<PAGE>
SEMI-ANNUAL REPORT
TO CONTRACT OWNERS
JUNE 30, 1996
THE PRUDENTIAL SERIES FUND, INC.
LIFE INSURANCE
- -- PRUDENTIAL'S VARIABLE APPRECIABLE LIFE-Registered Trademark-
- -- PRUCO LIFE'S VARIABLE APPRECIABLE LIFE-Registered Trademark-
- -- PRUCO LIFE OF NEW JERSEY'S VARIABLE APPRECIABLE LIFE-Registered Trademark-
- -- PRUDENTIAL'S CUSTOM VAL-SM-
- -- PRUCO LIFE'S DISCOVERY-Registered Trademark- LIFE PLUS
- -- PRUCO LIFE OF NEW JERSEY'S DISCOVERY-Registered Trademark- LIFE PLUS
- -- PRUCO LIFE'S VARIABLE LIFE INSURANCE
- -- PRUCO LIFE OF NEW JERSEY'S VARIABLE LIFE INSURANCE
- -- PRUDENTIAL SURVIVORSHIP PREFERRED-SM-
ANNUITIES
- -- PRUDENTIAL'S DISCOVERY-Registered Trademark- PLUS
- -- PRUCO LIFE'S DISOVERY-Registered Trademark- PLUS
- -- PRUCO LIFE OF NEW JERSEY'S DISCOVERY-Registered Trademark- PLUS
- -- PRUCO LIFE'S DISCOVERY PREFERRED-SM-
- -- PRUDENTIAL'S VARIABLE INVESTMENT PLAN-Registered Trademark-
- -- PRUDENTIAL'S QUALIFIED VARIABLE INVESTMENT PLAN
LIVE WELL. MAKE A PLAN. BE YOUR OWN ROCK.
[GRAPHIC] PRUDENTIAL
<PAGE>
The Prudential Series Fund, Inc.
SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
DEAR CONTRACT OWNER:
WE ARE PLEASED TO REPORT TO YOU ON THE INVESTMENT PERFORMANCE OF THE FUNDS
THAT UNDERLIE YOUR PRUDENTIAL VARIABLE LIFE OR ANNUITY CONTRACT.
DURING THE FIRST HALF OF 1996, STRONG ECONOMIC GROWTH AND RECORD INFLOWS TO
U.S. EQUITY FUNDS POWERED THE U.S. STOCK MARKET TO NEW HIGHS. THIS SAME
HEALTHY U.S. ECONOMY PUSHED INTEREST RATES SHARPLY HIGHER AND BOND PRICES
LOWER. AS A RESULT, THE STOCK MARKET RECORDED STRONG GAINS, WHILE THE BOND
MARKET DISAPPOINTED INVESTORS.
THE PRUDENTIAL SERIES FUND PORTFOLIOS FOLLOWED THE SAME PATTERN. OUR STOCK
PORTFOLIOS PROVIDED VERY GOOD RETURNS. BUT, WITH THE EXCEPTION OF THE HIGH
YIELD PORTFOLIO, OUR BOND PORTFOLIOS SHOWED LOSSES. ALTHOUGH THE ABSOLUTE
RETURNS ON OUR EQUITY PORTFOLIOS WERE GOOD, A NUMBER OF OUR PORTFOLIOS
FINISHED BELOW PEER AVERAGES DURING THE SIX-MONTH PERIOD.
AS WE ENTERED 1996, HIGH STOCK PRICES PROMPTED SOME OF OUR VALUE-ORIENTED
MANAGERS TO MAINTAIN A DEFENSIVE POSITION IN OUR STOCK PORTFOLIOS. AT THE SAME
TIME, STABLE INTEREST RATES MEANT OUR BOND MANAGERS WERE HOLDING
LONGER-MATURITY BONDS.
SOME OF OUR PORTFOLIOS DID PERFORM EXCEPTIONALLY WELL, INCLUDING THE NATURAL
RESOURCES PORTFOLIO AND SMALL CAPITALIZATION STOCK PORTFOLIO. OUR GLOBAL
PORTFOLIO ALSO EXPERIENCED HIGH RETURNS, BENEFITING FROM FALLING EUROPEAN
INTEREST RATES.
YOUR INSURANCE OR ANNUITY CONTRACT IS A LONG-TERM HOLDING. SIX MONTHS, ON THE
OTHER HAND, IS ONLY A SMALL SLICE OF A LIFETIME. THROUGHOUT THIS REPORT,
THEREFORE, WE TRY TO KEEP THE LONG TERM IN FOCUS, WHILE UPDATING YOU ON THE
PORTFOLIOS' RECENT PERFORMANCE. OVER THREE- AND FIVE- YEAR PERIODS, YOU'LL
FIND THAT MANY OF OUR PORTFOLIOS HAVE DELIVERED EXCELLENT ABSOLUTE AND
RELATIVE PERFORMANCE. WHEN YOU CONSIDER THE ALLOCATION OF YOUR ASSETS AMONG
THESE PORTFOLIOS AND THE PERFORMANCE EXPECTATIONS YOU HOLD, PLEASE KEEP THE
LONG TERM IN MIND.
ONLY THE NAMES HAVE CHANGED.
AS YOU READ THIS REPORT, YOU'LL NOTICE THAT THE NAMES OF SOME OF THE
PORTFOLIOS HAVE CHANGED. THEIR INVESTMENT OBJECTIVES, RISKS AND POTENTIAL
REWARDS REMAIN THE SAME.
WE BELIEVE THAT THE NEW NAMES ARE MORE REFLECTIVE OF THE PORTFOLIOS'
INVESTMENTS AND MANAGEMENT STYLE AND ARE ALSO EASIER TO REMEMBER.
HERE'S HOW THE NAMES HAVE CHANGED:
NEW NAME FORMER NAME
DIVERSIFIED BOND BOND
GOVERNMENT INCOME* GOVERNMENT SECURITIES
CONSERVATIVE BALANCED CONSERVATIVELY MANAGED FLEXIBLE
FLEXIBLE MANAGED AGGRESSIVELY MANAGED FLEXIBLE
EQUITY INCOME* HIGH DIVIDEND STOCK
EQUITY COMMON STOCK
PRUDENTIAL JENNISON GROWTH STOCK
GLOBAL GLOBAL EQUITY
*THE TERM "INCOME" IN THESE PORTFOLIOS REFERS TO THE INCOME GENERATED BY THE
INTEREST OR DIVIDEND EARNINGS FROM THE PORTFOLIO'S INVESTMENTS. ALL EARNINGS
ARE AUTOMATICALLY REINVESTED IN YOUR CONTRACT AND ARE REFLECTED IN THE DAILY
UNIT VALUE; THEY ARE NOT AVAILABLE AS A SOURCE OF DIRECT INCOME FOR THE
CONTRACT OWNER.
IF YOU HAVE ANY QUESTIONS ABOUT THESE CHANGES OR ABOUT YOUR PRUDENTIAL
VARIABLE LIFE OR ANNUITY POLICY, PLEASE CONTACT YOUR PRUDENTIAL/PRUCO
SECURITIES REPRESENTATIVE.
ALL OF US AT PRUDENTIAL THANK YOU FOR YOUR BUSINESS AND LOOK FORWARD TO
HELPING YOU MAKE A PLAN FOR YOUR FUTURE FINANCIAL SECURITY.
/s/ E. Michael Caulfield /s/ Mendel Melzer
E. MICHAEL CAULFIELD MENDEL MELZER
PRESIDENT CHAIRMAN
IMPORTANT NOTE:
The rates of return quoted on the following pages reflect deduction of
investment management fees and investment-related expenses, but not product
charges. They reflect the reinvestment of dividend and capital gain
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 and administrative charges, applicable
sales charges, and the mortality and expense risk charge applicable under the
contract. These contract charges effectively reduce the dollar amount of any
net gains and increase the dollar amount of any net losses. Your
Prudential/Pruco Securities Representative can provide you with actual rates
of return for your type of variable life insurance or annuity contract, and
show you a personalized illustration of how insurance charges affect the
returns you experience.
1
<PAGE>
Market Review
U.S. STOCKS
UP, UP & AWAY.
U.S. stocks surged higher in the first half of 1996, powered by a growing
economy and record inflows of investments into stock mutual funds. Employment,
consumer spending and housing starts all surged in the first half of the year.
In fact, some economists predicted that economic growth in the second quarter
would be as high as 5% -- the highest since 1988's 5.2% gain in the fourth
quarter.
Small company stocks led the way, just as they did last year. These companies,
generally defined as those whose outstanding stock is valued at less than $1
billion, typically perform well late in the economic cycle -- about where we
are right now.
Some analysts were concerned that stocks continued to rise while bonds were
falling: higher interest rates should theoretically make bonds more attractive
than stocks. But investors shrugged off such warnings, bidding most stocks
higher during the last six months.
- -- COMMODITY-RELATED STOCKS performed the best. Gold hit $415 an ounce in
January for the first time in six years.
Crude oil for future delivery topped $24 a barrel in March, the highest since
the 1990 Gulf War, and gasoline hit $2 a gallon in California and New York by
May. World grain inventories hit a 48-year low in May. Companies that owned
stockpiles of these commodities profited nicely as prices rose.
- -- CONSUMER CYCLICAL STOCKS (companies that produce things that people buy
more of when the economy is good - like cars) advanced smartly when the
economy revived dramatically in the first quarter. Retailers rebounded after
fears of poor holiday sales proved unfounded, and airlines soared as price
cutting in that industry ended.
- -- TECHNOLOGY STOCKS tumbled, then rebounded, finishing the first half of
1996 up 14.5%. Semiconductor stocks had sunk amid fear of rising supply and
declining demand last year. But these shares rebounded this year on signs of
renewed economic growth.
- -- INDUSTRIAL STOCKS, including producers of heavy machinery and
transportation equipment, also surged, on hopes that the economic upturn
would endure.
U.S. BONDS
INTEREST RATES: BACK OVER 7%.
After one of the best years on record in 1995, bonds stumbled in 1996.
Economic reports showed new-found strength in the economy, and investors
feared that faster economic growth would lead to higher inflation. (Inflation
erodes the value of the fixed income that bonds pay.) Prices of the 30-year
U.S. Treasury bond fell enough so that yields rose dramatically, until they
reached 6.88% by June 30, 1996, up by nearly a full percentage point from
December 31, 1995.
What happened? When we last wrote to you in December, it seemed that the
economy might slide into recession. In the ensuing months, though, the
economy instead bounced back smartly. And then commodity prices skyrocketed,
so investors started to worry about inflation.
- -- Long-term U.S. Treasury bonds lost the most, with those maturing in more
than 20 years losing 7.6%, as measured by the 20+ Year Lehman Treasury Index.
- -- Higher yielding bonds fared much better. High yield corporates performed
the best, advancing 3.5%, according to the Lehman High Yield Index.
- -- Asset backed and mortgage backed securities performed better than U.S.
government bonds, but not as well as high yield corporate "junk bonds". The
higher coupons of these bonds offered some price protection as interest rates
rose.
GLOBAL STOCKS
TRAILING THE U.S.
Stock markets around the world performed well in the first half of 1996, but
continued to trail the U.S., just as they did in 1995. In the 1990s,
economies have been generally growing faster overseas (particularly in the
Pacific Rim countries) than in the U.S., helping corporate profits and stock
prices to rise faster there. But last year and again this year, the U.S. has
been a leader in economic growth. Rising corporate profits here have pushed
stock prices higher than in most other major industrialized countries around
the world.
- -----------------------------------------------------------------------------
TURNAROUND IN JAPAN.
- -----------------------------------------------------------------------------
- -- Japan: The Japanese economy grew by an astounding 13% in the first
quarter, the fastest since 1973, energized by the falling Japanese yen. The
recovery lifted Japanese stocks to their highest levels in four years. But
the strong U.S. dollar left U.S. investors in Japanese stocks just slightly
ahead, as the greenback hit a 28-month high against the yen in June. (A
strengthening dollar works against U.S. investors who sell foreign
investments, because the proceeds will buy less when exchanged back into
dollars.)
- -----------------------------------------------------------------------------
IN EUROPE, RATES FELL.
WILL THE ECONOMY NOW GROW?
- -----------------------------------------------------------------------------
- -- Europe: Europe's short-lived economic recovery ended last fall.
Unemployment in Europe is now twice that in the U.S., and several countries
teetered on the verge of recession this spring. Despite the gloomy economy,
however, stocks rose in Europe this spring as investors bet that interest
rate reductions would spur economic growth later in 1996.
2
<PAGE>
HOW THE MARKETS COMPARED (1)
/ / Return Over Past 12 Months
/ / Average Return Over Past 20 years
(Annualized)
Money -------- 5.0%
Market ------------- 7.7%
[GRAPH]
Bonds ------ 4.7%
- --------------------------- 9.7%
Global Stocks --------------------- 13.6%
- ------------------------------------------ 15.3%
U.S. Stocks ------------------------------------------------------26.0%
- ----------------------------------------- 14.2%
0 5 10 15 20 25%
THIS CHART COMPARES THE MOST RECENT 12-MONTH RETURN FOR VARIOUS CATEGORIES
OF INVESTMENTS WITH THE AVERAGE ANNUAL TOTAL RETURN OVER 20 YEARS FOR THE
SAME INVESTMENT. AS YOU CAN SEE, STOCK AND BOND MARKET RETURNS CAN VARY
CONSIDERABLY FROM YEAR TO YEAR. UNLIKE STOCKS, BONDS GENERALLY OFFER A FIXED
RATE OF RETURN AND PRINCIPAL IF HELD TO MATURITY. AN INVESTMENT'S PAST
PERFORMANCE SHOULD NEVER BE USED TO PREDICT FUTURE RESULTS. THERE ARE
DIFFERENT RISKS ASSOCIATED WITH EACH INVESTMENT SECTOR, WHICH SHOULD BE
CAREFULLY CONSIDERED BEFORE INVESTING.
Graph represents comparison of markets for 1 year total return and 20 year
average annual return for the period ending Jun 30, 1996. Investment Total
Returns for the one year ending June 30, 1996: U.S. Money Markets - 5.0%;
U.S. Bonds - 4.7%; Global Stocks - 13.6%; U.S. Stocks - 26.0%. Investment
total Returns for the twenty years ending June 30, 1996: U.S. Money Markets -
7.7%; U.S. Bonds - 9.7%; Global Stocks - 15.3%; U.S. Stocks -14.2%.
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO's total return for the first half of 1996 was
2.6%. (SOURCE: LIPPER ANALYTICAL SERVICES). The Portfolio's 7-day yield on
Tuesday, June 25th, stood at 5.04%, which was ahead of IBC Financial Data's
money market fund average of 4.78%, although down from the 5.52% we reported
to you on December 31, 1995. (SOURCE: PRUDENTIAL). Our performance was above
average because we adjusted our maturities in the right directions at the
right time to meet changing market conditions.
We emphasize a conservative, quality-oriented investment approach. Our team
of credit analysts helps us to select securities that offer high yields with
minimum risk. This allows us to keep the Portfolio's yield high while
protecting its $10 per share value. There can be no assurance, however, that
the Portfolio will always be able to maintain a share value of $10.
The Federal Reserve influences the nation's economy by raising or lowering
short-term interest rates, attempting to encourage steady economic growth
without inflation. Since this Portfolio seeks to mirror short-term interest
rates, our strategy is to anticipate Federal Reserve actions and invest
accordingly. We invest primarily in securities that mature in 13 months or
less, including U.S. Treasury bills and other securities issued or guaranteed
by the U.S. government or its agencies, certificates of deposit, commercial
paper (short-term corporate debt) and bankers' acceptances (loans guaranteed
by banks). An investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. government.
INCEPTION DATE: 5/1/83
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SHORT-TERM INTEREST RATES DURING THE PAST SIX MONTHS
== MONEY MARKET PORTFOLIO
-- AVERAGE MONEY MARKET FUND
5.6%
5.4%
5.2%
[GRAPH]
5.0%
4.8%
4.6%
- --------------------------------------------------------------------------------
Jan '96 Feb '96 Mar '96 Apr '96 May '96 Jun '96
Weekly 7-day current yields of Money Market Portfolio and the IBC Financial
Data, Inc. Money Fund Avg.
Graph represents short-term interest rates during the past six months by
comparing the weekly 7 day yields of the Money Market Portfolio and the IBC
Financial Data, Inc. Money Fund Average. Both curves mirror each other with the
Money Market Portfolio starting out at approximately 5.5% in January and
leveling off at about 5.0% in June. The Money Fund Average begins at about 5.3%
in January, and levels off at about 4.8% in June.
(1) SOURCE: PRUDENTIAL. FOR PURPOSES OF COMPARISON ONLY. U.S. MONEY MARKETS AS
MEASURED BY LIPPER MONEY MARKET AVERAGE. BONDS AS MEASURED BY THE LEHMAN
BROTHERS GOVERNMENT/CORPORATE AGGREGATE INDEX. GLOBAL STOCKS AS MEASURED BY
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX. U.S. STOCKS AS MEASURED
BY THE S&P 500 INDEX.
Q
&
A
[PHOTO]
PORTFOLIO MANAGER
MANOLITA BRASIL
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Q. WHERE ARE SHORT-TERM INTEREST RATES HEADED FOR THE REMAINDER OF THE YEAR?
A. Currently, we think short-term interest rates could be heading higher.
Housing, consumer spending, business investment and payroll growth have all
been more robust than we anticipated at the beginning of the year. Although
inflation has remained low, this surge in economic activity, if sustained,
would prompt the Federal Reserve to raise short-term interest rates in order
to preempt inflationary pressures.
Q. GIVEN THESE CONDITIONS, WHAT IS THE PORTFOLIO'S STRATEGY?
A. We are following a fairly neutral strategy until we see a clearer economic
trend and some signal on Federal Reserve policy. We are investing in
fixed-rate securities with maturities short enough to allow us to invest in
new, higher yielding securities should interest rates rise, but long enough
to provide attractive and competitive returns should interest rates remain
unchanged.
Q. HOW MIGHT A CONTRACT OWNER BEST USE THE MONEY MARKET PORTFOLIO?
A. Ideally, the Money Market Portfolio should be considered as a temporary,
short-term investment. The Portfolio may not be a suitable long-term choice,
because its returns will generally be lower than those of the others in the
Series Fund over time. A Contract Owner should always assess his or her own
risk tolerance, of course, before making any investment decisions.
3
<PAGE>
DIVERSIFIED BOND PORTFOLIO
(FORMERLY THE BOND PORTFOLIO)
The DIVERSIFIED BOND PORTFOLIO fell 1.5% in the first half of 1996 as
interest rates rose sharply. The Portfolio performed in line with the
average.
As its name implies, the Diversified Bond Portfolio can invest in a
broad mix of different types of bonds, including U.S. government securities,
mortgage backed securities, corporate bonds and foreign (mainly government)
securities. The Portfolio's manager, Barbara Kenworthy, is a value investor.
She looks for bonds that offer competitive yields and appear to be priced
lower than their inherent worth would suggest.
As interest rates rose in the first six months of the year, this Portfolio
lost less than the average bond fund, by following a two-pronged strategy.
First, we reduced duration, a measure of sensitivity to interest rates, to
5.3 years from 5.7 years. Second, we held substantial assets in Yankee (U.S.
dollar-denominated foreign) bonds, which offered higher yields than
U.S.Treasurys.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE DIVERSIFIED BOND PORTFOLIO VS. LIPPER (VIP)
CORP. BBB AVERAGE AND LEHMAN AGGREGATE INDEX OVER 10 YEARS.
$25,000
= = $22,720 LEHMAN AGGREGATE INDEX (3)
=== $22,444 DIVERSIFIED BOND PORTFOLIO (1)
--- $21,583 LIPPER (VIP) CORP. BBB AVG. (2)
20,000
15,000
[GRAPH]
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Diversified Bond
Portfolio compared with the Lehman Aggregate Index and the Lipper VIP Corporate
BBB Average. In the ten years ended June 30, 1996, an investment of $10,000
would have a value of $22,4444, $22,720, and $21,583 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Six One Three Five Ten
Mos. Year Rank Years Rank Years Rank Years Rank
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified Bond Portfolio(1) -1.5% 6.1% 5/33 5.7% 11/31 8.6% 9/25 8.4% 5/11
Lipper (VIP) Corp. BBB Avg.(2) -1.9 4.7 5.2 8.4 8.2
Lehman Aggregate Index(3) -1.2 5.0 5.3 8.3 8.6
</TABLE>
INCEPTION DATE: 5/1/83
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) Corporate BBB Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
(3) The Lehman Aggregate Index (LAI) is comprised of over 5,000 government
and corporate bonds. The LAI is an unmanaged index and includes the
reinvestment of all interest but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the LAI may differ substantially from the securities
in the Portfolio. The LAI is not the only index that may be used to
characterize performance of income funds, and other indices may portray
different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
BARBARA KENWORTHY
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
THE PORTFOLIO CHANGES
AS WE FIND OPPORTUNITIES.*
6/30/96
/ / Corporate 52%
/ / Foreign (US$) 19
/ / Treasury 16
/ / CASH 7
/ / Mortgage 4
/ / Agency 1
/ / Asset-Backed 1
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Corporate 56%
/ / Foreign (US$) 18
/ / Treasury 14
/ / CASH 2
/ / Mortgage 3
/ / Agency 6
/ / Asset-Backed 1
CORPORATE:
Bonds issued by major U.S. corporations.
FOREIGN:
Dollar-denominated bonds issued by foreign companies or governments.
TREASURY:
Backed by the full faith and credit of the U.S. government.
AGENCY:
Issued by U.S. government agencies, with implied U.S. government guarantee.
MORTGAGE:
Bonds backed by pools of home mortgages.
ASSET-BACKED:
Backed by pools of collateralized loan receivables, such as credit card and
auto loans.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
THE PORTFOLIO IS HIGH QUALITY.*
6/30/96 12/31/95
U.S. Gov't 17% 20%
AAA 6 5
AA 5 4
A 19 24
BBB 34 35
BB 11 11
B 1 0
CASH 7 1
*SOURCE: PRUDENTIAL
4
<PAGE>
GOVERNMENT INCOME PORTFOLIO
(FORMERLY THE GOVERNMENT SECURITIES PORTFOLIO)
The GOVERNMENT INCOME PORTFOLIO lost 2.4% for the six months ended June 30.
It trailed the average because it had a longer than average maturity as
interest rates rose.
The Portfolio invests in intermediate- and long-term
bonds issued by the U.S. government and its agencies, including mortgage
backed securities. (Neither the market value of U.S. government securities
nor the Portfolio's shares are guaranteed by the U.S. government.)
During the last six months, we shortened the duration of the fund to 4.4
years from 5.3 years. When interest rates are rising, the prices of bonds
with shorter maturities will generally fall less than comparably rated bonds
with longer maturities.
In addition, we also increased our holdings in mortgage backed securities.
Since these offered higher yields than U.S. Treasurys, they performed better
over the last six months as interest rates rose.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE GOVERNMENT INCOME PORTFOLIO VS. LIPPER (VIP)
U.S. GOVERNMENT AVERAGE AND LEHMAN GOVERNMENT INDEX SINCE INCEPTION.
$20,000
== == $18,056 Lehman Government Index1
18,000 ----- $17,745 Government Income Porfolio2
===== $17,280 Lipper (VIP) U.S. Gov't Avg.3
16,000
14,000 [GRAPH]
12,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Government Income
Portfolio compared with Lehman Government Index and the Lipper VIP U.S.
Government Average. In the seven years ended June 30, 1996, an investment of
$10,000 would have a value of $17,745, $18,056, and $17,280 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
Six One Three Five Since
Mos. Year Rank Years Rank Years Rank Inception*
Gov't Income Portfolio(1) -2.4% 4.1% 13/30 4.5% 9/21 8.4% 2/13 8.4%
Lipper (VIP) U.S. Gov't Avg.(2) -1.9 3.9 4.2 7.8 8.3
Lehman Gov't Index(3) -1.8 4.5 4.9 8.2 8.7
*INCEPTION DATE: 5/1/89
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first full calendar month of performance. Some U.S. government securities are
guaranteed as to timely payment of principal and interest. The underlying
securities in the Portfolio carry this guarantee, but not the Portfolio
itself. Mortgage backed securities entail additional prepayment and extension
risk.
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges.
(2) The Lipper Variable Insurance Products (VIP) U.S. Government Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
(3) The Lehman Government 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 and includes the reinvestment of all interest, but does not
reflect the payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the 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
indices may portray different comparative performance.
Q
&
A
[PHOTO]
PORTFOLIO MANAGER
BARBARA KENWORTHY
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Q. BARBARA, IT'S BEEN A DIFFICULT SIX MONTHS IN THE BOND MARKET. WHAT
HAPPENED?
A. Economic growth was a lot stronger than investors expected. Commodities
prices - especially gold - rose quite a bit, so investors started to worry
once again that inflation might be coming back.
Q. DOES THAT MEAN THAT INTEREST RATES COULD GO STILL HIGHER?
A. Inflation at the moment seems to be contained. But if economic activity
continues to intensify, the Federal Reserve may take a preemptive strike
against inflation by raising short-term interest rates.
Q. WHAT DO YOU WATCH FOR WHEN DETERMINING WHAT INTEREST RATES WILL DO?
A. I watch the number of new jobs created by the economy each month. There
were 348,000 new jobs created in May, clearly worrying investors. I also
monitor commodities prices closely. Although gold and oil prices rose earlier
this year, they fell by midyear, and that's good news for bond holders. The
U.S. dollar is also important, because so many buyers of our U.S. government
bonds are actually citizens of other countries. They like to see a strong
dollar.
Q. THIS IS AN ELECTION YEAR. HOW WILL THE ELECTION AFFECT THE MARKET?
A. In most election years, government spending goes up, so those who are
running for re-election can point to lots of new initiatives and get
re-elected. That really hasn't happened so far this year. In fact, the budget
deficit is falling.That's generally good news for bond prices. But it's early
yet.
5
<PAGE>
ZERO COUPON BOND PORTFOLIOS
(CURRENTLY NOT AVAILABLE IN ALL CONTRACTS)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE ZERO COUPON BOND 2000 PORTFOLIO VS. LEHMAN
GOVERNMENT INDEX AND LIPPER (VIP) TARGET MATURITY AVERAGE OVER TEN YEARS.
$30,000
=== $23,933 Lipper (VIP) Target Mat. Avg. (2)
25,000 --- $23,602 Zero Coupon 2000 Portfolio (1)
= = $21,857 Lehman Government Index (3)
20,000
[GRAPH]
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Zero Coupon Bond 2000
Portfolio compared with the Lehman Government Index and the Lipper VIP Target
Maturity Average. In the ten years ended June 30, 1996, an investment of
$10,000 would have a value of $23,602, $21,857, and $23,933 respectively.
VALUE OF $10,000 INVESTED IN THE ZERO COUPON BOND 2005 PORTFOLIO VS. LEHMAN
GOVERNMENT INDEX AND LIPPER (VIP) TARGET MATURITY AVERAGE SINCE INCEPTION.
$30,000
=== $20,277 Zero Coupon 2005 Portfolio(1)
25,000 --- $20,051 Lipper (VIP) Target Mat. Avg.(2)
= = $18,056 Lehman Government Index (3)
20,000
[GRAPH]
15,000
10,000
6/30/89 90 91 92 93 94 95 96
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Zero Coupon Bond 2005
Portfolio compared with the Lehman Government Index and the Lipper VIP Target
Maturity Average. In the seven years ended June 30, 1996, an investment of
$10,000 would have a value of $20,277, $18,056, and $20,051 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Six One Three Five Ten Since
Mos. Year Rank Years Rank Years Rank Years Rank Inception*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zero Coupon 2000 Port(1) -2.5% 3.7% 5/14 4.3% 7/10 10.3% 7/10 9.0% 1/1 9.5%
Lipper (VIP) Target Mat. Avg.(2) -4.5 3.5 4.8 11.2 9.0 9.5
Lehman Gov't Index(3) -1.8 4.5 4.9 8.2 8.1 8.4
Zero Coupon 2005 Port(1) -6.9 2.3 14/14 5.1 3/10 12.2 4/10 N/A 10.5
Lipper (VIP) Target Mat. Avg.(2) -4.5 3.5 4.8 11.2 N/A 10.6
Lehman Gov't Index(3) -1.8 4.5 4.9 8.2 N/A 8.7
</TABLE>
*INCEPTION DATE: 2/12/86 (2000 PORTFOLIO); 5/1/89 (2005 PORTFOLIO)
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first full calendar month of performance.
