because we invest from the bottom up based on individual company fundamentals,
instead of following market trends, our investment approach tends to withstand
market turbulence. We remain confident that our research-driven approach will
continue to add value against our benchmarks and the broader market.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK -- 67.7%
AEROSPACE/DEFENSE -- 3.9%
620,100 Boeing Co. ................................................. $25,927,931
-----------
AIRLINES -- 0.3%
80,000 AMR Corp.*.................................................. 2,115,000
-----------
BANKING -- 7.8%
209,000 FleetBoston Financial Corp.................................. 7,106,000
40,000 M&T Bank Corp. ............................................. 18,000,000
700,000 Wells Fargo & Co............................................ 27,125,000
-----------
52,231,000
-----------
CHEMICALS -- 3.9%
598,000 du Pont (E.I.) de Nemours & Co.............................. 26,162,500
-----------
COMPUTERS -- 0.2%
28,600 Dell Computer Corp.*........................................ 1,410,337
-----------
COMPUTER SERVICES -- 1.6%
237,100 Compuware Corp.*............................................ 2,459,912
70,000 Electronic Data System Corp................................. 2,887,500
202,812 Sabre Holdings Corp......................................... 5,780,142
-----------
11,127,554
-----------
CONGLOMERATES -- 3.9%
145,000 Minnesota Mining & Manufacturing Co......................... 11,962,500
255,000 Textron, Inc. .............................................. 13,849,687
-----------
25,812,187
-----------
DRUGS & MEDICAL PRODUCTS -- 7.3%
381,000 American Home Products Corp................................. 22,383,750
82,000 Bristol-Myers Squibb Co..................................... 4,776,500
18,000 Lilly (Eli) & Co. .......................................... 1,797,750
385,000 Pharmacia Corp. ............................................ 19,899,687
-----------
48,857,687
-----------
ELECTRONICS -- 1.0%
90,000 Emerson Electric Co......................................... 5,433,750
24,600 Solectron Corp.*............................................ 1,030,125
-----------
6,463,875
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ENERGY -- 1.4%
73,200 Anadarko Petroleum Corp..................................... $ 3,609,675
175,000 Unocal Corp................................................. 5,796,875
-----------
9,406,550
-----------
FINANCIAL SERVICES -- 9.9%
260,000 Citigroup, Inc.............................................. 15,665,000
755,000 Freddie Mac................................................. 30,577,500
415,000 Household International, Inc................................ 17,248,438
111,500 John Hancock Financial Services*............................ 2,641,156
-----------
66,132,094
-----------
FOOD SERVICES -- 5.2%
1,050,600 McDonald's Corp............................................. 34,604,138
-----------
INSURANCE -- 1.3%
157,960 XL Capital Ltd.............................................. 8,549,585
-----------
LEISURE -- 0.2%
52,100 Carnival Corp............................................... 1,015,950
-----------
MANUFACTURING -- 3.9%
190,000 Alcoa Inc.*................................................. 5,510,000
680,000 ITT Industries, Inc.*....................................... 20,655,000
-----------
26,165,000
-----------
MEDIA/BROADCASTING -- 0.2%
30,000 News Corp. Ltd. ADR **...................................... 1,425,000
-----------
OIL/GAS -- 3.3%
219,000 Chevron Corp................................................ 18,573,938
76,500 Tosco Corp. ................................................ 2,165,906
40,000 USX-Marathon Group.......................................... 1,002,500
-----------
21,742,344
-----------
REAL ESTATE -- 0.0%
1,399 Security Capital Group, Inc., (Class A) *................... 483
-----------
RETAIL -- 3.3%
21,500 CVS Corp.................................................... 860,000
950,000 Kroger Co.*................................................. 20,959,375
-----------
21,819,375
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<C> <S> <C>
COMMON STOCK (CONCLUDED)
TECHNOLOGY -- 4.0%
483,000 Computer Associates International, Inc...................... $ 24,723,562
17,300 Intel Corp.................................................. 2,312,794
------------
27,036,356
------------
TELECOMMUNICATIONS -- 4.5%
9,000 AT&T Corp................................................... 2,846,250
355,000 Bell Atlantic Corp.*+....................................... 18,038,438
31,000 Motorola, Inc............................................... 900,938
108,400 Sprint Corp. (FON Group).................................... 5,528,400
60,000 WorldCom, Inc.*............................................. 2,752,500
------------
30,066,526
------------
WASTE DISPOSAL -- 0.6%
215,900 Waste Management, Inc....................................... 4,102,100
------------
Total Common Stock (cost-$438,240,553)...................... 452,173,572
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<C> <S> <C>
CORPORATE BONDS & NOTES -- 4.0%
BANKING -- 0.5%
$3,000 Nacional Financiera SNC, 8.575%, 5/8/03..................... 3,009,231
-----------
CONGLOMERATES -- 0.4%
3,000 LG&E Capital Corp., 5.75%, 11/1/01++........................ 2,942,790
-----------
ELECTRONICS -- 0.7%
3,000 Arrow Electronics, Inc., 7.57%, 11/24/00.................... 2,999,694
2,000 Sierra Pacific Resources, Inc., 6.892%, 4/20/03++........... 1,996,830
-----------
4,996,524
-----------
FINANCING -- 1.0%
2,000 Finova Capital Corp., 7.03%, 6/18/03........................ 1,682,520
2,000 General Motors Acceptance Corp., 7.15%, 12/17/01............ 2,021,700
2,000 Heller Financial Inc., 7.03%, 6/25/01....................... 2,010,920
695 Residential Funding Mortgages Corp., 7.00%, 10/25/27........ 691,061
-----------
6,406,201
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
--------- -----------
<C> <S> <C>
CORPORATE BONDS & NOTES (CONCLUDED)
FINANCIAL SERVICES -- 1.2%
$2,000 Chrysler Financial Corp., 6.82%, 2/10/13.................... $ 2,020,220
1,000 HSBC Cap Funding Corp., 9.55%, 12/31/49..................... 1,040,000
3,000 Salomon Smith Barney Holdings, Inc., 6.63%, 4/28/03......... 2,995,254
2,000 Textron Financial Corp., 6.58%, 9/17/02..................... 1,999,566
-----------
8,055,040
-----------
TELECOMMUNICATIONS -- 0.2%
1,500 WorldCom Inc., 7.05%, 11/20/01.............................. 1,505,925
-----------
Total Corporates Bonds & Notes (cost-$27,139,731)........... 26,915,711
-----------
U.S. GOVERNMENT AGENCY SECURITIES -- 12.2%
4,300 Federal National Mortgage Association, 6.00%, 8/16/30....... 4,020,715
1,285 Freddie Mac, 5.10%-6.00%, 8/16/30........................... 1,236,085
Government National Mortgage Association, 6.13%-9.75%,
79,282 7/24/30-8/15/23............................................. 76,040,952
-----------
Total U.S. Government Agency Securities
(cost-$81,144,471).......................................... 81,297,752
-----------
SHORT-TERM INVESTMENTS -- 19.1%
COMMERCIAL PAPER -- 10.9%
AUTOMOTIVE -- 3.6%
12,000 Ford Motor Credit Corp., 6.51%, 8/3/00...................... 11,928,390
12,000 General Motors Acceptance Corp., 6.53%, 7/10/00............. 11,980,410
-----------
23,908,800
-----------
FINANCIAL SERVICES -- 5.0%
12,000 American Express Credit Corp., 6.52%, 7/19/00............... 11,960,880
10,000 General Electric Capital Corp., 6.54%, 7/25/00.............. 9,956,400
10,000 Prudential Funding Corp., 6.50%, 7/20/00.................... 9,965,694
1,700 Washington Mutual, Inc., 6.85%, 8/30/00..................... 1,680,592
-----------
33,563,566
-----------
INDUSTRIAL -- 0.1%
300 Tyco International Group, 6.86%, 7/26/00.................... 298,571
-----------
TECHNOLOGY -- 2.2%
15,000 International Business Machines Corp., 6.52%, 7/24/00....... 14,937,517
-----------
TELECOMMUNICATIONS -- 0.0%
100 AT&T Corp., 6.56%, 9/19/00.................................. 98,542
-----------
Total Commercial Paper (amortized cost-$72,806,996)......... 72,806,996
-----------
</TABLE>
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
--------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 8.1%
$28,517 Federal Home Loan Bank, 6.36%-6.57%, 7/3/00-7/10/00................. $ 28,484,541
Federal National Mortgage Association, 6.36%-6.40%,
25,632 7/12/00-7/17/00..................................................... 25,575,311
------------
Total U.S. Government Agency Discount Notes (amortized
cost-$54,059,852)................................................... 54,059,852
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 0.1%
Repurchase Agreement with State Street Bank & Trust Co.,
dated 6/30/00, 5.85% due 7/3/00, proceeds: $297,145;
collateralized by Federal National Mortgage Association,
297 valued at $303,856; (amortized cost-$297,000)....................... 297,000
------------
Total Short-Term Investments (amortized cost-$127,163,848).......... 127,163,848
------------
Total Investments (cost-$673,688,603)..................... 103.0% 687,550,883
Liabilities in excess of other assets..................... (3.0) (19,928,732)
----- ------------
Net Assets................................................ 100.0% $667,622,151
===== ============
</TABLE>
-------------------------------
* Non-income producing security.
** Preferred stock
+ Effective July 3, 2000, the name of this company changed to Verizon
Communications.
++ Security exempt from registration under Rule 144a of the Securities Act of
1933. This security may be resold in transactions exempt from registration
typically to qualified institutional investors. At June 30, 2000, these
securities aggregated $4,939,620 or 0.74% of net assets.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost-$673,688,603)................... $687,550,883
Cash........................................................ 48,462
Receivable for investments sold............................. 29,168,930
Dividends and interest receivable........................... 1,032,702
Receivable for shares of beneficial interest sold........... 75,221
Prepaid expenses............................................ 6,770
------------
Total Assets.............................................. 717,882,968
------------
LIABILITIES:
Payable for investments purchased........................... 49,256,836
Payable for shares of beneficial interest redeemed.......... 308,926
Investment advisory fee payable............................. 438,129
Trustees' retirement plan payable........................... 103,406
Accrued expenses............................................ 153,520
------------
Total Liabilities......................................... 50,260,817
------------
Net Assets............................................ $667,622,151
============
COMPOSITION OF NET ASSETS:
Beneficial interest shares of $0.01 par value (unlimited
number authorized)........................................ $ 174,821
Paid-in-capital in excess of par............................ 649,157,810
Accumulated undistributed net investment income............. 7,840,521
Accumulated net realized loss on investments................ (3,413,281)
Net unrealized appreciation of investments.................. 13,862,280
------------
Net Assets............................................ $667,622,151
============
Shares outstanding.......................................... 17,482,123
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $38.19
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $27,159)... $ 3,930,392
Interest.................................................. 7,004,365
------------
Total investment income................................. 10,934,757
------------
EXPENSES:
Investment advisory fees.................................. 2,778,554
Trustees' fees and expenses............................... 84,370
Custodian fees............................................ 51,890
Transfer agent fees....................................... 29,040
Legal fees................................................ 28,326
Reports to shareholders................................... 25,320
Audit and tax service fees................................ 21,212
Insurance expense......................................... 2,512
Miscellaneous............................................. 1,996
------------
Total expenses.......................................... 3,023,220
Less: expense offset.................................... (720)
------------
Net expenses.......................................... 3,022,500
------------
Net investment income................................. 7,912,257
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments.......................... (2,656,551)
Net change in unrealized appreciation/depreciation of
investments............................................. (28,915,723)
------------
Net realized and unrealized loss on investments....... (31,572,274)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(23,660,017)
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................... $ 7,912,257 $ 10,021,902
Net realized gain (loss) on investments..................... (2,656,551) 58,154,646
Net change in unrealized appreciation/depreciation of
investments............................................... (28,915,723) (29,206,986)
------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................ (23,660,017) 38,969,562
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (10,093,638) (11,467,176)
Net realized gains.......................................... (56,361,979) (25,731,928)
------------ ------------
Total dividends and distributions to shareholders....... (66,455,617) (37,199,104)
------------ ------------
SHARE TRANSACTIONS:
Net proceeds from the sale of shares........................ 42,328,331 142,108,078
Reinvestment of dividends and distributions................. 66,455,617 37,199,104
Cost of shares redeemed..................................... (155,513,419) (153,697,507)
------------ ------------
Net increase (decrease) in net assets from share
transactions.......................................... (46,729,471) 25,609,675
------------ ------------
Total increase (decrease) in net assets............... (136,845,105) 27,380,133
NET ASSETS:
Beginning of year........................................... 804,467,256 777,087,123
------------ ------------
End of period (including undistributed net investment income
of $7,840,521 and $10,021,902, respectively).............. $667,622,151 $804,467,256
============ ============
SHARES ISSUED AND REDEEMED:
Issued...................................................... 1,059,374 3,293,544
Issued in reinvestment of dividends and distributions....... 1,877,277 916,460
Redeemed.................................................... (3,883,863) (3,547,618)
------------ ------------
Net increase (decrease)................................. (947,212) 662,386
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGH OUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ----------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............. $43.65 $43.74 $42.38 $36.21 $30.14 $20.83
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................... 0.49 0.56 0.60 0.34 0.43 0.42
Net realized and unrealized gain (loss)
on investments.............................. (2.10) 1.47 2.40 7.45 6.31 9.02
-------- -------- -------- -------- -------- -------
Total income (loss) from investment
operations.............................. (1.61) 2.03 3.00 7.79 6.74 9.44
-------- -------- -------- -------- -------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income......................... (0.58) (0.65) (0.33) (0.40) (0.41) (0.13)
Net realized gains............................ (3.27) (1.47) (1.31) (1.22) (0.26) --
-------- -------- -------- -------- -------- -------
Total dividends and distributions to
shareholders............................ (3.85) (2.12) (1.64) (1.62) (0.67) (0.13)
-------- -------- -------- -------- -------- -------
Net asset value, end of period.................. $38.19 $43.65 $43.74 $42.38 $36.21 $30.14
======== ======== ======== ======== ======== =======
TOTAL RETURN (1)................................ (3.0)% 5.0% 7.1% 22.3% 22.8% 45.6%
======== ======== ======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............... $667,622 $804,467 $777,087 $466,791 $180,728 $99,188
Ratio of expenses to average net assets (2)..... 0.84%(4) 0.83% 0.82% 0.87% 0.84%(3) 0.66%(3)
Ratio of net investment income to average net
assets........................................ 2.22%(4) 1.27% 1.74% 1.42% 1.66%(3) 1.85%(3)
Portfolio Turnover.............................. 84% 50% 37% 32% 27% 22%
</TABLE>
------------------------------
(1) Assumes reinvestment of all dividends and distributions. Total return for a
period of less than one year is not annualized.
(2) Inclusive of expenses offset by earnings credits from custodian bank (See 1G
in Notes to Financial Statements).
(3) During the fiscal years indicated above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratios of expenses to
average net assets and the ratios of net investment income to average net
assets would have been 0.85% and 1.65%, respectively, for the year ended
December 31, 1996, and 0.74% and 1.77%, respectively, for the year ended
December 31, 1995.
