THE
PRUDENTIAL
MEDLEY PROGRAM
[GRAPHIC OMITTED]
SEMI-ANNUAL REPORT TO
PARTICIPANTS
JUNE 30, 2000
[LOGO] PRUDENTIAL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NJ 07102-3777
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NJ 07102-2992
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<CAPTION>
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THE PRUDENTIAL MEDLEY PROGRAM
Average Annual Total Return as of June 30, 2000
Six One Five Ten Inception
Months(6) Year year year Date
--------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
VCA-10 CAPITAL GROWTH ACCOUNT
Without Sales Charge(1) -0.41% -9.43% 12.48% 12.89% 8/82
With Maximum Sales Charge(2) -7.65% -15.67% 12.07% 12.80% 8/82
VCA-11 MONEY MARKET ACCOUNT(3)
Without Sales Charge(1) 2.64% 4.98% 4.79% 4.50% 8/82
With Maximum Sales Charge(2) -4.48% -1.13% 4.36% 4.43% 8/82
The current seven-day yield on
June 30, 2000 was 5.78%
VCA-24(4)
WITHOUT SALES CHARGE(1)
Diversified Bond Account 2.45% 3.01% 5.16% 6.97% 5/83
Government Income Account 4.04% 3.56% 5.01% 6.61% 5/89
Conservative Balanced Account 0.96% 3.14% 9.66% 9.23% 5/83
Flexible Managed Account 0.23% 0.99% 11.3% 10.79% 5/83
Stock Index Account(5) -0.91% 6.16% 22.48% 16.49% 10/87
Equity Account -5.85% -8.65% 13.23% 13.54% 5/83
Global Account -1.35% 32.78% 18.90% 12.63% 9/88
WITH MAXIMUM SALES CHARGE(2)
Diversified Bond Account -4.56% -3.01% 4.82% 6.96% 5/83
Government Income Account -2.96% -2.45% 4.68% 6.61% 5/89
Conservative Balanced Account -6.09% -2.90% 9.35% 9.21% 5/83
Flexible Managed Account -6.82% -5.06% 11.00% 10.77% 5/83
Stock Index Account(5) -7.97% 0.11% 22.27% 16.47% 10/87
Equity Account -13.01% -14.81% 12.89% 13.49% 5/83
Global Account -8.35% 26.77% 18.70% 12.63% 9/88
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These returns represent past performance. Investment return and principal value
will fluctuate so that units, upon redemption, may be worth more or less than
their original cost.
(1) The results shown are after the deduction of all expenses and contract
charges including investment management and administrative fees, but do not
include the effect of any deferred sales charges. All total returns are for
the periods indicated and are calculated based on changes in unit values.
Past performance cannot guarantee comparable future results. Source:
Prudential
(2) The results shown are calculated in the same manner as those shown above
and in addition reflect the deduction of the following maximum deferred
sales charges: "1 Year", 6%; "5 Year", 2%; and "10 Year or Since
Inception", 0%. The performance results also reflect the impact of the $30
annual contract fee under The MEDLEY Program. Past performance cannot
guarantee comparable future results.
(3) For current yields on the Money Market Account, please call 1-800-458-6333.
An investment in the Account is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. There can be
no assurance that the Account will be able to maintain a stable unit value.
It is possible to lose money by investing in the Account.
(4) The Prudential Variable Contract Account-24 (VCA-24) was first offered on
May 1, 1987 (Stock Index Account on May 2, 1988, Government Income and
Global Accounts on May 1, 1991). However, the underlying investment
portfolios existed under other Prudential programs before they became part
of The MEDLEY Program. For purposes of comparison, the returns have been
recalculated to reflect a hypothetical return as if they were part of The
MEDLEY Program from each portfolio's inception, using charges applicable to
The MEDLEY Program.
(5) Standard & Poor's, S&P, Standard & Poor's 500, and 500 are trademarks of
McGraw-Hill, Inc. and have been licensed for use by The Prudential
Insurance Company of America and its affiliates and subsidiaries. The
Account is not sponsored, endorsed, sold or promoted by S&P and S&P makes
no representation regarding the advisability of investing in the Account.
(6) Six month returns are not annualized.