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges.
(2) The Lipper Variable Insurance Products (VIP) Target Maturity Average is
calculated by Lipper Analytical Services, Inc. and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
(3) The Lehman Government 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 and includes the reinvestment of all interest, but does not
reflect the payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the 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
indices may portray different comparative performance.
ZERO COUPON BOND PORTFOLIOS
Over the past six months, rising interest rates depressed bond prices. This
caused both of our Zero Coupon Bond Portfolios to lose some of their gains
from last year's bond rally. The portfolios' yields-to-maturity, however, are
higher than they were six months ago.
Zero coupon bonds (zeros) are issued at a deep discount to their face value.
When they mature at face value, the difference between the purchase price and
face value becomes the return to the investor. Zero coupon Treasury bonds do
not pay current income and have virtually no credit risk. Their prices purely
reflect changes in interest rates.
Zeros can be extremely volatile prior to maturity, rising and falling
dramatically with changing interest rates. Investors must hold these
securities until they mature in order to receive the face value and a
predictable rate of return.
ZERO COUPON BOND 2000 PORTFOLIO
The Zero Coupon Bond 2000 Portfolio fell 2.5% for the six-month period ended
June 30, 1996. This Portfolio currently has an average maturity of
approximately five years, maturing on November 15, 2000. With this
intermediate-term maturity, the Portfolio decreased in value as interest
rates rose.
ZERO COUPON BOND 2005 PORTFOLIO
For the six-month period ended June 30, 1996, the Zero Coupon Bond 2005
Portfolio fell by 6.9%. The Portfolio has an average maturity of
approximately 10 years. It matures on November 15, 2005. Its longer maturity
meant its value fell more significantly than that of the 2000 Portfolio,
losing some of its gains from last year.
Contract Owners investing in these Portfolios should be prepared for
Portfolio values to rise and fall prior to maturity.
6
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
(FORMERLY CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO)
The CONSERVATIVE BALANCED PORTFOLIO rose 5.0% in the six months ended June
30. The Portfolio performed slightly below the average.
Both the Conservative Balanced and the Flexible Managed Portfolios (see next
page) hold a combination of stocks, bonds and money market securities. The
Conservative Balanced Portfolio holds less in stocks - about 36% of assets,
which generally makes it less volatile and may also reduce returns when stock
prices are rising.
The sharp increase in interest rates this year has reduced the prices of
bonds and raised their yields, making them more attractive to buy. As a
result, we sold some of our stocks at a profit and purchased bonds, because
we believe they offer lower risk and higher potential rewards.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE CONSERVATIVE BALANCED PORTFOLIO VS. LIPPER
(VIP) FLEX. AVERAGE, S&P 500 AND LEHMAN AGGREGATE INDEX OVER TEN YEARS.
$45,000
40,000 $36,477 S&P 5003
=== $26,795 Lipper (VIP) Flex. Avg.2
35,000
--- $24,318 Conservative Balanced Portfolio1
30,000 = = $22,720 Lehman Aggregate Index4
25,000
20,000
[GRAPH]
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Conservative Balanced
Portfolio compared with the S&P 500, Lipper VIP Flexible Average, and the Lehman
Aggregate Index. In the ten years ended June 30, 1996, an investment of $10,000
would have a value of $24,318, $36,477, $26,795, $22,720 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
Six One Three Five Ten
Mos. Year Rank Years Rank Years Rank Years Rank
Conservative Balanced 5.0% 12.2% 54/67 8.3% 50/56 10.0% 45/51 9.3% 13/15
Lipper (VIP) Flex. Avg.(2) 5.4 15.2 10.6 12.0 10.4
S&P 500(3) 10.1 26.0 17.2 15.7 13.8
Lehman Aggregate Index(4) -1.2 5.0 5.3 8.3 8.6
INCEPTION DATE: 5/1/83
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) Flex Average is calculated by
Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
(3) The S&P 500 is a capital-weighted index, representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
(4) The Lehman Aggregate Index (LAI) is comprised of approximately 5,000
government and corporate bonds. The LAI is an unmanaged index and includes
the reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LAI may differ substantially from
the securities in the Portfolio. The LAI is not the only index that may be
used to characterize performance of income funds, and other indices may
portray different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
MARK STUMPP
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
[PIE CHART]
/ / Bonds 45%
/ / Large Co. Stocks 36
/ / Money Market 19
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
[PIE CHART]
/ / Bonds 35%
/ / Large Co. Stocks 40
/ / Money Market 25
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FIVE LARGEST INDUSTRIES - STOCKS.*
6/30/96
Insurance 3.0%
Oil Services 3.0
Misc. Industrial 2.9
Retail 2.4
Autos/Trucks 2.4
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FIVE LARGEST SECTORS - BONDS.*
6/30/96
Financial 13.9%
Industrial 10.6
U.S. Treasury 9.9
Foreign ($ Denominated) 8.8
Agency 0.4
*SOURCE: PRUDENTIAL
7
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
(FORMERLY AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO)
The FLEXIBLE MANAGED PORTFOLIO appreciated 5.1% during the six months ending
June 30. The Portfolio performed slightly below the average.
Both the Flexible Managed and the Conservative Balanced Portfolios hold a
combination of stocks, bonds and money market securities. They differ in the
proportion of assets held in each portfolio, with the Flexible Managed
Portfolio holding more in stocks - about 60% of assets, which makes it
generally more volatile but raises the possibility of higher returns when
stock prices are rising.
The sharp increase in interest rates this year has reduced the prices of
bonds and raised their yields, making them more attractive to buy. As a
result, we sold some of our stocks at a profit and purchased bonds, because
we believe they offer lower risk and higher potential rewards.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE FLEXIBLE MANAGED PORTFOLIO VS. LIPPER (VIP)
FLEX. AVERAGE, S&P 500, AND LEHMAN AGGREGATE INDEX OVER TEN YEARS.
$45,000
40,000 $36,477 S&P 500(3)
=== $26,795 Lipper (VIP) Flex. Avg.(2)
35,000
--- $24,318 Flexible Managed Portfolio(1)
30,000 = = $22,720 Lehman Aggregate Index(4)
25,000
20,000
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Flexible Managed
Portfolio compared with the S&P 500, Lipper VIP Flexible Average, and the Lehman
Aggregate Index. In the ten years ended June 30, 1996, an investment of $10,000
would have a value of $26,734, $36,477, $26,795, and $22,720 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
Six One Three Five Ten
Mos. Year Rank Years Rank Years Rank Years Rank
Flexible Managed 5.1% 16.3% 22/67 10.3% 31/56 12.6% 15/51 10.3% 7/15
Lipper (VIP) Flex. Avg.(2) 5.4 15.2 10.6 12.0 10.4
S&P 500(3) 10.1 26.0 17.2 15.7 13.8
Lehman Aggregate Index(4) -1.2 5.0 5.3 8.3 8.6
INCEPTION DATE: 5/1/83
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) Flex Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
(3) The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
(4) The Lehman Aggregate Index (LAI) is comprised of approximately 5,000
government and corporate bonds. The LAI is an unmanaged index and includes
the reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the LAI may differ substantially from
the securities in the Portfolio. The LAI is not the only index that may be
used to characterize performance of income funds, and other indices may
portray different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
MARK STUMPP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
[PIE CHART]
/ / Large Co. Stocks 60%
/ / Bonds 36
/ / Money Market 3
/ / Small Co. Stocks 1
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
[PIE CHART]
/ / Large Co. Stocks 62%
/ / Bonds 28
/ / Money Market 3
/ / Small Co. Stocks 7
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FIVE LARGEST INDUSTRIES - STOCKS.*
6/30/96
Drug & Medical Supplies 7.1%
Misc. Industrial 4.9
Computer Software 4.2
Insurance 2.6
Computer Hardware 2.5
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FIVE LARGEST SECTORS - BONDS.*
6/30/96
Industrial 10.1%
Financial 9.2
Foreign ($ Denominated) 7.7
U.S. Treasury 5.7
Asset-Backed 0.5
*SOURCE: PRUDENTIAL
8
<PAGE>
HIGH YIELD BOND PORTFOLIO
The HIGH YIELD BOND PORTFOLIO rose 4.8% in total return in the six months
ended June 30. Our large investment in telecommunications bonds helped us
perform better than the average portfolio.
This Portfolio invests in a diversified portfolio of non-investment grade, or
"junk bonds" rated BB or below. These bonds pay higher yields to compensate
investors for assuming more risk than they would with better quality bonds.
The default rate of high yield bonds rose gradually last year, meaning that
fewer companies were able to make their interest payments. Although the
default rate declined slightly this spring, we expect it will rise soon
again, once today's higher interest rates begin to affect companies.
We continued our strategy of focusing on bonds from larger companies within
the junk bond market, because we believe they are generally less susceptible
to default. We also focused on telecommunications bonds - for example
telephone and cable companies - which did well because of strong industry
growth and corporate mergers.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE HIGH YIELD BOND PORTFOLIO VS. LIPPER (VIP)
HIGH YIELD AVERAGE AND LEHMAN HIGH YIELD INDEX SINCE INCEPTION.
$28,000
24,000 = = $24,489 Lehman High Yield Index(3)
--- $24,018 Lipper (VIP) High Yield Avg.(2)
20,000 === $21,609 HIgh Yield Bond Portfolio(1)
16,000
12,000 [GRAPH]
8,000
6/30/ 87 88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the High Yield Bond Portfolio
compared with the Lehman High Yield Index and the Lipper VIP High Yield Average.
In the nine years ended June 30, 1996, an investment of $10,000 would have a
value of $21,609, $24,489, and $24,018 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
Six One Three Five Since
Mos. Year Rank Years Rank Years Rank Inception
High Yield Bond
Portfolio(1) 4.8% 12.5% 11/40 8.6% 13/28 13.2% 11/26 8.6%
Lipper (VIP) High Yield
Avg.(2) 4.6 11.9 8.5 13.0 10.0
Lehman High Yield
Index(3) 3.5 9.7 8.9 13.3 10.1
*INCEPTION DATE: 2/23/87
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first full calendar month of performance.
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
(2) The Lipper Variable Insurance Products (VIP) High Yield Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
(3) The Lehman High Yield Index (LHYI) is comprised of over 700 noninvestment
grade bonds. The LHYI is an unmanaged index and includes the reinvestment of
all interest but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Portfolio. The securities
that comprise the LHYI may differ substantially from the securities in the
Portfolio. The LHYI is not the only index that may be used to characterize
performance of income funds, and other indices may portray different
comparative performance.
DATA
BANK
[PHOTO]
LARS BERKMAN
[PHOTO]
MIKE SNYDER
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE PORTFOLIO'S AVERAGE QUALITY IS BELOW INVESTMENT GRADE.*
6/30/96
/ / BBB 0%
/ / BB 13
/ / B 61
/ / CCC or below 6
/ / Non-Rated 10
/ / CASH/Other 10
WHAT WAS IT 6 MONTHS AGO?*
12/31/95
[PIE CHART]
/ / BBB 0%
/ / BB 16
/ / B 59
/ / CCC or below 7
/ / Non-Rated 13
/ / CASH/Other 5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FIVE LARGEST INDUSTRIES.*
6/30/96
Cable 20.0%
Telecommunications 19.4
Gaming 9.7
Energy 5.8
Supermarkets 3.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FIVE LARGEST ISSUERS.*
6/30/96
Cablevision Systems 2.4%
Continental Cablevision 2.2
Comcast Cable 2.2
Foamex International 2.1
EchoStar 2.1
*SOURCE: PRUDENTIAL
9
<PAGE>
STOCK INDEX PORTFOLIO
The STOCK INDEX PORTFOLIO gained 10.0% in the first six months of the year,
in line with the 10.1% gain of the S&P 500, the unmanaged stock market index
this Portfolio is designed to track. (Source: Prudential). This Portfolio
holds all 500 stocks included in the S&P 500 Index and attempts to duplicate
its performance. Portfolio Manager John Moschberger manages the Portfolio by
investing funds received daily while trying to minimize commissions and
transaction costs.
The S&P 500 continued to set new records in the first six months of 1996,
following record- breaking performance last year. Although enjoyable while
they last, they aren't the kind of returns that we think investors should
come to expect. The long-term historical average annual returns of the S&P
500 are approximately 10.5%. (SOURCE: PRUDENTIAL).
Among the leading sectors in the S&P 500 in the first half of the year were
consumer cyclical stocks (those whose prices rise with economic growth, such
as autos), technology and industrial stocks.
STANDARD & POOR'S NEITHER SPONSORS NOR ENDORSES THE STOCK INDEX PORTFOLIO.
INVESTORS CANNOT DIRECTLY INVEST IN THE S&P 500 INDEX.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE STOCK INDEX PORTFOLIO VS. S&P 500 AND LIPPER
(VIP) S&P 500 INDEX AVERAGE SINCE INCEPTION.
$36,000
32,000 $34,843 S&P 500(3)
--- $33,383 Stock Index Portfolio(1)
28,000 === $33,270 Lipper (VIP) S&P 500 Index Avg.(2)
24,000
20,000
16,000 [GRAPH]
12,000
8,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Stock Index Portfolio
compared with the S&P 500 and the Lipper VIP S&P 500 Index Average. In the nine
years ended June 30, 1996, an investment of $10,000 would have a value of
$33,383, $34,843, and $33,270 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
Six One Three Five Since
Mos. Year Rank Years Inception
Stock Index Portfolio(1) 10.0% 25.6% 16.8% 15.3% 14.9%
Lipper (VIP) S&P 500
Index Avg.(2) 9.9 25.5 16.7 15.2 14.9
S&P 500(3) 10.1 26.0 17.2 15.7 15.5
*INCEPTION DATE: 10/19/87
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first full calendar month of performance.
(1) Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges.
(2) The Lipper Variable Insurance Products (VIP) S&P 500 Index Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
(3) The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
S&P 500 is not the only index that may be used to characterize performance of
this Portfolio, and other indices may portray different comparative
performance.
DATA
BANK
[PHOTO]
Portfolio Manager
John Moschberger
- --------------------------------------------------------------------------------
THE S&P 500: WHAT'S IN IT?*
6/30/96
/ / Consumer Growth 30%
/ / Industrial 16
/ / Financial 13 [PIECHART]
/ / Utility 12
/ / Technology 12
/ / Energy 9
/ / Consumer Cyclical 8
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Consumer Growth 28%
/ / Industrial 17
/ / Financial 12 [PIECHART]
/ / Utility 13
/ / Technology 12
/ / Energy 10
/ / Consumer Cyclical 8
- --------------------------------------------------------------------------------
S&P 500 - TOTAL RETURNS BY SECTOR.*
YTD
6/30/96 1995 1994
Consumer Cyclical 16.3% 13.3% -12.2%
Technology 14.5 42.7 20.4
Industrial 11.7 30.2 -0.7
Consumer Growth 10.7 42.9 7.5
Energy 10.5 30.9 3.9
Financial 10.3 53.5 -3.2
Utility 0.4 38.9 -7.6
S&P 500 10.1 37.6% 10.1%
*SOURCE: PRUDENTIAL
10
<PAGE>
- --------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
(FORMERLY THE HIGH DIVIDEND STOCK PORTFOLIO)
The EQUITY INCOME PORTFOLIO rose 7.1% for the six months ended June 30,
performing below the average portfolio because of our technology holdings,
which lost ground in June.
This Portfolio invests primarily in common stocks that tend to pay
higher-than-average dividends. These are theoretically less volatile than
other stocks because their dividend payments often help cushion price losses
in the underlying stocks themselves.
We've also found some dividend-paying stocks in cyclical industries (those
whose profits rise and fall with economic growth). These are both industrial
and consumer-oriented companies: paper, chemicals and steel companies, as
well as auto and retail stocks.
Typically, investors buy cyclical stocks because they are counting on an
economic rebound. Late last year, the prices of cyclical stocks fell to
near-recession levels as the economy slowed. We didn't think a recession was
likely, so we bought them. As long as there wasn't a significant economic
downturn, we expected to do well, and we were right. These stocks did quite
well in the first six months of this year. Q&A
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE EQUITY INCOME PORTFOLIO VS. S&P 500 AND LIPPER
(VIP) EQUITY INCOME AVERAGE SINCE INCEPTION.
$35,000
30,000 $32,358 S&P 5003
------ $29,215 Equity Income Portfolio1
25,000 ====== $27,451 Lipper (VIP) Equity Income Avg.2
20,000 [GRAPH]
15,000
10,000
6/30/ 87 88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Equity Income Portfolio
compared with the S&P 500 and the Lipper VIP Equity Income Average. In the
eight years ended June 30, 1996, an investment of $10,000 would have a value of
$29,215, $32,358, and $27,451 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Six One Three Five Since
Mos. Year Rank Years Rank Years Rank Inception*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income Portfolio1 7.1% 14.2% 18/18 11.8% 7/7 14.8% 3/5 13.7%
Lipper (VIP) Equity Income Avg.2 7.8 23.4 14.4 15.3 13.3
S&P 5003 10.1 26.0 17.2 15.7 15.1
*INCEPTION DATE: 2/19/88
</TABLE>
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first calendar month of performance.
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
2 The Lipper Variable Insurance Products (VIP) Equity Income Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity product.
These returns are net of investment fees and fund expenses but not product
charges.
3 The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
Q
&
A
[PHOTO]
Portfolio Manager
Warren Spitz
- --------------------------------------------------------------------------------
Q. WARREN, WHY DO YOU HOLD SO MUCH OF THE PORTOLIO'S ASSETS IN FINANCIAL STOCKS?
A. Actually, I'm holding a lot of REITs (14% of net assets on June 30). They
are Real Estate Investment Trusts, professionally managed investment
companies that own income-producing real estate such as apartments, shopping
malls and commercial office space. These are publicly-traded companies, and
many are listed on the New York Stock Exchange. A REIT offers the same
advantages as other real estate investments, such as income and potential
price appreciation, but also offers increased liquidity.
- --------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / Financial 28%
/ / Industrial 28
/ / Technology 13
/ / Energy 9 [PIECHART]
/ / Consumer Cyclicals 9
/ / Consumer Growth 5
/ / CASH 4
/ / Utility 4
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Financial 27%
/ / Industrial 26
/ / Technology 15
/ / Energy 8 [PIECHART]
/ / Consumer Cyclicals 6
/ / Consumer Growth 8
/ / CASH 6
/ / Utility 4
- --------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
IBM 3.9%
ELF Aquitaine ADR 3.6
Lehman Brothers 3.6
Equity Residential 3.2
Chrysler 3.2
*SOURCE: PRUDENTIAL
11
<PAGE>
- --------------------------------------------------------------------------------
Equity Portfolio
- --------------------------------------------------------------------------------
(FORMERLY THE COMMON STOCK PORTFOLIO)
The EQUITY PORTFOLIO rose 7.3% over the six months ended June 30. It trailed
the average because of its high concentration of cash.
This Portfolio is managed with a value investment style: we look for
inexpensive stocks. With the stock market setting new all time highs in the
last six months, we didn't find many stocks that fit our "inexpensive"
criteria. As a result, we defensively held about 30% of assets in cash as of
June 30, the highest the Portfolio has had in six years - and we did not
perform as well as the average portfolio, because we held so much cash. While
we'd prefer not to have so much of the Portfolio in cash, we are reluctant to
compromise on our strategy. We don't want to buy a stock for more than we
think it's worth.
Our largest investment in the first half of this year was in financial
services stocks, where we primarily owned stocks of banks, insurance
companies, credit card companies and stock brokerages. Rising interest rates
have not helped these stocks, but we expect they'll improve later this year.
We also had substantial assets in retail stocks, which helped the Portfolio's
performance significantly this year. This year, we began acquiring paper and
forest products stocks, because they were good bargains.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE EQUITY PORTFOLIO VS. S&P 500 AND LIPPER
(VIP) GROWTH AVERAGE OVER TEN YEARS.
$45,000
40,000 $36,477 S&P 5003
----- $36,002 Equity Portfolio1
35,000 ===== $33,967 Lipper (VIP) Growth Avg.2
30,000
25,000 [GRAPH]
20,000
15,000
10,000
6/30/86 87 88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Equity Portfolio compared
with the S&P 500 and the Lipper VIP Growth Average. In the ten years ended June
30, 1996, an investment of $10,000 would have a value of $36,002, $36,477, and
$33,967 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Six One Three Five Ten
Mos. Year Rank Years Rank Years Rank Years Rank
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Portfolio1 7.3% 20.9% 61/98 16.1% 31/65 16.1% 21/45 13.7% 7/27
Lipper (VIP) Growth Avg.2 10.6 24.0 15.9 15.6 12.6
S&P 5003 10.1 26.0 17.2 15.7 13.8
Inception date: 5/1/83
</TABLE>
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
2 The Lipper Variable Insurance Products (VIP) Growth Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
3 The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
Q
&
A
[PHOTO]
Portfolio Manager
Tom Jackson
- --------------------------------------------------------------------------------
Q. TOM, WHY ARE YOU HOLDING SO MUCH CASH?
A. I'm a value investor. I buy stocks that are very cheap compared to other
stocks in the market. Right now I just can't find very many. I had a lot of
cash both in 1990 and 1994. In the first instance, thanks to the market, I
had opportunities to put it to work in the fall of 1990. In 1994 I also had a
lot of cash, and that's when I bought the financial stocks that now are the
largest segment of the portfolio.
- --------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / CASH 30%
/ / Financial 23
/ / Industrial 13
/ / Consumer Cyclical 12 [CHART]
/ / Consumer Growth 8
/ / Technology 6
/ / Energy 5
/ / Utility 3
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / CASH 20%
/ / Financial 25
/ / Industrial 10
/ / Consumer Cyclical 12 [CHART]
/ / Consumer Growth 14
/ / Technology 9
/ / Energy 6
/ / Utility 4
- --------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
Chrysler 2.9%
Digital Equipment 2.6
Loews 2.2
American Express 2.2
Dean Witter Discover 2.1
*SOURCE: PRUDENTIAL
12
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO
- --------------------------------------------------------------------------------
(FORMERLY THE GROWTH STOCK PORTFOLIO)
The PRUDENTIAL JENNISON PORTFOLIO rose 7.5% during the six months ended June
30. It trailed the average because of its large investment in technology
stocks, which fell in June.
The Portfolio invests primarily in stocks of established companies with
above-average growth prospects, often because they enjoy a unique market
niche, a promising new product and/or superior management.
Our basic strategy is to buy stocks of companies that grow their sales and
earnings faster than average. In the first half, the Portfolio's largest area
of investment was in technology, including manufacturers of personal
computers, cellular telephones and semiconductors, totaling 26% of assets on
June 30, 1996. Technology stocks have been volatile this year. Although they
were the second best performing sector, they fell sharply in June when
supplies of semiconductors rose but demand fell.
We also seized opportunities in rapidly growing industries that serve an
aging population: pharmaceuticals and health care. Among drug manufacturers,
we bought companies that had recently consolidated or restructured their
businesses, enabling them to once again focus on new products. We also liked
managed care companies that are benefiting from the trend of corporations
seeking greater control over their employee medical expenses.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE PRUDENTIAL JENNISON PORTFOLIO VS. S&P 500
AND LIPPER (VIP) CAPITAL APPRECIATION AVERAGE SINCE INCEPTION.
$14,000
13,000 ----- $13,295 Lipper (VIP) Capital Appreciation Avg.2
===== $12,959 Prudential Jennison Portfolio1
12,000 $12,893 S&P 5003
11,000
[GRAPH]
10,000
6/30/95 6/30/96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Prudential Jennison
Portfolio compared with the Lipper VIP Capital Appreciation Average and the S&P
500. Since inception of 5/1/95 and through June 30, 1996, an investment of
$10,000 would have a value of $12,959, $13,295, and $12,893 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
SIX ONE SINCE
MOS. YEAR RANK INCEPTION*
Prudential Jennison Portfolio1 7.5% 19.7% 34/40 27.0%
Lipper (VIP) Capital Appreciation Avg.2 11.0 26.5 30.7
S&P 5003 10.1 26.0 26.4
*INCEPTION DATE: 5/1/95
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first calendar month of performance.
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change.
2 The Lipper Variable Insurance Products (VIP) Capital Appreciation Average
is calculated by Lipper Analytical Services, Inc., and reflects the
investment return of certain portfolios underlying variable life and annuity
products. These returns are net of investment fees and fund expenses but not
product charges.
3 The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
DAVID POIESZ
- --------------------------------------------------------------------------------
Q. WHAT'S HAPPENING WITH TECHNOLOGY STOCKS?
A. Technology stocks fell in late 1995, then rose earlier this year, only to
fall again in June. Although they are volatile from month-to-month, we remain
convinced that technology stocks present unparalleled long-term growth
opportunity. Personal computer, cellular telephone and semiconductor stocks
have done well for us.
- --------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / Technology 26%
/ / Consumer Staples 22
/ / Int. Gds & Svcs. 19
/ / Health Care 16 [PIECHART]
/ / Financial Services 6
/ / Capital Spending 5
/ / CASH 4
/ / Energy 2
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Technology 37%
/ / Consumer Staples 18
/ / Int. Gds & Svcs. 11
/ / Health Care 16 [PIECHART]
/ / Financial Services 7
/ / Capital Spending 4
/ / CASH 6
/ / Energy 1
- --------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
Boeing 3.0%
Hewlett Packard 2.8
Cisco Systems 2.8
Intel 2.5
Tellabs 2.2
*SOURCE: JENNISON ASSOCIATES.
13
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION STOCK PORTFOLIO
- --------------------------------------------------------------------------------
The SMALL CAPITALIZATION PORTFOLIO climbed 10.2% during the six months ended
June 30, in line with the 11.3% gain of the S&P 600 SmallCap Index, the
unmanaged stock market index this Portfolio is designed to track. (Source:
Prudential).
The Portfolio holds all 600 stocks included in the S&P 600 SmallCap Index and
attempts to duplicate its performance. These are stocks of small companies
with market values generally less than $1 billion. The stocks in which the
Portfolio invests are more volatile than the shares of larger, more
established companies. Portfolio Manager Wai Chiang manages the Portfolio by
investing funds received daily while trying to minimize commissions and
transaction costs.
The S&P 600 SmallCap Index continued to set new records in the first six
months of 1996, following record-breaking performance last year. Although
enjoyable while they last, these aren't the kind of returns that we think
investors should come to expect. Historically, the long-term average annual
return of small capitalization stock is 12%, as measured by Ibbotson
Associates.
Among the leading sectors in the S&P 600 SmallCap Index in the first half of
the year were transportation, consumer non-durables (such as clothing) and
energy.
STANDARD & POOR'S NEITHER SPONSORS NOR ENDORSES THE SMALL CAPITALIZATION
STOCK PORTFOLIO. INVESTORS CANNOT DIRECTLY INVEST IN THE S&P 600 SMALLCAP
INDEX.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE SMALL CAPITALIZATION STOCK PORTFOLIO VS.
S&P 600 SMALLCAP INDEX SINCE INCEPTION.
$14,000
13,000 $13,303 S&P 600 SmallCap Index2
----- $12,998 Small Capitalization Stock Portfolio1
12,000
11,000 [GRAPH]
10,000
6/30/95 6/30/96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Small Capitalization
Stock Portfolio compared with the S&P 600 SmallCap Index. Since inception of
5/1/95 and through June 30, 1996, an investment of $10,000 would have a value of
$12,998, and $13,303 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
SIX ONE SINCE
MOS. YEAR INCEPTION*
Small Capitalization Stock Portfolio1 10.2% 23.8% 27.4%
S&P 600 SmallCap Index2 11.3 26.2 33.0
*INCEPTION DATE: 5/1/95
* Lipper provides data on a monthly basis, so for comparative purposes, the
S&P 600 SmallCap Index since inception returns reflect the Portfolio's first
calendar month of performance.
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges.