(4) Annualized
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
OCC Accumulation Trust (the "Trust") was organized May 12, 1994 as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest at $0.01 par value. The Trust is comprised of: the Equity Portfolio,
the Small Cap Portfolio, the Global Equity Portfolio, the Managed Portfolio (the
"Portfolio"), the U.S. Government Income Portfolio, the Mid Cap Portfolio, and
the Science & Technology Portfolio. OpCap Advisors (the "Adviser"), a
wholly-owned subsidiary of Oppenheimer Capital, serves as the Trust's investment
adviser. The accompanying financial statement and notes thereto are those of the
Portfolio. The Trust is an investment vehicle for variable annuity and variable
life insurance contracts of various life insurance companies and qualified
pension and retirement plans.
The following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Investment securities, other than debt securities, listed on a national
securities exchange or traded in the over-the-counter National Market System are
valued each business day at the last reported sale price; if there are no such
reported sales, the securities are valued at their last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Debt securities (other than short-term
obligations) are valued each business day by an independent pricing service
(approved by the Board of Trustees) using methods which include current market
quotations from a major market maker in the securities and trader-reviewed
"matrix" prices. Short-term debt securities having a remaining maturity of sixty
days or less are valued at amortized cost or amortized value, which approximates
market value. Securities or other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Trustees. The ability of issuers of debt instruments to meet their
obligations may be affected by economic developments in a specific industry or
region.
The Portfolio's custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to ensure that the value, including accrued interest,
is at least equal to the repurchase price. In the event of default of the
obligation to repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligations. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
(B) FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no federal
income tax provision is required.
(C) INVESTMENT TRANSACTIONS AND OTHER INCOME
Investment transactions are accounted for on the trade date. In determining the
gain or loss from the sale of investments, the cost of investments sold has been
determined on the basis of identified cost. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES --CONTINUED
premiums on debt securities purchased are accreted or amortized to interest
income over the lives of the respective securities using the effective interest
method.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders from net investment income and net
realized capital gains, if any, are declared and paid at least annually.
The Portfolio records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions is determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book-tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal income tax treatment; temporary differences do not
require reclassification. To the extent dividends and/or distributions exceed
current and accumulated earnings and profits for federal income tax purposes,
they are reported as dividends and/or distributions of paid-in-capital or as a
tax return of capital.
(E) ALLOCATION OF EXPENSES
Expenses specifically identifiable to a particular portfolio are borne by that
portfolio. Other expenses are allocated to each portfolio based on its net
assets in relation to the total net assets of all applicable portfolios of the
Trust or another reasonable basis.
(F) USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
(G) EXPENSE OFFSET
The Portfolio benefits from an expense offset arrangement with its custodian
bank whereby uninvested cash balances earn credits that reduce custodian fees.
Had these cash balances been invested in income producing securities, they would
have generated income for the Portfolio.
(H) TRUSTEES' RETIREMENT PLAN
The Trustees have adopted a Retirement Plan (the "Plan") effective January 1,
1999. The Plan provides for payments upon retirement to independent Trustees
based on the average annual compensation paid to them during their five highest
paid years of service. An independent Trustee must serve for a minimum of seven
years (or such lessor period as may be approved by the Board of Trustees) to
become eligible to receive benefits. For the six months ended June 30, 2000, the
Portfolio accrued $36,016 in connection with the Plan.
(2) INVESTMENT ADVISORY AND SUB-ADVISORY FEES
The investment advisory fee is accrued daily and payable monthly to the Adviser,
and is computed as a percentage of the Portfolio's net assets as of the close of
business each day at the annual rate of 0.80% on the first $400 million of net
assets, 0.75% on the next $400 million of net assets and 0.70% thereafter. The
Adviser is contractually obligated to waive that portion of the advisory fee and
to assume any necessary expense to limit total operating expenses of the
Portfolio to 1.00% of average net assets (net of any expense offset) on an
annual basis.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONTINUED)
(2) INVESTMENT ADVISORY AND SUB-ADVISORY FEES --CONTINUED
Pursuant to a sub-advisory agreement between the Adviser and Pacific Investment
Management Co., (the "Sub-Adviser"), the Adviser, out of its investment advisory
fee, pays the Sub-Adviser a monthly fee at the annual rate of 0.25% for
providing investment advisory services for a portion of the Portfolio's
investments. The Sub-Adviser commenced providing these services on March 9,
2000. For the period ended June 30, 2000, the Adviser paid the Sub-Adviser
$58,960, of which $15,660 was payable at June 30, 2000.
(3) INVESTMENTS IN SECURITIES
For federal income tax purposes the cost of securities owned at June 30, 2000
was $673,688,603. Accordingly, net unrealized appreciation of investments of
$13,862,280 was composed of gross appreciation of $47,829,332 for those
investments having an excess of value over cost and gross depreciation of
$33,967,052 for those investments having an excess of cost over value.
For the six months ended June 30, 2000, purchases and sales of investment
securities, other than short-term securities, aggregated $489,616,530 and
$535,377,722, respectively.
(4) ACQUISITION OF INVESTMENT ADVISER AND SUB-ADVISER
On May 5, 2000 the general partners of PIMCO Advisors closed the transactions
contemplated by the Implementation and Merger Agreement dated as of October 31,
1999 ("Implementation Agreement"), as amended March 3, 2000, with Allianz of
America, Inc., Pacific Asset Management LLC, PIMCO Partners LLC, PIMCO Holding
LLC, PIMCO Partners, G.P., and other parties to the Implementation Agreement. As
a result of completing these transactions, PIMCO Advisors is now majority-owned
indirectly by Allianz AG, with subsidiaries of Pacific Life Insurance Company
retaining a significant minority interest. Allianz AG is a German based insurer.
Pacific Life Insurance Company is a Newport Beach, California based insurer. For
the Portfolio, the change of control as a result of the closing of the
Implementation Agreement resulted in the automatic termination of the current
investment advisory and sub-advisory agreements with OpCap Advisors and Pacific
Investment Management Co., respectively. Prior to the closing of the
Implementation Agreement, the Board of Trustees and stockholders of the
Portfolio approved new agreements with OpCap Advisors and Pacific Investment
Management Co. to become effective upon the closing of the Implementation
Agreement.
(5) SPECIAL MEETING OF SHAREHOLDERS
The Portfolio held a special meeting of shareholders on March 3, 2000.
Shareholders voted to: 1) approve a new investment advisory agreement between
OpCap Advisors and the Portfolio; 2) approve an investment sub-advisory
agreement by and among OpCap Advisors and Pacific Investment Management Co.;
3) elect V. Lee Barnes, Paul Y. Clinton, Thomas W. Courtney, Lacy B. Herrmann,
Joseph M. La Motta and Theodore Mason as Trustees of the Portfolio; and, 4)
ratifiy the appointment of PricewaterhouseCoopers LLP as independent accountants
for the fiscal year ending December 31, 2000.
<PAGE>
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED) (CONCLUDED)
The resulting vote count for each proposal is indicated below.
<TABLE>
<CAPTION>
WITHHHOLD
AFFIRMATIVE AGAINST AUTHORITY
----------- -------- ---------
<S> <C> <C> <C>
1. Approval of new investment advisory agreement between
OpCap Advisors and the Portfolio:........................ 16,344,349 341,809 956,291
2. Approval of investment sub-advisory agreement by and
among OpCap Advisors and Pacific Investment Management
Co.:..................................................... 16,160,276 399,526 1,082,647
3. Election of Trustees:
V. Lee Barnes............................................. 17,073,497 -- 568,952
Paul Y. Clinton........................................... 17,057,894 -- 584,555
Thomas W. Courtney........................................ 17,075,158 -- 567,291
Lacy B. Herrmann.......................................... 17,065,252 -- 577,197
Joseph M. La Motta........................................ 17,061,167 -- 581,282
Theodore T. Mason......................................... 17,069,268 -- 573,181
</TABLE>
4. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Portfolio's independent accountants for the fiscal year ending December 31,
2000.
<TABLE>
<S> <C> <C> <C>
16,769,615 148,572 724,262
</TABLE>
<PAGE>
(This page left intentionally blank)
<PAGE>
OCC ACCUMULATION TRUST
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
<TABLE>
<S> <C>
TRUSTEES AND PRINCIPAL OFFICERS
Susan A. Murphy President
Joseph M. LaMotta Trustee & Chairman
V. Lee Barnes Trustee
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
Theodore T. Mason Trustee
Steven Calabria Vice President
Bernard H. Garil Vice President
Jeffrey J. Hughes Vice President
Eric V. Retzlaff Vice President
Kenneth W. Corba Vice President and Portfolio Manager
Mark F. Degenhart Vice President and Portfolio Manager
Michael F. Gaffney Vice President and Portfolio Manager
John C. Giusio, Jr. Vice President and Portfolio Manager
Richard J. Glasebrook, II Vice President and Portfolio Manager
Colin Glinsman Vice President and Portfolio Manager
Louis Goldstein Vice President and Portfolio Manager
William Gross Vice President and Portfolio Manager
Benjamin D. Gutstein Vice President and Portfolio Manager
Vikki Hanges Vice President and Portfolio Manager
Elisa A. Mazen Vice President and Portfolio Manager
Dennis McKechnie Vice President and Portfolio Manager
Jeffrey D. Parker Vice President and Portfolio Manager
Brian S. Shlissel Treasurer
Elliot M. Weiss Secretary
</TABLE>
INVESTMENT ADVISER
OpCap Advisors
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER--MANAGED PORTFOLIO
Pacific Investment Management Co.
840 Newport Center Drive
Newport Beach, CA 92660
CUSTODIAN AND TRANSFER AGENT
State Street Corp.
P.O. Box 1978
Boston, MA 02105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
This report is authorized for distribution only
to shareholders and to others who have received
a copy of this Trust's prospectus.
<PAGE>
(This page left intentionally blank)
<PAGE>
Semiannual Report
--------------------------------------------------------------------------------
June 30, 2000
--------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
[Graphic Omitted]
Invest With Confidence(R) (registered trademark)
T. ROWE PRICE
This report is authorized for distribution only to those who have received a
copy of the portfolio's prospectus.
T. Rowe Price Investment Services, Inc.,
Distributor
<PAGE>
(This page left intentionally blank)
<PAGE>
DEAR INVESTOR
The stock market soared, dove, then rose again during the first six months of
the year, creating significant volatility among various sectors and individual
stocks. By the time the dust settled at the end of June, most major market
indices posted slight losses for the six-month period. In a generally poor
environment for equities, the low-P/E and higher-yielding stocks that compose
the universe of value stocks your fund inhabits posted small losses for the
first half of 2000.
<TABLE>
Performance Comparison
--------------------------------------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio -2.74% -10.22%
S&P 500 -0.43 7.24
Lipper Variable Annuity
Underlying Equity Income
Funds Average -1.65 -2.98
</TABLE>
As shown in the Performance Comparison table, your portfolio declined by
2.74% during the six months ended June 30, 2000, reflecting a drop of
nearly 3% in the first quarter and a slim gain in the second. Despite the
weak results, we were pleased to see the portfolio hold up reasonably well
during the sharp sell-off in technology and so-called New Economy stocks in
the spring. Since 1998, we have been struggling in an environment that has
favored growth stocks, many with little or no earnings, over value stocks.
However, momentum may have begun to shift back toward quality companies
with a history of earnings growth and relatively high dividend yields, and
we regard this development - if it continues - as a welcome return to
reality in the equities market.
The year began with a continuation of the pattern that characterized the
stock market through most of last year. In the first quarter, the
technology-heavy Nasdaq Composite led the way as the more aggressive market
sectors provided the strongest performance. In April and May, those stocks
experienced a sudden and sharp decline, and traditional value stocks
provided better relative performance. In June the market underwent another
reversal in sentiment, with growth stocks rebounding from their spring
decline. By the end of the second quarter the S&P 500, the Dow Jones
Industrial Average, and the Nasdaq Composite had all posted losses. Within
these indices, growth stocks generally fared better than value stocks, and
smaller and mid-cap shares outperformed the largest-cap stocks.
DIVIDEND DISTRIBUTIONS
On June 27, 2000, your Board of Directors declared a second-quarter income
dividend of $0.09 per share, bringing the year-to-date total to $0.18. This
distribution was paid on June 29 to shareholders of record on June 27.
Earlier this year we declared a capital gain distribution of $0.31 per
share, of which $0.11 represented short-term and $0.20 represented
long-term capital gains. This distribution was paid in the first quarter,
and no capital gain distribution was declared in the second quarter.
PORTFOLIO STRATEGY
During the first half, the portfolio benefited from several successful
investments and suffered from some that did not work out as well. Our
holdings in the health care, utility, and energy sectors were generally
good performers, while telecommunications and basic materials stocks
declined overall. Among our profitable positions were AMERICAN HOME
PRODUCTS, BAKER HUGHES, PHARMACIA, DISNEY, and STARWOOD HOTELS & RESORTS
WORLDWIDE. Disappointing stocks included INTERNATIONAL PAPER, DUPONT,
HERCULES, and ALLTEL.
Security Diversification
--------------------------------------------------------------------------------
6/30/00
Reserves 5%
Technology 5%
Capital Equipment, Process Industries, and Basic Materials 10%
Consumer Services and Cyclicals 13%
Financial 17%
Consumer Nondurables 20%
Energy and Utilities 26%
Business Services and Transportation 4%
1
<PAGE>
The strategy we followed during the period was to invest in good companies
after the sell-off. Equity investors not only have high expectations for
future returns, but also little tolerance for any disappointing news
affecting their investments. What else could explain the recent collapse of
stocks like PROCTER & GAMBLE? It dropped about 50% after announcing slower
earnings growth - not losses, but slower growth in profitability. Many
small technology and Internet companies fared even worse. Imagine what
would happen in a more difficult economic environment.
In this climate we capitalized on the significant price declines in several
stocks to make new investments. Our experience suggests that investing in
strong companies after they lose half their value is often a rewarding
move. This was our reason for new purchases in ROCKWELL INTERNATIONAL,
GILLETTE, MICROSOFT, and Procter & Gamble. Rockwell is the classic value
stock. Having fallen substantially in price, the stock sold for 10 times
earnings and sported a dividend yield of 3% - an attractive valuation for a
leading manufacturing company. The other companies listed in the Major
Portfolio Changes table following this letter share the common
characteristics of recent price weakness, strong market position, and
attractive valuations. Microsoft is a slightly unusual holding for us given
our general reluctance to invest in technology stocks for valuation
reasons. Nonetheless, after its highly publicized antitrust problems and
stock price nosedive, we thought it was an opportune time to initiate a
small position.
Most of the portfolio sales listed in the table were of successful
investments whose valuations reached unattractive levels as their share
prices rose, which diminished their appeal for us. Two holdings, US WEST
and CONSOLIDATED PAPERS, were takeover targets.
As shown in the Financial Profile table, the fund's holdings sell at a
substantial discount to the overall market. Our historical approach has
been to invest in companies selling at relatively low price/earnings ratios
with attractive dividend yields and other compelling valuation
characteristics. Compared with the broad market, at the end of June we had
a portfolio of undervalued companies with good prospects over the next few
years.
<TABLE>
<CAPTION>
Financial Profile
Equity Income
Portfolio S&P 500
--------------------------------------------------------------------------------
<S> <C> <C>
Current Yield 2.9% 1.1%
Price/Book Ratio 3.2 8.9
Price/Earnings Ratio
(2000 estimated EPS) 14.5 30.0
Historical Beta
(based on monthly
returns for 5 years) 0.68 1.00
</TABLE>
OUTLOOK
After the shakeout of the past six months, the market ended up treading
water as investors digested a series of tightening moves by the Fed aimed
at slowing the pace of economic growth. In earlier reports we discussed the
delinkage between stock prices and the earnings and dividend growth that
normally support them, since share prices have risen at a faster pace in
recent years. This gap began to close modestly during the first half of the
year, with earnings and dividend growth moving ahead while stocks declined
in value. Despite the improved performance of value stocks discussed
earlier, they remain very inexpensive relative to their growth stock
siblings. If history is any guide, true value tends to reassert itself over
time. The fund holds investments in many companies with inexpensive
valuations, thanks to the contrary investor sentiment of recent years. We
believe our portfolio comprises stocks that offer a good combination of
solid return potential and relatively low downside risk.