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TABLE OF CONTENTS
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I Letter to Medley Participants ....................................... 3
Market Commentary ................................................... 4
II VCA-10 Capital Growth Account ....................................... 8
Financial Statements ................................................ 10
III VCA-11 Money Market Account ......................................... 17
Financial Statements ................................................ 19
IV The Prudential Series Fund, Inc. VCA-24 ............................. 26
Diversified Bond Portfolio .......................................... 27
Government Income Portfolio ......................................... 29
Conservative Balanced Portfolio ..................................... 31
Flexible Managed Portfolio........................................... 33
Stock Index Portfolio ............................................... 35
Equity Portfolio .................................................... 37
Global Portfolio..................................................... 39
V The Prudential Series Fund, Inc.
Financial Statements ................................................ A1
Schedule of Investments.............................................. B1
Notes to Financial Statements........................................ C1
Financial Highlights ................................................ D1
Report of Independent Accountants.................................... E1
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus for The MEDLEY Program.
The report is for the information of persons participating in The Prudential
Variable Contract Account-10 (VCA-10), The Prudential Variable Contract
Account-11 (VCA-11), and The Prudential Variable Contract Account-24 (VCA-24),
The MEDLEY Program. VCA-10, VCA-11 and VCA-24 are distributed by Prudential
Investment Management Services LLC, a subsidiary of The Prudential Insurance
Company of America. VCA-10, VCA-11 and VCA-24 are group annuity insurance
products issued by The Prudential Insurance Company of America, Newark, NJ.
This report includes the financial statements of the VCA-10, Capital Growth
Account; VCA-11, Money Market Account; and The Prudential Series Fund, Inc.
This report does not include separate account financials for the VCA-24
Subaccounts. If you would like separate account financial statements as of
December 31, 1999, please call the telephone number on the back of this report.
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LETTER TO CONTRACT OWNERS
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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
3
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EQUITY COMMENTARY
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June 30, 2000
Turbulence and change in equity market
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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/ Russel 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
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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
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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
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EQUITY OUTLOOK
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June 30, 2000
Stocks are at a fair value
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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
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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
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<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
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BOND COMMENTARY
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June 30, 2000
A good first half for U.S. Treasuries
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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
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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
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BOND OUTLOOK 2000
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June 30, 2000
Current cycle of Fed rate hikes may be nearly over
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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
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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
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THE PRUDENTIAL SERIES FUND, INC.
The following pages represent information on The Prudential Series Fund, Inc.
Portfolios. Returns are at the Portfolio level, not at the Subaccount level.
VCA-24 Subaccount returns are located on the inside front cover of this report.
Each Subaccount of VCA-24 will invest in the corresponding portfolio of The
Prudential Series Fund, Inc. (the "Fund"). Of the portfolios comprising the
Fund, seven portfolios are presently available to The MEDLEY Program. The
Diversified Bond Subaccount invests in the Diversified Bond Portfolio, the
Government Income Subaccount in the Government Income Portfolio, the
Conservative Balanced Subaccount in the Conservative Balanced Portfolio, the
Flexible Managed Subaccount in the Flexible Managed Portfolio, the Stock Index
Subaccount in the Stock Index Portfolio, the Equity Subaccount invests in the
Equity Portfolio, and the Global Subaccount in the Global Portfolio.
There is no assurance that the investment objective of the portfolios will be
attained, nor is there any guarantee that the amount available to a Participant
will equal or exceed the total contributions made on that Participant's behalf.
The value of the investments held in each account may fluctuate daily and is
subject to the risks of both changing economic conditions and the selection of
investments necessary to meet the Subaccounts' or Portfolios' objectives.
IMPORTANT NOTE
This information supplements the financial statements and other information
included in this Report to Participants in The MEDLEY Program. It highlights the
investment performance of the seven portfolios of The Prudential Series Fund,
Inc., which are available through the Prudential Variable Contract Account-24.
The rates of return quoted on the following pages reflect deduction of
investment management fees and portfolio expenses, but not product charges. They
reflect the reinvestment of dividend and capital gains distributions. They are
not an estimate or a guarantee of future performance.
Contract unit values increase or decrease based on the performance of the
portfolio and when redeemed, may be worth more or less than original cost.
Changes in contract values depend not only on the investment performance of the
Portfolio but also on the insurance, administrative charges and applicable sales
charges, if any, under a contract. These contract charges effectively reduce the
dollar amount of any net gains and increase the dollar amount of any net losses.