2 The S&P 600 SmallCap Index is a capital-weighted index representing the
aggregate market value of the common equity of 600 small company stocks. The
S&P 600 SmallCap Index is an unmanaged index and includes the reinvestment of
all dividends but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Portfolio. The S&P 600
SmallCap Index is not the only index that may be used to characterize
performance of this Portfolio, and other indices may portray different
comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
WAI CHIANG
- --------------------------------------------------------------------------------
THE S&P 600 SMALLCAP INDEX
WHAT'S IN IT?*
6/30/96
/ / Materials
and Service 21%
/ / Consumer
Non-Durables 20
/ / Technology 19
/ / Financial 16 [PIECHART]
/ / Energy 6
/ / Capital Goods 5
/ / Consumer
Durables 5
/ / Utilities 5
/ / Transportation 3
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Materials
and Service 23%
/ / Consumer
Non-Durables 18
/ / Technology 20
/ / Financial 17 [PIECHART]
/ / Energy 6
/ / Capital Goods 5
/ / Consumer
Durables 5
/ / Utilities 4
/ / Transportation 2
- --------------------------------------------------------------------------------
S&P 600 SMALLCAP INDEX -
TOTAL RETURNS BY SECTOR.*
YTD
6/30/96
Energy 21.2%
Transportation 17.6
Consumer Non-Durables 17.4
Materials and Service 14.4
Consumer Durables 11.5
Financial 7.8
Capital Goods 5.7
Utilities 5.2
Technology 4.5
*SOURCE: WILSHIRE ASSOCIATES.
14
<PAGE>
- --------------------------------------------------------------------------------
GLOBAL PORTFOLIO
- --------------------------------------------------------------------------------
(FORMERLY THE GLOBAL EQUITY PORTFOLIO)
The GLOBAL PORTFOLIO rose 10.3%, during the six months ended June 30. Our
performance was below average because of generally poor performance of some
of our Pacific Basin stocks.
This Portfolio invests primarily in stocks of foreign and U.S. corporations
(see table at lower right for current allocations). Our performance during
the past six months stemmed from two strategic decisions:
First, we decided to invest heavily in European stocks - our largest region
at 25% of total net assets on 6/30/96. These stocks performed quite well in
the first half of 1996;
Second, we held fewer assets in Japan (17% of total net assets on 6/30/96),
where a strong U.S. dollar consumed virtually all profits that U.S.- based
investors would have made there. That was a wise decision.
We held 14% in the Pacific Basin, excluding Japan. We remain optimistic that
our Pacific Basin stocks will do well in the second half of the year, because
of the region's strong economic growth. Some stock markets there (Singapore
and Hong Kong, especially) were among the best performers in the world during
the first half of the year.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE GLOBAL PORTFOLIO VS. MORGAN STANLEY INDEX
AND LIPPER (VIP) GLOBAL AVERAGE SINCE INCEPTION.
$25,000
----- $23,164 Lipper (VIP) Global Avg.2
== == $20,930 Morgan Stanley Index3
20,000 ===== $20,859 Global Portfolio1
15,000
[GRAPH]
10,000
6/30/88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Global Portfolio compared
with the Lipper VIP global Average and the Morgan Stanley Index. In the seven
year ended June 30, 1996, an investment of $10,000 would have a value of
$20,859, $23,164, and $20,930 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
SIX ONE THREE FIVE SINCE
MOS. YEAR RANK YEARS RANK YEARS RANK INCEPTION*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Portfolio1 10.3% 16.7% 23/35 15.2% 5/21 12.4% 7/13 10.0%
Lipper (VIP) Global Avg.2 11.3 21.5 13.0 12.2 10.8
Morgan Stanley Index3 7.3 19.0 13.6 12.5 10.0
*INCEPTION DATE: 9/19/88
</TABLE>
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first calendar month of performance.
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. Foreign investments are subject to the risks of currency fluctuation
and the impact of social, political and economic change.
2 The Lipper Variable Insurance Products (VIP) Global Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product charges.
3 The Morgan Stanley Index is a weighted index comprised of approximately
1500 companies listed on the stock exchanges of the U.S.A., Europe, Canada,
Australia, New Zealand and the Far East. The combined market capitalization
of these companies represents approximately 60% of the aggregate market value
of the stock exchanges in the countries comprising the World Index. The World
Index is an unmanaged index and includes the reinvestment of all dividends
but does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Portfolio. The securities that comprise
the World Index may differ substantially from the securities in the
Portfolio. The World Index is not the only index that may be used to
characterize performance of global funds, and other indices may portray
different comparative performance.
Q
&
A
[PHOTO]
PORTFOLIO MANAGER
DAN DUANE
- --------------------------------------------------------------------------------
DAN, YOUR PORTFOLIO PERFORMED BETTER THAN MANY U.S. STOCK PORTFOLIOS THIS
YEAR. WHY?
A. I'm a growth-oriented investor - I look for consistent earnings growth.
I'm especially interested in stocks that should benefit as the economy
improves. Since the U.S. led world economic growth, we had 20% of our assets
there, mainly in technology stocks, which rose nicely. Plus, as interest
rates fell in Europe this spring, the Portfolio's stocks there advanced
smartly.
Q. WHAT'S HAPPENING IN EUROPE?
A. I'm seeing surprisingly strong earnings from European companies, some as a
result of corporate restructuring. And unlike the U.S., interest rates were
falling in Europe in the first half of 1996, creating a hospitable
environment for stocks.
Q. WHAT DO YOU LIKE NOW?
A. The U.S. economy and the U.S. stock market have been strong this year. But
in the next year or two, economic growth should increase faster outside the
U.S. Asian stocks could do well. I expect very fast economic growth there, as
the Japanese economy recovers further and China lowers its trade barriers.
- --------------------------------------------------------------------------------
INVESTMENTS BY COUNTRY.*
6/30/96 12/31/95
Continental Europe 25% 23%
United States 20 21
Japan 17 17
Pacific Basin 14 17
United Kingdom 10 10
CASH 6 6
Australia 5 5
Mexico 2 1
Argentina 1 0
- --------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
Microsoft Corp. 2.0%
Sony Corp. 1.9
Carrefour Supermarch 1.9
GKN PLC Guest Keen 1.9
Oracle Corp. 1.9
* SOURCE: PRUDENTIAL
15
<PAGE>
- --------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO
- --------------------------------------------------------------------------------
The NATURAL RESOURCES PORTFOLIO gained 19.4% for the six months ended June
30. The Portfolio performed much better than its peers, because of good
investments in fertilizer and oil service industry stocks.
The Natural Resources Portfolio primarily invests in companies that own,
process or provide goods and services in natural resources such as precious
and base metals, oil, natural gas and forest products.
Why is this Portfolio - and many natural resources portfolios - doing so
well? It's beginning to look like the 15-year-long bear market in natural
resources is finally coming to an end. In the past six months, gold hit $415
an ounce, grain prices skyrocketed, and oil and gasoline prices soared. What
happened? World demand for commodities has been increasing steadily. That's
especially true in places where economic growth has been strong and the
standard of living is rising.
The Portfolio's single largest investment is in energy stocks, at 52% of
total assets. We expect that worldwide demand for energy will continue to
grow faster than supply. Although oil prices have fallen this spring, we
expect them to rebound later in the year. The Portfolio is also focusing on
precious metals (19% of total assets). Gold prices have weakened lately, but
we believe this is only temporary.
- --------------------------------------------------------------------------------
VALUE OF $10,000 INVESTED IN THE NATURAL RESOURCES PORTFOLIO VS. S&P 500 AND
LIPPER (VIP) NATURAL RESOURCES AVERAGE SINCE INCEPTION.
$34,000
$32,721 S&P 5003
30,000 ----- $29,050 Natural Resources Portfolio1
===== $17,688 Lipper (VIP) Nat. Res. Avg.2
26,000
22,000
18,000 [GRAPH]
14,000
10,000
6/30/88 89 90 91 92 93 94 95 96
- --------------------------------------------------------------------------------
Graph represents the growth of $10,000 invested in the Natural Resources
Portfolio compared with the S&P 500 and the Lipper VIP Natural Resources
Average. In the eight years ended June 30, 1996, an investment of $10,000 would
have a value of $29,050, $32,721, and $17,68 respectively.
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Six One Three Five Since
Mos. Year Rank Years Rank Years Rank Inception*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Natural Resources Portfolio1 19.4% 30.7% 2/10 14.3% 2/9 14.9% 1/8 14.1%
Lipper (VIP) Nat. Res. Avg.2 13.1 19.9 8.8 9.9 6.9
S&P 5003 10.1 26.0 17.2 15.7 15.8
</TABLE>
*INCEPTION DATE: 5/1/88
* Lipper provides data on a monthly basis, so for comparative purposes the
Lipper Average and Index since inception returns reflect the Portfolio's
first full calendar month of performance.
1 Past performance is not predictive of future performance. Portfolio
performance does not reflect Separate Account expenses or other product
charges. The Portfolio may invest in foreign securities. Foreign investments
are subject to the risks of currency fluctuation and the impact of social,
political and economic change. (Sector investing carries higher risks than
investments in a broadly diversified portfolio.)
2 The Lipper Variable Insurance Products (VIP) Natural Resources Average is
calculated by Lipper Analytical Services, Inc., and reflects the investment
return of certain portfolios underlying variable life and annuity products.
These returns are net of investment fees and fund expenses but not product
charges.
3 The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index that may be
used to characterize performance of this Portfolio, and other indices may
portray different comparative performance.
DATA
BANK
[PHOTO]
PORTFOLIO MANAGER
LEIGH GOEHRING
- --------------------------------------------------------------------------------
LEIGH, NATURAL RESOURCES BY DEFINITION ARE IN SHORT SUPPLY. WHAT'S DEMAND
LIKE?
A. It's rising rapidly. Most analysts have consistently and extraordinarily
underestimated worldwide demand for commodities. Demand for grain, oil and
other commodities in countries such as China and India has boomed, for
example, now that both are embracing capitalism and anxious to increase their
standard of living.
- --------------------------------------------------------------------------------
WHAT'S IN THE PORTFOLIO?*
6/30/96
/ / Energy 52%
/ / Precious Metals 19
/ / Misc.
Non-Resources 14 [PIECHART]
/ / Base Metals 8
/ / Forest Products 5
/ / Diversified
Resources 1
/ / CASH 1
WHAT WAS IN IT 6 MONTHS AGO?*
12/31/95
/ / Energy 44%
/ / Precious Metals 20
/ / Misc.
Non-Resources 18 [PIECHART]
/ / Base Metals 9
/ / Forest Products 6
/ / Diversified
Resources 2
/ / CASH 1
- --------------------------------------------------------------------------------
FIVE LARGEST HOLDINGS.*
6/30/96
Noble Affiliates 3.8%
Marine Drilling Co. 3.2
Alum. Co. AM & RTS 3.1
Cambior Inc. 2.6
Western Gas Resource 2.4
*SOURCE: PRUDENTIAL
16
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR'S OUTLOOK
- --------------------------------------------------------------------------------
TREES DON'T GROW TO THE SKY.
U.S. stocks rose 10.1% in the first half of 1996, confounding many analysts
who had expected a pullback by now. While we're quite pleased with the
unusually high returns that stocks have provided for our Contract Owners, we
realistically know this tremendous performance can not continue. It's simply
the law of averages.
Since 1926, when records started being kept, the U.S. stock market's average
return has been 10.5% a year, as measured by the S&P 500. Yet, in recent
years, returns have been much higher. (See chart below.)
LAST 70 YEARS RECENT BULL MARKET LAST YEAR
1926 - 1995 1982 - 1995 1995
------------ ------------ ------
10.5% 16.4% 37.4%
(5.9% OVER AVERAGE) (26.9% OVER AVERAGE)
When the final results are in, we expect 1996's performance may be closer to
average than to 1995's.
SOURCE: PRUDENTIAL
U.S. STOCKS
We're at a bit of a crossroads here. Many analysts now are wary of the U.S.
stock market. It rose at a record pace last year, and this year's advance to
date has been quite handsome. Is there no end in sight?
Should interest rates continue to rise in the second half as they did in the
first half, investors may be tempted to sell stocks to buy bonds. And if the
Federal Reserve feels compelled to raise short- term interest rates, both
stocks and bonds could be vulnerable.
That said, some groups of stocks may offer more opportunity than others.
/ / Some analysts think cyclical stocks (those that benefit from an improving
economy), including technology stocks, may benefit in the months to come.
/ / Some analysts also like retailers. Retail stocks have been marked down for
several years now, and are finally recovering after a holiday season that
was not nearly as bad as predicted.
U.S. BONDS
The first half of this year has been a rough one for bond investors, but we
think the worst may soon be over. We expect today's higher long-term interest
rates will slow the U.S. economy down a bit, and that's always good for bond
investors. We do worry about commodity prices, the possibility of wage
inflation, and more frequent talk about tax cuts - all warning signals of
increasing inflation. But with stocks at these price levels, we think bonds
provide a strong alternative.
GLOBAL STOCKS
Economic growth overseas has been a lot stronger than in the U.S. in recent
years. And since stronger growth usually means higher corporate profits,
which means higher stock prices, we like non-U.S. stocks. We expect they may
perform better than U.S. stocks during the second half of 1996, considering
how far the U.S. stock market has risen to date.
/ / We expect economic growth in Asia will be the strongest in the world.
Japan's economy grew explosively in the first quarter, heralding the end
to a long downturn. Plus China has been encouraging its citizens to buy
imported goods.
/ / In Europe, we expect stock prices to rebound as the economy there
recovers. Many European stocks are undervalued by U.S. standards.
- --------------------------------------------------------------------------------
PLEASE KEEP IN MIND THAT THE FINANCIAL MARKETS COULD BE JUST AS VOLATILE IN
THE SECOND HALF OF 1996 AS THEY WERE IN THE FIRST HALF OF 1996. THERE COULD
BE SOME MAJOR MOVES - BOTH UP AND DOWN. IT'S ALWAYS A GOOD IDEA TO TALK
THINGS OVER WITH YOUR PRUDENTIAL/PRUCO SECURITIES REPRESENTATIVE. HE OR SHE
CAN HELP YOU DECIDE HOW YOUR NEEDS HAVE CHANGED AND HOW WE CAN HELP YOU MEET
THEM.
- --------------------------------------------------------------------------------
SHORT TAKES
TOM JACKSON
EQUITY PORTFOLIO
"I'm a contrarian. I buy stocks that are very cheap compared to the market.
With the market just off record highs, I SEE VERY FEW INEXPENSIVE STOCKS. So
I have more cash than I would like to have. But I'm also an optimist. The
market usually gives me an opportunity to put cash to work."
WARREN SPITZ
EQUITY INCOME PORTFOLIO
"I believe that industrial issues and economically sensitive stocks in
general are our best opportunities, and with any sort of reasonable growth in
the economy these ought to do well. WE'LL BE WATCHING OIL PRICES. But things
look good in the short run in the stock market.
DAVID POIESZ
PRUDENTIAL JENNISON PORTFOLIO
"We continue to believe that there are a large number of ATTRACTIVE COMPANIES
IN THE TECHNOLOGY INDUSTRY. Sometimes one quarter's earnings can foretell
what's going to happen and sometimes not. That's the hard part of what we do.
So we're going to continue to look at a 12- to 18-month time horizon."
DAN DUANE
GLOBAL PORTFOLIO
"Foreign markets should do better than the U.S. during the second half of the
year, because their stocks are less expensive than U.S. stocks and investors
are starting to get more interested in them. I EXPECT THE MOST GROWTH IN
ASIA, followed by Europe and the U.S."
BARBARA KENWORTHY
DIVERSIFIED BOND PORTFOLIO
"It should be an exciting second half of the year. We'll be watching the
economic statistics coming out of Washington very closely over the next
several months for signs of faster than expected growth. If growth continues
to surge, THE FEDERAL RESERVE COULD STEP IN AND INCREASE SHORT-TERM INTEREST
RATES."
LARS BERKMAN
HIGH YIELD BOND PORTFOLIO
"DEFAULTS WILL BE INCREASING in the high yield credit market as today's high
interest rates slow economic growth. So we're casting an even more critical
eye than usual on the new issues that cross our desk. We'll be watching our
holdings very, very closely."
S96-0347
17
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments................................ $ 600,282,975
Interest receivable........................ 3,161,331
--------------
Total Assets............................. 603,444,306
--------------
LIABILITIES
Bank overdraft............................. 188,007
Accrued expenses........................... 144,476
Payable to investment adviser.............. 612,051
--------------
Total Liabilities........................ 944,534
--------------
NET ASSETS................................... $ 602,499,772
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 602,450
Paid-in capital, in excess of par........ 601,897,322
--------------
602,499,772
Net assets, June 30, 1996.................. $ 602,499,772
--------------
--------------
Net asset value per share of 60,249,977
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.0000
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 16,830,963
---------------
EXPENSES
Investment management fee.................. 1,211,857
Shareholders' reports...................... 71,240
Accounting fees............................ 37,644
Custodian expense.......................... 29,281
Professional fees.......................... 7,904
Directors' expense......................... 1,421
Miscellaneous expenses..................... (6)
---------------
Total Expenses........................... 1,359,341
Less: Custodian fee credit................. (9,371)
---------------
Net Expenses............................. 1,349,970
NET INVESTMENT INCOME........................ 15,480,993
---------------
NET LOSS ON INVESTMENTS...................... (1,861)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 15,479,132
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 15,480,992 $ 33,920,243
Net realized loss on investments....................................................... (1,861) 0
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 15,479,132 33,920,243
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (15,479,132) (33,920,243)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [6,202,200 and 13,987,392 shares, respectively]..................... 62,022,000 139,873,920
Reinvestment of dividend distributions [1,547,913 and 3,392,024 shares,
respectively]......................................................................... 15,479,132 33,920,243
Capital stock repurchased [(8,832,100) and (14,375,600) shares, respectively].......... (88,321,000) (143,756,000)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (10,819,868) 30,038,163
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (10,819,868) 30,038,163
NET ASSETS:
Beginning of period.................................................................... 613,319,640 583,281,477
------------------ -------------------
End of period.......................................................................... $ 602,499,772 $ 613,319,640
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$669,714,649)............................ $ 672,507,539
Cash....................................... 580
Interest receivable........................ 11,708,825
Receivable for securities sold............. 5,130,840
--------------
Total Assets............................. 689,347,784
--------------
LIABILITIES
Accrued expenses........................... 73,436
Payable for securities purchased........... 15,536,442
Payable to investment adviser.............. 655,860
Payable for portfolio shares redeemed...... 30,171
--------------
Total Liabilities........................ 16,295,909
--------------
NET ASSETS................................... $ 673,051,875
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 621,786
Paid-in capital, in excess of par........ 675,603,024
--------------
676,224,810
Undistributed net investment income........ 4,290,451
Accumulated net realized losses............ (10,256,276)
Net unrealized appreciation................ 2,792,890
--------------
Net assets, June 30, 1996.................. $ 673,051,875
--------------
--------------
Net asset value per share of 62,178,622
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.8245
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Interest................................... $ 23,777,853
---------------
EXPENSES
Investment management fee.................. 1,302,685
Shareholders' reports...................... 69,075
Accounting fees............................ 37,628
Custodian expense.......................... 36,200
Professional fees.......................... 4,736
Directors' expense......................... 1,414
---------------
1,451,738
---------------
NET INVESTMENT INCOME........................ 22,326,115
---------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS
Net realized loss on investments........... (1,967,514)
Net unrealized loss on investments......... (30,470,050)
---------------
NET LOSS ON INVESTMENTS...................... (32,437,564)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 10,111,449)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 22,326,115 $ 41,106,435
Net realized gain (loss) on investments................................................ (1,967,514) 3,945,376
Net unrealized gain (loss) on investments.............................................. (30,470,050) 65,195,088
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (10,111,449) 110,246,899
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (18,750,062) (40,773,047)
Net realized gain from investment transactions......................................... (0) (1,426,845)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (18,750,062) (42,199,892)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,683,452 and 3,596,587 shares, respectively]...................... 29,383,573 39,971,262
Reinvestment of dividend distributions [1,756,937 and 3,793,654 shares,
respectively]......................................................................... 18,750,062 42,199,892
Capital stock repurchased [(1,233,092) and (3,376,822) shares, respectively]........... (2,056,675) (36,030,334)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 46,076,960 46,140,820
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 17,215,449 114,187,827
NET ASSETS:
Beginning of period.................................................................... 655,836,426 541,648,599
------------------ -------------------
End of period.......................................................................... $ 673,051,875 $ 655,836,426
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A2
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$485,564,233)............................ $ 483,916,488
Cash....................................... 769
Interest receivable........................ 7,285,848
--------------
Total Assets............................. 491,203,105
--------------
LIABILITIES
Payable to investment adviser.............. 483,822
Accrued expenses and other liabilities..... 17,139
Payable for portfolio shares redeemed...... 16,374
--------------
Total Liabilities........................ 517,335
--------------
NET ASSETS................................... $ 490,685,770
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 440,947
Paid-in capital, in excess of par........ 500,492,515
--------------
500,933,462
Undistributed net investment income........ 3,668,899
Accumulated net realized losses............ (12,268,846)
Net unrealized depreciation................ (1,647,745)
--------------
Net assets, June 30, 1996.................. $ 490,685,770
--------------
--------------
Net asset value per share of 44,094,707
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 11.1280
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Interest................................... $ 16,478,267
---------------
EXPENSES
Investment management fee.................. 973,228
Shareholders' reports...................... 56,631
Accounting fees............................ 37,533
Custodian expense.......................... 18,100
Professional fees.......................... 7,113
Directors' expense......................... 1,378
---------------
1,093,983
---------------
NET INVESTMENT INCOME........................ 15,384,284
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 11,474,571
Net unrealized loss on investments......... (39,068,372)
---------------
NET LOSS ON INVESTMENTS...................... (27,593,801)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 12,209,517)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 15,384,284 $ 31,463,453
Net realized gain (loss) on investments................................................ 11,474,571 (12,819,604)
Net unrealized gain (loss) on investments.............................................. (39,068,372) 66,364,196
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (12,209,517) 85,008,045
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (12,976,474) (31,133,859)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [569,543 and 863,496 shares, respectively].......................... 6,563,524 9,888,081
Reinvestment of dividend distributions [1,180,667 and 2,693,392 shares,
respectively]......................................................................... 12,976,474 31,133,859
Capital stock repurchased [(473,085) and (7,346,525) shares, respectively]............. (5,443,542) (80,695,126)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. 14,096,456 (39,673,186)
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (11,089,535) 14,201,000
NET ASSETS:
Beginning of period.................................................................... 501,775,305 487,574,305
------------------ -------------------
End of period.......................................................................... $ 490,685,770 $ 501,775,305
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A3
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2000 PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$22,776,430)............................. $ 24,675,513
Cash....................................... 115
Interest receivable........................ 128
--------------
Total Assets............................. 24,675,756
--------------
LIABILITIES
Accrued expenses and other liabilities..... 7,919
Payable to investment adviser.............. 24,303
--------------
Total Liabilities........................ 32,222
--------------
NET ASSETS................................... $ 24,643,534
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 19,440
Paid-in capital, in excess of par........ 22,664,372
--------------
22,683,812
Undistributed net investment income........ 60,510
Accumulated net realized gains............. 129
Net unrealized appreciation................ 1,899,083
--------------
Net assets, June 30, 1996.................. $ 24,643,534
--------------
--------------
Net asset value per share of 1,944,015
outstanding shares of common stock
(authorized 25,000,000 shares)........... $ 12.6766
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Interest................................... $ 645,311
---------------
EXPENSES
Investment management fee.................. 49,051
Accounting fees............................ 4,663
Custodian expense.......................... 2,896
Shareholders' reports...................... 2,706
Professional fees.......................... 1,482
Directors' expense......................... 1,214
---------------
62,012
---------------
NET INVESTMENT INCOME........................ 583,299
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized loss on investments......... (1,223,584)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 640,285)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 583,299 $ 1,045,991
Net realized gain on investments....................................................... 0 945,638
Net unrealized gain (loss) on investments.............................................. (1,223,584) 2,457,617
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (640,285) 4,449,246
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (488,633) (1,046,055)
Net realized gain from investment transactions......................................... 0 (945,910)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (488,633) (1,991,965)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [9,885 and 111,200 shares, respectively]............................ 129,000 1,481,434
Reinvestment of dividend distributions [39,117 and 151,186 shares, respectively]....... 488,633 1,991,965
Capital stock repurchased [(8,008) and (89,987) shares, respectively].................. (104,000) (1,195,434)
Initial capitalization repurchased [-0- and (8,965) shares, respectively].............. 0 (111,423)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 513,633 2,166,542
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (615,285) 4,623,823
NET ASSETS:
Beginning of period.................................................................... 25,258,819 20,634,996
------------------ -------------------
End of period.......................................................................... $ 24,643,534 $ 25,258,819
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A4
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2005 PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$22,754,152)............................. $ 24,115,100
Cash....................................... 38
Interest receivable........................ 388
--------------
Total Assets............................. 24,115,526
--------------
LIABILITIES
Accrued expenses........................... 9,270
Payable to investment adviser.............. 23,274
--------------
Total Liabilities........................ 32,544
--------------
NET ASSETS................................... $ 24,082,982
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 20,048
Paid-in capital, in excess of par........ 22,582,514
--------------
22,602,562
Undistributed net investment income........ 119,472
Net unrealized appreciation................ 1,360,948
--------------
Net assets, June 30, 1996.................. $ 24,082,982
--------------
--------------
Net asset value per share of 2,004,766
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 12.0129
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Interest................................... $ 675,458
---------------
EXPENSES
Investment management fee.................. 46,489
Accounting fees............................ 4,657
Custodian expense.......................... 3,620
Shareholders' reports...................... 2,165
Professional fees.......................... 1,482
Directors' expense......................... 1,212
---------------
59,625
---------------
NET INVESTMENT INCOME........................ 615,833
---------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS
Net unrealized loss on investments......... (2,292,970)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 1,677,137)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 615,833 $ 1,027,273
Net realized gain on investments....................................................... 0 471,329
Net unrealized gain (loss) on investments.............................................. (2,292,970) 3,840,819
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (1,677,137) 5,339,421
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (515,639) (1,031,193)
Net realized gain from investment transactions......................................... 0 (471,329)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (515,639) (1,502,522)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [177,985 and 292,895 shares, respectively].......................... 2,239,000 3,700,000
Reinvestment of dividend distributions [43,999 and 116,304 shares, respectively]....... 515,639 1,502,522
Capital stock repurchased [(10,032) and (152,641) shares, respectively]................ (126,000) (1,898,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 2,628,639 3,304,522
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 435,863 7,141,421
NET ASSETS:
Beginning of period.................................................................... 23,647,119 16,505,698
------------------ -------------------
End of period.......................................................................... $ 24,082,982 $ 23,647,119
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A5
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$3,902,670,743).......................... $4,175,165,104
Interest and dividends receivable.......... 37,927,708
Receivable for securities sold............. 45,999,404
--------------
Total Assets............................. 4,259,092,216
--------------
LIABILITIES
Bank overdraft............................. 480,081
Accrued expenses and other liabilities..... 307,097
Payable for securities purchased........... 53,823,548
Payable to investment adviser.............. 5,700,984
Payable for portfolio shares redeemed...... 24,177
--------------
Total Liabilities........................ 60,335,887
--------------
NET ASSETS................................... $4,198,756,329
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,653,551
Paid-in capital, in excess of par........ 3,754,657,953
--------------
3,757,311,504
Undistributed net investment income........ 13,448,311
Accumulated net realized gains............. 155,502,153
Net unrealized appreciation................ 272,494,361
--------------
Net assets, June 30, 1996.................. $4,198,756,329
--------------
--------------
Net asset value per share of 265,355,100
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.8232
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $387,002 foreign
withholding tax)......................... $ 11,827,753
Interest................................... 82,232,889
---------------
94,060,642
---------------
EXPENSES
Investment management fee.................. 11,142,227
Shareholders' reports...................... 436,236
Custodian expense.......................... 109,688
Accounting fees............................ 63,482
Professional fees.......................... 11,559
Directors' expense......................... 2,516
---------------
Total Expenses........................... 11,765,708
Less: Custodian fee credit................. (37,208)
---------------
Net Expenses............................. 11,728,500
NET INVESTMENT INCOME........................ 82,332,142
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 134,431,601
Net unrealized loss on investments......... (17,355,738)
---------------
NET GAIN ON INVESTMENTS...................... 117,075,863
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 199,408,005
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 82,332,142 $ 155,293,990
Net realized gain on investments....................................................... 134,431,601 167,342,297
Net unrealized gain (loss) on investments.............................................. (17,355,738) 264,773,974
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 199,408,005 587,410,261
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (66,596,974) (154,987,434)
Net realized gain from investment transactions......................................... 0 (133,660,168)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (66,596,974) (288,647,602)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [6,900,567 and 5,345,143 shares, respectively]...................... 61,743,531 81,026,772
Reinvestment of dividend distributions [4,247,406 and 19,023,739 shares,
respectively]......................................................................... 66,596,974 288,647,602
Capital stock repurchased [(3,212,460) and (15,343,313) shares, respectively].......... (3,169,472) (228,767,054)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 125,171,033 140,907,320
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 257,982,064 439,669,979
NET ASSETS:
Beginning of period.................................................................... 3,940,774,265 3,501,104,286
------------------ -------------------
End of period.......................................................................... $ 4,198,756,329 $ 3,940,774,265
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A6
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$4,171,361,917).......................... $4,534,558,702
Cash....................................... 3,242,910
Interest and dividends receivable.......... 30,608,157
Receivable for securities sold............. 57,978,331
--------------
Total Assets............................. 4,626,388,100
--------------
LIABILITIES
Accrued expenses and other liabilities..... 361,169
Payable for securities purchased........... 79,103,914
Payable to investment adviser.............. 6,650,119
Payable for portfolio shares redeemed...... 78,099
--------------
Total Liabilities........................ 86,193,301
--------------
NET ASSETS................................... $4,540,194,799
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,448,883
Paid-in capital, in excess of par........ 3,773,098,454
--------------
3,775,547,337
Undistributed net investment income........ 6,347,631
Accumulated net realized gains............. 395,103,046
Net unrealized appreciation................ 363,196,785
--------------
Net assets, June 30, 1996.................. $4,540,194,799