As always, we appreciate your confidence in T. Rowe Price and your
continued support.
Respectfully submitted,
Brian C. Rogers
President and Chairman of the
Investment Advisory Committee
July 21, 2000
2
<PAGE>
PORTFOLIO HIGHLIGHTS
Twenty-Five Largest Holdings
--------------------------------------------------------------------------------
Percent of
Net Assets
6/30/00
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
BP Amoco 2.9%
Exxon Mobil 2.6
Mellon Financial 2.4
SBC Communications 2.1
American Home Products 1.9
General Mills 1.8
Pharmacia 1.6
Chevron 1.6
FleetBoston Financial 1.5
Royal Dutch Petroleum 1.4
Texaco 1.4
ALLTEL 1.4
Kimberly-Clark 1.4
Hershey Foods 1.3
Lockheed Martin 1.3
Heinz 1.3
Starwood Hotels & Resorts Worldwide 1.3
GTE 1.3
Bell Atlantic 1.3
Citigroup 1.3
3M 1.2
Fannie Mae 1.2
Disney 1.2
Eastman Kodak 1.2
American General 1.1
--------------------------------------------------------------------------------
Total 39.0%
--------------------------------------------------------------------------------
</TABLE>
MAJOR PORTFOLIO CHANGES
--------------------------------------------------------------------------------
Six Months Ended 6/30/00
Listed in descending order of size
LARGEST PURCHASES (10)
--------------------------------------------------------------------------------
Rockwell International*
Microsoft*
Procter & Gamble*
Eaton*
Unisys*
Motorola*
AT&T
Gillette*
International Paper
UNUMProvident
LARGEST SALES (10)
--------------------------------------------------------------------------------
BCE**
US West
Hewlett-Packard**
BP Amoco
Exxon Mobil
Baker Hughes
Consolidated Papers
American Home Products
TRW**
Anheuser-Busch
--------------------------------------------------------------------------------
*Position added.
**Position eliminated.
3
<PAGE>
Performance Comparison
--------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
<TABLE>
<CAPTION>
Equity Income Portfolio
--------------------------------------------------------------------------------
As of 6/30/00
Equity Income Portfolio S&P 500 Index Lipper Variable
<S> <C> <C> <C>
3/30/94 10000 10000 10000
6/30/94 10170 10042 10070
6/30/95 12409 12660 12136
6/30/96 15536 15952 14825
6/30/97 19815 21487 19355
6/30/98 23653 27968 23756
6/30/99 27261 34333 27067
6/30/00 24474 36820 26241
</TABLE>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
--------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<CAPTION>
EQUITY INCOME PORTFOLIO
Periods Ended 6/30/00
Since Inception
1 Year 3 Years 5 Years Inception Date
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-10.22% 7.29% 14.55% 15.40% 3/31/94
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
T. Rowe Price Equity Income Portfolio
Unaudited
For a share outstanding throughout each period
--------------------------------------------------------------------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 18.73 $ 19.25 $ 18.59 $ 15.26 $ 13.21 $ 10.42
Investment
activities
Net investment
income (loss) 0.19 0.38 0.39 0.40 0.42 0.44
Net realized and
unrealized gain
(loss) (0.71) 0.33 1.27 3.94 2.13 3.05
Total from
investment
activities (0.52) 0.71 1.66 4.34 2.55 3.49
Distributions
Net investment
income (0.18) (0.38) (0.39) (0.40) (0.42) (0.44)
Net realized gain (0.31) (0.85) (0.61) (0.61) (0.08) (0.26)
Total distributions (0.49) (1.23) (1.00) (1.01) (0.50) (0.70)
NET ASSET VALUE
END OF PERIOD $17.72 $18.73 $19.25 $18.59 $15.26 $13.21
RATIOS/SUPPLEMENTAL
DATA
TOTAL RETURN(diamond) (2.74)% 3.72% 9.07% 28.85% 19.56% 34.76%
Ratio of total
expenses to
average net assets 0.85%! 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment
income (loss) to average
net assets 2.10%! 1.90% 2.15% 2.56% 2.94% 3.61%
Portfolio turnover rate 41.1%! 32.6% 18.2% 20.5% 17.4% 10.1%
Net assets,
end of period
(in thousands) $550,046 $595,433 $526,952 $ 344,724 $103,751 $14,658
</TABLE>
(diamond) Total return reflects the rate that an investor would have
earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
T. Rowe Price Equity Income Portfolio
June 30, 2000 (Unaudited)
SHARES/PAR VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
COMMON STOCKS 94.5%
FINANCIAL 16.7%
BANK AND TRUST 9.2%
Bank of America 74,200 $ 3,191
Bank One 203,227 5,398
Firstar 117,400 2,473
FleetBoston Financial 239,617 8,147
J. P. Morgan 56,700 6,244
KeyCorp 58,300 1,027
Mellon Financial 359,000 13,081
Mercantile Bankshares 119,450 3,565
National City 132,700 2,264
Wells Fargo 128,560 4,982
50,372
INSURANCE 5.0%
American General 102,800 6,271
Chubb 80,700 4,963
Lincoln National 86,300 3,118
SAFECO 151,000 3,006
St. Paul 163,576 5,582
UNUMProvident 242,200 4,859
27,799
FINANCIAL SERVICES 2.5%
Citigroup 114,448 6,895
Fannie Mae 128,300 6,696
13,591
TOTAL FINANCIAL 91,762
UTILITIES 12.7%
TELEPHONE 7.5%
ALLTEL 124,800 7,730
AT&T 105,500 3,336
Bell Atlantic 136,100 6,916
BellSouth 79,500 3,389
GTE 147,700 6,916
SBC Communications 264,168 11,425
Vodafone Airtouch ADR 40,600 1,682
41,394
ELECTRIC UTILITIES 5.2%
Duke Energy 99,400 5,604
Entergy 97,000 2,637
FirstEnergy 160,320 3,747
Niagara Mohawk * 137,600 $ 1,918
Reliant Energy 115,700 3,420
Scottish Power ADR 71,088 2,377
Southern 188,100 4,385
Unicom 119,600 4,627
28,715
TOTAL UTILITIES 70,109
CONSUMER NONDURABLES 19.7%
COSMETICS 1.5%
Gillette 69,400 2,425
International Flavors &
Fragrances 184,200 5,560
7,985
BEVERAGES 1.3%
Anheuser-Busch 38,700 2,890
Brown-Forman (Class B) 80,700 4,338
7,228
FOOD PROCESSING 7.0%
Campbell 130,500 3,801
General Mills 264,400 10,113
Heinz 164,300 7,188
Hershey Foods 151,400 7,343
Kellogg 77,900 2,318
McCormick 159,300 5,177
Unilever (EUR) 54,900 2,518
38,458
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT 1.5%
Abbott Laboratories 130,200 5,802
Becton, Dickinson 89,700 2,573
8,375
PHARMACEUTICALS 4.1%
American Home Products 174,900 10,276
Merck 48,000 3,678
Pharmacia 167,763 8,671
22,625
MISCELLANEOUS CONSUMER PRODUCTS 4.3%
Armstrong World 91,700 1,404
Fortune Brands 139,300 3,213
Hasbro 160,300 2,414
Philip Morris 173,700 4,614
PPG Industries 51,200 2,269
Procter & Gamble 55,700 3,189
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price Equity Income Portfolio
June 30, 2000 (Unaudited)
SHARES/PAR VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Stanley Works 147,400 $ 3,501
UST 225,700 3,315
23,919
TOTAL CONSUMER NONDURABLES 108,590
CONSUMER SERVICES 7.2%
GENERAL MERCHANDISERS 0.8%
J.C. Penney 98,700 1,820
May Department Stores 118,800 2,851
4,671
Specialty Merchandisers 1.3%
Toys "R" Us * 412,900 6,013
Tupperware 60,000 1,320
7,333
ENTERTAINMENT AND LEISURE 2.3%
Disney 167,900 6,516
Hilton 317,300 2,975
Reader's Digest (Class A) 82,200 3,267
12,758
MEDIA AND COMMUNICATIONS 2.8%
Dow Jones 43,000 3,150
Dun & Bradstreet 128,200 3,670
Knight-Ridder 97,200 5,170
R.R. Donnelley 140,700 3,174
15,164
TOTAL CONSUMER SERVICES 39,926
CONSUMER CYCLICALS 5.2%
AUTOMOBILES AND RELATED 1.3%
Dana 50,000 1,059
Eaton 44,400 2,975
Genuine Parts 171,050 3,421
7,455
BUILDING AND REAL ESTATE 2.7%
Rouse 138,000 3,416
Simon Property Group, REIT 189,536 4,205
Starwood Hotels &
Resorts Worldwide, REIT 220,505 7,180
14,801
MISCELLANEOUS CONSUMER DURABLES 1.2%
Eastman Kodak 107,700 6,408
6,408
TOTAL CONSUMER CYCLICALS 28,664
TECHNOLOGY 4.8%
ELECTRONIC COMPONENTS 0.4%
Motorola 82,400 $ 2,395
2,395
OFFICE AUTOMATION 0.8%
Xerox 200,900 4,168
4,168
AEROSPACE & DEFENSE 2.4%
Boeing 55,800 2,333
Lockheed Martin 291,400 7,230
Rockwell International 122,400 3,856
13,419
INFORMATION PROCESSING 0.9%
COMPAQ Computer 107,800 2,756
Unisys * 132,900 1,935
4,691
TELECOMMUNICATIONS & EQUIPMENT 0.3%
US West 16,650 1,428
1,428
Total Technology 26,101
CAPITAL EQUIPMENT 0.9%
ELECTRICAL EQUIPMENT 0.7%
Hubbell (Class B) 155,800 3,973
3,973
MACHINERY 0.2%
Cooper Industries 26,867 875
875
TOTAL CAPITAL EQUIPMENT 4,848
BUSINESS SERVICES AND TRANSPORTATION 4.4%
MISCELLANEOUS BUSINESS SERVICES 1.5%
H&R Block 93,200 3,017
Waste Management 276,672 5,257
8,274
RAILROADS 1.8%
Norfolk Southern 275,600 4,100
Union Pacific 154,700 5,753
9,853
COMPUTER SERVICE & SOFTWARE 1.1%
BMC Software * 47,000 1,714
Microsoft * 54,900 4,390
6,104
TOTAL BUSINESS SERVICES AND TRANSPORTATION 24,231
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price Equity Income Portfolio
June 30, 2000 (Unaudited)
SHARES/PAR VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
ENERGY 13.5%
ENERGY SERVICES 0.8%
Baker Hughes 140,800 $ 4,506
4,506
INTEGRATED PETROLEUM - DOMESTIC 1.6%
Amerada Hess 83,900 5,181
USX-Marathon 139,400 3,493
8,674
INTEGRATED PETROLEUM - INTERNATIONAL 10.0%
BP Amoco ADR 283,096 16,013
Chevron 101,450 8,604
Exxon Mobil 183,061 14,370
Royal Dutch Petroleum 129,500 7,973
Texaco 147,100 7,833
54,793
EXPLORATION & PRODUCTION 1.1%
Unocal 186,900 6,191
6,191
Total Energy 74,164
PROCESS INDUSTRIES 8.6%
DIVERSIFIED CHEMICALS 2.0%
Dow Chemical 80,700 2,436
DuPont 129,000 5,644
Hercules 205,500 2,890
10,970
SPECIALTY CHEMICALS 3.1%
3M 82,300 6,790
Great Lakes Chemical 132,800 4,183
Imperial Chemical ADR 46,400 1,430
Pall 238,400 4,410
16,813
PAPER AND PAPER PRODUCTS 3.5%
Consolidated Papers 6,200 227
Fort James 248,500 5,747
International Paper 203,453 6,065
Kimberly-Clark 130,900 7,510
19,549
TOTAL PROCESS INDUSTRIES 47,332
BASIC MATERIALS 0.8%
METALS 0.8%
Newmont Mining 99,949 $ 2,162
Phelps Dodge 55,400 2,060
TOTAL BASIC MATERIALS 4,222
TOTAL COMMON STOCKS (COST $531,072) 519,949
U.S. GOVERNMENT OBLIGATIONS 0.4%
U.S. Treasury Bonds
6.00%, 2/15/26 $ 500,000 489
6.25%, 8/15/23 20,000 20
U.S. Treasury Notes
5.625%, 2/15/06 250,000 243
5.75%, 8/15/03 400,000 393
5.875%, 2/15/04 20,000 20
6.50%, 5/31/01 700,000 700
7.00%, 7/15/06 400,000 415
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $2,222) 2,280
SHORT-TERM INVESTMENTS 4.3%
MONEY MARKET FUNDS 4.3%
Reserve Investment
Fund, 6.68% # 23,409,691 23,410
TOTAL SHORT-TERM INVESTMENTS
(COST $23,410) 23,410
TOTAL INVESTMENTS IN SECURITIES
99.2% of Net Assets (Cost $556,704) $545,639
Other Assets Less Liabilities 4,407
NET ASSETS $550,046
----------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price Equity Income Portfolio
June 30, 2000 (Unaudited)
VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C>
NET ASSETS CONSIST OF:
Accumulated net investment
income - net of distributions $306
Accumulated net realized gain/loss -
net of distributions 18,125
Net unrealized gain (loss) (11,063)
Paid-in-capital applicable to 31,049,656
shares of $0.0001 par value
capital stock outstanding;
1,000,000,000 shares 542,678
of the Corporation authorized
NET ASSETS $550,046
----------
NET ASSET VALUE PER SHARE $17.72
----------
</TABLE>
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
EUR Euro
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
T. Rowe Price Equity Income Portfolio
In thousands
(Unaudited)
6 Months
Ended
6/30/00
<S> <C>
INVESTMENT INCOME (LOSS)
Income
Dividend $ 7,413
Interest 747
Total income 8,160
Expenses
Investment management and administrative 2,348
Net investment income (loss) 5,812
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities 18,005
Foreign currency transactions (2)
Net realized gain (loss) 18,003
Change in net unrealized gain or loss
Securities (41,364)
Other assets and liabilities
denominated in foreign currencies 2
Change in net unrealized gain or loss (41,362)
Net realized and unrealized gain (loss) (23,359)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $(17,547)
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price Equity Income Portfolio
In thousands
(Unaudited)
6 Months Year
Ended Ended
6/30/00 12/31/99
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) $ 5,812 $ 11,004
Net realized gain (loss) 18,003 33,148
Change in net unrealized gain or loss (41,362) (26,050)
Increase (decrease) in net assets from operations (17,547) 18,102
Distributions to shareholders
Net investment income (5,515) (11,093)
Net realized gain (9,407) (25,635)
Decrease in net assets from distributions (14,922) (36,728)
Capital share transactions *
Shares sold 50,457 126,172
Distributions reinvested 14,922 36,728
Shares redeemed (78,297) (75,793)
Increase (decrease) in net assets from capital
share transactions (12,918) 87,107
NET ASSETS
Increase (decrease) during period (45,387) 68,481
Beginning of period 595,433 526,952
END OF PERIOD $550,046 $595,433
------------------------
*Share information
Shares sold 2,811 6,291
Distributions reinvested 849 1,944
Shares redeemed (4,408) (3,817)
Increase (decrease) in shares outstanding (748) 4,418
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Equity Income Portfolio
June 30, 2000 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the corporation) is registered under the
Investment Company Act of 1940. The Equity Income Portfolio (the fund), a
diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on March
31, 1994. The fund seeks substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established U.S. companies. The shares of the fund are currently being
offered only to separate accounts of certain insurance companies as an
investment medium for both variable annuity contracts and variable life
insurance policies.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated
into U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of
such gains and losses.