26
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PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO
June 30, 2000
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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
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Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
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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%
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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
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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.
27
<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.
28
<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(4) 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.
(4) Six month returns are not annualized.
29
<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.
30
<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.
31
<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.
32
<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.
33
<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.
34
<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.
35
<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.
36
<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.
37
<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.
38
<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.
39
<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.
40
<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.
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.
A1
<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.
A2
<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.
A3
<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.
A4
<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.
A5
<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.
A6
<PAGE> 8
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.
A7
<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.
B1
<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.
B2
<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.
B3
<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.
B4
<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.
B5
<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.
B6
<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.
B7
<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.
B8
<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.
B9
<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.
B10
<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.
B11
<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.
B12
<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.
B13
<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.
B14
<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.
B15
<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.
B16
<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.
B17
<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.
B18
<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.
B19
<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.
B20
<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.
B21
<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.
B22
<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.
B23
<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.
B24
<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.
B25
<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.
B26
<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.
B27
<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.
B28
<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.
B29
<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.
B30
<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.
B31
<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.
B32
<PAGE> 45
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.
B33
<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.
B34
<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.
B35
<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.
B36
<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.
B37
<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.
B38
<PAGE> 62
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.
B39
<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.
B40
<PAGE> 66
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.
B41
<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.
B42
<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 the seven Portfolios available for investment by
VCA-24: Diversified Bond Portfolio, Government Income Portfolio,
Conservative Balanced Portfolio, Flexible Managed Portfolio, Stock Index
Portfolio, Equity Portfolio and Global Portfolio.
The Portfolios of the Series Fund have the following as investment
objectives:
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.
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 Portfolio: Capital appreciation by investing primarily in stocks
of major, established companies.
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 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.
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.
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
C1
<PAGE>
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.
Securities Lending: The Series Fund 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
C2
<PAGE>
owned subsidiary of The Prudential. For the six months ended June 30,
2000, PSI has been compensated by the following amounts:
<TABLE>
<S> <C>
Conservative Balanced Portfolio .................... $313,795
Flexible Managed Portfolio .......................... 359,455
Stock Index Portfolio ............................... 6,743
Global Portfolio .................................... 91,526
--------
$771,519
</TABLE>
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. Each 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 of this statement increased (decreased)
undistributed net investment income ("UNI") and accumulated net realized
gain (loss) on investments ("G/L") by the following amounts:
<TABLE>
<CAPTION>
UNI G/L
----------- -----------
<S> <C> <C>
Equity Portfolio(a) ................ $ 2,338,357 $(2,338,357)
Global Portfolio(a) ................ 363,522 (363,522)
</TABLE>
(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. The Prudential pays for the services of PIC, 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.
C3
<PAGE>
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.
<TABLE>
<CAPTION>
Investment Advisory Fee
-----------------------
<S> <C>
Diversified Bond Portfolio ........................... 0.40%
Government Income Portfolio .......................... 0.40
Conservative Balanced Portfolio ...................... 0.55
Flexible Managed Portfolio ........................... 0.60
Stock Index Portfolio ................................ 0.35
Equity Portfolio ..................................... 0.45
Global Portfolio ..................................... 0.75
</TABLE>
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 and PIFM 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 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:
<TABLE>
<CAPTION>
Amount Incurred
for the Amount Due
Six Months Ended as of
June 30, 2000 June 30, 2000
---------------- -------------
<S> <C> <C>
Diversified Bond Portfolio ..................... $ 4,900 $ 800
Government Income Portfolio .................... 3,400 600
Conservative Balanced Portfolio ................ 4,000 700
Flexible Managed Portfolio ..................... 5,000 800
Stock Index Portfolio .......................... 5,000 800
Equity Portfolio ............................... 5,000 900
Global Portfolio ............................... 4,700 800
------- ------
$32,000 $5,400
</TABLE>
For the six months ended June 30, 2000, PSI, earned $123,655 in
brokerage commissions from transactions executed on behalf of the
following Portfolios:
<TABLE>
<CAPTION>
Commission
----------
<S> <C>
Conservative Balanced Portfolio .................... $ 3,837
Flexible Managed Portfolio ......................... 20,378
Equity Portfolio ................................... 99,440
--------
$123,655
</TABLE>
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
C4
<PAGE>
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:
<TABLE>
<CAPTION>
Principal Percentage
Amount Interest
--------- ----------
<S> <C> <C>
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
Stock Index Portfolio .............................. 59,383,000 9.40
Equity Portfolio ................................... 67,436,000 10.67
Global Portfolio ................................... 25,850,000 4.09
All other Portfolios ............................... 275,315,000 43.59
------------ ------
$631,671,000 100.00%
</TABLE>
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.