--------------
--------------
Net asset value per share of 244,888,364
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 18.5399
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $305,599 foreign
withholding tax)......................... $ 20,178,105
Interest................................... 60,742,218
---------------
80,920,323
---------------
EXPENSES
Investment management fee.................. 13,077,649
Shareholders' reports...................... 449,618
Custodian expense.......................... 155,543
Accounting fees............................ 63,578
Professional fees.......................... 11,658
Directors' expense......................... 2,356
Miscellaneous expenses..................... 160
---------------
Total Expenses........................... 13,760,562
Less: Custodian fee credit................. (28,843)
---------------
Net Expenses............................. 13,731,719
NET INVESTMENT INCOME........................ 67,188,604
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 329,017,502
Foreign currency transactions............ (69,542)
---------------
Net realized gain on investments and
foreign currencies....................... 328,947,960
---------------
Net unrealized loss on investments and
foreign currencies--
Securities............................... (177,534,657)
Foreign currency translations............ (1,903)
---------------
Net unrealized loss on investments and
foreign currencies....................... (177,536,560)
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 151,411,400
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 218,600,004
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 67,188,604 $ 126,640,661
Net realized gain on investments and foreign currency transactions..................... 328,947,960 292,267,835
Net unrealized gain (loss) on investments and foreign currency translations............ (177,536,560) 410,041,102
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 218,600,004 828,949,598
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (55,089,785) (124,621,227)
Net realized gain from investment transactions......................................... 0 (176,844,671)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (55,089,785) (301,465,898)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,585,954 and 8,486,525 shares, respectively]...................... 102,930,223 146,641,074
Reinvestment of dividend distributions [3,016,416 and 17,050,711 shares,
respectively]......................................................................... 55,089,785 301,465,898
Capital stock repurchased [(2,312,429) and (11,612,102) shares, respectively].......... (42,540,265) (195,926,134)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 115,479,743 252,180,838
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 278,989,962 779,664,538
NET ASSETS:
Beginning of period.................................................................... 4,261,204,837 3,481,540,299
------------------ -------------------
End of period.......................................................................... $ 4,540,194,799 $ 4,261,204,837
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A7
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$383,974,369)............................ $ 389,237,766
Interest and dividends receivable.......... 6,360,342
Receivable for securities sold............. 5,087,625
--------------
Total Assets............................. 400,685,733
--------------
LIABILITIES
Payable for securities purchased........... 5,162,058
Payable to investment adviser.............. 536,937
Accrued expenses and other liabilities..... 76,909
--------------
Total Liabilities........................ 5,775,904
--------------
NET ASSETS................................... $ 394,909,829
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 506,937
Paid-in capital, in excess of par........ 412,188,718
--------------
412,695,655
Distributions in excess of net investment
income................................... (1,622,576)
Accumulated net realized losses............ (21,426,647)
Net unrealized appreciation................ 5,263,397
--------------
Net assets, June 30, 1996.................. $ 394,909,829
--------------
--------------
Net asset value per share of 50,693,750
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 7.7901
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 274,453
Interest................................... 20,423,153
---------------
20,697,606
---------------
EXPENSES
Investment management fee.................. 1,055,264
Accounting fees............................ 60,620
Shareholders' reports...................... 39,495
Professional fees.......................... 14,226
Custodian expense.......................... 9,050
Directors' expense......................... 1,325
---------------
1,179,980
---------------
NET INVESTMENT INCOME........................ 19,517,626
---------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS
Net realized loss on investments........... (328,490)
Net unrealized loss on investments......... (1,455,694)
---------------
NET LOSS ON INVESTMENTS...................... (1,784,184)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 17,733,442
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 19,517,626 $ 34,801,907
Net realized loss on investments....................................................... (328,490) (14,399,977)
Net unrealized gain (loss) on investments.............................................. (1,455,694) 33,692,744
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 17,733,442 54,094,674
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (18,499,456) (36,032,307)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,284,746 and 4,596,182 shares, respectively]...................... 18,427,000 36,443,000
Reinvestment of dividend distributions [2,378,703 and 4,650,470 shares,
respectively]......................................................................... 18,499,456 36,032,307
Capital stock repurchased [(1,135,128) and (3,656,896) shares, respectively]........... (9,160,000) (28,853,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 27,766,456 43,622,307
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 27,000,442 61,684,674
NET ASSETS:
Beginning of period.................................................................... 367,909,387 306,224,713
------------------ -------------------
End of period.......................................................................... $ 394,909,829 $ 367,909,387
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A8
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$908,450,837)............................ $1,305,441,879
Interest and dividends receivable.......... 2,209,231
Receivable for securities sold............. 431,036
Receivable for portfolio shares sold....... 44,178
Receivable for daily variation margin on
open futures contracts (see Note 2)...... 296,250
--------------
Total Assets............................. 1,308,422,574
--------------
LIABILITIES
Bank overdraft............................. 320,702
Payable for securities purchased........... 12,986,778
Payable to investment adviser.............. 1,066,391
Accrued expenses and other liabilities..... 24,391
--------------
Total Liabilities........................ 14,398,262
--------------
NET ASSETS................................... $1,294,024,312
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 594,370
Paid-in capital, in excess of par........ 884,640,435
--------------
885,234,805
Undistributed net investment income........ 1,372,594
Accumulated net realized gains............. 10,069,971
Net unrealized appreciation
Securities............................... 396,991,042
Futures contracts........................ 355,900
--------------
Net assets, June 30, 1996.................. $1,294,024,312
--------------
--------------
Net asset value per share of 59,437,042
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 21.7713
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $77,230 foreign
withholding tax)......................... $ 12,360,704
Interest................................... 1,291,654
---------------
13,652,358
---------------
EXPENSES
Investment management fee.................. 2,010,481
Shareholders' reports...................... 97,562
Accounting fees............................ 33,192
Custodian expense.......................... 14,480
Professional fees.......................... 8,693
Directors' expense......................... 1,499
---------------
2,165,907
---------------
NET INVESTMENT INCOME........................ 11,486,451
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 4,225,951
Futures contracts........................ 2,281,500
---------------
Net realized gain on investments........... 6,507,451
---------------
Net unrealized gain on investments --
Securities............................... 89,273,070
Futures contracts........................ 703,550
---------------
Net unrealized gain on investments......... 89,976,620
---------------
NET GAIN ON INVESTMENTS...................... 96,484,071
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 107,970,522
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 11,486,451 $ 18,865,378
Net realized gain on investments....................................................... 6,507,451 12,159,728
Net unrealized gain on investments..................................................... 89,976,620 225,882,882
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 107,970,522 256,907,988
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (9,796,702) (18,734,051)
Net realized gain from investment transactions......................................... 0 (7,293,493)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (9,796,702) (26,027,544)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,719,770 and 7,147,197 shares, respectively]...................... 163,386,005 130,752,103
Reinvestment of dividend distributions [455,937 and 1,331,092 shares, respectively].... 9,796,702 26,027,544
Capital stock repurchased [(416,074) and (1,230,332) shares, respectively]............. (8,610,283) (20,916,230)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 164,572,424 135,863,417
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 262,746,244 366,743,861
NET ASSETS:
Beginning of period.................................................................... 1,031,278,068 664,534,207
------------------ -------------------
End of period.......................................................................... $ 1,294,024,312 $ 1,031,278,068
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A9
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$1,082,981,956).......................... $1,211,792,013
Interest and dividends receivable.......... 7,285,520
--------------
Total Assets............................. 1,219,077,533
--------------
LIABILITIES
Payable for securities purchased........... 2,034,594
Payable to investment adviser.............. 1,202,793
Bank overdraft............................. 337,324
Accrued expenses........................... 64,926
--------------
Total Liabilities........................ 3,639,637
--------------
NET ASSETS................................... $1,215,437,896
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 707,431
Paid-in capital, in excess of par........ 1,060,648,168
--------------
1,061,355,599
Undistributed net investment income........ 3,854,856
Accumulated net realized gains............. 21,417,384
Net unrealized appreciation................ 128,810,057
--------------
Net assets, June 30, 1996.................. $1,215,437,896
--------------
--------------
Net asset value per share of 70,743,104
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 17.1810
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $297,238 foreign
withholding tax)......................... $ 18,665,282
Interest................................... 2,920,739
---------------
21,586,021
---------------
EXPENSES
Investment management fee.................. 2,342,570
Shareholders' reports...................... 119,022
Accounting fees............................ 28,707
Custodian expense.......................... 16,290
Professional fees.......................... 6,916
Directors' expense......................... 1,564
---------------
2,515,069
---------------
NET INVESTMENT INCOME........................ 19,070,952
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 7,495,252
Net unrealized gain on investments......... 51,903,497
---------------
NET GAIN ON INVESTMENTS...................... 59,398,749
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 78,469,701
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 19,070,952 $ 39,916,318
Net realized gain on investments....................................................... 7,495,252 61,266,793
Net unrealized gain on investments..................................................... 51,903,497 90,522,832
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 78,469,701 191,705,943
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (16,495,768) (38,782,405)
Net realized gain from investment transactions......................................... (0) (46,564,566)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (16,495,768) (85,346,971)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,155,290 and 4,803,598 shares, respectively]...................... 37,208,000 76,990,000
Reinvestment of dividend distributions [960,302 and 5,213,794 shares, respectively].... 16,495,768 85,346,971
Capital stock repurchased [(590,192) and (1,152,259) shares, respectively]............. (10,203,000) (18,404,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 43,500,768 143,932,971
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 105,474,701 250,291,943
NET ASSETS:
Beginning of period.................................................................... 1,109,963,195 859,671,252
------------------ -------------------
End of period.......................................................................... $ 1,215,437,896 $ 1,109,963,195
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A10
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$3,551,124,146).......................... $4,278,610,400
Interest and dividends receivable.......... 13,195,181
--------------
Total Assets............................. 4,291,805,581
--------------
LIABILITIES
Bank overdraft............................. 696,463
Payable to investment adviser.............. 4,738,607
Payable for portfolio shares redeemed...... 274,158
Accrued expenses........................... 141,201
--------------
Total Liabilities........................ 5,850,429
--------------
NET ASSETS................................... $4,285,955,152
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,572,277
Paid-in capital, in excess of par........ 3,140,589,506
--------------
3,142,161,783
Undistributed net investment income........ 10,971,098
Accumulated net realized gain.............. 405,336,017
Net unrealized appreciation on
investments.............................. 727,486,254
--------------
Net assets, June 30, 1996.................. $4,285,955,152
--------------
--------------
Net asset value per share of 157,227,682
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 27.2595
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $920,498 foreign
withholding tax)......................... $ 37,177,656
Interest................................... 26,595,382
---------------
63,773,038
---------------
EXPENSES
Investment management fee.................. 9,126,965
Shareholders' reports...................... 377,463
Accounting fees............................ 35,228
Custodian expense.......................... 12,670
Professional fees.......................... 7,113
Directors' expense......................... 2,346
Miscellaneous expenses..................... 1,964
---------------
9,563,749
---------------
NET INVESTMENT INCOME........................ 54,209,289
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currency transactions:
Securities transactions.................. 299,665,469
Foreign currency transactions............ (16,774)
---------------
Net realized gain on investments and
foreign currency transactions:........... 299,648,695
---------------
Net unrealized gain (loss) on investments
and foreign currencies:
Securities............................... (72,114,608)
Foreign currency......................... 6,569
---------------
Net unrealized loss on investments and
foreign currency transactions............ (72,108,039)
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 227,540,656
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 281,749,945
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 54,209,289 $ 73,682,361
Net realized gain on investments and foreign currency transactions..................... 299,648,695 234,571,951
Net unrealized gain (loss) on investments and foreign currencies....................... (72,108,039) 553,122,748
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 281,749,945 861,377,060
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (39,745,221) (71,456,482)
Net realized gain from investment transactions......................................... -- (132,219,093)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (39,745,221) (203,675,575)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,170,836 and 15,687,254 shares, respectively]..................... 221,033,197 374,478,697
Reinvestment of dividend distributions [1,453,897 and 8,038,373 shares,
respectively]......................................................................... 39,745,220 203,675,575
Capital stock repurchased [(1,142,226) and (1,673,110) shares, respectively]........... (30,632,116) (39,823,647)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 230,146,301 538,330,625
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 472,151,025 1,196,032,110
NET ASSETS:
Beginning of period.................................................................... 3,813,804,127 2,617,772,017
------------------ -------------------
End of period.......................................................................... $ 4,285,955,152 $ 3,813,804,127
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A11
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
PRUDENTIAL JENNISON
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$139,258,371)............................ $ 149,989,763
Interest and dividends receivable.......... 116,607
Receivable for securities sold............. 540,040
--------------
Total Assets............................. 150,646,410
--------------
LIABILITIES
Bank overdraft............................. 7,804
Accrued expenses........................... 40,228
Payable for securities purchased........... 6,122,536
Payable to investment adviser.............. 172,387
--------------
Total Liabilities........................ 6,342,955
--------------
NET ASSETS................................... $ 144,303,455
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 107,108
Paid-in capital, in excess of par........ 134,533,920
--------------
134,641,028
Undistributed net investment income........ 93,809
Accumulated net realized losses............ (1,162,774)
Net unrealized appreciation................ 10,731,392
--------------
Net assets, June 30, 1996.................. $ 144,303,455
--------------
--------------
Net asset value per share of 10,710,830
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 13.4727
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $11,889 foreign
withholding tax)......................... $ 406,185
Interest................................... 103,789
---------------
509,974
---------------
EXPENSES
Investment management fee.................. 278,992
Custodian expense.......................... 13,213
Accounting fees............................ 4,655
Professional fees.......................... 2,534
Shareholders' reports...................... 1,984
Directors' expense......................... 1,213
Miscellaneous expenses..................... 99
---------------
302,690
---------------
NET INVESTMENT INCOME........................ 207,284
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (1,293,372)
Net unrealized gain on investments......... 6,686,973
---------------
NET GAIN ON INVESTMENTS...................... 5,393,601
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 5,600,885
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
APRIL 25, 1995
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1996 BUSINESS) TO
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 207,284 $ 42,553
Net realized gain (loss) on investments................................................ (1,293,372) 130,598
Net unrealized gain on investments..................................................... 6,686,973 4,044,419
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 5,600,885 4,217,570
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (148,490) (7,538)
------------------ -------------------
CAPITAL TRANSACTIONS:
Initial capitalization [-0- and 990,000 shares, respectively].......................... 0 9,900,000
Capital stock sold [5,925,925 and 4,215,890 shares, respectively]...................... 78,776,000 51,219,000
Reinvestment of dividend distributions [11,151 and 667 shares, respectively]........... 148,490 7,538
Capital stock repurchased [(254,671) and (188,132) shares, respectively]............... (3,164,000) (2,346,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 75,760,490 58,780,538
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 81,212,885 62,990,570
NET ASSETS:
Beginning of period.................................................................... 63,090,570 *100,000
------------------ -------------------
End of period.......................................................................... $ 144,303,455 $ 63,090,570
------------------ -------------------
------------------ -------------------
<CAPTION>
*Prior to April 25, 1995 (commencement of business), the Portfolio issued 10,000 shares to The Prudential for $100,000.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A12
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
SMALL CAPITALIZATION STOCK
<TABLE>
<CAPTION>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
<CAPTION>
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$94,274,479)............................. $ 100,652,929
Interest and dividends receivable.......... 64,187
Receivable for daily variation margin on
open futures contracts (see Note 2)...... 96,200
--------------
Total Assets............................. 100,813,316
--------------
LIABILITIES
Accrued expenses and other liabilities..... 31,363
Payable for securities purchased........... 2,286,084
Payable to investment adviser.............. 79,772
--------------
Total Liabilities........................ 2,397,219
--------------
NET ASSETS................................... $ 98,416,097
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 75,683
Paid-in capital, in excess of par........ 89,899,124
--------------
89,974,807
Undistributed net investment income........ 105,578
Accumulated net realized gains............. 2,123,212
Net unrealized appreciation................ 6,212,500
--------------
Net assets, June 30, 1996.................. $ 98,416,097
--------------
--------------
Net asset value per share of 7,568,258
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 13.0038
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $68 foreign withholding
tax)..................................... $ 348,102
Interest................................... 179,778
---------------
527,880
---------------
EXPENSES
Investment management fee.................. 132,235
Custodian expense.......................... 16,290
Accounting fees............................ 9,296
Shareholders' reports...................... 1,984
Directors' expense......................... 1,213
Professional fees.......................... 543
Miscellaneous expenses..................... 100
---------------
161,661
---------------
NET INVESTMENT INCOME........................ 366,219
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 1,348,222
Futures contracts........................ 378,390
---------------
Net realized gain on investments........... 1,726,612
---------------
Net unrealized gain (loss) on investments
--
Securities............................... 3,781,515
Futures contracts........................ (177,175)
---------------
Net unrealized gain on investments......... 3,604,340
---------------
NET GAIN ON INVESTMENTS...................... 5,330,952
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 5,697,171
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD
APRIL 25, 1995
SIX MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1996 BUSINESS) TO
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 366,219 $ 175,519
Net realized gain on investments....................................................... 1,726,612 801,247
Net unrealized gain on investments..................................................... 3,604,340 2,608,160
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 5,697,171 3,584,926
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (293,274) (142,886)
Net realized gain from investment transactions......................................... 0 (404,647)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (293,274) (547,533)
------------------ -------------------
CAPITAL TRANSACTIONS:
Initial capitalization [-0- and 990,000 shares, respectively].......................... 0 9,900,000
Capital stock sold [3,751,395 and 3,181,402 shares, respectively]...................... 48,033,000 36,389,000
Reinvestment of dividend distributions [22,762 and 46,817 shares, respectively]........ 293,274 547,533
Capital stock repurchased [(217,169) and (216,949) shares, respectively]............... (2,781,000) (2,507,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 45,545,274 44,329,533
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 50,949,171 47,366,926
NET ASSETS:
Beginning of period.................................................................... 47,466,926 100,000
------------------ -------------------
End of period.......................................................................... $ 98,416,097 $ 47,466,926
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A13
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$431,468,668)............................ $ 497,608,414
Foreign currency, at value (cost:
$1,917,853).............................. 1,915,194
Cash....................................... 68
Dividends and interest receivable.......... 685,254
Receivable for securities sold............. 29,651,173
Receivable for portfolio shares sold....... 1,174,003
Other assets............................... 370,136
--------------
Total Assets............................. 531,404,242
--------------
LIABILITIES
Accrued expenses........................... 1,470,783
Payable for securities purchased........... 28,511,947
Payable to investment adviser.............. 894,365
Payable for portfolio shares redeemed...... 563,600
--------------
Total Liabilities........................ 31,440,695
--------------
NET ASSETS................................... $ 499,963,547
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 299,987
Paid-in capital, in excess of par........ 423,439,696
--------------
423,739,683
Distributions in excess of net investment
income................................... (4,668,585)
Accumulated net realized gains............. 14,763,278
Net unrealized appreciation on securities
and foreign currency translations........ 66,129,171
--------------
Net assets, June 30, 1996.................. $ 499,963,547
--------------
--------------
Net asset value per share of 29,998,744
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 16.6661
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $316,784 foreign
withholding tax)......................... $ 3,504,157
Interest................................... 259,289
---------------
3,763,446
---------------
EXPENSES
Investment management fee.................. 1,683,904
Custodian expense.......................... 567,141
Accounting fees............................ 82,233
Shareholders' reports...................... 3,785
Miscellaneous expenses..................... 1,649
Directors' expense......................... 1,005
Professional fees.......................... 870
---------------
2,340,587
---------------
NET INVESTMENT INCOME........................ 1,422,859
---------------
NET REALIZED AND UNREALIZED GAIN ON
SECURITIES AND FOREIGN CURRENCIES
Net realized gain on investments and
foreign currency transactions............ 21,253,391
Net unrealized gain on investments and
foreign currency translations............ 20,207,018
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 41,460,409
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 42,883,268
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,422,859 $ 1,620,950
Net realized gain on investments and foreign currency transactions..................... 21,253,391 13,763,168
Net unrealized gain on investments and foreign currency translations................... 20,207,018 39,034,318
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 42,883,268 54,418,436
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (1,422,859) (5,982,859)
Net realized gain from investment transactions......................................... (11,839,285) (7,583,630)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (13,262,144) (13,566,489)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,172,834 and 2,817,622 shares, respectively]...................... 69,061,810 42,294,857
Reinvestment of dividend distributions [799,358 and 872,571 shares, respectively]...... 13,262,144 13,566,489
Capital stock repurchased [(695,066) and (2,794,423) shares, respectively]............. (11,506,065) (41,558,737)
Initial capitalization repurchased [(36,088) and (48,679) shares, respectively]........ (575,000) (789,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 70,242,889 13,513,609
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 99,864,013 54,365,556
NET ASSETS:
Beginning of period.................................................................... 400,099,534 345,733,978
------------------ -------------------
End of period.......................................................................... $ 499,963,547 $ 400,099,534
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A14
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1996
<S> <C>
ASSETS
Investments, at value (cost:
$284,081,434)............................ $ 372,399,982
Interest and dividends receivable.......... 796,689
Receivable for securities sold............. 1,383,647
--------------
Total Assets............................. 374,580,318
--------------
LIABILITIES
Accrued expenses and other liabilities..... 113,006
Payable for securities purchased........... 5,318,445
Payable to investment adviser.............. 416,949
--------------
Total Liabilities........................ 5,848,400
--------------
NET ASSETS................................... $ 368,731,918
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 179,241
Paid-in capital, in excess of par........ 262,992,872
--------------
263,172,113
Undistributed net investment income........ 398,521
Accumulated net realized gains............. 16,842,713
Net unrealized appreciation on securities
and foreign currencies................... 88,318,571
--------------
Net assets, June 30, 1996.................. $ 368,731,918
--------------
--------------
Net asset value per share of 17,924,090
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 20.5719
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996
<S> <C>
INVESTMENT INCOME
Dividends (net of $42,560 foreign
withholding tax)......................... $ 2,018,634
Interest................................... 267,777
---------------
2,286,411
---------------
EXPENSES
Investment management fee.................. 762,477
Shareholders' reports...................... 31,742
Accounting fees............................ 28,075
Custodian expense.......................... 7,502
Professional fees.......................... 6,322
Directors' expense......................... 1,301
Miscellaneous expenses..................... 181
---------------
837,600
---------------
NET INVESTMENT INCOME........................ 1,448,811
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on investments and
foreign currencies--
Securities transactions.................. 9,214,760
Options written.......................... 189,896
Foreign currency transactions............ 5,464
---------------
Net realized gain on investments and
foreign currencies....................... 9,410,120
---------------
Net unrealized gain on investments and
foreign currencies--
Securities............................... 46,182,335
Foreign currency translations............ 23
---------------
Net unrealized gain on investments and
foreign currencies....................... 46,182,358
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 55,592,478
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 57,041,289
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,448,811 $ 3,291,987
Net realized gain on investments and foreign currency transactions..................... 9,410,120 19,734,447
Net unrealized gain on investments and foreign currency translations................... 46,182,358 39,062,266
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 57,041,289 62,088,700
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (1,008,920) (3,370,234)
Net realized gain from investment transactions......................................... 0 (13,348,694)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (1,008,920) (16,718,928)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [1,108,154 and 1,205,152 shares, respectively]...................... 22,511,000 19,186,000
Reinvestment of dividend distributions [50,026 and 981,450 shares, respectively]....... 1,008,920 16,718,928
Capital stock repurchased [(208,090) and (948,328) shares, respectively]............... (3,992,000) (15,377,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 19,527,920 20,527,928
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 75,560,289 65,897,700
NET ASSETS:
Beginning of period.................................................................... 293,171,629 227,273,929
------------------ -------------------
End of period.......................................................................... $ 368,731,918 $ 293,171,629
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
A15
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
INVESTMENT OBJECTIVES
(Schedule of Investments appear on the following pages)
- --------------------------------------------------------------------------------
FIXED INCOME PORTFOLIOS
MONEY MARKET Maximum current income, stability of capital and
maintenance of liquidity through investment in high
quality short-term debt instruments.
DIVERSIFIED BOND A high level of income over the longer term, providing
reasonable safety of capital through investment in readily
marketable intermediate and long-term fixed income
securities.
GOVERNMENT INCOME High level of income, over the longer term, through
investment primarily in U.S. Government securities,
including intermediate and long-term Treasury bonds, and
other debt obligations issued by U.S. Government agencies
and instrumentalities.
ZERO COUPON BONDS; Highest predictable compound investment return consistent
MATURITIES OF 2000, with safety of capital, if held to maturity, through
AND 2005 investment primarily in debt obligations of the U.S.
Treasury and investment grade corporations.
- --------------------------------------------------------------------------------
BALANCED PORTFOLIOS
CONSERVATIVE A favorable total return through investment in a blend of
BALANCED money market instruments, fixed income securities and
common stocks managed towards a lower potential risk of
loss than the Aggressively Managed Flexible Portfolio and
correspondingly lower potential for appreciation.
FLEXIBLE MANAGED Higher total return through investment in a blend of money
market instruments, fixed income securities and common
stocks managed with a higher degree of risk of loss in
order to attain potentially higher results than the
Conservatively Managed Flexible Portfolio.
- --------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIOS
HIGH YIELD BONDS Seeks a high total return through investment in a
diversified portfolio of low to medium quality (high
yield) fixed income securities. Such securities have
speculative characteristics, and generally involve greater
risks of loss than higher quality securities.
- --------------------------------------------------------------------------------
DIVERSIFIED STOCK PORTFOLIOS
STOCK INDEX Seeks results that correspond to the price and yield
performance of the broad, publicly-traded stock market by
trying to duplicate the performance of the Standard and
Poor's 500 Composite Stock Price Index.
EQUITY INCOME Seeks both current income and capital appreciation by
investing primarily in stocks and convertible securities
with prospects for income returns above those of the S&P
500 Index or New York Stock Exchange indices.
EQUITY The Portfolio seeks capital appreciation through
investment primarily in stocks and convertible securities
of major, established corporations as well as stocks of
smaller companies. Income from dividends from the
Portfolio's investments will be incidental.
PRUDENTIAL JENNISON Seeks long-term growth of capital through investment
primarily in common stock of established companies with
above average growth prospects. Dividend income from the
Portfolio's investments will be incidental.
SMALL CAPITALIZATION This Portfolio seeks to achieve long-term growth of
STOCK capital through investment primarily in common stocks of
publicly traded companies with smaller market
capitalization. Dividend income from the Portfolio's
investments will be incidental.
GLOBAL Seeks long-term capital growth through investment
primarily in common stock and common stock equivalents of
foreign and domestic corporations.