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $109,292,000 and $131,551,000, respectively, for the
six months ended June 30, 2000.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$556,704,000. Net unrealized loss aggregated $11,065,000 at period-end, of
which $51,841,000 related to appreciated investments and $62,906,000 to
depreciated investments.
12
<PAGE>
T. Rowe Price Equity Income Portfolio
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management and administrative agreement between the fund and
T. Rowe Price Associates, Inc. (the manager) provides for an all-inclusive
annual fee, of which $431,000 was payable at June 30, 2000. The fee,
computed daily and paid monthly, is equal to 0.85% of the fund's average
daily net assets. Pursuant to the agreement, investment management,
shareholder servicing, transfer agency, accounting, and custody services
are provided to the fund, and interest, taxes, brokerage commissions, and
extraordinary expenses are paid directly by the fund.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 2000, totaled $668,000 and are reflected as interest income in the
accompanying Statement of Operations.
<PAGE>
(This page left intentionally blank)
<PAGE>
--------------------------------------------------------------------------------
June 30, 2000
--------------------------------------------------------------------------------
INTERNATIONAL STOCK PORTFOLIO
[Graphic Omitted]
Invest With Confidence(R)(registered trademark)
T. ROWE PRICE
This report is authorized for distribu-
tion only to those who have received a
copy of the portfolio's prospectus.
T. Rowe Price Investment Services, Inc.,
Distributor
<PAGE>
(This page left intentionally blank)
<PAGE>
DEAR INVESTOR
International stock markets declined in the first half of 2000 after surging
last year. As in the U.S., high valuations, increasing costs, and uncertain
profit prospects - combined with rising interest rates - caused a severe
correction in New Economy stocks. Heavy stock issuance by technology, media, and
telecom companies also weighed on stocks. Major currencies, including the euro,
Japanese yen, and British pound, also declined against the dollar, reducing the
value of overseas assets held by U.S. investors. Returns over the past 12
months, however, were robust.
PERFORMANCE REVIEW
<TABLE>
<CAPTION>
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------------------------------------------------------------------
<S> <C> <C>
International Stock
Portfolio -4.73% 22.38%
MSCI EAFE Index -3.95 17.44
Lipper Variable Annuity
Underlying International
Funds Average -3.59 27.75
</TABLE>
Your fund's six-month decline was slightly steeper than that of the MSCI
EAFE Index and the Lipper category, as shown in the table. For the 12
months ended June 30, 2000, however, performance was a strong 22.38%, ahead
of the EAFE (Europe, Australasia, and Far East) index but behind Lipper.
Our shortfall against the index in the first half is primarily attributable
to the fund's Japanese stocks - concentrated in New Economy sectors - which
underperformed those represented in EAFE but still hold large gains over
the past year. Portfolio holdings in other countries, particularly the
U.K., Germany, and Hong Kong, outperformed the relevant index components.
The fund also benefited from its relatively small positions in the U.K. and
Germany compared with EAFE, as well as its relatively large allocation to
stronger performers, such as Canada.
The declines of the euro (-4%), the yen (-3%), and the British pound (-6%)
hurt performance in U.S. dollar terms. After dipping to record lows in the
second quarter, the euro recovered somewhat as growth in Europe appears to
be accelerating even as the U.S. economy apparently began to slow. The
earlier strength of the yen and the pound had been cause for concern, and
both currencies' declines were considered necessary corrections.
The primary factors driving international market performance in the first
half were uncertainty about the growth prospects and profitability of New
Economy-related companies, abundant supply of newly issued shares in the
telecom and Internet sectors, and worries about U.S. interest rates. Early
in the year, powerful momentum in New Economy stocks carried over from
1999, but confidence began to falter in March. Rising interest rates
reduced the current value of expected future earnings of technology and
Internet-related companies - especially important for companies that have
no current earnings. Telecom and media stock valuations, driven up most by
earlier optimistic forecasts, fell hardest. In Europe, the technology
sector remained much more buoyant than in other regions. This, combined
with the gains of European energy, pharmaceutical, and food manufacturing
stocks, helped Europe perform relatively better than other regions. In
Japan, heavy selling of stocks by foreigners, margin investors, and
Japanese companies reducing their ownership in each other, hurt
performance. The Pacific ex-Japan performed poorly due to its greater
sensitivity to U.S. interest rates and market volatility, combined with
certain local factors. Market gyrations and rate hikes north of the border
were also a significant burden for Latin America, as was the pending
Mexican presidential election on July 2 (after the close of the reporting
period). As it turned out, the undisputed victory of pro-market opposition
candidate Vicente Fox was a major positive for the Mexican market.
INVESTMENT REVIEW
At the end of June, the portfolio's allocation to Europe represented 60% of
assets, up from 58% in December. Within Europe, the U.K. was our largest
country exposure, at about 18% of net assets (still underweight compared
with EAFE). New purchases and additions to existing holdings included
buying New Economy stocks after they had fallen sharply, as well as adding
to depressed Old Economy positions before they began to recover in April.
Europe's economic growth broadened and deepened in the first half. Unabated
oil price strength pushed euro-zone inflation up and it hovered around the
2.0% target of the European Central Bank (ECB). As a result of these
factors, and the weakness of
1
<PAGE>
the euro, the ECB raised interest rates 125 basis points over the period,
to 4.25% (100 basis points equal one percentage point). In contrast to the
euro zone, the U.K. economy weakened, inflation remained below the Bank of
England's 2.5% target, and interest rates, though increased 50 basis points
in the first quarter to 6.00%, were not changed in the second quarter. The
strength of the pound relative to the depressed euro was a problem for U.K.
exporters.
<TABLE>
<CAPTION>
GEOGRAPHIC DIVERSIFICATION
Europe Japan Far East Latin America Other and Reserves
<S> <C> <C> <C> <C>
60 19 6 4 11
</TABLE>
Based on net assets as of 6/30/00.
EUROPE
Country performance depended on the returns of large index stocks,
particularly the telecom stocks that dominate many indices, rather than on
economic or local conditions. The U.K. and GERMANY were the weakest major
markets, down 12% and 7% in dollar terms, due largely to the sharp declines
of British Telecom and DEUTSCHE TELEKOM. The poor performance of other
major index stocks (financials in the U.K., autos in Germany) also hampered
the indices. In contrast, FRANCE rose 6% as France Telecom, perceived to
have better assets than its neighboring state telecom companies, made
modest gains, and as oil major TOTALFINAELF and technology stocks ALCATEL
and STMICROELECTRONICS powered higher. The strength of telecom equipment
company LM ERICSSON, 50% of SWEDEN's index, was a major reason for that
market's 10% advance, which qualified Sweden as Europe's strongest major
market.
At the beginning of the year, excitement about telecom and media stocks
surged as U.K. global wireless giant VODAFONE-AIRTOUCH won its hostile bid
for German wireless operator Mannesmann and AOL's acquisition of Time
Warner in the U.S. turned attention to other media companies with desirable
film, TV, and musical "content." Later, greater-than-anticipated costs and
delays affecting new third-generation (3G) wireless services hurt the
telecom sector. Increased telecom stock issuance also weighed on returns,
as did reduced forecasts for the Internet-related businesses of media
companies.
Telecom deals came hard and heavy throughout the period as companies sought
to improve their market positions or focus their resources. Because it is
now focusing on global data and Internet protocol services, U.K.-based
CABLE & WIRELESS (C&W) sold its subsidiary, Hong Kong's largest telecom
operator, CABLE & WIRELESS HONG KONG TELECOM. TELEFONICA of SPAIN bought
out its four subsidiaries in Latin America. France Telecom bought the
U.K.'s second-largest wireless network, Orange, which regulators obliged
Vodafone to divest. Deutsche Telekom successfully spun off its Internet
service provider, T-Online, and France Telecom announced plans to float its
own Wanadoo service provider in July.
As telecom companies looked ahead to planned launches of
Internet-compatible mobile services, they struck deals to build popular
portals and acquire content. Vodafone linked with French telecom and
Internet provider VIVENDI and its media subsidiary, CANAL PLUS, so that it
can offer programs and e-commerce to its wireless subscribers. To enrich
its media catalogue, Vivendi later agreed to buy Canadian entertainment and
beverage conglomerate Seagram, and took control of Canal Plus. Spanish
Internet service provider Terra Networks (controlled by Telefonica)
announced plans to acquire leading U.S. portal Lycos. Across Europe,
telecom companies joined with banks to provide e-banking.
<TABLE>
<CAPTION>
MARKET PERFORMANCE
--------------------------------------------------------------------------------
Six Months Local Local Currency U.S.
Ended 6/30/00 Currency vs. U.S. Dollars Dollars
--------------------------------------------------------------------------------
<S> <C> <C> <C>
France 11.01% -4.37% 6.16%
Germany -3.04 -4.37 -7.28
Hong Kong -12.81 -0.28 -13.05
Italy 8.95 -4.37 4.19
Japan -2.12 -3.26 -5.32
Mexico -3.03 -3.01 -5.96
Netherlands 5.89 -4.37 1.26
Singapore -19.74 -3.64 -22.67
Sweden 12.68 -2.60 9.75
Switzerland 1.34 -1.56 -0.24
United Kingdom -6.02 -6.07 -11.72
</TABLE>
Source: RIMES Online, using MSCI indices
In the technology sector, news focused on booming demand, particularly for
semiconductors, mobile telecom-related components, and telecom
infrastructure. The surging semiconductor cycle helped ASM LITHOGRAPHY,
STMicroelectronics, PHILIPS ELECTRONICS, and INFINEON TECHNOLOGIES (the
semiconductor unit of Germany's SIEMENS, which came public in March) make
robust gains. Strength in optical and broadband networking
2
<PAGE>
caused French telecom equipment manufacturer Alcatel to surge. Ericsson's
gains reflected its leading global position in telecom infrastructure.
European banks made acquisitions to build market share, increase operating
efficiency, and raise returns. Spanish banks extended their presence in the
rapidly growing Latin American market as BANCO BILBAO VIZCAYA (BBVA)
acquired Mexican bank Bancomer and BANCO SANTANDER (BSCH) won Serfin, which
was auctioned by the Mexican government. NETHERLANDS-based banking and
insurance giant ING GROEP acquired U.S. insurer Reliastar, giving it a
top-10 position in the U.S. life insurance market. Within Europe, Italian
BANCA POPOLARE (BIPOP) acquired Germany's largest online bank, Entrium;
FINNISH/Swedish NORDIC BALTIC HOLDING acquired its DANISH neighbor,
UNIDANMARK; and Royal Bank of Scotland succeeded in its hostile bid to
acquire U.K. bank NatWest. Food producers and pharmaceuticals also made
acquisitions. Anglo/Dutch food group UNILEVER acquired U.S. Bestfoods to
create the world's second-largest food manufacturer, and U.K.
pharmaceutical giants GLAXO WELLCOME and SMITHKLINE BEECHAM agreed to join
forces.
FAR EAST AND OTHER
About 19% of net assets was invested in JAPAN, still less than in the EAFE
benchmark. More than half of the Japanese market's 5% decline over the six
months was due to the yen's 3% decline. The New Economy stocks that had led
in 1999 fell in the first half. Leadership shifted to Old Economy sectors
including food, pharmaceuticals, capital goods, and materials. Lackluster
markets echoed the tone of the economic environment. There were signs of
recovery - notably an increase in private-sector capital expenditure and
better-than-expected results in the Bank of Japan's quarterly Tankan
business survey. Yet these positive indications only reinforced the picture
of robust export demand, helping large, industrial, export-oriented
companies but not smaller, domestic businesses. With unemployment still
high by historic Japanese standards, consumers remained reluctant to spend.
Rising bankruptcies and continued company restructuring perpetuated job
uncertainty. A general election in June followed the sudden death of Prime
Minister Obuchi. The governing Liberal Democratic Party prevailed in the
election, although it lost strength, and the political environment is not
expected to change significantly.
News that banks and the government might grant debt forgiveness to some
major debtors disappointed investors in financial stocks. Underweighting
the sector was helpful. Brokerages, such as industry leader NOMURA
Securities, performed well as they launched record-size stock mutual funds.
In April, $1.1 trillion invested in post office savings started to mature.
About a quarter of the sums maturing left the postal bank, and investors
expected a portion of those outflows to be channeled into equity mutual
funds.
Early in the year, dominant wireless operator NTT DOCOMO climbed higher on
news about the greater-than-expected success of its Internet compatible
"i-mode" mobile services. Later, however, concerns about profitability,
competition, and increasing stock issuance hurt its performance as well as
that of its parent, NTT. To extend their limited international interests,
NTT agreed to acquire U.S. Web-hosting firm Verio and DoCoMo bought 15% of
Dutch cellular operator KPN Mobile. However, disappointment about the
deals, expectations that the government will soon sell another portion of
its 53% holding in NTT, and the likelihood that NTT will then reduce its
ownership of DoCoMo, put pressure on both stocks. In the technology sector,
companies with significant semiconductor businesses, such as TOSHIBA and
NEC, performed well. Robust demand for semiconductor manufacturing
equipment and increased market share in digital copiers lifted CANON. In
contrast, wireless phone component maker MURATA MANUFACTURING, which had
soared when mobile prospects were improving, fell sharply. The launch of
PlayStation2 did not enable SONY to sustain last year's peak levels.
Convenience store SEVEN-ELEVEN Japan, which soared last year on forecasts
for its Internet-related business, dropped steeply. While the six-month
performance of these stocks was poor, all had strong gains and many doubled
or tripled during the 12-month period.
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION
--------------------------------------------------------------------------------
Percent of Percent of
Net Assets Net Assets
12/31/99 6/30/00
--------------------------------------------------------------------------------
<S> <C> <C>
Services 31.6% 33.9%
Capital Equipment 18.6 19.2
Finance 16.4 18.5
Consumer Goods 14.3 13.8
Energy 5.8 6.3
Materials 2.4 1.5
Multi-industry 1.5 1.5
Miscellaneous 1.9 --
Reserves 7.5 5.3
Total 100.0% 100.0%
</TABLE>
Roughly 9% of the portfolio was invested in the PACIFIC EX-JAPAN (which
includes AUSTRALIA and NEW ZEALAND, countries not part of MSCI's definition
of "Far East"). More than a third of the regional weighting is in HONG KONG
and about a quarter in Australia. The impact of rising U.S. interest rates,
poor sentiment about Internet
3
<PAGE>
stocks, and local factors sent Asian markets lower. Companies that rose on
Internet prospects early in the year later fell sharply. Telecom and
technology stocks with thriving, established businesses performed better.
China's success clearing major U.S. and EU hurdles in its quest to join the
World Trade Organization was a significant positive for the region's
future. Economic growth, industrial production, and exports remained
strong. The consumer sector in Hong Kong and China, which had lagged
earlier, started to revive, and deflation appears to have moderated in
China. Korea struggled with concerns about its financial system, but the
government's steps to deal with insolvent conglomerates and provide market
liquidity helped the market recover. After the pro-independence opposition
party won Taiwan's presidential election, the island's markets were
affected by intermittent concerns about relations with China.