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:
<TABLE>
<CAPTION>
Cost of Purchases:
Government Non-Government
Securities Securities
---------- --------------
<S> <C> <C>
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
Stock Index Portfolio .............................. 0 133,703,961
Equity Portfolio ................................... 0 251,721,501
Global Portfolio ................................... 0 376,923,599
<CAPTION>
Proceeds from Sales:
Government Non-Government
Securities Securities
---------- --------------
<S> <C> <C>
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
Stock Index Portfolio .............................. 0 105,636,662
Equity Portfolio ................................... 0 842,655,641
Global Portfolio ................................... 0 355,097,058
</TABLE>
C5
<PAGE>
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
Stock Index Portfolio .......................... 2,421,693,015 2,210,555,510 2,370,266,248 159,710,678
Equity Portfolio................................ 4,965,052,251 492,566,081 1,138,419,652 645,853,571
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>
Appreciation
Open Date Termination Date Shares Current Value Current 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 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>
Open Date Termination Date Contracts Current Value Current Basis Apreciation
--------- ---------------- --------- ------------- ------------- -----------
<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 -- --
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
Portfolio has Class II shares outstanding.
C6
<PAGE>
Transactions in shares of common stock of the Equity Portfolio were as
follows:
Equity Portfolio:
<TABLE>
<CAPTION>
Class I Shares Amount
------- ------ ------
<S> <C> <C>
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)
=========== ===============
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
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
=========== ===============
<CAPTION>
Class II Shares Amount
-------- ------ ------
<S> <C> <C>
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
=========== ===============
<CAPTION>
Shares Amount
- ------ ------
<S> <C> <C>
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
=========== ===============
</TABLE>
(a) Commencement of offering of Equity Portfolio Class II shares.
C7
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<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%
<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>
(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.
D1
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<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>
<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>
(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.
D2
<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%
<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>
(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 II shares.
SEE NOTES TO FINANCIAL STATEMENTS.
D3
<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)
Distributions 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 $ 884.5 $ 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.
D4
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
================================================================================
THE PRUDENTIAL MEDLEY PROGRAM
BOARD OF DIRECTORS
JOHN R.STRANGFELD W.SCOTT MCDONALD, JR., PH.D.
Chairman, Vice President,
The Prudential Series Fund, Inc. Kaludis Consulting Group
The Prudential Variable Contract
Accounts 10;11
SAUL K. FENSTER, PH.D. JOSEPH WEBER,PH.D.
President, Vice President,
New Jersey Institute of Technology Interclass (international
corporate learning)
================================================================================
The toll-free numbers shown below can be used to make transfers and
reallocations, review how your premiums are being allocated and receive current
investment option values in your contract. Unit values for each investment
option are available to all Contract Owners from the toll-free numbers. The
phone lines are open each business day during the hours shown. Please be sure to
have your contract number available when you call.
If you own a VARIABLE LIFE INSURANCE CONTRACT, please call the following
telephone number:
[phone]
(800)778-2255
8 A.M.- MIDNIGHT EASTERN TIME
If you own a VARIABLE ANNUITY CONTRACT, please call the following telephone
number:
[phone]
(800)458-6333
8 A.M.- 8 P.M.EASTERN TIME
================================================================================
STANDARD & POOR'S 500 INDEX comprises 500 large, established, publicly traded
stocks. MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX comprises
approximately 620 European companies. SALOMON BROTHERS EXTENDED MARKET INDEX
defines the small capitalization stock universe or remaining 20% of the
available capital of each country and includes the remaining 75% of the BMI
issues. The BMI measures the performance of the entire universe of
institutionally investable securities. 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 MCSI WORLD INDEX that reflect
actual buyable opportunities for the non-domestic 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.
<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. MD.RS.007.0700
M1095 on recycled paper. INST-20000915-A004795