- --------------------------------------------------------------------------------
SPECIALIZED PORTFOLIOS
NATURAL RESOURCES Seeks long term growth of capital by investing primarily
in stocks and convertible securities of companies that
operate within the natural resources sector of the
economy.
B1
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 99.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 12.5%
Abn-Amro Bank North America, C.D.,
5.030%, 08/20/96.............................. $ 19,000,000 $ 19,000,239
Bank of New York Company, Inc.,
4.950%, 08/16/96, Tranche #TR00129............ 1,000,000 999,373
Barnett Banks, Inc., C.D.,
5.390%, 07/08/96.............................. 8,272,000 8,271,882
Bayerische Vereinsbank,
5.410%, 10/02/96.............................. 2,000,000 2,000,046
Canadian Imperial Bank, C.D.,
5.520%, 09/09/96.............................. 10,000,000 10,000,000
Commerzbank,, C.D.,
5.475%, 10/11/96.............................. 5,000,000 5,000,877
Dresdner U.S. Finance, Inc.,
5.130%, 11/22/96.............................. 1,000,000 998,245
Engelhard Corp.,
5.428%, 07/08/96.............................. 4,000,000 4,000,000
First National Bank of Chicago,
5.500%, 10/03/96, Tranche #TR00217............ 3,000,000 3,000,000
First National Bank of Seattle,
5.800%, 05/09/97.............................. 5,000,000 4,997,546
Morgan Guaranty Trust Co., C.D.,
5.180%, 09/04/96.............................. 3,000,000 2,998,287
5.420%, 09/17/96.............................. 9,000,000 9,000,381
Toronto-Dominion Bank, C.D.,
5.340%, 07/31/96.............................. 1,000,000 999,946
U.S. National Bank of Oregon,
5.320%, 07/30/96, Tranche #TR00029............ 4,000,000 3,999,833
--------------
75,266,655
--------------
COMMERCIAL PAPER -- 62.6%
American Honda Finance Corp.,
5.350%, 07/08/96-07/10/96..................... 8,000,000 7,991,083
5.400%, 07/25/96.............................. 1,000,000 996,400
5.420%, 07/24/96.............................. 4,000,000 3,986,149
Aristar, Inc.,
5.360%, 07/02/96.............................. 2,000,000 1,999,702
5.450%, 07/03/96.............................. 2,180,000 2,179,340
Associates Corp. of North America,
4.500%, 09/30/96, Tranche #TR00076............ 2,000,000 1,993,696
4.750%, 08/01/96.............................. 1,500,000 1,498,577
5.400%, 07/29/96.............................. 9,867,000 9,825,559
7.500%, 10/15/96.............................. 2,000,000 2,010,191
9.700%, 05/01/97.............................. 450,000 463,688
Bank of New York Co.,
5.320%, 07/02/96.............................. 2,832,000 2,831,582
Barnett Banks, Inc.,
5.420%, 07/09/96.............................. 1,000,000 998,796
Bell Atlantic Network Funding Corp.,
5.400%, 07/08/96.............................. 1,260,000 1,258,677
Bell South Telecommunications, Inc.,
5.320%, 07/08/96.............................. 2,000,000 1,997,931
Beneficial Corp.,
5.250%, 07/26/96.............................. 1,000,000 996,354
5.290%, 07/26/96.............................. 9,000,000 8,966,938
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Bradford & Bingley Building Society,
5.350%, 07/12/96.............................. $ 8,000,000 $ 7,986,922
Caterpillar Financial Services Corp.,
5.250%, 09/19/96.............................. 1,000,000 988,333
5.320%, 08/15/96.............................. 1,000,000 993,350
Chubb Capital Corp.,
5.330%, 07/11/96.............................. 3,200,000 3,195,262
Ciesco, L.P.,
5.300%, 07/12/96.............................. 3,000,000 2,995,142
CIT Group Holdings, Inc.,
5.330%, 08/12/96-08/13/96..................... 13,000,000 12,918,866
Colonial Pipeline Co.,
5.350%, 07/16/96.............................. 5,000,000 4,988,854
Commerzbank, C.D.,
5.475%, 10/11/96.............................. 20,000,000 20,002,673
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 9,030,000 9,030,000
Countrywide Funding Corp.,
5.400%, 07/23/96.............................. 3,000,000 2,990,100
5.420%, 07/25/96.............................. 2,000,000 1,992,773
Countrywide Home Loan,
5.420%, 07/22/96.............................. 1,000,000 996,838
5.430%, 08/20/96.............................. 3,000,000 2,977,375
Finova Capital Corp.,
5.370%, 07/30/96.............................. 3,000,000 2,987,023
5.450%, 07/16/96-07/23/96..................... 4,700,000 4,688,267
5.480%, 07/19/96.............................. 3,000,000 2,991,780
First Data Corp.,
5.450%, 07/23/96.............................. 11,002,000 10,965,357
Ford Motor Credit Co.,
5.290%, 08/02/96.............................. 3,000,000 2,985,893
5.300%, 07/09/96.............................. 10,000,000 9,988,222
5.380%, 08/19/96.............................. 13,000,000 12,904,804
General Electric Capital Corp.,
5.330%, 08/12/96.............................. 17,000,000 16,894,288
General Motors Acceptance Corp.,
5.340%, 09/16/96.............................. 7,500,000 7,414,338
8.250%, 08/01/96.............................. 2,500,000 2,504,795
General Signal Corp.,
5.400%, 07/10/96.............................. 7,000,000 6,990,550
GTE Corp.,
5.420%, 07/26/96.............................. 1,000,000 996,236
Heller Financial Services Inc.,
5.480%, 07/16/96.............................. 6,000,000 5,986,300
Heller Financial, Inc.,
5.490%, 07/29/96.............................. 2,000,000 1,991,460
Honeywell Inc.,
5.400%, 07/02/96.............................. 16,134,000 16,131,580
International Business Machines Credit Corp.,
5.290%, 07/10/96.............................. 4,000,000 3,994,710
ITT Industries, Inc.,
5.350%, 07/08/96.............................. 1,000,000 998,960
Lehman Brothers Holdings, Inc.,
5.550%, 07/08/96.............................. 16,020,000 16,002,712
Merrill Lynch & Co., Inc,
5.400%, 07/12/96.............................. 15,000,000 14,975,250
</TABLE>
B2
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Mitsubishi International Corp.,
5.320%, 07/29/96-08/12/96..................... $ 3,200,000 $ 3,182,828
5.380%, 07/01/96.............................. 700,000 700,000
Morgan Stanley Group, Inc.,
5.290%, 07/09/96.............................. 2,374,000 2,371,209
5.330%, 07/10/96.............................. 10,000,000 9,986,675
NationsBank Corp. of North Carolina,
4.75%, 08/15/96............................... 2,000,000 1,998,097
Newell Co.,
5.420%, 07/22/96.............................. 2,000,000 1,993,677
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 7,000,000 7,000,000
Norwest Financial, Inc.,
5.340%, 07/11/96.............................. 3,000,000 2,995,550
Philip Morris Companies, Inc.,
5.300%, 07/19/96.............................. 6,000,000 5,984,100
5.390%, 07/25/96.............................. 10,000,000 9,964,067
PNC Funding Corp.,
5.400%, 07/11/96.............................. 5,000,000 4,992,500
Preferred Receivables Funding Corp.,
5.300%, 08/22/96.............................. 5,000,000 4,961,722
5.350%, 07/15/96.............................. 3,645,000 3,637,416
5.370%, 07/22/96.............................. 8,000,000 7,974,940
Rank Xerox Capital (Europe) PLC,
5.300%, 07/01/96.............................. 1,000,000 1,000,000
Riverwoods Funding Corp.,
5.300%, 07/02/96.............................. 7,000,000 6,998,969
Sears Roebuck Acceptance Corp.,
5.400%, 07/25/96.............................. 2,000,000 1,992,800
Smith Barney Inc.,
5.360%, 07/02/96.............................. 2,000,000 1,999,702
5.380%, 07/18/96.............................. 2,751,000 2,744,011
Special Purpose A/R Cooperative,
5.400%, 07/09/96.............................. 1,000,000 998,800
Transamerica Financial Corp.,
5.310%, 09/09/96.............................. 4,368,000 4,322,900
Travelers/Aetna Property Casualty Corp.,
5.350%, 07/11/96.............................. 4,000,000 3,994,056
U.S. West Communications Inc.,
5.400%, 07/02/96.............................. 5,800,000 5,799,130
USL Capital Corp.,
5.400%, 07/01/96.............................. 4,000,000 4,000,000
Westpac Capital Corp.,
5.350%, 07/02/96.............................. 4,000,000 3,999,406
Whirlpool Financial Corp.,
5.400%, 07/25/96.............................. 7,000,000 6,974,800
--------------
377,011,031
--------------
TERM NOTES -- 18.7%
American Express Centurion Bank,
5.434%, 03/19/97, Tranche #TR00146............ 3,000,000 2,999,584
%5.450%, 02/14/97, Tranche #TR00137........... 2,000,000 1,999,638
5.466%, 04/15/97.............................. 2,000,000 1,999,684
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Associates Corp. of North America,
7.730%, 10/31/96.............................. $ 2,000,000 $ 2,013,938
Bayerische Landesbank,
5.430%, 10/18/96.............................. 1,000,000 1,000,029
Beneficial Corp.,
9.050%, 03/14/97, Tranche #TR00426............ 1,100,000 1,124,450
FCC National Bank,
5.770%, 04/15/97.............................. 4,000,000 3,998,185
General Electric Capital Corp.,
7.625%, 07/24/96.............................. 875,000 876,181
8.300%, 06/02/97, Tranche #TR00526............ 2,005,000 2,045,691
General Motors Acceptance Corp.,
5.504%, 08/02/96, Tranche #TR00100............ 11,000,000 10,998,801
5.516%, 08/21/96, Tranche #TR00407............ 1,000,000 999,946
General Motors Acceptance Corp.,
7.875%, 02/27/97-02/28/97, Tranche #TR00199... 2,250,000 2,287,811
8.800%, 07/03/96, Tranche #TR00612............ 1,000,000 1,000,138
Goldman Sachs Group, L.P.,
5.617%, 08/23/96, Tranche #TR0004H............ 30,000,000 30,000,000
Huntington National Bank,
4.480%, 10/14/96.............................. 1,000,000 996,289
International Lease Finance Corp.,
4.750%, 07/15/96.............................. 2,000,000 1,999,604
6.375%, 11/01/96.............................. 1,000,000 1,002,290
John Deere Capital Corp,
4.625%, 09/02/96.............................. 2,500,000 2,495,635
Merrill Lynch & Co. Inc.,
5.437%, 10/02/96, Tranche #TR00195............ 11,000,000 10,999,187
Morgan Stanley Group, Inc.,
%5.625%, 08/15/96, Tranche #TR00102........... 7,000,000 7,000,000
%5.660%, 07/15/96, Tranche #TR00100........... 4,000,000 4,000,000
NBD Bank, N.A.,
5.320%, 07/29/96, Tranche #TR00287............ 2,000,000 1,999,914
SMM Trust 1995-Q,
%5.938%, 01/08/97............................. 19,000,000 18,999,070
--------------
112,836,065
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.8%
Federal Home Loan Mortgage Corp.,
5.645%, 08/15/96.............................. 10,000,000 9,996,896
Federal National Mortgage Association,
5.495%, 09/27/96.............................. 10,000,000 10,000,000
</TABLE>
B3
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
United States Treasury Notes,
6.875%, 02/28/97-03/31/97..................... $ 15,000,000 $ 15,172,328
--------------
35,169,224
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $600,282,975*)........................................... 600,282,975
--------------
OTHER ASSETS -- 0.4%
(net of liabilities)........................................... 2,216,797
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 602,499,772
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
C.D. Certificates of Deposit
L.P. Limited Partnership
PLC Public Limited Company (British Corporation)
*The cost of securities for federal income tax purposes is substantially the
same as for reporting purposes.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B4
<PAGE>
DIVERSIFIED BOND PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 92.7% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 18.0%
Advanta Mortgage Loan Trust, Series 1994-3
8.490%, 01/25/26.............................. $ 8,500,000 $ 8,705,859
Advanta National Bank, C.D.,
6.260%, 09/01/97.............................. 5,000,000 4,992,500
Aristar, Inc.,
5.750%, 07/15/98.............................. 2,000,000 1,969,640
7.500%, 07/01/99.............................. 2,000,000 2,041,940
Associates Corp. of North America,
8.375%, 01/15/98.............................. 500,000 514,245
BankAmerica Corp.,
5.984%, 05/17/99.............................. 10,000,000 10,082,000
Chase Manhattan Corp.,
8.000%, 06/15/99.............................. 2,000,000 2,066,800
Chemical Bank,
6.625%, 08/15/05.............................. 2,000,000 1,902,380
Chrysler Financial Corp.,
9.500%, 12/15/99.............................. 5,000,000 5,411,250
Citicorp, M.T.N.,
8.500%, 02/24/97, Tranche #TR00128............ 3,000,000 3,044,130
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
**7.875%, 03/15/98, Tranche #TR00003.......... 5,000,000 5,123,300
**8.750%, 12/15/99, Tranche #TR00001.......... 3,000,000 3,174,180
Erac USA Finance Co.,
7.000%, 06/15/00, Tranche #TR00001............ 9,000,000 8,997,187
Ford Motor Credit Co.,
5.750%, 01/25/01.............................. 4,000,000 3,818,160
6.250%, 02/26/98.............................. 3,000,000 2,994,150
General Motors Acceptance Corp.,
8.400%, 10/15/99.............................. 3,700,000 3,883,557
General Motors Acceptance Corp., M.T.N.,
7.500%, 11/04/97, Tranche #TR00598............ 2,000,000 2,034,480
Mellon Financial Co.,
6.500%, 12/01/97.............................. 2,000,000 2,002,940
NationsBank Corp.,
7.000%, 05/15/03.............................. 5,000,000 4,972,350
**Nationwide CSN Trust,
9.875%, 02/15/25.............................. 5,000,000 5,464,100
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B.................... 3,500,000 3,500,612
**Principal Mutual Life Insurance,
7.875%, 03/01/24.............................. 5,000,000 4,750,200
RHG Finance Corp.,
8.875%, 10/01/05.............................. 2,000,000 2,065,000
Salomon, Inc.,
7.000%, 05/15/99.............................. 10,000,000 10,005,100
Salomon, Inc., M.T.N.,
5.980%, 02/02/98, Tranche #TR00027............ 10,000,000 9,890,400
7.250%, 05/01/01.............................. 2,250,000 2,244,420
Santander Financial Issuances, Inc.,
7.875%, 04/15/05.............................. 2,500,000 2,572,350
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038............ $ 3,000,000 $ 2,945,130
--------------
121,168,360
--------------
FOREIGN -- 15.6%
African Development Bank,
6.875%, 10/15/15.............................. 5,000,000 4,699,750
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04.............................. 3,000,000 2,812,620
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
8.625%, 06/02/00, Tranche #TR00001............ 2,000,000 2,035,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 4,100,000 4,258,875
Central Puerto, SA,
10.750%, 11/02/97............................. 3,000,000 3,090,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 3,000,000 2,842,500
Hydro-Quebec,
8.050%, 07/07/24.............................. 4,500,000 4,770,180
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 01/01/49........................... 5,000,000 5,184,450
10.000%, 05/01/02............................. 5,000,000 5,640,350
National Australia Bank, Ltd.,
9.700%, 10/15/98.............................. 1,700,000 1,812,710
**National Bank of Romania,
9.750%, 06/25/99.............................. 5,000,000 5,027,500
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98.............................. 1,800,000 1,901,250
Nova Scotia, Province of Canada,
8.875%, 07/01/19.............................. 3,000,000 3,366,750
Ontario, Province of Canada,
15.750%, 03/15/12............................. 3,475,000 3,883,174
Polysindo International Finance Co.,
11.375%, 06/15/06............................. 5,000,000 5,087,500
Quebec, Province of Canada,
6.500%, 01/17/06.............................. 8,500,000 7,967,305
Republic of Argentina,
9.250%, 02/23/01.............................. 1,900,000 1,828,750
Republic of Columbia,
7.250%, 02/15/03-02/23/04..................... 7,500,000 6,991,450
**8.000%, 06/14/01, Tranche #TR00001.......... 12,000,000 11,889,960
8.750%, 10/06/99.............................. 3,500,000 3,574,375
Republic of Italy,
6.875%, 09/27/23.............................. 13,900,000 12,533,908
Saskatchewan, Province of Canada,
8.000%, 07/15/04.............................. 4,000,000 4,188,040
--------------
105,386,397
--------------
INDUSTRIAL -- 36.6%
**Agco Corp.,
8.500%, 03/15/06.............................. 5,000,000 4,900,000
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043............ 2,000,000 2,128,640
Auburn Hills Trust,
12.000%, 05/01/20............................. 10,000,000 14,444,000
</TABLE>
B5
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
B.J. Services Co.,
7.000%, 02/01/06.............................. $ 5,000,000 $ 4,557,500
Ballys Grand, Inc.,
10.375%, 12/15/03............................. 3,000,000 3,292,500
Boise Cascade Corp.,
9.875%, 02/15/01.............................. 1,000,000 1,063,380
Buckeye Cellulose Corp.,
9.250%, 09/15/08.............................. 2,000,000 2,000,000
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................. 4,000,000 4,393,400
Columbia Gas Systems, Inc.,
7.620%, 11/28/25.............................. 6,500,000 6,111,105
Crane Co.,
7.250%, 06/15/99.............................. 3,000,000 3,006,540
Darden Restaurants, Inc.,
7.125%, 02/01/16.............................. 10,000,000 9,017,300
Delta Air Lines, Inc.,
9.875%, 05/15/00.............................. 6,000,000 6,555,540
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98.............................. 1,000,000 1,017,700
8.380%, 06/12/98, Tranche #TR00017............ 2,000,000 2,058,220
Digital Equipment Corp.,
7.125%, 10/15/02.............................. 4,000,000 3,880,400
7.750%, 04/01/23.............................. 6,000,000 5,424,480
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. 5,000,000 4,900,000
8.500%, 06/15/03.............................. 5,000,000 4,950,000
10.000%, 02/15/01............................. 5,000,000 5,262,500
J.C. Penney Co., Inc.,
9.750%, 06/15/21.............................. 6,000,000 6,721,260
**Lumbermens Mutual Casualty Co.,
9.150%, 07/01/26.............................. 5,000,000 5,173,000
MFS Communications Co., Inc.,
*Zero Coupon, 01/15/06........................ 9,000,000 5,445,000
News America Holdings, Inc.,
7.500%, 03/01/00.............................. 6,000,000 6,083,220
7.750%, 12/01/45.............................. 7,000,000 6,263,320
Noble Drilling Corp.,
9.125%, 07/01/06.............................. 3,000,000 3,007,500
Noram Energy Corp.,
7.500%, 08/01/00.............................. 5,000,000 5,067,400
Occidental Petroleum Corp.,
10.125%, 11/15/01............................. 5,000,000 5,682,200
11.125%, 08/01/10............................. 5,000,000 6,414,900
Paramount Communications, Inc.,
7.500%, 01/15/02.............................. 5,000,000 4,932,200
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07.............................. 4,000,000 4,171,520
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 5,750,000 6,045,550
RJR Nabisco, Inc.,
6.700%, 06/15/02.............................. 5,000,000 4,877,050
Rodamco NV,
7.300%, 05/15/05.............................. 5,000,000 4,977,500
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B................... 4,000,000 3,940,000
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................. 5,000,000 5,375,000
Ryerson Tull Inc.,
8.500%, 07/15/01.............................. 6,000,000 6,010,905
9.125%, 07/15/06.............................. 2,000,000 2,002,650
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Tenet Healthcare Corp.,
8.625%, 12/01/03.............................. $ 6,500,000 $ 6,589,375
9.625%, 09/01/02.............................. 1,500,000 1,593,750
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23.............................. 9,000,000 8,762,580
Time Warner, Inc.,
7.750%, 06/15/05.............................. 9,800,000 9,566,956
Transco Energy Co.,
9.125%, 05/01/98.............................. 3,000,000 3,117,570
9.375%, 08/15/01.............................. 6,000,000 6,593,940
USX Corp.,
9.800%, 07/01/01.............................. 4,900,000 5,376,280
Viacom, Inc.,
7.750%, 06/01/05.............................. 10,550,000 10,286,461
Weatherford Enterra, Inc.,
7.250%, 05/15/06.............................. 4,000,000 3,958,840
Westvaco Corp.,
9.750%, 06/15/20.............................. 5,000,000 6,082,050
Whitman Corp.,
7.500%, 08/15/01.............................. 3,000,000 3,045,510
--------------
246,126,692
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 21.1%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A.................... 150,000 159,117
Federal National Mortgage Association,
9.000%, 10/01/16-09/01/21..................... 660,567 694,538
Government National Mortgage Association,
7.500%, 05/20/02-02/15/26..................... 28,669,171 28,770,260
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................. 750,000 957,960
Resolution Funding Corp.,
Zero Coupon, 10/15/15......................... 17,100,000 4,249,179
8.125%, 10/15/19, Principle Only.............. 700,000 771,533
8.625%, 01/15/21.............................. 200,000 232,312
United States Treasury Bonds,
11.250%, 02/15/15............................. 18,000,000 25,976,160
12.000%, 08/15/13............................. 22,000,000 31,013,180
United States Treasury Notes,
6.375%, 03/31/01.............................. 2,900,000 2,887,298
6.875%, 05/15/06-08/15/25..................... 24,886,000 24,722,408
7.250%, 02/15/98.............................. 5,000,000 5,088,300
7.500%, 05/15/02.............................. 2,000,000 2,093,740
7.750%, 12/31/99.............................. 4,750,000 4,948,883
7.875%, 07/31/96.............................. 7,000,000 7,015,330
12.500%, 08/15/14............................. 1,500,000 2,206,635
--------------
141,786,833
--------------
UTILITIES -- 1.4%
El Paso Electric Company,
9.400%, 05/01/11.............................. 4,000,000 3,960,000
Pennsylvania Power & Light Co.,
9.375%, 07/01/21.............................. 1,150,000 1,282,457
Texas Utilities Electric Co.,
5.875%, 04/01/98.............................. 4,000,000 3,961,800
--------------
9,204,257
--------------
TOTAL LONG-TERM BONDS
(Cost $620,879,649)............................................ 623,672,539
--------------
</TABLE>
B6
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.2% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 48,835,000 $ 48,835,000
--------------
OTHER ASSETS -- 0.1%
(net of liabilities)........................................... 544,336
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 673,051,875
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
C.D. Certificate of Deposit
L.P. Limited Partnership
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
*Denotes deferred interest security that accrues no interest until a
predetermined date at which time a specified coupon rate becomes effective.