Australian media giant NEWS CORP., Korean technology leader SAMSUNG
ELECTRONICS, and CHINA MOBILE (HONG KONG), were leading performers. Markets
were enthusiastic as News Corp. filed for an initial public offering (IPO)
of its newly formed company, Sky Global Networks, which brings together
News Corp.'s worldwide satellite-TV-related businesses. The buoyant
semiconductor cycle boosted leading producer Samsung, which also has
significant market positions in flat panel screens and wireless phones.
China Mobile (Hong Kong)'s subscribers rose 2.3 million in the first
quarter, and it announced plans to acquire wireless operators in seven more
provinces. A focus on returns, government reforms, and a dominant market
position helped INDIAN finance company ICICI rise strongly. Important
changes in the telecom sector included the Hong Kong IPO of CHINA UNICOM,
and the acquisition of Cable & Wireless Hong Kong Telecom by PACIFIC
CENTURY CYBERWORKS.
LATIN AMERICA
About 4% of the portfolio was in Latin America, all of it in BRAZIL and
MEXICO. Moody's upgrade of Mexican debt to "investment grade," foreign
investment in Mexican banks, and, most importantly, the smooth and
undisputed election victory of pro-market candidate Vicente Fox were major
positives for Mexico. Brazil's central bank reduced interest rates from 19%
to 17.5% in two steps, reflecting the vast economic improvements since last
year's currency devaluation. Further key reforms advanced. However, late in
the period, uncertainty arose about whether an upcoming Supreme Court
ruling would result in significant additional fiscal costs. Brazilian
energy leader PETROBRAS was your portfolio's strongest performer. Improved
margins and higher refined product prices boosted first-quarter results
above expectations. Telecom incumbents TELMEX in Mexico and TELEBRAS in
Brazil rose strongly in the first quarter, but declined in April and May
and ended June only modestly ahead. Telmex and Canadian telecom company BCI
announced a joint venture to combine their Latin American telecom assets
outside of Mexico. GRUPO TELEVISA, Mexico's dominant television broadcaster
and a major producer of Spanish language programs (also shown on Univision
in the U.S.), entered advanced negotiations to acquire the largest radio
group in Mexico.
INVESTMENT POLICY AND OUTLOOK
We expect continued, but more moderate, economic growth in Europe through
the remainder of the year, even if the U.S. economy slows. Inflation may
creep due to the impact of weak currencies and higher oil prices. However,
if the gap between U.S. and European growth continues to narrow, as we
expect, the euro should find its ground relative to the dollar. The
attention focused recently on high U.S. productivity could help advance
tax, pension, and labor reforms. Industry consolidation, company
restructuring, and the New Economy are all less advanced than in the U.S.,
so there is greater scope for growth. We find European companies
attractive, but valuations relative to growth prospects are high compared
with most other overseas markets.
Japan's economy will continue to be challenged by depressed consumer demand
and yen strength. If the Bank of Japan raises interest rates, as it has
suggested, the economy might face additional difficulties. Foreigners,
heavy sellers in the second quarter, could continue to reduce positions.
Japan's corporate sector remains behind those of other developed regions in
its focus on increasing returns and shareholder value. The economic outlook
for the Pacific ex-Japan is healthy, but remains tied to U.S. growth.
Reforms in Asia continue gradually, but the job remains incomplete in most
countries. Valuations remain attractive compared with developed regions and
reasonable relative to historic levels. A slowdown in global spending on
technology could have a negative impact on market performance.
The half ended on a note of broad-based market strength after a year of
extremes. Yet negative and positive surprises are likely to continue. With
investors particularly sensitive to news about the less established
Internet-related businesses, there is still potential for volatility in the
coming months. Over time, as more experience of the New Economy
accumulates, we would expect the peaks and troughs to become less
pronounced. The painful process of winnowing the New Economy
4
<PAGE>
winners from the losers has started, and we expect much more consolidation.
Global growth is presently robust. We do not expect a sharp slowdown, but
are aware that a less vigorous environment would accelerate the process of
weeding out weaker New Economy companies. The importance of stock selection
and attention to fundamentals would then rise further. The more convincing
evidence of a U.S. slowdown that emerged recently enhances the relative
prospects for international market performance.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
Chairman
/s/ John R. Ford
John R. Ford
President
July 24, 2000
NEW PRESIDENT OF T. ROWE PRICE
INTERNATIONAL FUNDS
After more than 20 years as president of the T. Rowe Price International
Funds, Inc., Martin G. Wade has passed the baton to his colleague, John R.
Ford. Like Mr. Wade, John Ford has been associated with T. Rowe Price's
international investment manager since 1984. He currently serves on the
Investment Advisory Committees of all the T. Rowe Price international
equity funds.
Mr. Wade was instrumental in the launching of T. Rowe Price's first foreign
stock offering, the International Stock Fund, in 1980, and played a key
role thereafter in the company's increasing presence as an international
asset manager. He remains associated with the International Funds as
chairman and is also a member of the Board of Directors of T. Rowe Price
Associates.
<TABLE>
<CAPTION>
PORTFOLIO HIGHLIGHTS
TWENTY-FIVE LARGEST HOLDINGS
--------------------------------------------------------------------------------
PERCENT OF
NET ASSETS
6/30/00
--------------------------------------------------------------------------------
<S> <C>
Nokia, Finland 2.7%
Vodafone-Airtouch, United Kingdom 2.5
Glaxo Wellcome, United Kingdom 1.7
TotalFinaElf, France 1.5
Telefonica, Spain/Brazil 1.5
Vivendi, France 1.4
Shell Transport & Trading, United Kingdom 1.4
News Corp. 1.4
Societe Television Francaise, France 1.4
Nippon Telegraph & Telephone, Japan 1.3
Canon, Japan 1.3
Royal Bank of Scotland, United Kingdom 1.3
Murata Manufacturing, Japan 1.3
Telecom Italia Mobile, Italy 1.3
NEC, Japan 1.2
Alcatel, France 1.2
LM Ericsson, Sweden 1.2
Cable & Wireless, United Kingdom 1.2
AXA, France 1.2
Philips Electronics, Netherlands 1.2
Kyocera, Japan 1.1
Sony, Japan 1.1
ING Groep, Netherlands 1.1
Reed International, United Kingdom 1.1
Telebras, Brazil 1.1
Total 34.7%
</TABLE>
Note: Table excludes reserves.
5
<PAGE>
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
<TABLE>
<CAPTION>
INTERNATIONAL STOCK PORTFOLIO
--------------------------------------------------------------------------------
As of 6/30/00
International Lipper Variable Annuity
Stock MSCI EAFE Underlying International
Portfolio Index Funds Average
<S> <C> <C> <C>
3/31/94 10,000 10,000 10,000
6/94 10,100 10,518 10,089
6/95 10,574 10,723 10,570
12/96 12,341 12,183 12,362
6/97 14,491 13,787 14,706
6/98 15,222 14,667 16,230
6/99 16,093 15,829 17,058
6/00 19,695 18,590 21,221
</TABLE>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
--------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<CAPTION>
INTERNATIONAL STOCK PORTFOLIO
Periods Ended 6/30/00
Since Inception
1 Year 3 Years 5 Years Inception Date
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
22.38% 10.77% 13.25% 11.46% 3/31/94
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
6
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
T. Rowe Price International Stock Portfolio
Unaudited
For a share outstanding throughout each period
-----------------------------------------------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of
period $ 19.04 $ 14.52 $ 12.74 $ 12.64 $ 11.26 $ 10.18
-----------------------------------------------------------
Investment
activities
Net investment
income (loss) 0.05 0.12 0.17 0.12 0.09 0.07
Net realized
and unrealized
gain (loss) (0.95) 4.69 1.84 0.27* 1 .55 1.06
Total from
investment
activities (0.90) 4.81 2.01 0.39 1.64 1.13
Distributions
Net investment
income - (0.07) (0.17) (0.12) (0.17) (0.05)
Net realized gain - (0.22) (0.06) (0.06) (0.09) -
In excess of net
realized gain - - - (0.11) - -
Total distributions - (0.29) (0.23) (0.29) (0.26) (0.05)
NET ASSET VALUE
End of period $18.14 $19.04 $14.52 $12.74 $12.64 $11.26
-----------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
TOTAL RETURN(diamond) (4.73)% 33.32% 15.86% 3.09% 14.70% 11.18%
Ratio of total
expenses to average
net assets 1.05%! 1.05% 1.05% 1.05% 1.05 1.05%
Ratio of net
investment income
(loss) to average
net assets 0.65%! 0.83% 1.25% 1.10% 1.22% 1.47%
Portfolio turnover
rate 40.8%! 25.4% 18.1% 16.6% 9.7% 17.4%
Net assets,
end of period
(in thousands) $767,025 $707,330 $497,946 $369,400 $210,746 $ 51,661
</TABLE>
(diamond) Total return reflects the rate that an investor would have
earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
* The amount presented is calculated pursuant to a methodology
prescribed by the Securities and Exchange Commission for a share
outstanding throughout the period. This amount is inconsistant with
the fund's aggregate gains and losses because of the timing of sales
and redemptions of fund shares in relation to fluctuating market
values for the investment portfolio.
! Annualized
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
AUSTRALIA 2.7%
COMMON STOCKS 1.8%
Brambles Industries 68,000 $ 2,088
Commonwealth Bank
of Australia 124,118 2,055
Lend Lease 71,852 916
News Corp. 289,352 3,980
Publishing & Broadcasting 269,000 2,067
TABCORP Holdings 139,000 798
Telstra 449,744 1,824
Telstra, Installment Receipts 78,000 177
13,905
PREFERRED STOCKS 0.9%
News Corp. 545,932 6,584
6,584
TOTAL AUSTRALIA (COST $16,051) 20,489
BELGIUM 0.7%
COMMON STOCKS 0.7%
Dexia (EUR) 11,715 1,728
Fortis B (EUR) 83,702 2,436
Societe Europeenne des
Satellites (Class A) (EUR) 3,328 559
UCB (EUR) 8,270 304
TOTAL BELGIUM (COST $3,850) 5,027
BRAZIL 2.1%
COMMON STOCKS 1.3%
Embratel Participacoes
ADR (USD) 30,000 709
Telebras ADR (USD) 84,445 8,202
Unibanco GDR (USD) 23,802 684
9,595
PREFERRED STOCKS 0.8%
Banco Itau 7,340,700 645
Petrol Brasileiros 153,020 4,624
Telefonica ADR (USD) 24,305,616 456
Telesp Cellular Participacoes 27,319,985 494
6,219
TOTAL BRAZIL (COST $15,492) 15,814
CANADA 1.2%
COMMON STOCKS 1.2%
Alcan Aluminum 35,420 $ 1,101
Celestica (USD) 85,512 4,244
Nortel Networks 44,230 3,069
Royal Bank of Canada 15,190 777
Total Canada (Cost $6,909) 9,191
DENMARK 0.2%
COMMON STOCKS 0.2%
Tele Danmark A/S 18,280 1,230
TOTAL DENMARK (COST $1,042) 1,230
FINLAND 2.7%
COMMON STOCKS 2.7%
Nokia (EUR) 403,820 20,606
TOTAL FINLAND (COST $8,183) 20,606
FRANCE 12.3%
COMMON STOCKS 12.3%
Alcatel (EUR) * 141,390 9,274
Altran Technologies (EUR) 5,530 1,083
Aventis (EUR) 92,952 6,784
Aventis (DAX Exchange) (EUR) 15,387 1,102
AXA (EUR) 56,878 8,960
BNP Paribas (EUR) 73,230 7,047
Canal Plus (EUR) 3,680 618
Cap Gemini (EUR) 12,230 2,154
Carrefour (EUR) 10,144 693
Cie de St. Gobain (EUR) 17,630 2,383
Groupe Danone (EUR) * 4,100 544
Hermes (EUR) 8,390 1,133
L'Oreal (EUR) 914 791
Lafarge (EUR) 3,884 302
Legrand (EUR) 14,820 3,325
LVMH (EUR) 4,369 1,802
Sanofi Synthelabo (EUR) 115,712 5,513
Schneider Electric (EUR) 11,602 809
Societe Generale (EUR) * 21,826 1,313
Societe Television Francaise * 150,500 10,489
Sodexho Alliance (EUR) 4,997 906
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
STMicroelectronics (EUR) 67,799 $ 4,272
TotalFinaElf (Class B) (EUR) 77,159 11,830
Vivendi (EUR) 124,434 10,983
TOTAL FRANCE (COST $63,483) 94,110
GERMANY 4.4%
COMMON STOCKS 4.3%
Allianz (EUR) 11,180 4,016
Bayer (EUR) 23,002 898
Bayerische Vereinsbank (EUR) 73,040 4,749
Deutsche Bank (EUR) 56,914 4,684
Deutsche Telekom (EUR) 63,621 3,632
E.on (EUR) 48,170 2,322
Gehe (EUR) 34,221 1,127
Infineon Technologies (EUR) * 48,901 3,875
Rhoen Klinikum (EUR) 11,350 450
SAP (EUR) 41,430 6,107
Siemens (EUR) 7,773 1,173
33,033
PREFERRED STOCKS 0.1%
SAP (EUR) 2,640 488
488
TOTAL GERMANY (COST $29,163) 33,521
HONG KONG 3.3%
COMMON STOCKS 3.3%
Cable & Wireless (HKT) 603,600 1,332
Cheung Kong Holdings 327,000 3,597
China Mobile (Hong Kong) * 787,000 6,941
China Unicom * 1,040,000 2,195
Dao Heng Bank Group 330,000 1,460
Henderson Land Development 288,000 1,267
Hutchison Whampoa 453,200 5,697
Pacific Century CyberWorks * 1,230,000 2,430
Sun Hung Kai Properties 86,000 618
TOTAL HONG KONG (COST $17,070) 25,537
INDIA 1.0%
COMMON STOCKS 1.0%
Global Tele-Systems 46,000 $ 1,383
Hindustan Lever 47,000 2,997
ICICI Limited 342,000 970
ICICI Limited ADR (USD) 74,347 1,394
Mahanagar Telephone 265,000 1,273
Total India (Cost $7,795) 8,017
IRELAND 0.2%
COMMON STOCKS 0.2%
SmartForce ADR (USD) * 38,411 1,841
TOTAL IRELAND (COST $1,168) 1,841
ITALY 5.3%
COMMON STOCKS 5.3%
Alleanza Assicurazioni (EUR) 198,000 2,637
Banca Intesa (EUR) 1,472,030 6,591
Bipop-Carire (EUR) * 400,000 3,147
ENI (EUR) 622,655 3,596
Mediaset (EUR) 56,000 855
Mediolanum (EUR) 197,295 3,210
San Paolo IMI (EUR) 28,041 498
Tecnost (EUR) 333,800 1,259
Telecom Italia (EUR) 441,550 6,070
Telecom Italia Mobile (EUR) 948,784 9,692
Unicredito (EUR) 718,601 3,437
TOTAL ITALY (COST $26,977) 40,992
JAPAN 19.0%
COMMON STOCKS 19.0%
Bridgestone 53,000 1,121
Canon 207,000 10,301
DDI 115 1,106
East Japan Railway 141 819
Fanuc 30,600 3,112
Fuji Bank 639,000 4,854
Fuji Television Network 275 4,302
Fujitsu 138,000 4,773
Hitachi 93,000 1,341
Ito-Yokado 22,000 1,323
Kao 43,000 1,313
Kokuyo 55,000 901
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Kyocera 51,000 $ 8,647
Makita 72,000 686
Marui 170,000 3,252
Matsushita Electric Industrial 246,000 6,376
Mitsui Fudosan 426,000 4,617
Murata Manufacturing 68,000 9,754
NEC 302,000 9,478
Nippon Telegraph & Telephone 778 10,339
Nomura Securities 255,000 6,237
NTT DoCoMo 276 7,465
Sankyo 96,000 2,167
Seven-Eleven Japan 46,000 3,845
Shin-Etsu Chemical 48,000 2,434
Shiseido 103,000 1,592
Softbank 12,100 1,642
Sony 92,500 8,631
Sumitomo 174,000 1,956
Sumitomo Bank 376,000 4,607
Sumitomo Electric Industries 55,000 942
TDK 21,000 3,016
Toshiba 686,000 7,739
Yamanouchi Pharmaceutical 93,000 5,075
TOTAL JAPAN (COST $102,219) 145,763
MEXICO 2.3%
COMMON STOCKS 2.3%
Femsa UBD (Represents 1
Class B and 4 Series
D shares) 509,290 2,172
Grupo Iusacell ADR (USD) * 51,000 797
Grupo Televisa GDR (USD) * 99,245 6,842
Telefonos de Mexico (Class L)
ADR (USD) 136,492 7,797
TOTAL MEXICO (COST $13,065) 17,608
NETHERLANDS 6.2%
COMMON STOCKS 6.2%
ABN Amro (EUR) 32,212 789
Akzo Nobel (EUR) 9,664 411
ASM Lithography (EUR) * 124,780 5,363
CSM (EUR) 54,482 1,071
Equant (EUR) 28,118 1,143
Fortis NI (EUR) 118,090 3,437
ING Groep (EUR) 126,215 $ 8,531
KPN (EUR) 42,248 1,890
Philips Electronics (EUR) * 188,566 8,893
Royal Dutch Petroleum (EUR) 77,040 4,788
TNT Post Groep (EUR) 6,434 174
UTD Pan-Europe
Communications (EUR) * 51,217 1,339
VNU (EUR) 146,730 7,579
Wolters Kluwer (EUR) 89,342 2,380
TOTAL NETHERLANDS (COST $36,131) 47,788
NEW ZEALAND 0.2%
COMMON STOCKS 0.2%
Telecom Corporation of
New Zealand 395,000 1,381
TOTAL NEW ZEALAND (COST $1,717) 1,381
NORWAY 0.2%
COMMON STOCKS 0.2%
Orkla (Class A) 79,170 1,504
TOTAL NORWAY (COST $1,172) 1,504
PORTUGAL 0.1%
COMMON STOCKS 0.1%
Jeronimo Martins (EUR) 45,280 746
TOTAL PORTUGAL (COST $525) 746
SINGAPORE 0.4%
COMMON STOCKS 0.4%
United Overseas Bank 414,424 2,712
TOTAL SINGAPORE (COST $2,576) 2,712
SOUTH KOREA 1.4%
COMMON STOCKS 1.4%
Korea Telecom ADR (USD) 56,200 2,719
Pohang Iron & Steel
ADR (USD) 18,074 434
Samsung Electronics 23,266 7,699
TOTAL SOUTH KOREA (COST $5,907) 10,852
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
SPAIN 3.3%
COMMON STOCKS 3.3%
Banco Bilbao Vizcaya
Argentaria (EUR) 334,456 $ 4,997
Banco Santander Central
Hispano (EUR) 402,472 4,246
Empresa Nacional de
Electricidad (EUR) 181,088 3,508
Repsol (EUR) 109,193 2,174
Telefonica (EUR) * 329,974 7,088
Tele Sudeste Celular
Participacoes ADR (USD) 15,289 712
Telesp - Telecomunicacoes de
Sao Paulo ADR (USD) 76,445 2,118
Telefonica de Argentina
ADR (USD) 21,360 760
TOTAL SPAIN (COST $17,685) 25,603
SWEDEN 3.2%
COMMON STOCKS 3.2%
ABB 16,134 1,869
Atlas Copco (Class B) 17,780 333
Electrolux (Class B) 72,790 1,126
Hennes & Mauritz (Class B) 113,830 2,375
LM Ericsson (Class B) * 466,190 9,223
Nordic Baltic Holding 489,514 3,691
Nordic Baltic Holding (DKK) * 60,344 440
Sandvik 21,720 456
Securitas (Class B) 246,874 5,234
TOTAL SWEDEN (COST $18,235) 24,747
SWITZERLAND 3.9%
COMMON STOCKS 3.9%
ABB 26,066 3,120
Adecco 9,617 8,171
Credit Suisse Group 14,770 2,938
Nestle 3,587 7,179
Roche Holdings 218 2,122
Swisscom 2,397 830
UBS * 35,286 5,170
TOTAL SWITZERLAND (COST $19,787) 29,530
TAIWAN 0.9%
COMMON STOCKS 0.9%
Hon Hai Precision Industry 352,000 $ 3,185
Taiwan Semiconductor
Manufacturing 796,136 3,783
TOTAL TAIWAN (COST $5,191) 6,968
UNITED KINGDOM 17.5%
COMMON STOCKS 17.5%
Abbey National 81,000 962
AstraZeneca Group 122,050 5,695
Baltimore Technologies * 217,000 1,655
BG Group 80,620 520
BP Amoco 341,000 3,274
Cable & Wireless 540,800 9,124
Cadbury Schweppes 326,320 2,148
Celltech Group * 93,200 1,791
Centrica 186,700 619
Compass Group 506,000 6,665
David S. Smith 121,000 289
Diageo 392,980 3,526
Electrocomponents 99,000 1,019
GKN 23,000 293
Glaxo Wellcome 455,400 13,258
Hays 55,600 310
Hilton Group 130,000 453
HSBC Holdings (HKD) 159,600 1,827
Kingfisher 297,500 2,712
Marconi 244,300 3,176
Reed International 971,000 8,455
Rio Tinto 198,000 3,257
Royal Bank of Scotland 611,400 10,158
Shell Transport & Trading 1,283,500 10,885
SmithKline Beecham 563,300 7,381
Standard Chartered 187,000 2,329
Tesco 398,900 1,240
Tomkins 572,592 1,858
Unilever 301,035 1,823
United News & Media 106,600 1,530
Vodafone AirTouch 4,751,694 19,376
WPP Group 460,000 6,710
TOTAL UNITED KINGDOM (COST $124,156) 134,318
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
UNITED STATES 2.2%
MONEY MARKET FUNDS 2.2%
Reserve Investment Fund
6.68% # 17,048,218 $ 17,048
TOTAL UNITED STATES (COST $17,048) 17,048
TOTAL INVESTMENTS IN SECURITIES
96.9% of Net Assets (Cost $562,597) $ 742,943
Other Assets Less Liabilities 24,082
NET ASSETS $ 767,025
----------
</TABLE>
# Seven-day yield
* Non-income producing
ADR American depository receipt
GDR Global depository receipt
DKK Danish krone
EUR Euro
HKD Hong Kong dollar
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
SHARES VALUE
--------------------------------------------------------------------------------
In thousands
<S> <C> <C>
</TABLE>
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
In thousands
<TABLE>
ASSETS
<S> <C>
Investments in securities, at value (cost $562,597) $ 742,943
Securities lending collateral 56,361
Other assets 28,683
Total assets 827,987
LIABILITIES
Obligation to return securities lending collateral 56,361
Other liabilities 4,601
Total liabilities 60,962
NET ASSETS $ 767,025
----------
NET ASSETS CONSIST OF:
Accumulated net investment income - net of distributions $ 4,168
Accumulated net realized gain/loss - net of distributions 19,636
Net unrealized gain (loss) 180,333
Paid-in-capital applicable to 42,285,212 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares of the Corporation authorized 562,888
NET ASSETS $ 767,025
----------
NET ASSET VALUE PER SHARE $ 18.14
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
T. Rowe Price International Stock Portfolio
(Unaudited)
In thousands
6 Months
Ended
6/30/00
<S> <C>
INVESTMENT INCOME (LOSS)
Income
Dividend (net of foreign taxes of $709) $ 4,901
Interest 1,025
Securities lending 174
Total income 6,100
Expenses
Investment management and administrative 3,771
Net investment income (loss) 2,329
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities 15,669
Futures (108)
Foreign currency transactions (775)
Net realized gain (loss) 14,786
Change in net unrealized gain or loss
Securities (44,648)
Futures (689)
Other assets and liabilities denominated in foreign currencies 20
Change in net unrealized gain or loss (45,317)
Net realized and unrealized gain (loss) (30,531)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (28,202)
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price International Stock Portfolio
(Unaudited)
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 2,329 $ 4,530
Net realized gain (loss) 14,786 20,576
Change in net unrealized gain or loss (45,317) 150,246
Increase (decrease) in net assets from operations (28,202) 175,352
Distributions to shareholders
Net investment income - (2,521)
Net realized gain - (7,924)
Decrease in net assets from distributions - (10,445)
Capital share transactions *
Shares sold 698,784 372,834
Distributions reinvested -- 10,445
Shares redeemed (610,887) (338,802)
Increase (decrease) in net assets from capital
share transactions 87,897 44,477
NET ASSETS
Increase (decrease) during period 59,695 209,384
Beginning of period 707,330 497,946
END OF PERIOD $767,025 $707,330
---------------------
*Share information
Shares sold 38,532 23,632
Distributions reinvested - 602
Shares redeemed (33,403) (21,379)
Increase (decrease) in shares outstanding 5,129 2,855
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Notes to Financial Statements
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Series, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The International Stock Portfolio
(the fund), a diversified, open-end management investment company, is the
sole portfolio established by the corporation and commenced operations on
March 31, 1994. The fund seeks long-term growth of capital by investing
primarily in the common stocks of established, non-U.S. companies. The
shares of the fund are currently being offered only to separate accounts of
certain insurance companies as an investment medium for both variable
annuity contracts and variable life insurance policies.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
VALUATION Equity securities are valued at the last quoted sales price at
the time the valuations are made. A security which is listed or traded on
more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated
into U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of
such gains and losses.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
SECURITIES LENDING The fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. government securities as
collateral against the loans. Cash collateral received is invested in a
money market pooled account by the fund's lending agent. Collateral is
maintained over the life of the loan in an amount not less than 100% of the
value of loaned securities. Although risk is mitigated by the collateral,
the fund could experience a delay in recovering its securities and a
possible loss of income or value if the borrower fails to return them. At
June 30, 2000, the value of loaned securities was $57,309,000; aggregate
collateral consisted of $56,361,000 in the securities lending collateral
pool and U.S. government securities valued at $2,748,000.
OTHER Purchases and sales of portfolio securities, other than short-term
securities, aggregated $259,501,000 and $139,881,000, respectively, for the
six months ended June 30, 2000.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
16
<PAGE>
T. Rowe Price International Stock Portfolio
At June 30, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$562,597,000. Net unrealized gain aggregated $180,346,000 at period-end, of
which $205,063,000 related to appreciated investments and $24,717,000 to
depreciated investments.
NOTE 4 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in
which it invests. Foreign income taxes are accrued by the fund and withheld
from dividend and interest income.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by subsidiaries of T. Rowe Price Associates, Inc.
(Price Associates) and Robert Fleming Holdings Limited.
The investment management and administrative agreement between the fund and
the manager provides for an all-inclusive annual fee, of which $683,000 was
payable at June 30, 2000. The fee, computed daily and paid monthly, is
equal to 1.05% of the fund's average daily net assets. Pursuant to the
agreement, investment management, shareholder servicing, transfer agency,
accounting, and custody services are provided to the fund, and interest,
taxes, brokerage commissions, and extraordinary expenses are paid directly
by the fund.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 2000, totaled $1,025,000 and are reflected as interest income in
the accompanying Statement of Operations.
During the six months ended June 30, 2000, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating
$11,221,000 with certain affiliates of the manager and paid commissions of
$18,000 related thereto.
17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SEMIANNUAL
REPORT
JUNE 30, 2000
(UNAUDITED)
WARBURG PINCUS TRUST
(BULLET) GLOBAL POST-VENTURE CAPITAL PORTFOLIO
(formerly Post-Venture Capital Portfolio)
Warburg Pincus Trust (the "Trust") shares are not available directly to
individual investors, but may be offered only through certain insurance products
and pension and retirement plans.
More complete information about the Trust, including charges and expenses and,
when applicable, the special considerations and risks associated with
international investing, is provided in the PROSPECTUS, which must precede or
accompany this document and which should be read carefully before investing. You
may obtain additional copies by calling 800-222-8977 or by writing to Warburg
Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030.
Credit Suisse Asset Management Securities, Inc., Distributor to the Trust, is
located at 466 Lexington Ave., New York, NY 10017-3147. The Trust is advised by
Credit Suisse Asset Management, LLC.
[GRAPHIC OMITTED]
WARBURG PINCUS FUNDS
PART OF CREDIT SUISSE ASSET MANAGEMENT
<PAGE>
FROM TIME TO TIME, THE PORTFOLIOS' INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY
WAIVE SOME FEES AND/OR REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD
BE LOWER. WAIVERS AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE.
RETURNS ARE HISTORICAL AND INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS.
RETURNS AND SHARE PRICE WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS
THAN ORIGINAL COST.
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY
FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN
ACCOUNTING METHODS.
THE VIEWS OF THE PORTFOLIOS' MANAGEMENT ARE AS OF THE DATE OF THE LETTERS, AND
PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF JUNE 30, 2000; THESE
VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING
IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
PORTFOLIO SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET
MANAGEMENT, LLC ("CSAM") OR ANY AFFILIATE, ARE NOT FDIC INSURED AND ARE NOT
GUARANTEED BY CSAMOR ANY AFFILIATE. PORTFOLIO INVESTMENTS ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING LOSS OF YOUR INVESTMENT.
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SEMIANNUAL INVESTMENT ADVISER'S REPORT -- JUNE 30, 2000
--------------------------------------------------------------------------------
August 4, 2000
Dear Shareholder:
For the six months ended June 30, 2000, Warburg Pincus Trust--Global
Post-Venture Capital Portfolio (the "Portfolio") (formerly Post-Venture Capital
Portfolio--the name change was effective May 1, 2000) had a gain of 4.98% vs.
gains of 0.22% for the Lipper Global Funds Index* and 1.22% for the Russell 2000
Growth Index,** and a loss of 3.04% for the Morgan Stanley Capital International
World Index.*** The Portfolio's one-year return through June 30, 2000 was
52.26%. Its since-inception (on September 30, 1996) average annual total return
through June 30, 2000 was 20.64%.
Global stock markets were volatile in the period, reflecting worries that an
expanding global economy would put upward pressure on interest rates. Technology
and telecommunications stocks, which entered the period with generally lofty
valuations, were especially volatile. By region, the U.S. market was, on the
whole, lackluster, though many major indexes had positive results. Europe had
its share of winners and losers for the six months. Most Asian markets,
including Japan's, struggled after a solid 1999. Elsewhere of note, Latin
American markets generally declined, while Canada rallied.
Against this backdrop, the Portfolio had a gain, and performed well relative
to its benchmarks. The Portfolio saw good showings from a number of its
holdings, including certain technology and media stocks. Other stocks that
helped the Portfolio included its health-care and energy stocks, as well as
specific consumer-related names.