**Indicates a restricted security; the aggregate cost of the restricted
securities is $59,997,941. The aggregate value, $61,288,670 is
approximately 9.1% of net assets. (See Note 2)
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B7
<PAGE>
GOVERNMENT INCOME PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 87.8% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 3.2%
Chase Manhattan Credit Card Master Trust,
%5.626%, 08/15/01, Series 1995-2.............. $ 12,500,000 $ 12,507,750
Equicon Home Equity Loan Trust, CMO,
7.850%, 03/18/14, Series 1995-2............... 3,000,000 3,065,625
--------------
15,573,375
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 84.6%
Federal Home Loan Bank,
6.780%, 07/24/02.............................. 10,000,000 9,826,600
Federal Home Loan Mortgage Corp.,
6.710%, 06/11/02.............................. 5,000,000 4,939,050
%6.875%, 06/01/25............................. 13,663,608 13,752,934
Federal National Mortgage Association,
8.000%, 03/01/22-05/01/26..................... 26,247,298 26,447,445
8.500%, 05/01/24-04/01/25..................... 32,993,948 33,890,724
9.000%, 02/01/25-04/01/25..................... 14,453,196 15,089,426
Federal National Mortgage Association
Debentures,
6.550%, 08/10/00.............................. 6,000,000 5,957,820
Government National Mortgage Association,
7.500%, 12/15/25-02/15/26..................... 20,042,209 19,772,040
8.000%, 09/15/23-10/15/25..................... 23,138,738 23,385,708
Main Place Funding,
%5.674%, 07/17/98............................. 10,000,000 10,007,812
Resolution Funding Corp.,
Zero Coupon, 04/15/09......................... 45,000,000 18,278,100
8.125%, 10/15/19, Principal Only Class A...... 4,200,000 4,629,198
Student Loan Market Association,
5.880%, 02/06/01.............................. 19,290,000 18,629,896
7.500%, 03/08/00.............................. 12,000,000 12,361,920
United States Treasury Bonds,
8.125%, 08/15/19.............................. 40,000,000 44,900,000
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/08......................... 25,000,000 11,280,500
United States Treasury Notes,
6.250%, 04/30/01.............................. 15,000,000 14,857,050
6.875%, 03/31/00.............................. 30,000,000 30,435,900
7.750%, 12/31/99.............................. 57,000,000 59,386,590
7.875%, 11/15/04.............................. 35,000,000 37,619,400
--------------
415,448,113
--------------
TOTAL LONG-TERM BONDS
(Cost $432,669,233)............................................ 431,021,488
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 10.8% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 52,895,000 $ 52,895,000
--------------
OTHER ASSETS -- 1.4%
(net of liabilities)........................................... 6,769,282
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 490,685,770
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
CMO Collateralized Mortgage Obligations
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B8
<PAGE>
ZERO COUPON BOND 2000 PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 99.0% VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/00-02/15/02................ $ 33,250,000 $ 24,393,513
--------------
24,393,513
--------------
TOTAL LONG-TERM BONDS
(Cost $22,494,430)............................................. 24,393,513
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 1.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 282,000 282,000
--------------
LIABILITIES -- (0.1%)
(net of other assets).......................................... (31,979)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 24,643,534
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B9
<PAGE>
ZERO COUPON BOND 2005 PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 96.6% VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS
Financing Corp. (FICO),
Zero Coupon, 03/07/04......................... $ 3,350,000 $ 1,973,820
Resolution Funding Corp.,
Zero Coupon, 07/15/07......................... 10,000,000 4,639,400
United States Treasury Bonds,
Zero Coupon, 11/15/04 (P/O)................... 11,000,000 6,279,130
Zero Coupon, 11/15/05-05/15/06 (I/O).......... 20,000,000 10,366,735
--------------
TOTAL LONG-TERM BONDS
(Cost $21,898,152)............................................. 23,259,100
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENT -- 3.5% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96.............................. 856,000 856,000
--------------
LIABILITIES -- (0.1%)
(net of other assets).......................................... (32,118)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 24,082,982
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
FICO Financing Corporation
I/O Interest Only
P/O Principal Only
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B10
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 35.6% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.4%
+Coltec Industries, Inc......................... 311,000 $ 4,431,750
GenCorp, Inc.................................... 676,800 10,236,600
+UNC, Inc....................................... 289,100 2,421,212
--------------
17,089,562
--------------
AIRLINES -- 0.8%
+AMR Corp....................................... 200,000 18,200,000
+USAir Group, Inc............................... 835,000 15,030,000
--------------
33,230,000
--------------
ALUMINUM -- 0.6%
Aluminum Co. of America......................... 400,000 22,950,000
--------------
AUTOS - CARS & TRUCKS -- 2.3%
A.O. Smith Corp................................. 466,800 11,670,000
Chrysler Corp................................... 500,000 31,000,000
Ford Motor Co................................... 318,300 10,304,962
General Motors Corp............................. 500,000 26,187,500
General Motors Corp. (Class 'H' Stock).......... 107,600 6,469,450
Titan Wheel International, Inc.................. 748,350 11,973,600
--------------
97,605,512
--------------
CHEMICALS -- 0.7%
Imperial Chemical Industries, PLC, ADR.......... 371,300 18,240,112
OM Group, Inc................................... 308,400 12,104,700
--------------
30,344,812
--------------
CHEMICALS - SPECIALTY -- 0.8%
Ferro Corp...................................... 655,200 17,362,800
M.A. Hanna Co................................... 734,550 15,333,731
--------------
32,696,531
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp.................................... 900,000 9,675,000
National Data Corp.............................. 320,100 10,963,425
+Paxar Corp..................................... 1,022,928 17,901,240
--------------
38,539,665
--------------
CONSTRUCTION -- 1.0%
J. Ray McDermott, SA............................ 511,600 12,790,000
Owens Corning................................... 662,800 28,500,400
--------------
41,290,400
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp................................ 290,400 9,764,700
--------------
DIVERSIFIED GAS -- 0.7%
+Basin Exploration, Inc......................... 148,000 962,000
Sonat Offshore Drilling, Inc.................... 173,100 8,741,550
Tidewater, Inc.................................. 204,224 8,960,328
+Weatherford Enterra, Inc....................... 321,353 9,640,590
Western Gas Resources, Inc...................... 162,100 2,634,125
--------------
30,938,593
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.3%
International Business Machines Corp............ 134,000 13,266,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.3%
United States Surgical Corp..................... 365,500 11,330,500
--------------
ELECTRICAL EQUIPMENT -- 1.0%
+Anixter International, Inc..................... 337,400 5,018,825
Belden, Inc..................................... 492,300 14,769,000
Westinghouse Electric Corp...................... 1,200,000 22,500,000
--------------
42,287,825
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
ELECTRONICS -- 1.1%
+ADT Ltd........................................ 620,000 $ 11,702,500
+Digital Equipment Corp......................... 262,000 11,790,000
+IMO Industries, Inc............................ 596,900 3,432,175
Texas Instruments, Inc.......................... 400,000 19,950,000
--------------
46,874,675
--------------
FINANCIAL SERVICES -- 1.2%
American Express Co............................. 159,000 7,095,375
Lehman Brothers Holdings, Inc................... 400,000 9,900,000
Reinsurance Group of America, Inc............... 487,800 18,414,450
Salomon, Inc.................................... 300,000 13,200,000
--------------
48,609,825
--------------
FOODS -- 0.2%
Philip Morris Companies, Inc.................... 94,000 9,776,000
--------------
FOREST PRODUCTS -- 0.8%
Louisiana-Pacific Corp.......................... 700,000 15,487,500
Mead Corp....................................... 350,800 18,197,750
--------------
33,685,250
--------------
FURNITURE -- 0.2%
Leggett & Platt, Inc............................ 380,200 10,550,550
--------------
GAS PIPELINES -- 0.7%
Enron Oil & Gas Co.............................. 332,700 9,274,012
+Global Marine, Inc............................. 615,800 8,544,225
+Seagull Energy Corp............................ 387,200 9,680,000
--------------
27,498,237
--------------
HOLDINGS -- 0.2%
Hanson, PLC, ADR................................ 700,000 9,975,000
--------------
HOUSING RELATED -- 0.1%
+Giant Cement Holdings, Inc..................... 415,200 5,241,900
--------------
INSURANCE -- 2.7%
Allstate Corp................................... 129,599 5,912,954
Equitable of Iowa Companies..................... 372,700 13,230,850
Financial Security Assurance Holdings, Ltd...... 226,200 6,192,225
National Re Corp................................ 207,600 7,836,900
PennCorp Financial Group, Inc................... 544,200 17,278,350
Provident Companies, Inc........................ 177,200 6,556,400
TIG Holdings, Inc............................... 588,300 17,060,700
Trenwick Group, Inc............................. 276,200 13,810,000
W.R. Berkley Corp............................... 192,800 8,049,400
Western National Corp........................... 900,000 16,537,500
--------------
112,465,279
--------------
MACHINERY -- 1.2%
Case Corp....................................... 642,800 30,854,400
DT Industries, Inc.............................. 234,500 4,279,625
+Global Industrial Technologies, Inc............ 390,700 6,251,200
Parker-Hannifin Corp............................ 204,750 8,676,281
--------------
50,061,506
--------------
MEDIA -- 1.8%
Central Newspapers, Inc. (Class 'A' Stock)...... 331,700 12,438,750
Comcast Corp. (Special Class 'A' Stock)......... 9,600 177,600
Gannett Co., Inc................................ 200,000 14,150,000
Hollinger International, Inc.................... 161,400 1,835,925
Knight-Ridder, Inc.............................. 200,000 14,500,000
Lee Enterprises, Inc............................ 337,400 7,971,075
McGraw-Hill, Inc................................ 192,400 8,802,300
</TABLE>
B11
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Media General, Inc. (Class 'A' Stock)........... 123,600 $ 4,604,100
Times Mirror Co. (Class 'A' Stock).............. 280,276 12,192,006
--------------
76,671,756
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 2.9%
BW/IP, Inc. (Class 'A' Stock)................... 379,200 7,204,800
Danaher Corp.................................... 455,600 19,818,600
Donaldson Company, Inc.......................... 400,400 10,310,300
+IDEX Corp...................................... 285,600 10,852,800
+Jan Bell Marketing, Inc........................ 1,000,000 2,625,000
+Litton Industries, Inc......................... 259,700 11,296,950
Mark IV Industries, Inc......................... 601,193 13,601,992
Mascotech, Inc.................................. 650,000 9,587,500
+SPS Transaction Services, Inc.................. 192,800 3,470,400
Trinity Industries, Inc......................... 385,500 13,107,000
+Wolverine Tube, Inc............................ 279,500 9,782,500
York International Corp......................... 199,000 10,298,250
--------------
121,956,092
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.0%
Eastman Kodak Co................................ 138,600 10,776,150
Houghton Mifflin Co............................. 200,000 9,950,000
Whitman Corp.................................... 913,400 22,035,775
--------------
42,761,925
--------------
PETROLEUM -- 1.7%
Amerada Hess Corp............................... 100,000 5,362,500
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 594,400 10,327,700
Elf Aquitaine, ADR.............................. 1,290,100 47,411,175
Parker & Parsley Petroleum Co................... 257,800 7,153,950
--------------
70,255,325
--------------
PETROLEUM SERVICES -- 3.1%
Baker Hughes, Inc............................... 300,000 9,862,500
Coflexip, ADR................................... 700,000 12,162,500
+ENSCO International, Inc....................... 600,000 19,500,000
ICO, Inc........................................ 500,000 2,812,500
+Marine Drilling Co., Inc....................... 1,000,000 10,125,000
+Mesa, Inc...................................... 1,008,400 5,546,200
Murphy Oil Corp................................. 190,800 8,657,550
Noble Affiliates, Inc........................... 400,000 15,100,000
+Noble Drilling Corp............................ 800,000 11,100,000
+Oryx Energy Co................................. 849,400 13,802,750
+Pride Petroleum Services, Inc.................. 360,100 5,131,425
+Western Atlas, Inc............................. 300,000 17,475,000
--------------
131,275,425
--------------
RAILROADS -- 0.5%
Burlington Northern, Inc........................ 246,800 19,959,950
--------------
RETAIL -- 2.6%
+Best Products Company, Inc..................... 1,094,500 1,812,766
+Bombay Company, Inc............................ 923,300 5,770,625
+Burlington Coat Factory Warehouse.............. 244,600 2,568,300
Charming Shoppes, Inc........................... 2,435,000 17,197,188
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 227,900 8,318,350
+Filene's Basement Corp......................... 160,000 780,000
K mart Corp..................................... 2,058,700 25,476,413
Rite Aid Corp................................... 6,000 178,500
TJX Companies, Inc.............................. 464,900 15,690,375
+Toys 'R' Us, Inc............................... 600,000 17,100,000
Woolworth Corp.................................. 600,000 13,500,000
--------------
108,392,517
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RUBBER -- 0.3%
Goodyear Tire & Rubber Co....................... 269,800 $ 13,017,850
--------------
STEEL -- 1.4%
+Bethlehem Steel Corp........................... 1,000,000 11,875,000
LTV Corp........................................ 1,515,000 17,233,125
+Material Sciences Corp......................... 675,000 11,643,750
+National Steel Corp. (Class 'B' Stock)......... 300,000 3,262,500
USX-U.S. Steel Group............................ 450,000 12,768,750
--------------
56,783,125
--------------
TELECOMMUNICATIONS -- 0.4%
Century Telephone Enterprises, Inc.............. 227,300 7,245,188
Frontier Corp................................... 297,700 9,117,063
--------------
16,362,251
--------------
TEXTILES -- 1.2%
+Farah, Inc..................................... 258,500 1,906,438
+Fieldcrest Cannon, Inc......................... 460,000 9,027,500
+Fruit of the Loom, Inc. (Class 'A' Stock)...... 500,000 12,750,000
+Owens-Illinois, Inc............................ 552,700 8,843,200
Phillips-Van Heusen Corp........................ 600,000 7,650,000
+Tultex Corp.................................... 579,000 2,750,250
V.F. Corp....................................... 154,600 9,218,025
--------------
52,145,413
--------------
TOBACCO -- 0.1%
RJR Nabisco Holdings Corp....................... 144,000 4,464,000
--------------
TRUCKING/SHIPPING -- 0.2%
Yellow Corp..................................... 500,000 6,625,000
--------------
TOTAL COMMON STOCKS
(Cost $1,219,180,944).......................................... 1,496,742,951
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.3% SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 0.2%
Salomon Inc..................................... 400,000 10,050,000
--------------
MEDIA -- 0.1%
Times Mirror Co. (Cum. Conv.), Series B......... 119,724 3,217,582
--------------
TOTAL PREFERRED STOCKS
(Cost $12,725,059)............................................. 13,267,582
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 38.9% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 13.8%
Advanta National Bank, C.D.,
6.260%, 09/01/97.............................. $ 10,500,000 10,484,250
Associates Corp. of North America,
6.625%, 05/15/01.............................. 44,500,000 43,983,800
8.375%, 01/15/98.............................. 1,100,000 1,131,339
Banc One Credit Card Master Trust,
7.750%, 12/15/99.............................. 5,100,000 5,192,412
BCH Cayman Islands, Ltd.,
6.500%, 02/15/06.............................. 6,100,000 5,624,688
</TABLE>
B12
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Capital One Bank, M.T.N.
6.660%, 08/17/98, Tranche #TR00055............ $ 10,050,000 $ 10,029,800
6.730%, 06/04/98, Tranche #TR00001............ 16,000,000 15,976,000
6.900%, 04/15/99, Tranche #TR00064............ 22,250,000 22,250,000
CIGNA Mortgage Securities, Inc.,
9.400%, 01/15/02.............................. 1,219,404 1,208,277
CIT Group Holdings, M.T.N.,
5.850%, 03/16/98, Tranche #SR00010............ 25,000,000 24,847,500
6.200%, 04/15/98, Tranche #SR00011............ 10,000,000 9,983,600
Discover Credit Corp., M.T.N.,
9.000%, 04/01/98.............................. 16,000,000 16,595,840
Erac USA Finance Co.,
6.350%, 01/15/01, Tranche #TR00005............ 6,500,000 6,262,344
7.000%, 06/15/00.............................. 25,000,000 24,992,187
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #SR00067........... 3,000,000 3,161,520
10.050%, 06/15/99, Tranche #SR00068........... 500,000 536,710
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,288,600
First USA Bank,
8.200%, 02/15/98.............................. 14,575,000 14,916,929
Ford Motor Credit Co., M.T.N.,
5.668%, 10/04/99, Tranche #TR00537............ 23,750,000 23,733,137
7.060%, 06/06/01, Tranche #TR00675............ 37,000,000 37,092,500
General Motors Acceptance Corp.,
7.125%, 05/01/03.............................. 38,700,000 38,681,424
General Motors Acceptance Corp., M.T.N.,
5.395%, 02/02/99, Tranche #TR00100............ 2,000,000 1,999,782
6.300%, 09/10/97.............................. 5,000,000 5,012,600
7.375%, 07/20/98, Tranche #TR00067............ 4,650,000 4,732,723
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,652,425
NationsBank Corp.,
7.000%, 05/15/03.............................. 24,500,000 24,364,515
Norwest Corp., M.T.N.,
6.250%, 03/15/01.............................. 16,800,000 16,359,840
Okobank,
%6.968%, 09/27/49............................. 18,750,000 19,125,000
**%7.387%, 10/29/49........................... 12,500,000 12,806,250
RHG Finance Corp.,
8.875%, 10/01/05.............................. 8,000,000 8,260,000
Salomon, Inc.,
7.000%, 05/15/99.............................. 42,000,000 42,021,420
Salomon, Inc., M.T.N.,
5.980%, 02/02/98, Tranche #SR00027............ 35,000,000 34,616,400
7.250%, 05/01/01.............................. 8,625,000 8,603,610
Santander Financial Issuances, Inc.,
7.875%, 04/15/05.............................. 3,250,000 3,344,055
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Sears Roebuck Acceptance Corp., M.T.N.,
6.380%, 02/16/99.............................. $ 70,000,000 $ 69,688,500
Standard Credit Card Master Trust,
5.950%, 09/07/03.............................. 4,650,000 4,365,187
Wells Fargo & Co,
6.875%, 04/01/06.............................. 500,000 481,670
--------------
578,406,834
--------------
FOREIGN -- 6.7%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001.......... 5,500,000 5,596,250
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,582,875
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03............................ 7,600,000 7,201,000
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 5,073,225
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,229,375
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,227,250
Grupo Embotellador Mexicana,
**10.750%, 11/19/97........................... 8,015,000 8,255,450
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 7,512,812
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 01/01/49........................... 10,000,000 10,368,900
9.750%, 12/15/98.............................. 16,950,000 18,097,176
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 6,120,453
Quebec, Province of Canada,
7.125%, 02/09/24.............................. 22,155,000 20,244,574
7.500%, 07/15/23.............................. 31,250,000 29,908,125
Republic of Argentina,
9.250%, 02/23/01.............................. 4,300,000 4,138,750
Republic of Columbia,
7.125%, 05/11/98.............................. 2,775,000 2,761,125
7.250%, 02/15/03-02/23/04..................... 27,900,000 26,021,510
8.000%, 06/14/01, Tranche #TR00001............ 20,750,000 20,559,723
8.750%, 10/06/99.............................. 12,325,000 12,586,906
Republic of Italy,
6.875%, 09/27/23.............................. 69,150,000 62,353,938
Telekom Malaysia,
**7.875%, 08/01/25............................ 14,150,000 14,207,449
--------------
282,046,866
--------------
INDUSTRIAL -- 8.8%
Agco Corp.,
8.500%, 03/15/06.............................. 6,500,000 6,370,000
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027............ 3,000,000 3,108,390
Auburn Hills Trust,
12.000%, 05/01/20............................. 10,150,000 14,660,660
B.J. Services Co.,
7.000%, 02/01/06.............................. 4,000,000 3,646,000
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97.............................. 3,750,000 3,758,625
</TABLE>
B13
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Digital Equipment Corp.,
7.125%, 10/15/02.............................. $ 10,000,000 $ 9,701,000
7.750%, 04/01/23.............................. 5,000,000 4,520,400
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. 3,500,000 3,430,000
8.500%, 06/15/03.............................. 18,000,000 17,820,000
10.000%, 02/15/01............................. 2,500,000 2,631,250
Lockheed Martin,
7.700%, 06/15/08.............................. 25,500,000 25,912,463
Lumbermens Mutual Casualty Co.,
9.150%, 07/01/26.............................. 21,500,000 22,243,900
News America Holdings, Inc.,
7.750%, 12/01/45.............................. 73,500,000 65,764,860
9.250%, 02/01/13.............................. 10,000,000 10,868,900
Noble Drilling Corp.,
9.125%, 07/01/06.............................. 3,500,000 3,508,750
Norcen Energy Resources,
7.375%, 05/15/06.............................. 8,000,000 7,898,400
Paramount Communications, Inc.,
7.500%, 01/15/02.............................. 5,425,000 5,351,437
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07.............................. 3,000,000 3,128,640
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 8,950,000 9,410,030
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. 4,000,000 3,958,000
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,498,050
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 44,040,000 42,350,384
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 9,762,200
9.125%, 01/15/13.............................. 12,930,000 13,503,833
9.150%, 02/01/23.............................. 8,000,000 8,271,520
Viacom, Inc.,
6.750%, 01/15/03.............................. 19,345,000 18,252,201
7.750%, 06/01/05.............................. 44,675,000 43,559,019
Weatherford Enterra, Inc.,
7.250%, 05/15/06.............................. 4,000,000 3,958,840
--------------
369,847,752
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 9.6%
Federal National Mortgage Association,
9.050%, 04/10/00.............................. 14,000,000 15,139,740
United States Treasury Notes,
5.000%, 02/15/99.............................. 17,000,000 16,492,720
5.125%, 02/28/98.............................. 12,800,000 12,611,968
5.625%, 11/30/00.............................. 59,800,000 57,921,682
5.875%, 04/30/98.............................. 8,000,000 7,968,720
6.125%, 07/31/00-09/30/00..................... 10,350,000 10,230,809
6.250%, 04/30/01.............................. 14,200,000 14,064,674
6.500%, 04/30/97-05/31/01..................... 19,500,000 19,587,845
6.750%, 04/30/00.............................. 8,000,000 8,083,760
6.875%, 05/15/06-08/15/25..................... 240,200,000 240,708,006
--------------
402,809,924
--------------
TOTAL LONG-TERM BONDS
(Cost $1,638,721,545).......................................... 1,633,111,376
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 24.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 6.8%
Abn-Amro Bank North America,, C.D.,
5.030%, 08/20/96.............................. $ 28,000,000 $ 28,000,353
Advanta Corp.,
5.125%, 11/15/96.............................. 12,535,000 12,491,504
Advanta National Bank, C.D.,
5.800%, 03/19/97, Tranche #SR00009............ 25,000,000 25,071,875
5.840%, 03/14/97, Tranche #SR00007............ 21,500,000 21,373,150
Banque Nationale De Paris, C.D.,
5.400%, 07/11/96.............................. 11,000,000 11,000,092
Barnett Banks, Inc., C.D.,
5.390%, 07/08/96.............................. 19,058,000 19,057,729
Bayerische Hypotheken, C.D.,
5.340%, 09/18/96.............................. 4,000,000 3,999,460
Bayerische Landesbank, C.D.,
5.100%, 07/05/96.............................. 3,000,000 2,999,885
Bayerische Vereinsbank,
5.410%, 10/02/96.............................. 3,000,000 3,000,069
Canadian Imperial Bank, C.D.,
5.520%, 09/09/96.............................. 25,000,000 25,000,000
Capital One Bank,
8.625%, 01/15/97, Tranche #TR00005............ 32,425,000 32,837,770
Commerzbank,
5.310%, 09/23/96.............................. 7,000,000 6,997,074
Commonwealth Bank of Australia,
5.320%, 08/12/96-08/14/96..................... 5,500,000 5,465,272
Deutsche Bank, C.D.,
5.090%, 08/23/96.............................. 23,000,000 23,000,000
Dresdner U.S. Finance, C.D.,
5.690%, 07/16/96.............................. 2,000,000 2,000,076
Engelhard Corp.,
5.428%, 07/08/96.............................. 5,000,000 5,000,000
Lowes Co.,
5.650%, 07/01/96.............................. 920,000 920,000
Marine Midland Bank N.A.,
5.687%, 09/27/96.............................. 6,500,000 6,483,750
NBD Bank, N.A.,
5.050%, 08/01/96, Tranche #TR00280............ 5,000,000 4,998,338
Rabobank Nederland C.D.,
5.020%, 08/22/96.............................. 5,000,000 5,000,000
Societe Generale Bank,
5.400%, 07/12/96.............................. 27,000,000 27,000,133
Societe Generale Bank C.D.,
5.340%, 07/02/96.............................. 5,000,000 5,000,002
Union Bank of Switzerland C.D.,
5.050%, 07/08/96.............................. 2,000,000 1,999,846
United States National Bank of Oregon,
5.320%, 07/30/96, Tranche #TR00029............ 5,000,000 4,999,791
--------------
283,696,169
--------------
COMMERCIAL PAPER -- 10.8%
Allied-Signal Corp.,
5.400%, 07/12/96.............................. 7,850,000 7,837,047
American Honda Finance Corp.,
5.400%, 07/11/96.............................. 7,115,000 7,104,327
5.480%, 08/26/96.............................. 2,000,000 1,982,951
5.500%, 07/09/96.............................. 2,000,000 1,997,556
</TABLE>
B14
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Associates Corp. of North America,
5.400%, 07/29/96.............................. $ 15,502,000 $ 15,436,892
Bank of New York Co.,
5.320%, 07/02/96.............................. 3,000,000 2,999,557
Barnett Banks, Inc.,
5.420%, 07/09/96.............................. 2,000,000 1,997,591
5.500%, 07/01/96.............................. 12,600,000 12,600,000
Bell Atlantic Network,
5.400%, 07/10/96.............................. 6,250,000 6,241,562
Beneficial Corp.,
5.380%, 08/21/96.............................. 9,000,000 8,931,405
Bradford & Bingley Building Society,
5.350%, 07/12/96.............................. 2,000,000 1,996,731
Caterpillar Financial Services Corp.,
5.250%, 09/19/96.............................. 2,000,000 1,976,667
Ciesco, L.P.,
5.350%, 07/26/96.............................. 5,000,000 4,981,424
5.380%, 08/08/96.............................. 2,000,000 1,988,642
CIT Group Holdings, Inc.,
5.330%, 08/12/96-08/13/96..................... 19,000,000 18,880,075