We made no material changes to the Portfolio in terms of overall strategy,
notwithstanding the Portfolio's name change and our increased ability to invest
in foreign stocks (the Portfolio may now invest without limit in foreign
securities). Our focus remained on well-managed, well-financed companies with
innovative products and services, especially those with competitive advantages
in the technology area, broadly defined.
In terms of regional allocation, we remained heavily biased in favor of the
U.S., though we modestly raised our exposure to foreign companies, adding a few
European, Canadian and Asian stocks we judged to be attractive. Going forward,
we are likely to continue to raise the Portfolio's weighting in foreign stocks,
given a strong and rising trend of venture-capital activity abroad and the
relatively attractive valuations at which many of these underfollowed stocks
trade. Opportunity within the U.S., meanwhile, should remain abundant. Assets in
domestic venture pools stand at record levels, and venture capitalists remain
eager to invest in highly innovative U.S. companies.
1
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SEMIANNUAL INVESTMENT ADVISER'S REPORT -- JUNE 30, 2000 (CONT'D)
--------------------------------------------------------------------------------
In sum, we are excited about venture-backed companies as an asset class, and
believe that the group has much to offer in terms of long-term growth potential
as well as the potential for diversification. We would caution investors,
however, that investing in these securities entails certain risks (e.g., that of
heightened volatility) as well as rewards. Our focus will remain on stocks of
well-managed, well-financed companies we deem to have the best long-term growth
prospects.
Elizabeth B. Dater Harold E. Sharon
Co-Portfolio Manager Co-Portfolio Manager
Federico D. Laffan Jun Sung Kim
Co-Portfolio Manager Co-Portfolio Manager
INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING
CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND
DIFFERENCES IN ACCOUNTING METHODS. THERE ARE ALSO SPECIAL RISK CONSIDERATIONS
ASSOCIATED WITH POST-VENTURE-CAPITAL INVESTMENTS. THESE ARE DETAILED IN THE
FUND'S PROSPECTUS, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
---------------
* The Lipper Global Funds Index is an equal-weighted performance index,
adjusted for capital-gain distributions and income dividends, of the largest
qualifying funds within this investment objective, and is compiled by Lipper
Inc.
** The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. It includes reinvestment of
dividends, and is compiled by Frank Russell Company.
*** The Morgan Stanley Capital International World Index is a market-weighted
average of the performance of securities listed on the stock exchanges of
all developed countries.
2
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SCHEDULE OF INVESTMENTS -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (57.4%)
BANKS & SAVINGS & LOANS (0.8%)
Mellon Financial Corp. 43,600 $ 1,588,675
------------
BUSINESS SERVICES (6.2%)
Acxiom Corp.+ 30,600 833,850
August Technology Corp.+ 26,100 429,019
BISYS Group, Inc.+ 24,700 1,519,050
Checkpoint Systems, Inc.+ 96,200 721,500
DoubleClick, Inc.+ 20,200 770,125
Getty Images, Inc.+ 34,700 1,286,069
Harte-Hanks, Inc. 74,800 1,870,000
QRS Corp.+ 24,900 611,606
SunGard Data Systems, Inc.+ 68,800 2,132,800
TMP Worldwide, Inc.+ 23,200 1,712,450
------------
11,886,469
------------
COMMUNICATIONS & MEDIA (7.2%)
AMFM, Inc.+ 13,500 931,500
Cablevision Systems Corp.+ 50,200 3,407,325
CMG Information Services, Inc.+ 23,000 1,053,687
Globespan, Inc.+ 9,100 1,110,911
Hispanic Broadcasting Corp.+ 22,800 755,250
MaMaMedia, Inc.+ # 92,592 499,997
USA Networks, Inc.+ 105,600 2,283,600
Westwood One, Inc.+ 38,600 1,317,225
Yahoo!, Inc.+ 21,200 2,626,150
------------
13,985,645
------------
COMPUTERS (9.1%)
Brocade Communications Systems, Inc.+ 8,400 1,541,269
Citrix Systems, Inc.+ 52,000 984,750
Documentum, Inc.+ 22,000 1,966,250
Excalibur Technologies Corp.+ 43,400 1,733,287
Intuit, Inc.+ 61,400 2,540,425
Network Appliance, Inc.+ 26,100 2,101,050
Sun Microsystems, Inc.+ 34,300 3,119,156
Verisign, Inc.+ 14,300 2,523,950
VERITAS Software Corp.+ 8,800 994,537
------------
17,504,674
------------
CONSUMER SERVICES (1.1%)
DeVry, Inc.+ 80,800 2,136,150
------------
ELECTRONICS (8.1%)
Altera Corp.+ 27,700 2,823,669
DSP Group, Inc.+ 24,200 1,355,200
Flextronics International, Ltd.+ 51,200 3,516,800
JDS Uniphase Corp.+ 25,400 3,044,825
KLA-Tencor Corp.+ 14,800 866,725
Manufacturers' Services, Ltd.+ 3,700 76,081
Maxim Integrated Products, Inc.+ 26,200 1,779,962
Vitesse Semiconductor Corp.+ 29,200 2,148,025
------------
15,611,287
------------
ENERGY (1.1%)
Chaparral Resources, Inc.+# 2,778 18,057
Newfield Exploration Co.+ 55,500 2,171,437
------------
2,189,494
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D) -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
FINANCIAL SERVICES (2.4%)
AMBAC Financial Group, Inc. 40,100 $ 2,197,981
Gabelli Asset Management, Inc. Class A+ 63,500 1,587,500
T. Rowe Price Associates, Inc. 21,100 896,750
------------
4,682,231
------------
HEALTHCARE (2.9%)
Affymetrix, Inc.+ 2,900 478,863
Community Health Care+ 13,000 210,438
Guidant Corp.+ 12,000 594,000
IVAX Corp.+ 66,000 2,739,000
Oxford Health Plans, Inc.+ 68,500 1,631,156
------------
5,653,457
------------
LEISURE & ENTERTAINMENT (0.6%)
Premier Parks, Inc.+ 47,100 1,071,525
------------
OIL SERVICES (2.3%)
Cooper Cameron Corp.+ 33,700 2,224,200
Nabors Industries, Inc.+ 51,200 2,128,000
------------
4,352,200
------------
PHARMACEUTICALS (3.1%)
Amgen, Inc.+ 19,300 1,355,825
Medimmune, Inc.+ 34,500 2,553,000
Millennium Pharmaceuticals, Inc.+ 7,200 805,500
Watson Pharmaceuticals, Inc.+ 20,900 1,123,375
Women First Healthcare, Inc.+ 50,100 62,625
------------
5,900,325
------------
RETAIL (2.5%)
Amazon.com, Inc.+ 21,900 795,244
AnnTaylor Stores Corp.+ 50,200 1,662,875
Saks, Inc.+ 59,000 619,500
Tiffany & Co. 26,900 1,815,750
------------
4,893,369
------------
TELECOMMUNICATIONS & EQUIPMENT (9.0%)
ANTEC Corp.+ 15,000 623,438
Cabletron Systems, Inc.+ 28,000 707,000
CIENA Corp.+ 20,600 3,433,763
Cisco Systems, Inc.+ 78,300 4,976,944
Covad Communications Group, Inc.+ 31,950 515,194
Exodus Communications, Inc.+ 79,200 3,648,150
Pinnacle Holdings, Inc.+ 31,300 1,690,200
VoiceStream Wireless Corp.+ 15,300 1,779,342
------------
17,374,031
------------
UTILITIES - ELECTRIC (1.0%)
SCANA Corp. 80,800 1,949,300
------------
TOTAL COMMON STOCKS (Cost $72,044,769) 110,778,832
------------
FOREIGN COMMON STOCKS (33.7%)
AUSTRALIA (0.2%)
MEDIA (0.2%)
BMCmedia.com, Ltd.+ 1,171,000 478,102
------------
TOTAL AUSTRALIA 478,102
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D) -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
CANADA (4.8%)
ENERGY (0.9%)
Berkley Petroleum Corp.+ 275,000 $ 1,735,373
------------
MEDIA (2.6%)
Corus Entertainment, Inc.+ 82,000 2,186,047
Shaw Communications, Inc. Class B 110,600 2,730,437
------------
4,916,484
------------
SOFTWARE & SERVICES (0.8%)
Descartes Systems Group, Inc. 51,500 1,529,355
------------
TECHNOLOGY HARDWARE & EQUIPMENT (0.5%)
Sierra Wireless, Inc.+ 18,600 1,000,922
------------
TOTAL CANADA 9,182,134
------------
FINLAND (1.7%)
SOFTWARE & SERVICES (0.9%)
Comptel Oyj 85,500 1,729,342
------------
TELECOMMUNICATION SERVICES (0.8%)
Nokia Oyj 31,000 1,588,334
------------
TOTAL FINLAND 3,317,676
------------
FRANCE (0.8%)
MEDIA (0.8%)
Ipsos SA+ 15,400 1,623,850
------------
TOTAL FRANCE 1,623,850
------------
GERMANY (3.2%)
MATERIALS (1.6%)
Jenoptik AG 108,000 3,105,828
------------
SOFTWARE & SERVICES (1.6%)
Articon Information Systems AG+ 20,100 1,406,538
Telesens AG+ 43,000 1,731,212
------------
3,137,750
------------
TOTAL GERMANY 6,243,578
------------
IRELAND (0.5%)
TECHNOLOGY HARDWARE & EQUIPMENT (0.5%)
Parthus Technologies PLC+ 337,000 951,494
------------
TOTAL IRELAND 951,494
------------
ISRAEL (3.1%)
TELECOMMUNICATION SERVICES (3.1%)
Amdocs, Ltd.+ 20,000 1,535,000
Audiocodes, Ltd.+ 8,700 1,044,000
Gilat Satellite Networks+ 48,200 3,343,875
------------
5,922,875
------------
TOTAL ISRAEL 5,922,875
------------
ITALY (0.9%)
INSURANCE (0.9%)
Bayerische Vita SpA 200,000 1,719,709
------------
TOTAL ITALY 1,719,709
------------
JAPAN (1.9%)
DIVERSIFIED FINANCIALS (0.9%)
Promise Co., Ltd. 9,900 784,129
Shinko Securities Co., Ltd. 195,000 875,460
------------
1,659,589
------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D) -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
FOREIGN COMMON STOCKS (CONT'D)
JAPAN (CONT'D)
HOTELS RESTAURANTS & LEISURE (0.5%)
H.I.S. Co., Ltd. 18,300 $ 906,339
------------
MATERIALS (0.5%)
Misumi Corp. 9,400 963,975
------------
TOTAL JAPAN 3,529,903
------------
LUXEMBOURG (0.7%)
SOFTWARE & SERVICES (0.7%)
Thiel Logistik AG+ 13,100 1,233,148
------------
TOTAL LUXEMBOURG 1,233,148
------------
NETHERLANDS (1.9%)
CONSUMER DURABLES (1.1%)
Ifco Systems NV+ 78,600 2,098,361
------------
ENERGY (0.1%)
Petroplus International NV 21,526 253,805
------------
TECHNOLOGY HARDWARE & EQUIPMENT (0.7%)
BE Semiconductor Industries NV 87,000 1,363,545
------------
TOTAL NETHERLANDS 3,715,711
------------
NORWAY (1.9%)
ENERGY (1.9%)
Fred Olsen Energy ASA+ 102,400 946,433
Navis ASA+ 704,500 873,675
Petroleum Geo Services ADR+ 108,400 1,849,575
------------
3,669,683
------------
TOTAL NORWAY 3,669,683
------------
SINGAPORE (1.4%)
TECHNOLOGY HARDWARE & EQUIPMENT (1.4%)
Chartered Semiconductor Manufacturing
Limited ADR+ 29,300 2,637,000
------------
TOTAL SINGAPORE 2,637,000
------------
SOUTH KOREA (0.4%)
TELECOMMUNICATION SERVICES (0.4%)
SK Telecom Co., Ltd. - ADR 23,000 835,188
------------
TOTAL KOREA 835,188
------------
SPAIN (2.9%)
DIVERSIFIED FINANCIALS (0.6%)
Dinamia Capital Privado. Sociedad
de Capital Riesgo, SA+ 84,130 1,128,239
------------
HOTELS RESTAURANTS & LEISURE (1.0%)
NH Hoteles SA 165,000 1,905,914
------------
SOFTWARE & SERVICES (0.9%)
Indra Sistemas SA 74,500 1,711,100
------------
TRANSPORTATION (0.4%)
Transportes Azkar SA+ 92,700 777,535
------------
TOTAL SPAIN 5,522,788
------------
SWEDEN (1.1%)
DIVERSIFIED FINANCIALS (0.6%)
Ledstiernan AB+ 300,000 1,197,165
------------
REAL ESTATE (0.5%)
Kungsleden AB 103,200 947,197
------------
TOTAL SWEDEN 2,144,362
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D) -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
FOREIGN COMMON STOCKS (CONT'D)
SWITZERLAND (1.4%)
MATERIALS (0.4%)
Mikron Holding AG 1,100 $ 812,450
------------
REAL ESTATE (0.1%)
Intershop Holding AG 399 234,335
------------
SOFTWARE & SERVICES (0.9%)
Gretag Imaging Group 8,700 1,680,001
Logitech International SA 31 22,134
------------
1,702,135
------------
TOTAL SWITZERLAND 2,748,920
------------
UNITED KINGDOM (4.9%)
DIVERSIFIED FINANCIALS (0.9%)
AMVESCAP PLC ADR 9,700 760,237
3i Group PLC 48,000 987,547
------------
1,747,784
------------
MEDIA (0.4%)
EMAP PLC 47,600 766,015
------------
SOFTWARE & SERVICES (2.1%)
Autonomy Corp. PLC+ 15,700 1,884,000
Itnet PLC+ 165,000 1,642,392
Orchestream Holdings PLC+ 95,700 457,822
------------
3,984,214
------------
PHARMACEUTICALS & BIOTECHNOLOGY (1.5%)
Oxford Glycosciences PLC+ 75,900 2,154,469
Skyepharma PLC+ 619,000 815,281
------------
2,969,750
------------
TOTAL UNITED KINGDOM 9,467,763
------------
TOTAL FOREIGN COMMON STOCKS (Cost $61,698,872) 64,943,884
------------
SHORT TERM INVESTMENTS (7.0%)
Institutional Money Market Trust 4,285,675 4,285,675
RBB Money Market Portfolio 9,233,698 9,233,698
------------
TOTAL SHORT TERM INVESTMENTS (Cost $13,519,373) 13,519,373
------------
PREFERRED STOCK (0.0%)
Women.com Networks, Inc.+ 32,513 67,058
------------
TOTAL PREFERRED STOCK (Cost $106,968) 67,058
------------
RIGHTS (0.0%)
FRANCE (0.0%)
MEDIA (0.0%)
Ipsos+ (Cost $0) 7,400 0
------------
TOTAL INVESTMENTS AT VALUE (98.1%)
(Cost $147,369,982*) 189,309,147
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%) 3,630,982
------------
NET ASSETS (100.0%) $192,940,129
============
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
--------------------------------------------------------------------------------
# Restricted security.
+ Non-income producing security.
* Cost for federal income tax purposes is $147,576,774.
See Accompanying Notes to Financial Statements.