Coca Cola Enterprises, Inc.,
5.400%, 07/16/96.............................. 2,179,000 2,174,097
5.450%, 08/19/96.............................. 3,000,000 2,977,746
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 15,328,000 15,328,000
Corporate Receivables Corp.,
5.400%, 07/23/96-08/12/96..................... 3,711,000 3,690,621
Countrywide Home Loan,
5.400%, 07/15/96.............................. 3,000,000 2,993,700
5.420%, 07/22/96.............................. 2,000,000 1,993,677
5.430%, 08/20/96-08/22/96..................... 6,000,000 5,953,845
Duracell Inc.,
5.400%, 07/09/96-07/22/96..................... 6,575,000 6,559,310
Enterprise Funding Corp,
5.400%, 07/24/96-08/01/96..................... 7,029,000 6,998,412
5.410%, 08/12/96.............................. 3,821,000 3,796,883
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,000,000 5,001,250
Finova Capital Corp.,
5.420%, 07/11/96.............................. 3,000,000 2,995,483
5.460%, 08/12/96.............................. 11,000,000 10,929,930
First Data Corp.,
5.450%, 07/23/96-07/30/96..................... 13,231,000 13,178,211
Ford Motor Credit Co.,
5.370%, 07/10/96.............................. 22,000,000 21,970,465
General Electric Capital Corp.,
5.330%, 08/12/96.............................. 10,000,000 9,937,817
General Motors Acceptance Corp.,
6.700%, 04/30/97, Tranche #TR00319............ 11,000,000 11,048,290
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,338,280
General Signal Corp.,
5.400%, 07/10/96.............................. 5,200,000 5,192,980
GTE Corp.,
5.430%, 07/22/96.............................. 8,000,000 7,974,660
Honeywell Inc.,
5.400%, 07/02/96.............................. 20,000,000 19,997,000
Household Finance Corp.,
5.380%, 08/20/96.............................. 5,000,000 4,962,639
Lehman Brothers Holdings, Inc.,
5.550%, 07/08/96.............................. 21,678,000 21,654,606
Merrill Lynch & Co. Inc,
5.400%, 07/12/96.............................. 12,000,000 11,980,200
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Mitsubishi Intl. Corp.,
5.330%, 07/08/96.............................. $ 7,512,000 $ 7,504,215
Morgan Stanley Group, Inc.,
5.600%, 07/01/96.............................. 7,000,000 7,000,000
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 9,000,000 9,000,000
NYNEX Corporation,
5.340%, 07/22/96.............................. 2,000,000 1,993,770
5.420%, 08/16/96.............................. 3,000,000 2,979,223
PHH Corporation,
5.450%, 07/11/96.............................. 4,000,000 3,993,944
Philip Morris Companies, Inc.,
5.300%, 07/19/96.............................. 2,000,000 1,994,700
5.390%, 07/25/96.............................. 10,000,000 9,964,067
PNC Funding Corp.,
5.430%, 07/08/96.............................. 5,000,000 4,994,721
Preferred Receivables Funding Corp.,
5.330%, 07/17/96.............................. 4,000,000 3,990,524
5.370%, 07/24/96.............................. 17,625,000 17,564,532
Rank Xerox Capital,
5.300%, 07/18/96.............................. 13,700,000 13,665,712
Sears Roebuck Acceptance Corp.,
5.400%, 07/25/96.............................. 2,000,000 1,992,800
Smith Barney Inc.,
5.360%, 07/02/96.............................. 2,000,000 1,999,702
5.380%, 07/18/96.............................. 5,000,000 4,987,297
Special Purpose A/R Cooperative Corp.,
5.430%, 07/08/96.............................. 3,000,000 2,996,832
Transamerica Corp.,
5.310%, 10/15/96.............................. 10,130,000 9,971,617
Union Electric Company,
5.350%, 07/01/96.............................. 4,000,000 4,000,000
United States West Commerce, Inc.,
5.450%, 07/15/96.............................. 2,000,000 1,995,761
USL Capital Corp.,
5.400%, 07/01/96.............................. 12,000,000 12,000,000
5.420%, 07/01/96.............................. 5,000,000 5,000,000
WCP Funding, Inc.,
5.400%, 07/25/96.............................. 5,000,000 4,982,000
Westpac Capital Corp.,
5.350%, 07/02/96.............................. 5,000,000 4,999,257
Whirlpool Financial Corp.,
5.400%, 07/25/96.............................. 7,000,000 6,974,800
Xerox Corp.,
5.320%, 07/08/96.............................. 8,000,000 7,991,724
--------------
454,117,727
--------------
MEDIUM TERM NOTES -- 3.8%
Advanta Corp Mid,
8.180%, 02/09/97, Tranche #TR00028............ 10,000,000 10,175,000
American General Financial Credit,
7.750%, 01/15/97.............................. 3,700,000 3,739,748
Associates Corp. of North America,
4.750%, 08/01/96.............................. 2,000,000 1,998,614
7.730%, 10/31/96.............................. 2,000,000 2,013,938
Beneficial Corp.,
9.350%, 02/03/97, Tranche #TR00156............ 3,500,000 3,573,420
Chrysler Financial Corp.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,295,620
</TABLE>
B15
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
First National Bank of Chicago,
5.500%, 10/03/96, Tranche #TR00217............ $ 7,000,000 $ 7,000,000
General Electric Capital,
7.780%, 12/30/96.............................. 2,000,000 2,021,660
General Motors Acceptance Corp.,
6.260%, 10/21/97, Tranche #TR00065............ 8,000,000 7,997,409
7.600%, 02/10/97, Tranche #TR00137............ 2,000,000 2,026,675
8.250%, 08/01/96, Tranche #TR00674............ 7,000,000 7,003,992
8.750%, 08/01/96.............................. 1,000,000 1,002,547
Grupo Condumex, SA,
**6.250%, 07/27/96............................ 4,300,000 4,300,000
Huntington National Bank,
4.480%, 10/14/96.............................. 1,000,000 996,289
Mellon Bank N.A.,
6.200%, 11/01/95, Tranche #TR00029............ 10,000,000 10,005,716
Merrill Lynch & Co., Inc.,
%5.875%, 09/13/96, Tranche #TR00197........... 27,000,000 26,998,411
NationsBank of Texas N.A.,
6.820%, 07/10/96, Tranche #TR00112............ 6,000,000 6,000,038
Norwest Corp.,
7.875%, 01/30/97, Tranche #TR00188............ 2,000,000 2,023,808
Sears Roebuck Acceptance Corp.,
9.000%, 09/15/96.............................. 2,000,000 2,012,300
SMM Trust,
5.313%, 12/16/96.............................. 15,790,000 15,789,256
%5.938%, 12/16/96............................. 27,000,000 26,998,823
Student Loan Marketing Association,
%5.600%, 08/09/96............................. 7,650,000 7,648,445
--------------
158,621,709
--------------
PROMISSORY NOTE -- 0.1%
Philip Morris Companies, Inc.,
8.875%, 07/01/96.............................. 4,600,000 4,600,000
--------------
REPURCHASE AGREEMENT -- 2.1%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 90,569,000 90,569,000
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.0%
United States Treasury Note,
7.500%, 01/31/97.............................. $ 22,000,000 $ 22,290,550
US Treasury Bill,
5.611%, 05/01/97.............................. 19,000,000 18,148,040
--------------
40,438,590
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,032,043,195
--------------
OTHER ASSETS -- 0.6%
(net of liabilities)........................................... 23,591,225
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,198,756,329
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
L.P. Limited Partnership
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $62,386,210.90. The aggregate value, $62,735,299 is
approximately 1.5% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 58.0% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.7%
Boeing Co....................................... 582,600 $ 50,759,025
Lockheed Martin Corp............................ 350,000 29,400,000
United Technologies Corp........................ 375,000 43,125,000
--------------
123,284,025
--------------
AIRLINES -- 0.6%
+AMR Corp....................................... 300,000 27,300,000
--------------
AUTOS - CARS & TRUCKS -- 0.9%
Chrysler Corp................................... 650,000 40,300,000
--------------
BANKS AND SAVINGS & LOANS -- 2.7%
Banc One Corp................................... 750,000 25,500,000
BankAmerica Corp................................ 300,000 22,725,000
Chase Manhattan Corp............................ 279,248 19,721,890
Citicorp........................................ 335,000 27,679,375
State Street Boston Corp........................ 500,000 25,500,000
--------------
121,126,265
--------------
BEVERAGES -- 0.4%
Anheuser-Busch Companies, Inc................... 250,000 18,750,000
--------------
CHEMICALS -- 1.1%
Agrium, Inc..................................... 400,000 5,243,750
E.I. du Pont de Nemours & Co.................... 400,000 31,650,000
W.R. Grace & Co................................. 200,000 14,175,000
--------------
51,068,750
--------------
CHEMICALS - SPECIALTY -- 0.4%
Praxair, Inc.................................... 413,900 17,487,275
--------------
COMMERCIAL SERVICES -- 0.4%
+CUC International, Inc......................... 500,000 17,750,000
--------------
COMPUTER SERVICES -- 6.6%
3Com Corp....................................... 600,000 27,450,000
+America Online, Inc............................ 600,000 26,250,000
+Bay Networks, Inc.............................. 525,000 13,518,750
+Cisco Systems, Inc............................. 1,000,000 56,625,000
Computer Associates International, Inc.......... 500,000 35,625,000
+Computer Sciences Corp......................... 225,000 16,818,750
Electronic Data Systems Corp.................... 542,400 29,154,000
First Data Corp................................. 422,500 33,641,562
+Gateway 2000, Inc.............................. 392,700 13,351,800
HBO & Co........................................ 300,000 20,325,000
+Microsoft Corp................................. 125,000 15,015,625
+Sun Microsystems, Inc.......................... 215,000 12,658,125
--------------
300,433,612
--------------
CONSTRUCTION -- 0.4%
Fluor Corp...................................... 250,000 16,343,750
--------------
COSMETICS & SOAPS -- 0.8%
Procter & Gamble Co............................. 400,000 36,250,000
--------------
DIVERSIFIED GAS -- 0.4%
Cross Timbers Oil Co............................ 700,000 17,325,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.7%
Alco Standard Corp.............................. 300,000 13,575,000
International Business Machines Corp............ 200,000 19,800,000
--------------
33,375,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 6.5%
American Home Products Corp..................... 800,000 48,100,000
Becton, Dickinson & Co.......................... 400,000 32,100,000
+Boston Scientific Corp......................... 600,000 27,000,000
Ciba-Geigy AG, ADR.............................. 750,000 45,703,125
Genzyme Corp.................................... 100,000 5,025,000
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Johnson & Johnson............................... 450,000 $ 22,275,000
Pfizer, Inc..................................... 700,000 49,962,500
Pharmacia & Upjohn, Inc......................... 1,500,000 66,562,500
--------------
296,728,125
--------------
ELECTRICAL EQUIPMENT -- 1.9%
+Applied Materials, Inc......................... 725,000 22,112,500
Baldor Electric Co.............................. 1 22
Belden, Inc..................................... 510,000 15,300,000
+FORE Systems, Inc.............................. 400,000 14,450,000
Westinghouse Electric Corp...................... 1,900,000 35,625,000
--------------
87,487,522
--------------
ELECTRONICS -- 2.4%
+ADT Ltd........................................ 1,200,000 22,650,000
Hewlett-Packard Co.............................. 225,000 22,415,625
Intel Corp...................................... 500,000 36,718,750
+Maxim Integrated Products, Inc................. 900,000 24,581,250
--------------
106,365,625
--------------
FINANCIAL SERVICES -- 1.5%
MBNA Corp....................................... 1,300,000 37,050,000
Morgan Stanley Group, Inc....................... 600,000 29,475,000
--------------
66,525,000
--------------
FOODS -- 0.8%
Nabisco Holdings Corporation (Class 'A'
Stock)........................................ 1,080,000 38,205,000
--------------
FOREST PRODUCTS -- 1.3%
Kimberly-Clark Corp............................. 400,000 30,900,000
Willamette Industries, Inc...................... 480,000 28,560,000
--------------
59,460,000
--------------
HOSPITAL MANAGEMENT -- 1.2%
Columbia/HCA Healthcare Corp.................... 500,000 26,687,500
Guidant Corp.................................... 250,000 12,312,500
+Tenet Healthcare Corp.......................... 800,000 17,100,000
--------------
56,100,000
--------------
INSURANCE -- 3.7%
Aetna Life & Casualty Co........................ 650,000 46,475,000
Allstate Corp................................... 568,000 25,915,000
American International Group, Inc............... 250,000 24,656,250
CIGNA Corp...................................... 250,000 29,468,750
Travelers Group, Inc............................ 847,500 38,667,188
W.R. Berkley Corp............................... 48,300 2,016,525
--------------
167,198,713
--------------
LEISURE -- 1.5%
+Bally Entertainment Corporation................ 700,000 19,250,000
Carnival Corp. (Class 'A' Stock)................ 1,100,000 31,762,500
+Mirage Resorts, Inc............................ 350,000 18,900,000
--------------
69,912,500
--------------
MACHINERY -- 0.6%
Case Corp....................................... 600,000 28,800,000
--------------
MEDIA -- 1.3%
Comcast Corp. (Class 'A' Stock)................. 1,000,000 18,375,000
+Tele-Communications, Inc. (Series 'A' Stock)... 1,500,000 27,187,500
Tele-Communications, Inc. (Series 'A' Stock).... 431,900 11,445,350
--------------
57,007,850
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.7%
General Electric Co............................. 700,000 60,550,000
Illinois Tool Works, Inc........................ 450,000 30,431,250
</TABLE>
B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Pentair, Inc.................................... 400,000 $ 12,000,000
Tyco International, Ltd......................... 1,000,000 40,750,000
York International Corp......................... 500,000 25,875,000
--------------
169,606,250
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
+DeVRY, Inc..................................... 292,300 13,153,500
--------------
PETROLEUM -- 1.9%
Mobil Corp...................................... 375,000 42,046,875
Royal Dutch Petroleum Co., ADR.................. 300,000 46,125,000
--------------
88,171,875
--------------
PETROLEUM SERVICES -- 1.9%
Baker Hughes, Inc............................... 581,700 19,123,388
Halliburton Co.................................. 700,000 38,850,000
Total SA, ADR................................... 700,000 25,987,500
--------------
83,960,888
--------------
RESTAURANTS -- 0.3%
+Outback Steakhouse, Inc........................ 400,000 13,793,750
--------------
RETAIL -- 4.6%
+Federated Department Stores, Inc............... 1,250,000 42,656,250
+General Nutrition Companies, Inc............... 500,000 8,750,000
Home Depot, Inc................................. 400,000 21,600,000
Nike, Inc. (Class 'B' Stock).................... 275,000 28,256,250
Nine West Group................................. 600,000 30,675,000
Office Depot, Inc............................... 900,000 18,337,500
+Price/Costco, Inc.............................. 780,000 16,867,500
+Safeway, Inc................................... 680,000 22,440,000
+Staples, Inc................................... 1,051,500 20,504,250
--------------
210,086,750
--------------
TELECOMMUNICATIONS -- 3.6%
AT&T Corp....................................... 800,000 49,600,000
Frontier Corp................................... 800,000 24,500,000
+Glenayre Technologies, Inc..................... 300,000 15,000,000
Lucent Technologies, Inc........................ 500,000 18,937,500
MCI Communications Corp......................... 1,000,000 25,625,000
+Newbridge Networks Corp........................ 450,000 29,475,000
--------------
163,137,500
--------------
TOBACCO -- 0.9%
RJR Nabisco Holdings Corp....................... 1,250,000 38,750,000
--------------
TOTAL COMMON STOCKS
(Cost $2,271,775,720).......................................... 2,635,244,525
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.6% SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 0.2%
Salomon, Inc.................................... 400,000 10,050,000
--------------
LEISURE -- 0.4%
Bally Entertainment Corporation (Conv.)......... 600,000 15,675,000
--------------
TOTAL PREFERRED STOCKS
(Cost $22,630,000)............................................. 25,725,000
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 0.2% VALUE VALUE
------------- --------------
<S> <C> <C>
RESTAURANTS -- 0.0%
+Boston Chicken, Inc.,
Zero Coupon, 06/01/15......................... $ 2,500,000 734,375
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 0.2%
+Federated Department Stores, Inc.,
5.000%, 10/01/03.............................. $ 8,000,000 $ 9,120,000
--------------
TOTAL CONVERTIBLE BONDS
(Cost $9,774,598).............................................. 9,854,375
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 31.2% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 11.1%
Associates Corp. of North America,
6.625%, 05/15/01.............................. 15,500,000 15,320,200
Banc One Credit Card Master Trust,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,000,000 5,090,600
BCH Cayman Islands, Ltd.,
6.500%, 02/15/06.............................. 6,000,000 5,532,480
Capital One Bank,
6.730%, 06/04/98, Tranche #TR00001............ 26,000,000 25,961,000
Capital One Bank, M.T.N.
6.660%, 08/17/98, Tranche #TR00055............ 11,175,000 11,152,538
6.900%, 04/15/99, Tranche #TR00064............ 22,250,000 22,250,000
Chase Manhattan Credit Card Master Trust,
7.400%, 05/15/00, Series 1992-1............... 5,000,000 5,039,050
CIT Group Holdings, M.T.N.,
5.850%, 03/16/98, Tranche #SR00010............ 25,000,000 24,847,500
6.200%, 04/15/98, Tranche #SR00011............ 19,100,000 19,068,676
Discover Credit Corp., M.T.N.,
9.000%, 04/01/98.............................. 10,000,000 10,372,400
Erac USA Finance Co., M.T.N.,
6.350%, 01/15/01.............................. 3,500,000 3,372,031
7.000%, 06/15/00, Tranche #TR00005............ 13,500,000 13,495,781
First USA Bank,
8.200%, 02/15/98.............................. 13,000,000 13,304,980
First USA Bank, M.T.N.,
6.238%, 10/16/97.............................. 20,000,000 20,000,000
Ford Motor Credit Corp., M.T.N.,
5.668%, 10/04/99, Tranche #TR00537............ 6,250,000 6,245,562
7.060%, 06/06/01, Tranche #TR00675............ 13,000,000 13,032,500
General Motors Acceptance Corp.,
7.125%, 05/01/03.............................. 22,300,000 22,289,296
General Motors Acceptance Corp., M.T.N.,
7.375%, 07/20/98, Tranche #TR00667............ 4,500,000 4,580,055
7.875%, 03/15/00.............................. 5,000,000 5,180,550
Lumbermens Mutual Casualty Co.,
**9.150%, 07/01/26............................ 19,500,000 20,174,700
MBNA Master Credit Card Trust,
%5.745%, 01/15/02, Series 1994-1, Class A..... 7,500,000 7,516,350
NationsBank Corp.,
7.000%, 05/15/03.............................. 22,000,000 21,878,340
Norwest Corp., M.T.N.,
6.250%, 03/15/01.............................. 16,000,000 15,580,800
</TABLE>
B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Okobank,
%6.968%, 09/27/49............................. $ 18,750,000 $ 19,125,000
**%7.387%, 10/29/49........................... 3,500,000 3,539,375
%7.387%, 10/29/49............................. 9,000,000 9,101,250
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 7,600,000 7,990,640
RHG Finance Corp.,
8.875%, 10/01/05.............................. 7,000,000 7,227,500
Salomon, Inc.,
7.000%, 05/15/99.............................. 34,600,000 34,617,646
7.250%, 05/01/01.............................. 8,625,000 8,603,610
Salomon, Inc., M.T.N.,
5.980%, 02/02/98, Tranche #SR00027............ 23,500,000 23,242,440
Santander Financial Issuances, Inc.,
7.875%, 04/15/05.............................. 3,000,000 3,086,820
Sears Roebuck Acceptance Corp., M.T.N.,
6.380%, 02/16/99.............................. 72,000,000 71,679,600
Standard Credit Card Master Trust,
5.950%, 09/07/03, Series 1993-2A.............. 4,500,000 4,224,375
Wells Fargo & Co,
6.875%, 04/01/06.............................. 500,000 481,670
--------------
504,370,940
--------------
FOREIGN -- 6.1%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001.......... 5,500,000 5,596,250
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 2,300,000 2,389,125
**9.750%, 08/26/99............................ 5,000,000 5,193,750
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03............................ 5,650,000 5,353,375
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 15,100,000 14,760,250
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,229,375
Empresas La Moderna, SA,
10.250%, 11/12/97............................. 2,000,000 2,045,000
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 6,300,000 6,394,500
Grupo Embotellador Mexicana,
**10.750%, 11/19/97........................... 8,020,000 8,260,600
Grupo Televisa, SA, M.T.N.,
10.000%, 11/09/97............................. 4,000,000 4,145,000
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 01/01/49........................... 9,000,000 9,332,010
9.750%, 12/15/98.............................. 16,760,000 17,894,317
National Bank of Romania,
**9.750%, 06/25/99............................ 9,000,000 9,049,500
Quebec, Province of Canada,
7.125%, 02/09/24.............................. 22,150,000 20,240,005
7.500%, 07/15/23.............................. 31,250,000 29,908,125
Republic of Argentina,
9.250%, 02/23/01.............................. 5,200,000 5,005,000
Republic of Columbia,
7.125%, 05/11/98.............................. 2,700,000 2,686,500
7.250%, 02/15/03-02/23/04..................... 23,300,000 21,675,718
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
**8.000%, 06/14/01, M.T.N., Tranche
#TR00001.................................... $ 16,500,000 $ 16,348,695
8.750%, 10/06/99.............................. 12,300,000 12,561,375
Republic of Italy,
6.875%, 09/27/23.............................. 66,850,000 60,279,982
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B................... 2,000,000 1,970,000
Telekom Malaysia,
**7.875%, 08/01/25............................ 8,370,000 8,403,982
--------------
277,722,434
--------------
INDUSTRIAL -- 8.8%
Agco Corp.,
**8.500%, 03/15/06............................ 6,500,000 6,370,000
Auburn Hills Trust,
12.000%, 05/01/20............................. 9,650,000 13,938,460
B.J. Services Co.,
7.000%, 02/01/06.............................. 4,000,000 3,646,000
Bally's Grand, Inc.,
10.375%, 12/15/03............................. 5,000,000 5,487,500
Comdisco, Inc.,
7.250%, 04/15/98.............................. 10,000,000 10,120,500
Delta Air Lines, Inc.,
9.875%, 01/01/98.............................. 6,000,000 6,271,080
Digital Equipment Corp.,
7.125%, 10/15/02.............................. 10,300,000 9,992,030
7.750%, 04/01/23.............................. 30,380,000 27,465,950
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. 6,600,000 6,468,000
8.500%, 06/15/03.............................. 66,000,000 65,340,000
10.000%, 02/15/01............................. 2,500,000 2,631,250
Lockheed Martin,
7.700%, 06/15/08.............................. 18,500,000 18,799,238
News America Holdings, Inc.,
7.750%, 12/01/45.............................. 60,500,000 54,132,980
9.250%, 02/01/13.............................. 10,000,000 10,868,900
Noble Drilling Corp.,
9.125%, 07/01/06.............................. 3,500,000 3,508,750
Norcen Energy Resources,
7.375%, 05/15/06.............................. 10,750,000 10,613,475
Paramount Communications, Inc.,
7.500%, 01/15/02.............................. 5,400,000 5,326,776
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07.............................. 3,000,000 3,128,640
RJR Nabisco, Inc.,
8.750%, 08/15/05.............................. 3,000,000 2,968,500
Service Corp. International,
7.000%, 06/01/15.............................. 2,500,000 2,498,050
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33..................... 38,250,000 36,771,996
Time Warner, Inc.,
7.750%, 06/15/05.............................. 10,000,000 9,762,200
9.125%, 01/15/13.............................. 8,790,000 9,180,100
9.150%, 02/01/23.............................. 8,000,000 8,271,520
Transco Energy Co.,
9.125%, 05/01/98.............................. 14,000,000 14,548,660
Viacom, Inc.,
6.750%, 01/15/03.............................. 13,750,000 12,973,263
7.750%, 06/01/05.............................. 40,175,000 39,171,429
--------------
400,255,247
--------------
</TABLE>
B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.2%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... $ 11,800,000 $ 2,142,408
United States Treasury Notes,
5.125%, 02/28/98, Series 1998................. 39,100,000 38,525,621
6.250%, 04/30/01.............................. 5,850,000 5,794,250
6.500%, 05/31/01.............................. 3,200,000 3,201,504
6.875%, 05/15/06-08/15/25..................... 173,250,000 173,202,530
7.500%, 05/15/02, Series 2002................. 4,000,000 4,187,480
7.750%, 12/31/99, Series 1999................. 6,750,000 7,032,623
--------------
234,086,416
--------------
TOTAL LONG-TERM BONDS
(Cost $1,420,442,225).......................................... 1,416,435,037
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 9.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK/FINANCES INSTRUMENTS -- 2.0%
Abn-Amro Bank North America, C.D.,
5.030%, 08/20/96.............................. 5,000,000 5,000,063
Advanta Corp.,
5.125%, 11/15/96.............................. 9,000,000 8,968,770
Advanta National Bank, C.D.,
6.140%, 02/28/97.............................. 17,000,000 17,128,138
American Express Centurian Bank,
%5.470%, 11/29/96, Tranche #TR000128.......... 573,000 572,919
Associates Corp. of North America,
4.625%, 11/30/96.............................. 1,000,000 995,984
Banque Nationale de Paris,
5.350%, 08/05/96.............................. 1,000,000 999,964
5.420%, 07/11/96, C.D......................... 4,000,000 4,000,054
Barnett Banks, Inc., C.D.,
5.390%, 07/08/96.............................. 3,242,000 3,241,954
Canadian Imperial Bank, C.D.,
5.520%, 09/09/96.............................. 3,000,000 3,000,000
Capital One Bank, M.T.N.
8.625%, 01/15/97, Tranche #TR00005............ 19,000,000 19,241,870
Comerica Bank of Detroit,, M.T.N.,
%5.418%, 02/14/97, Tranche #TR00006........... 569,000 568,725
Commerzbank, C.D.,
5.310%, 09/23/96.............................. 1,000,000 999,582
Deutsche Bank, C.D.,
5.000%, 08/12/96.............................. 1,000,000 999,434
Engelhard Corp.,
5.428%, 07/08/96.............................. 1,000,000 1,000,000
Ford Motor Credit Corp.,
8.000%, 10/01/96.............................. 1,000,000 1,005,648
General Electric Capital Corp.,
8.000%, 02/01/97.............................. 1,500,000 1,522,125
General Motors Acceptance Corp.,
8.000%, 10/01/96.............................. 500,000 502,765
8.250%, 08/01/96.............................. 1,000,000 1,002,070
7.750%, 04/15/97.............................. 575,000 582,779
Gillette Co.,
4.750%, 08/15/96.............................. 600,000 599,358
Household Finance Corp.,
7.625%, 12/15/96.............................. 1,500,000 1,512,586
International Lease Finance Corp.,
6.375%, 11/01/96.............................. 2,000,000 2,004,580
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Marine Midland Bank N.A.,
%5.687%, 09/27/96............................. $ 6,500,000 $ 6,483,750
Societe Generale NA, C.D.,
5.340%, 07/02/96.............................. 1,000,000 1,000,001
5.400%, 07/12/96.............................. 5,000,000 5,000,027
Suntrust Banks, Inc.,
5.350%, 08/12/96.............................. 1,000,000 993,758
U.S. National Bank of Oregon,
5.320%, 07/30/96, Tranche #TR00029............ 1,000,000 999,958
--------------
89,926,862
--------------
COMMERCIAL PAPER -- 1.8%
American Express Credit Corp.,
4.900%, 08/16/96.............................. 2,000,000 1,987,478
American Honda Finance Corp.,
5.400%, 07/25/96.............................. 1,000,000 996,400
5.480%, 08/26/96.............................. 1,000,000 991,476
5.500%, 07/09/96.............................. 1,000,000 998,778
Associates Corp. of North America,
5.400%, 07/29/96.............................. 4,631,000 4,611,550
Bank of New York,
5.320%, 07/02/96.............................. 1,000,000 999,852
Bell Atlantic Financial Services, Inc.