7
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost-$147,369,982) $189,309,147
Foreign currency (Cost-$9,469) 9,306
Receivable for investments sold 11,375,403
Dividends, interest, and reclaims receivable 180,953
Receivable for fund shares sold 472,639
Prepaid expenses and other assets 0
------------
Total Assets 201,347,448
------------
LIABILITIES
Advisory fee payable 178,655
Administrative services fee payable 31,260
Payable for investments purchased 7,806,086
Payable for fund shares redeemed 6,430
Accrued expenses payable 27,649
Other liabilities 357,239
------------
Total Liabilities 8,407,319
------------
NET ASSETS
Capital Stock, $.001 par value 9,543
Paid-in capital 133,491,090
Accumulated undistributed net investment income (545,437)
Accumulated net realized gain from investments
and foreign currency related items 18,056,725
Net unrealized appreciation from investments and
foreign currency related items 41,928,208
------------
Net Assets $192,940,129
============
NET ASSET VALUE
Net assets $192,940,129
------------
Shares outstanding 9,542,972
------------
Net asset value, offering price and redemption
price per share $20.22
======
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 550,688
Dividends 186,551
Foreign Taxes Withheld (9,019)
------------
Total investment income 728,220
------------
EXPENSES:
Investment Advisory Fees 1,137,194
Administrative Services Fees 184,035
Transfer Agent Fees 25,164
Custodian/Sub-custodian Fees 20,878
Printing Fees 8,711
Audit Fees 6,510
Legal Fees 4,397
Directors Fees 1,325
Insurance Expense 320
Interest Expense 142
Miscellaneous Expenses 1,615
------------
1,390,291
------------
Less: fees waived, expenses reimbursed and
transfer agent fee offsets (116,634)
------------
Total expenses 1,273,657
------------
Net investment income (loss) (545,437)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS AND FOREIGN CURRENCY RELATED ITEMS
Net realized gain from investments 21,418,284
Net realized loss from foreign currency related items (61,016)
Net change in unrealized depreciation from investments (16,874,339)
Net change in unrealized depreciation from foreign
currency related items (10,942)
------------
Net realized and unrealized gain from investments and
foreign currency related items 4,471,987
------------
Net increase in net assets
resulting from operations $ 3,926,550
============
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income loss $ (545,437) $ (666,292)
Net realized gain from investments
and foreign currency related items 21,357,268 2,500,790
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items (16,885,281) 46,728,153
------------- -------------
Net increase in net assets resulting
from operations 3,926,550 48,562,651
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 139,501,953 150,704,290
Net asset value of shares redeemed (102,271,984) (109,538,405)
------------- -------------
Net increase in net assets from
capital share transactions 37,229,969 41,165,885
------------- -------------
Net increase in net assets 41,156,519 89,728,536
NET ASSETS:
Beginning of period 151,783,610 62,055,074
------------- -------------
End of period $ 192,940,129 $ 151,783,610
============= =============
UNDISTRIBUTED NET INVESTMENT LOSS $ (545,437) $ 0
============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2000 -----------------------------------------------
(UNAUDITED) 1999 1998 1997 1996(1)
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period $ 19.26 $ 11.82 $ 11.06 $ 9.76 $ 10.00
-------- -------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment loss (0.05) (0.08) (0.04) (0.08) 0.00
Net gains (losses) from investments
and foreign currency related items
(both realized and unrealized) 1.01 7.52 0.80 1.38 (0.24)
-------- -------- ------- ------- -------
Total from investment activities 0.96 7.44 0.76 1.30 (0.24)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 20.22 $ 19.26 $ 11.82 $ 11.06 $ 9.76
======== ======== ======= ======= =======
Total return 4.98%(2) 62.94% 6.87% 13.34% (2.40)%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $192,940 $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.43%(3)(4) 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3)(4)
Ratio of net income (loss) to average
net assets (.60)%(3) (.87)% (.83)% (.75)% .80%(3)
Decrease reflected in above operating
expense ratios due to waivers/
reimbursements .10%(3) .18% .30% .18% 4.16%(3)
Portfolio turnover rate 22.12% 44.38% 73.18% 238.12% 6.80%
</TABLE>
[FN]
--------------------------------------------------------------------------------
(1) For the period September 30, 1996 (commencement of operations) through
December 31, 1996.
(2) Non-annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expenses. These arrangements resulted in a reduction to
the Portfolio's net expense ratio by .03% for the six months ended June 30,
2000 and .01%, .00%, .00% and .01% for each of the years or period ended
December 31, 1999, 1998, 1997 and 1996, respectively. The Portfolio's
operating expense ratio after reflecting these arrangements was 1.40% for
the six months ended June 30, 2000 and 1.40%, 1.40%, 1.40%, and 1.40% for
each of the years or period ended December 31, 1999, 1998, 1997 and 1996,
respectively.
</FN>
See Accompanying Notes to Financial Statements.
11
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Trust (the "Trust"), a Massachusetts Business Trust, is an
open-end management investment company registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, and currently offers six investment
Portfolios (the "Portfolios"). The accompanying financial statements and notes
thereto relate to the Global Post-Venture Capital Portfolio (the "Portfolio"),
formerly the Post-Venture Capital Portfolio.
The Portfolio is diversified with an investment objective that seeks
long-term growth of capital. Shares of the Portfolio are not available directly
to individual investors but may be offered only through (a) variable-annuity
contracts and variable life insurance contracts offered by separate accounts of
certain insurance companies and (b) tax-qualified pension and retirement plans.
The Portfolio may not be available in connection with a particular contract or
plan.
The net asset value ("NAV") of the Portfolio is determined daily as of the
close of regular trading on the New York Stock Exchange. The Portfolio's
investments are valued at market value, which is generally determined using the
last reported sales price. If no sales are reported, investments are generally
valued at the mean between the last reported bid and asked prices. If market
quotations are not readily available, securities and other assets are valued by
another method that the Board of Trustees believes accurately reflects fair
value. Debt that will mature in 60 days or less is valued on the basis of
amortized cost, which approximates market value, unless the Board determines
that using this method would not reflect an investment's value.
The Portfolio initially values its investments in private-equity portfolios
at cost. After that, the Portfolio values these investments according to reports
from the private-equity portfolios that Abbott Capital Management, LLC
("Abbott"), the Portfolio's sub-investment adviser, generally receives on a
quarterly basis. The Portfolio's NAV typically will not reflect interim changes
in the values of its private-equity-portfolio investments.
The books and records of the Portfolio are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Portfolio does not isolate that portion
of gains and losses on investments in equity securities which is due to changes
in the foreign exchange rate from that which is due to changes in market prices
of equity securities. The Portfolio isolates that portion of gains and losses on
investments in debt securities which is due to changes in the foreign exchange
rate from that which is due to changes in market prices of debt securities.
The Portfolio may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among others, currency risk
(fluctuations in currency exchange rates), information risk (key information may
be inaccurate or unavailable) and political risk (expropriation, nationalization
or the imposition of capital or currency controls or punitive taxes). Other
risks of investing in foreign securities include liquidity and valuation risks.
A Portfolio's investments in securities of issuers located in less developed
countries considered to be "emerging markets" involve risks in addition to those
generally applicable to foreign securities. Focusing on emerging (less
developed) markets involves higher levels of risk, including increased currency,
information, liquidity, market, political and valuation risks. Deficiencies in
regulatory oversight, market infrastructure, shareholder protections and company
laws could expose the Portfolio to operational and other risks as well. Some
countries may have restrictions that could limit the Portfolio's access to
attractive opportunities. Additionally, emerging markets often face serious
economic problems (such as high
12
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES--(CONT'D)
external debt, inflation and unemployment) that could subject the Portfolio to
increased volatility or substantial declines in value.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
The Portfolio may enter into forward currency contracts for the purchase or
sale of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counter-parties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Portfolio will enter into forward foreign currency contracts primarily for
hedging purposes. Forward foreign currency contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the contract settlement
date or an offsetting position is entered into. At June 30, 2000, the Portfolio
had no open forward foreign currency contracts.
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid at least annually. However, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
No provision is made for federal income taxes as it is the Trust's intention
to have the Portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code of
1986, as amended (the "Code"), and make the requisite distributions to its
shareholders which will be sufficient to relieve it from federal income and
excise taxes.
Costs incurred by the Trust in connection with its organization have been
deferred and are being amortized over a period of five years from the date the
Trust commenced its operations. Costs incurred by the Portfolio in connection
with the offering of their shares have been deferred and are being amortized
over a one year period from the date each Portfolio commenced its operations.
The Portfolio may be subject to taxes imposed by countries in which they
invest, with respect to their investments in issuers existing or operating in
such countries. Such taxes are generally based on income earned or repatriated
and capital gains realized on the sale of such investments. The Portfolio
accrues such taxes when the related income or capital gains are earned.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Portfolio, along with other Funds managed by Credit Suisse Asset
Management LLC ("CSAM"), can transfer uninvested cash balances to a pooled cash
account, which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by the Portfolios' custodian bank until the agreements mature. Each agreement
requires that the market value of the collateral be sufficient to cover payments
of interest and principal; however, in the event of default or bankruptcy by the
other party to the agreement, retention of the collateral may be subject to
legal proceedings. At June 30, 2000, the Portfolio had no investments in
repurchase agreements.
The preparation of 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 statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
13
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES--(CONT'D)
The Portfolio has an arrangement with the transfer agent whereby interest
earned on uninvested cash balances is used to offset a portion of their transfer
agent expense. For the six months ended June 30, 2000, the Portfolios received
credits or reimbursements under the arrangement as follows in the amount of
$22,846.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
CSAM, which is an indirect wholly-owned U.S. subsidiary of Credit Suisse
Group, serves as the Portfolio's investment adviser. For its investment advisory
services, CSAM receives a fee of 1.25% of the Portfolio's average daily net
assets.
For the period ended June 30, 2000, investment advisory fees and voluntary
waivers were as follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ --------- ------------
<S> <C> <C>
$1,137,194 $(93,788) $1,043,406
</TABLE>
Abbott serves as sub-investment adviser for the Portfolio's assets invested
in U.S. or foreign private limited partnerships or other investment Funds
("Private Fund Investments"). Pursuant to the sub-advisory agreement between
Abbott and CSAM, Abbott is entitled to a quarterly fee from CSAM at the annual
rate of 1.00% of the net asset value of Private Fund Investments, which fee
amount or a portion thereof may be waived by Abbott. No compensation is paid by
Global Post-Venture Capital to Abbott for its sub-investment advisory services.
Credit Suisse Asset Management Securities, Inc. ("CSAMSI"), a wholly-owned
subsidiary of CSAM, and PFPC Inc. ("PFPC"), an indirect subsidiary of PNC
Financial Services Group, Inc. ("PNC"), also serve as the Portfolio's
co-administrator. For its administrative services, CSAMSI receives a fee
calculated at an annual rate of .10% of each Portfolios' average daily net
assets.
For the six months ended June 30, 2000, co-administrative services fees
earned by CSAMSI amounted to $90,975.
For its administrative services to the Portfolio, PFPC currently receives a
fee, exclusive of out-of-pocket expenses, based on the following fee structure:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ ---------------------------------
<S> <C>
First $500 million .100% of average daily net assets
Next $1 billion .075% of average daily net assets
Over $1.5 billion .050% of average daily net assets
</TABLE>
For the six months ended June 30, 2000, administrative services fees earned
by PFPC (including out-of-pocket expenses) amounted to $93,060.
Provident Distributors, Inc. serves as distributor of the Portfolio's shares
without compensation. Effective August 1, 2000, Credit Suisse Asset Management
Securities, Inc. will become distributor to the Trust without compensation.
14
<PAGE>
WARBURG PINCUS TRUST -- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
3. LINE OF CREDIT
The Portfolio, together with other Funds advised by CSAM, have established a
$350 million committed, unsecured, line of credit facility ("Credit Facility")
with Deutche Bank, AG as administrative agent, State Street Bank and Trust
Company as operations agent, Bank of Nova Scotia as syndication agent and
certain other lenders, for temporary or emergency purposes primarily relating to
unanticipated Fund share redemptions. Under the terms of the Credit Facility,
the Funds with access to the Credit Facility pay an aggregate commitment fee at
a rate of .075% per annum on the entire amount of the Credit Facility, which is
allocated among the participating Funds in such manner as is determined by the
governing Boards of the various Funds. In addition, the participating Funds will
pay interest on borrowing at the Federal funds rate plus .50%. At June 30, 2000,
there were no loans outstanding for the Portfolio.
4. INVESTMENTS IN SECURITIES
For the six months ended June 30, 2000, purchases and sales of investment
securities (excluding short-term investments) were $117,167,037 and $87,459,903,
respectively.
At June 30, 2000, the net unrealized appreciation from investments for those
securities having an excess of value over cost and net unrealized depreciation
from investments for those securities having an excess of cost over value (based
on cost for federal income tax purposes) were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
------------ -------------- -------------
<S> <C> <C>
$50,299,968 $(8,567,595) $41,732,373
</TABLE>
5. RESTRICTED SECURITIES
Certain investments are restricted as to resale and are valued as determined
by or under the direction of the Board in good faith, at fair value. The table
below shows the acquisition dates, aggregate cost, fair value as of June 30,
2000 and percent of net assets which the securities represent.
<TABLE>
<CAPTION>
SECURITY ACQUISITION MARKET PERCENTAGE
DESCRIPTION DATE COST VALUE OF NET ASSETS
------------------------- ----------- -------- -------- --------------
<S> <C> <C> <C> <C>
Chaparral Resources, Inc. 07/28/98 $250,000 $ 18,057 0.01%
MaMaMedia, Inc. 09/13/99 499,994 499,997 0.30%
</TABLE>
6. CAPITAL SHARE TRANSACTIONS
The Portfolio is authorized to issue an unlimited number of full and
fractional shares of beneficial interest, par value $.001 per share.
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
JUNE 30, ENDED
2000 DECEMBER 31,
(UNAUDITED) 1999
----------- -----------
<S> <C> <C>
Shares sold 6,747,510 10,839,440
Shares issued to shareholders on reinvestment
of dividends and distributions 0 0
Shares redeemed (5,084,494) (8,211,345)
---------- ----------
Net increase in shares outstanding 1,663,016 2,628,095
========== ==========
</TABLE>
15
<PAGE>
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<PAGE>
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<PAGE>
[GRAPHIC OMITTED]
WARBURG PINCUS FUNDS
PART OF CREDIT SUISSE ASSET MANAGEMENT
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 (BULLET) www.warburg.com
CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. TRPVF-3-0600
<PAGE>
================================================================================
Whether providing insurance protection for home, family and business or
arranging to cover future education and retirement expenses, Prudential people
have always been able to deliver something more: personal service, quality,
attention to detail and the financial strength of The Rock(R). Since 1875,
Prudential has been helping individuals and families meet their financial needs.
================================================================================
In the past, Contract Owners who held several variable contracts at the same
address received multiple copies of annual and semi-annual reports. In an effort
to lessen waste and reduce your fund's expenses of postage and printing, we will
attempt to mail only one copy of this report for the contracts listed on the
cover, based on our current records for Contract Owners with the same last name
and same address. No action on your part is necessary. Upon request, we will
furnish you with additional reports. The toll-free numbers listed on the inside
back cover of this report should be used to request any additional copies. Proxy
material and tax information will continue to be sent to each account of record.
The Prudential Insurance Company of America ------------
30 Scranton Office Park PRSRT.STD.
Scranton, PA 18507-1789 U.S. POSTAGE
(800) 458-6333 PAID
SUMMIT NJ
Permit # 657
------------
UNION BUG Printed in the U.S.A. DS.RS.003.0700
M1095 on recycled paper. INST-20000913-A004788