5.380%, 07/16/96.............................. 1,900,000 1,895,741
Beneficial Corp.,
5.380%, 08/21/96.............................. 2,000,000 1,984,757
Chubb Capital Corp.,
5.330%, 07/11/96.............................. 1,000,000 998,519
Ciesco, L.P.,
5.300%, 07/12/96.............................. 1,000,000 998,381
CIT Group Holdings, Inc.,
5.330%, 08/13/96.............................. 4,000,000 3,974,534
Commonwealth Bank of Australia,
5.320%, 08/14/96.............................. 1,000,000 993,498
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 1,642,000 1,642,000
Countrywide Funding Corp.,
5.400%, 07/23/96.............................. 1,000,000 996,700
5.430%, 08/22/96.............................. 1,000,000 992,157
Deutsche Bank
5.090%, 08/23/96.............................. 2,000,000 2,000,000
Enterprise Funding Corp,
5.400%, 07/24/96.............................. 1,000,000 996,550
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,100,000 5,101,275
Finova Capital Corp.,
5.450%, 07/16/96.............................. 1,400,000 1,396,821
5.470%, 07/22/96.............................. 1,000,000 996,809
First Data Corp.,
5.450%, 07/23/96.............................. 2,571,000 2,562,437
Ford Motor Credit Corp.,
5.370%, 07/10/96.............................. 1,000,000 998,658
General Signal Corp,
5.400%, 07/09/96.............................. 800,000 799,040
GTE Corp.,
5.430%, 07/30/96.............................. 1,000,000 995,626
Honeywell Inc.,
5.400%, 07/02/96.............................. 2,866,000 2,865,570
IBM Credit Corp.,
5.370%, 07/23/96.............................. 1,500,000 1,495,078
Lehman Brothers Holdings, Inc.,
5.550%, 07/08/96.............................. 4,220,000 4,215,446
Merrill Lynch & Co., Inc.,
5.400%, 07/12/96.............................. 3,000,000 2,995,050
</TABLE>
B20
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Morgan Stanley Group, Inc.,
5.290%, 07/09/96.............................. $ 1,137,000 $ 1,135,663
5.330%, 07/10/96.............................. 2,000,000 1,997,335
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 2,000,000 2,000,000
NYNEX Corp.,
5.420%, 07/22/96.............................. 1,000,000 996,838
Philip Morris Companies, Inc.,
5.390%, 07/25/96.............................. 5,000,000 4,982,033
PNC Funding Corp.,
5.430%, 07/08/96.............................. 1,000,000 998,944
Preferred Receivables Funding Corp.,
5.300%, 08/22/96.............................. 2,000,000 1,984,689
5.370%, 07/15/96.............................. 2,000,000 1,995,823
Rank Xerox Capital,
5.300%, 07/18/96.............................. 2,000,000 1,994,994
Signal Capital Corp.,
5.400%, 07/10/96.............................. 2,000,000 1,997,300
Smith Barney, Inc.,
5.380%, 07/18/96.............................. 1,000,000 997,460
Transamerica Corp.,
5.310%, 10/15/96.............................. 2,741,000 2,698,145
USL Capital Corp.,
5.400%, 07/01/96.............................. 2,000,000 2,000,000
Westpac Capital Corp.,
5.350%, 07/02/96.............................. 1,000,000 999,851
Whirlpool Financial Corp.,
5.400%, 07/25/96.............................. 1,500,000 1,494,600
Xerox Corp.,
5.320%, 07/08/96.............................. 2,200,000 2,197,724
--------------
82,951,580
--------------
TERM NOTES -- 1.0%
American Express Centurian Bank,
%5.484%, 01/13/97, Tranche #TR00099........... 1,000,000 1,000,023
Associates Corp. of North America,
7.730%, 10/31/96, Tranche #SR00324............ 1,000,000 1,006,969
Ford Motor Credit Corp,
5.750%, 11/04/96, Tranche #TR00095............ 1,000,000 1,000,864
7.950%, 03/27/97.............................. 465,000 472,243
General Motors Acceptance Corp.,
5.300%, 07/12/96, Tranche #TR00760............ 1,500,000 1,499,739
%5.440%, 10/21/96, Tranche #TR00065........... 1,000,000 999,676
7.000%, 06/02/97, Tranche #TR00476............ 6,000,000 6,042,000
**7.750%, 02/20/97, Tranche #TR00162.......... 250,000 253,065
7.850%, 03/05/97, Tranche #TR00187............ 4,350,000 4,403,205
7.900%, 03/13/97, Tranche #TR00205............ 500,000 506,402
**7.000%, 05/19/97, Tranche #TR00041.......... 10,000,000 10,070,204
Merrill Lynch & Co., Inc.,
%5.875%, 09/13/96, Tranche #TR00197........... 4,000,000 3,999,765
National Australia Bank, Ltd.,
5.750%, 10/02/96, Tranche #TR00003............ 2,000,000 2,000,034
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Nationsbank Corp.,
%5.500%, 11/18/96, Tranche #TR00026........... $ 500,000 $ 500,115
NBD Bank, N.A.,
5.320%, 07/29/96, Tranche #TR00287............ 2,000,000 1,999,914
Rabobank Nederland,
4.800%, 12/26/96, Tranche #TR00203............ 1,600,000 1,594,828
SMM Trust,
%5.938%, 12/16/96............................. 6,375,000 6,374,722
Wells Fargo & Company,
%5.438%, 08/16/96, Tranche #TR00201........... 175,000 174,999
--------------
43,898,763
--------------
PROMISSORY NOTES -- 0.0%
Philip Morris Companies, Inc.,
8.875%, 07/01/96.............................. 1,000,000 1,000,000
--------------
REPURCHASE AGREEMENTS -- 5.0%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 226,483,000 226,483,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Notes,
7.500%, 01/31/97.............................. 3,000,000 3,039,560
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 447,299,765
--------------
OTHER ASSETS -- 0.1%
(net of liabilities)........................................... 5,636,097
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,540,194,799
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $91,448,870. The aggregate value, $92,512,735 is
approximately 2.0% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
%Indicates a variable rate security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B21
<PAGE>
HIGH YIELD BOND PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 0.1% SHARES VALUE
------------- --------------
<S> <C> <C>
BEVERAGES -- 0.0%
**+Dr. Pepper Bottling Holdings, Inc. (Class 'B'
Stock)........................................ 5,807 $ 27,583
--------------
FINANCIAL SERVICES -- 0.1%
**+PM Holdings Corp............................. 1,103 275,750
--------------
RETAIL -- 0.0%
**+Loehmann's Holdings, Inc..................... 4,403 101,269
--------------
TELECOMMUNICATIONS -- 0.0%
**Pagemart Nationwide, Inc...................... 13,125 139,453
--------------
TOTAL COMMON STOCKS
(Cost $5,226).................................................. 544,055
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 1.4% SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 0.3%
[Harvard Industries, Inc. (Cum. Ex.)............ 47,701 1,252,151
--------------
TELECOMMUNICATIONS -- 0.9%
**Cablevision Systems Corp., Series H........... 10,924 1,054,239
**Cablevision Systems Corp., Series L........... 283 2,652,371
--------------
3,706,610
--------------
UTILITY - ELECTRIC -- 0.2%
[El Paso Electric Co............................ 5,750 603,750
--------------
TOTAL PREFERRED STOCKS
(Cost $5,822,484).............................................. 5,562,511
--------------
<CAPTION>
MARKET
WARRANTS -- 0.2% SHARES VALUE
------------- --------------
<S> <C> <C>
COMMUNICATIONS -- 0.1%
**++American Telecasting Inc.................... 6,500 162,500
**++Intermedia Communications of Florida,
Inc........................................... 3,000 120,000
--------------
282,500
--------------
HOUSING RELATED -- 0.0%
++Miles Homes Services, Inc..................... 15,000 3,750
--------------
LEISURE -- 0.0%
++Casino America, Inc........................... 6,526 20
**++Casino Magic Corp........................... 10,500 105
**++President Casinos, Inc...................... 37,075 18,538
--------------
18,663
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.0%
**++CellNet Data System, Inc.................... 17,000 0
++Foamex - JPS Automotive, L.P.................. 2,000 10,000
--------------
10,000
--------------
TELECOMMUNICATIONS -- 0.1%
++Cellular Communications International Inc..... 4,375 0
++Clearnet Communications, Inc.................. 26,202 0
++IntelCom Group, Inc........................... 20,790 332,640
**++Intercel, Inc............................... 6,720 0
++Nextel Communications, Inc.................... 3,793 38
**++Pagemart, Inc............................... 9,200 73,600
--------------
406,278
--------------
TOTAL WARRANTS
(Cost $33,997)................................................. 721,191
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 1.4% VALUE VALUE
------------- --------------
<S> <C> <C>
COMMUNICATIONS -- 0.7%
Geotek Communications, Inc.,
12.000%, 02/15/01............................. $ 2,000,000 2,740,000
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 0.7%
**GST Telecommunications, Inc.,
*
Zero Coupon, 12/15/05......................... $ 650,000 $ 643,500
**Winstar Communications, Inc.,
*
Zero Coupon, 10/15/05......................... 2,925,000 1,989,000
--------------
2,632,500
--------------
TOTAL CONVERTIBLE BONDS
(Cost $4,025,583).............................................. 5,372,500
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 88.6% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 7.5%
Bally's Park Place Funding, Inc.,
9.250%, 03/15/04.............................. 5,500,000 5,850,625
Casino Magic Finance Corp.,
11.500%, 10/15/01............................. 4,250,000 4,377,500
Empress River Casino Finance Corp.,
10.750%, 04/01/02............................. 4,500,000 4,702,500
Mesa Operating Co.,
*Zero Coupon, 07/01/06........................ 1,125,000 653,906
PM Holdings Corp., Series B,
*Zero Coupon, 09/01/05........................ 2,981,000 1,676,812
PSF Finance, L.P.,
12.250%, 06/15/04............................. 1,000,000 820,000
Resorts International Hotel Financing, Inc.,
11.000%, 09/15/03............................. 750,000 780,000
Trump Atlantic City Associates,
11.250%, 05/01/06............................. 4,300,000 4,321,500
Trump Castle Funding, Inc.,
11.750%, 11/15/03............................. 6,300,000 6,441,750
--------------
29,624,593
--------------
FOREIGN -- 5.2%
Diamond Cable Communications Co., PLC,
*13.250%, 09/30/04............................ 2,000,000 1,370,000
*Zero Coupon, 12/15/05........................ 3,500,000 2,056,250
Plitt Theaters, Inc,
10.875%, 06/15/04............................. 4,000,000 4,040,000
Polysindo International Finance Co.,
11.375%, 06/15/06............................. 750,000 763,125
Rogers Cablesystems Ltd.,
Series B, 10.000%, 03/15/05................... 4,250,000 4,186,250
10.000%, 12/01/07............................. 1,000,000 973,750
Stone Consolidated Corp.,
10.250%, 12/15/00............................. 3,500,000 3,609,375
Videotron Holdings, PLC,
*Zero Coupon, 07/01/04........................ 2,175,000 1,598,625
*Zero Coupon, 08/15/05........................ 3,200,000 2,040,000
--------------
20,637,375
--------------
INDUSTRIAL -- 75.3%
Adelphia Communications Corp.,
12.500%, 05/15/02............................. 375,000 380,625
+X+9.500%, 02/15/04........................... 1,630,000 1,409,950
American Telecasting Inc.,
*Zero Coupon, 06/15/04........................ 3,000,000 2,130,000
**Series D, Zero Coupon, 08/15/05............. 6,500,000 3,770,000
*
Ameritruck Distribution Corp., Series B,
12.250%, 11/15/05............................. 1,500,000 1,440,000
Apparel Retailers, Inc., Series B,
*Zero Coupon, 08/15/05........................ 1,800,000 1,534,500
</TABLE>
B22
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Applied Extrusion Technologies, Inc., Series B,
11.500%, 04/01/02............................. $ 1,700,000 $ 1,717,000
Benedek Broadcasting Corp.,
11.875%, 03/01/05............................. 2,910,000 3,070,050
Boyd Gaming Corp., Series B,
10.750%, 09/01/03............................. 5,500,000 5,775,000
Buckeye Cellulose Corp.,
9.250%, 09/15/08.............................. 750,000 750,000
Building Materials Corp. of America, Series B,
*Zero Coupon, 07/01/04........................ 5,000,000 3,725,000
Cablevision Systems Corp.,
9.250%, 11/01/05.............................. 4,825,000 4,487,250
9.875%, 02/15/13.............................. 1,300,000 1,205,750
CAI Wireless Systems Inc.,
12.250%, 09/15/02............................. 3,000,000 3,135,000
CellNet Data System, Inc.,
**Zero Coupon, 06/15/05....................... 4,250,000 3,017,500
*
Cellular Communications International Inc.,
*Zero Coupon, 08/15/00........................ 4,375,000 2,668,750
Centennial Cellular Corp.,
10.125%, 05/15/05............................. 4,500,000 4,320,000
Century Communications Corp.,
9.500%, 03/01/05.............................. 3,500,000 3,377,500
Clearnet Communications, Inc.,
*Zero Coupon, 12/15/05........................ 7,940,000 4,843,400
Comcast Cellular Corp., Series B,
Zero Coupon, 03/05/00......................... 4,000,000 2,740,000
Comcast Corp.,
9.375%, 05/15/05.............................. 5,000,000 4,812,500
9.125%, 10/15/06.............................. 1,000,000 942,500
Comcast UK Cable,
*Zero Coupon, 11/15/07........................ 2,500,000 1,443,750
Continental Cablevision, Inc.,
9.500%, 08/01/13.............................. 8,000,000 8,640,000
Del Monte Corp.,
**+X+12.250%, 09/01/02........................ 2,853,000 2,624,760
Dial Call Communications, Inc.,
*Zero Coupon, 04/15/04........................ 2,250,000 1,440,000
**Series B, Zero Coupon, 12/15/05............. 1,000,000 600,000
*
Dictaphone Corp,
11.750%, 08/01/05............................. 3,350,000 3,232,750
Dominion Textile (USA) Inc.,
9.250%, 04/01/06.............................. 3,500,000 3,360,000
EchoStar Communications Corp.,
*Zero Coupon, 06/01/04........................ 8,000,000 6,020,000
EchoStar Satellite Broadcasting Corp.,
**Zero Coupon, 03/15/04....................... 3,000,000 1,852,500
Envirotest Systems Corp.,
9.125%, 03/15/01.............................. 4,055,000 3,548,125
Exide Corp.,
10.000%, 04/15/05............................. 2,500,000 2,440,625
Falcon Drilling Co. Inc., Series B,
9.750%, 01/15/01.............................. 1,500,000 1,530,000
12.500%, 03/15/05............................. 2,500,000 2,775,000
Falcon Holdings Group, L.P., Series B,
+X+11.000%, 09/15/03.......................... 3,493,165 3,301,042
Foamex, L.P.,
11.250%, 10/01/02............................. 1,500,000 1,507,500
11.875%, 10/01/04............................. 1,500,000 1,410,000
Foamex - JPS Automotive, L.P., Series B,
*Zero Coupon, 07/01/04........................ 2,000,000 1,420,000
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Food 4 Less Inc., Series B,
*Zero Coupon, 07/15/05........................ $ 1,900,000 $ 902,500
Fresh Del Monte Produce, Series B,
10.000%, 05/01/03............................. 5,500,000 5,115,000
G-I Holdings, Inc.,
Series B, Zero Coupon, 10/01/98............... 1,911,000 1,533,578
**10.000%, 02/15/06........................... 1,819,000 1,791,715
Gaylord Container Corp.,
*Zero Coupon, 05/15/05........................ 4,365,000 4,599,837
Geotek Communication Inc.,
*Zero Coupon, 07/15/05........................ 5,000,000 3,187,500
Grand Union Co.,
12.000%, 09/01/04............................. 3,500,000 3,246,250
GST (USA), Inc.,
*Zero Coupon, 12/15/05........................ 5,200,000 2,860,000
Gulf Canada Resources, Ltd.,
9.625%, 07/01/05.............................. 3,600,000 3,564,000
Harvard Industries, Inc.,
12.000%, 07/15/04............................. 1,125,000 1,102,500
Herff Jones Inc, Series B,
11.000%, 08/15/05............................. 3,500,000 3,605,000
Hills Stores Co.,
**12.500%, 07/01/03........................... 4,000,000 3,920,000
HMC Acquisition Properties Inc., Series B,
**9.000%, 12/15/07............................ 3,000,000 2,730,000
HMH Properties, Inc., Series B,
9.500%, 05/15/05.............................. 5,550,000 5,300,250
Host Marriott Travel Plaza, Series B,
9.500%, 05/15/05.............................. 4,600,000 4,393,000
IntelCom Group (USA), Inc.,
*Zero Coupon, 09/15/05........................ 6,300,000 3,780,000
Intercel, Inc.,
*Zero Coupon, 02/01/06........................ 2,100,000 1,260,000
*Zero Coupon, 05/01/06........................ 2,500,000 1,362,500
Interlake Corp.,
12.000%, 11/15/01............................. 3,760,000 3,948,000
Intermedia Communications of Florida, Inc.,
Series B, 13.500%, 06/01/05................... 3,000,000 3,360,000
*Zero Coupon, 05/15/06........................ 2,000,000 1,120,000
International Cabletel, Inc.,
*Zero Coupon, 10/15/03........................ 1,500,000 1,091,250
*Series A, Zero Coupon, 04/15/05.............. 4,350,000 2,751,375
JCAC, Inc.,
10.125%, 06/15/06............................. 375,000 371,250
Jitney-Jungle Stores America Inc.,
12.000%, 03/01/06............................. 4,000,000 4,070,000
JPS Automotive Products Corp.,
11.125%, 06/15/01............................. 4,000,000 4,110,000
K & F Industries, Inc.,
13.750%, 08/01/01............................. 778,000 809,120
11.875%, 12/01/03............................. 1,500,000 1,605,000
Kaiser Aluminum & Chemical Corp.,
9.875%, 02/15/02.............................. 4,190,000 4,106,200
KCS Energy, Inc., Series B,
11.000%, 01/15/03............................. 5,000,000 5,306,250
Lady Luck Gaming Corp.,
11.875%, 03/01/01............................. 1,500,000 1,470,000
Lenfest Communications Inc.,
8.375%, 11/01/05.............................. 3,300,000 3,011,250
Marcus Cable Operating Co., L.P.,
*Zero Coupon, 08/01/04........................ 5,750,000 4,111,250
Metrocall Inc.,
10.375%, 10/01/07............................. 5,500,000 5,087,500
MFS Communications Co., Inc.,
*Zero Coupon, 01/15/04........................ 6,500,000 4,875,000
*Zero Coupon, 01/15/06........................ 4,000,000 2,420,000
</TABLE>
B23
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Miles Homes Services, Inc.,
12.000%, 04/01/01............................. $ 1,250,000 $ 937,500
MobileMedia Corp.,
9.375%, 11/01/07.............................. 3,250,000 2,908,750
Mohegan Tribal Gaming,
**13.500%, 11/15/02........................... 3,500,000 4,392,500
NewCity Communications, Inc.,
11.375%, 11/01/03............................. 3,250,000 3,623,750
Newflo Corp.,
13.250%, 11/15/02............................. 1,500,000 1,612,500
Nortek, Inc.,
9.875%, 03/01/04.............................. 3,750,000 3,562,500
Owens & Minor, Inc.,
10.875%, 06/01/06............................. 3,450,000 3,497,437
Pagemart Nationwide, Inc.,
*Zero Coupon, 02/01/05........................ 6,500,000 4,290,000
Pagemart, Inc.,
*Zero Coupon, 11/01/03........................ 2,000,000 1,520,000
Paging Network, Inc.,
10.125%, 08/01/07............................. 5,250,000 5,158,125
Pathmark Stores, Inc.,
11.625%, 06/15/02............................. 3,500,000 3,482,500
Petroleum Heat & Power Company, Inc.,
12.250%, 02/01/05............................. 813,000 886,170
9.375%, 02/01/06.............................. 2,000,000 1,860,000
Phar-Mor, Inc.,
11.720%, 09/11/02............................. 3,400,000 3,383,000
PriCellular Wireless Corp.,
*Zero Coupon, 10/01/03........................ 4,490,000 3,547,100
Smith's Food & Drugs Centers, Inc.,
11.250%, 05/15/07............................. 2,250,000 2,266,875
Specialty Retailers, Inc., Series B,
11.000%, 08/15/03............................. 1,500,000 1,560,000
SPX Corp.,
11.750%, 06/01/02............................. 2,500,000 2,643,750
Talley Industries, Inc.,
*Zero Coupon, 10/15/05........................ 2,148,000 1,718,400
Talley Manufacturing & Technology, Inc.,
10.750%, 10/15/03............................. 1,500,000 1,537,500
Teleport Communications,
9.875%, 07/01/06.............................. 975,000 975,000
Telewest, PLC,
*Zero Coupon, 10/01/07........................ 3,350,000 1,976,500
Tenet Healthcare Corp.,
10.125%, 03/01/05............................. 7,000,000 7,385,000
TransTexas Gas Corp.,
11.500%, 06/15/02............................. 3,500,000 3,482,500
United International Holdings, Inc., Series B,
Zero Coupon, 11/15/99......................... 5,050,000 3,322,750
United Stationer Supply,
12.750%, 05/01/05............................. 3,500,000 3,753,750
USAir Inc., Series 89-A2,
9.820%, 01/01/13.............................. 3,000,000 2,745,000
Winstar Communications, Inc.,
*Zero Coupon, 10/15/05........................ 5,850,000 3,217,500
--------------
297,521,541
--------------
UTILITIES -- 0.6%
California Energy Co., Inc.,
*Zero Coupon, 01/15/04........................ 2,250,000 2,160,000
--------------
TOTAL LONG-TERM BONDS
(Cost $346,993,079)............................................ 349,943,509
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENT -- 6.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 27,094,000 $ 27,094,000
--------------
OTHER ASSETS -- 1.4%
(net of liabilities)........................................... 5,672,063
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 394,909,829
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
L.P. Limited Partnership
PLC Public Limited Company (British Corporation)
*Denotes deferred interest security that pays no interest until a
predetermined date at which time a specified coupon rate becomes effective.
**Indicates a restricted security; the aggregate cost of the restricted
securities is $30,524,344. The aggregate value, $31,956,883 is
approximately 8.1% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
++Non-income producing.
[Payment-in-kind preferred stock--dividend is paid in additional preferred
shares in lieu of cash.
+X+Payment-in-kind bonds--interest is paid in additional bonds in lieu of
cash.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B24
<PAGE>
STOCK INDEX PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 95.9% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.3%
AlliedSignal, Inc............................... 69,400 $ 3,964,475
Boeing Co....................................... 83,850 7,305,431
General Dynamics Corp........................... 15,400 954,800
Lockheed Martin Corp............................ 48,749 4,094,916
McDonnell Douglas Corp.......................... 54,800 2,657,800
Northrop Grumman Corp........................... 13,500 919,687
Raytheon Co..................................... 58,900 3,040,712
Rockwell International Corp..................... 53,100 3,039,975
United Technologies Corp........................ 30,100 3,461,500
--------------
29,439,296
--------------
AIRLINES -- 0.4%
+AMR Corp....................................... 22,200 2,020,200
Delta Air Lines, Inc............................ 15,000 1,245,000
Southwest Airlines Co........................... 34,400 1,001,900
+USAir Group, Inc............................... 16,100 289,800
--------------
4,556,900
--------------
ALUMINUM -- 0.4%
Alcan Aluminum, Ltd............................. 55,850 1,703,425
Aluminum Co. of America......................... 43,400 2,490,075
Reynolds Metals Co.............................. 15,100 787,087
--------------
4,980,587
--------------
AUTOS - CARS & TRUCKS -- 2.2%
Chrysler Corp................................... 92,300 5,722,600
Cummins Engine Co., Inc......................... 9,600 387,600
Dana Corp....................................... 24,700 765,700
Echlin, Inc..................................... 14,500 549,187
Ford Motor Co................................... 284,900 9,223,637
General Motors Corp............................. 183,200 9,595,100
Genuine Parts Co................................ 30,050 1,374,787
Johnson Controls, Inc........................... 10,200 708,900
+Navistar International Corp.................... 17,500 172,812
Safety Kleen Corp............................... 13,050 228,375
--------------
28,728,698
--------------
BANKS AND SAVINGS & LOANS -- 6.5%
Banc One Corp................................... 110,094 3,743,196
Bank of Boston Corp............................. 27,300 1,351,350
Bank of New York Company, Inc................... 48,300 2,475,375
BankAmerica Corp................................ 89,448 6,775,686
Bankers Trust NY Corp........................... 19,600 1,447,950
Barnett Banks, Inc.............................. 22,600 1,378,600
Boatmen's Bancshares, Inc....................... 39,400 1,580,925
Chase Manhattan Corp............................ 107,447 7,588,444
Citicorp........................................ 119,500 9,873,687
Comerica, Inc................................... 28,300 1,262,887
CoreStates Financial Corp....................... 54,300 2,090,550
First Bank System, Inc.......................... 35,600 2,064,800
First Chicago NBD Corp.......................... 77,115 3,017,124
First Union Corp................................ 69,925 4,256,684
Fleet Financial Group, Inc...................... 64,000 2,784,000
Golden West Financial Corp...................... 14,000 784,000
Great Western Financial Corp.................... 34,700 828,462
H.F. Ahmanson & Co.............................. 29,400 793,800
J.P. Morgan & Co., Inc.......................... 46,450 3,930,831
KeyCorp......................................... 56,700 2,197,125
Mellon Bank Corp................................ 33,450 1,906,650
NationsBank Corp................................ 72,539 5,993,535
Norwest Corp.................................... 88,600 3,089,925
PNC Bank Corp................................... 83,100 2,472,225
Suntrust Banks, Inc............................. 56,400 2,086,800
U.S. Bancorp.................................... 38,700 1,398,037
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Wachovia Corp................................... 41,100 $ 1,798,125
Wells Fargo & Co................................ 23,866 5,700,991
--------------
84,671,764
--------------
BEVERAGES -- 4.0%
Adolph Coors Co. (Class 'B' Stock).............. 9,500 169,812
Anheuser-Busch Companies, Inc................... 61,900 4,642,500
Brown-Forman Corp. (Class 'B' Stock)............ 16,700 668,000
Coca-Cola Co.................................... 613,200 29,970,150
PepsiCo, Inc.................................... 385,000 13,619,375
Seagram Co., Ltd................................ 92,900 3,123,762
--------------
52,193,599
--------------
CHEMICALS -- 2.4%
Air Products & Chemicals, Inc................... 26,800 1,547,700
Dow Chemical Co................................. 63,500 4,826,000
E.I. du Pont de Nemours & Co.................... 135,800 10,745,175
Eastman Chemical Co............................. 19,500 1,187,062
+FMC Corp....................................... 8,700 567,675
Hercules, Inc................................... 26,900 1,486,225
Mallinckrodt Group, Inc......................... 17,300 672,537
Monsanto Co..................................... 142,700 4,637,750
Nalco Chemical Co............................... 15,600 491,400
Rohm & Haas Co.................................. 16,100 1,010,275
Sigma-Aldrich Corp.............................. 12,500 668,750
Union Carbide Corp.............................. 33,000 1,311,750
W.R. Grace & Co................................. 23,300 1,651,387
--------------
30,803,686
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp.................................. 36,575 841,225
Great Lakes Chemical Corp....................... 16,100 1,002,225
Morton International, Inc....................... 35,000 1,303,750
Praxair, Inc.................................... 37,500 1,584,375
Raychem Corp.................................... 11,000 790,625
--------------
5,522,200
--------------
COMMERCIAL SERVICES -- 0.4%
+CUC International, Inc......................... 46,150 1,638,325
Deluxe Corp..................................... 19,400 688,700
Dun & Bradstreet Corp........................... 42,160 2,635,000
John H. Harland Co.............................. 8,200 201,925
Moore Corp., Ltd................................ 22,800 430,350
Ogden Corp...................................... 11,000 199,375
--------------
5,793,675
--------------
COMPUTER SERVICES -- 4.6%
3Com Corp....................................... 40,800 1,866,600
+Amdahl Corp.................................... 27,300 293,475
Autodesk, Inc................................... 11,100 331,612
Automatic Data Processing, Inc.................. 71,000 2,742,375
+Bay Networks, Inc.............................. 45,700 1,176,775
+Cabletron Systems, Inc......................... 17,400 1,194,075
+Ceridian Corp.................................. 16,500 833,250
+Cisco Systems, Inc............................. 137,800 7,802,925
+COMPAQ Computer Corp........................... 65,600 3,230,800
Computer Associates International, Inc.......... 59,175 4,216,219
+Computer Sciences Corp......................... 14,000 1,046,500
+EMC Corp....................................... 55,200 1,028,100
First Data Corp................................. 54,500 4,339,562
+Intergraph Corp................................ 11,300 137,012
+Microsoft Corp................................. 145,900 17,526,237
+Novell, Inc.................................... 88,500 1,227,937
+Oracle Corp.................................... 161,425 6,366,198
</TABLE>
B25
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Silicon Graphics, Inc.......................... 40,000 $ 960,000
+Sun Microsystems, Inc.......................... 45,000 2,649,375
+Tandem Computers, Inc.......................... 26,900 332,887
--------------
59,301,914
--------------
CONSTRUCTION -- 0.2%
Fluor Corp...................................... 20,800 1,359,800
Foster Wheeler Corp............................. 10,400 466,700
Kaufman & Broad Home Corp....................... 8,366 121,307
Owens Corning................................... 13,200 567,600
Pulte Corp...................................... 5,900 157,825
--------------
2,673,232
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 8,100 232,875
Bemis Co., Inc.................................. 13,200 462,000
+Crown Cork & Seal Co., Inc..................... 31,000 1,395,000
--------------
2,089,875
--------------
COSMETICS & SOAPS -- 2.3%
Alberto Culver Co. (Class 'B' Stock)............ 7,000 324,625
Avon Products, Inc.............................. 33,700 1,520,712
Clorox Co....................................... 12,700 1,125,537
Colgate Palmolive Co............................ 36,000 3,051,000
Gillette Co..................................... 107,800 6,724,025
International Flavors & Fragrances, Inc......... 27,200 1,295,400
Procter & Gamble Co............................. 167,752 15,202,525
--------------
29,243,824
--------------
DIVERSIFIED GAS -- 0.2%
Ashland, Inc.................................... 16,300 645,887
Coastal Corp.................................... 26,500 1,106,375
Eastern Enterprises............................. 5,100 169,575
ENSERCH Corp.................................... 17,000 369,750
NICOR, Inc...................................... 12,100 343,337
ONEOK, Inc...................................... 6,400 160,000
--------------
2,794,924
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 1.8%
Alco Standard Corp.............................. 31,976 1,446,914
Avery Dennison Corp............................. 12,500 685,937
Honeywell, Inc.................................. 30,800 1,678,600
International Business Machines Corp............ 135,500 13,414,500
Pitney Bowes, Inc............................... 37,000 1,766,750
+Unisys Corp.................................... 41,100 292,837
Xerox Corp...................................... 79,246 4,239,661
--------------
23,525,199
--------------
DRUGS AND HOSPITAL SUPPLIES -- 9.0%
Abbott Laboratories............................. 192,200 8,360,700
Allergan, Inc................................... 16,400 643,700
+ALZA Corp...................................... 20,900 572,137
American Home Products Corp..................... 153,300 9,217,162
+Amgen, Inc..................................... 65,400 3,531,600
Bausch & Lomb, Inc.............................. 13,700 582,250
Baxter International, Inc....................... 66,500 3,142,125
Becton, Dickinson & Co.......................... 15,200 1,219,800
+Biomet, Inc.................................... 26,100 375,187
+Boston Scientific Corp......................... 43,800 1,971,000
Bristol-Myers Squibb Co......................... 123,540 11,118,600
C.R. Bard, Inc.................................. 14,400 489,600
Eli Lilly & Co.................................. 135,500 8,807,500
Johnson & Johnson............................... 326,400 16,156,800
Medtronic, Inc.................................. 57,100 3,197,600
Merck & Co., Inc................................ 301,550 19,487,669
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Pfizer, Inc..................................... 156,500 $ 11,170,187
+Pharmacia & Upjohn, Inc........................ 123,425 5,476,984
Schering-Plough Corp............................ 89,600 5,622,400
St. Jude Medical, Inc........................... 19,200 643,200
United States Surgical Corp..................... 15,700 486,700
Warner-Lambert Co............................... 66,900 3,679,500
--------------
115,952,401
--------------
ELECTRICAL EQUIPMENT -- 0.3%
+Applied Materials, Inc......................... 43,200 1,317,600
W.W. Grainger, Inc.............................. 12,800 992,000
Westinghouse Electric Corp...................... 102,500 1,921,875
--------------
4,231,475
--------------
ELECTRONICS -- 4.2%
+Advanced Micro Devices, Inc.................... 33,300 453,712
AMP, Inc........................................ 53,844 2,160,490
Apple Computer, Inc............................. 30,100 632,100
+Data General Corp.............................. 9,000 117,000
+Digital Equipment Corp......................... 38,000 1,710,000
EG&G, Inc....................................... 11,800 252,225
Emerson Electric Co............................. 54,800 4,952,550
Harris Corp..................................... 9,800 597,800
Hewlett-Packard Co.............................. 125,200 12,473,050
Intel Corp...................................... 201,700 14,812,344
+LSI Logic Corp................................. 30,600 795,600
Micron Technology, Inc.......................... 51,200 1,324,800
Motorola, Inc................................... 145,600 9,154,600
+National Semiconductor Corp.................... 33,800 523,900
Perkin-Elmer Corp............................... 10,300 496,975
Tandy Corp...................................... 14,965 708,967
Tektronix, Inc.................................. 8,600 384,850
Texas Instruments, Inc.......................... 46,400 2,314,200
Thomas & Betts Corp............................. 9,200 345,000
--------------
54,210,163
--------------
ENVIRONMENTAL SERVICES -- 0.1%
Laidlaw, Inc. (Class 'B' Stock)................. 70,000 708,750
--------------
FINANCIAL SERVICES -- 2.9%
American Express Co............................. 118,000 5,265,750
Beneficial Corp................................. 13,300 746,462
Dean Witter Discover & Co....................... 41,245 2,361,276
Federal Home Loan Mortgage Corp................. 43,650 3,732,075
Federal National Mortgage Association........... 268,800 9,004,800
Fifth Third Bancorp............................. 25,100 1,355,400
Green Tree Financial Corp....................... 33,300 1,040,625
H & R Block, Inc................................ 25,800 841,725
Household International , Inc................... 23,700 1,801,200
MBNA Corp....................................... 55,450 1,580,325
Merrill Lynch & Co., Inc........................ 42,600 2,774,325
Morgan Stanley Group, Inc....................... 37,300 1,832,362
National City Corp.............................. 55,000 1,931,875
Republic New York Corp.......................... 14,100 877,725
Salomon, Inc.................................... 25,400 1,117,600
Transamerica Corp............................... 16,900 1,368,900
--------------
37,632,425
--------------
FOODS -- 4.2%
Archer-Daniels-Midland Co....................... 127,522 2,438,858
Campbell Soup Co................................ 61,100 4,307,550
ConAgra, Inc.................................... 59,800 2,713,425
CPC International, Inc.......................... 35,800 2,577,600
Fleming Companies, Inc.......................... 9,400 135,125
General Mills, Inc.............................. 38,700 2,109,150
Giant Food, Inc. (Class 'A' Stock).............. 13,800 495,075
</TABLE>
B26
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
H.J. Heinz & Co................................. 89,850 $ 2,729,194
Hershey Foods Corp.............................. 19,100 1,401,462
Kellogg Co...................................... 52,800 3,867,600
Philip Morris Companies, Inc.................... 203,800 21,195,200
Pioneer Hi-Bred International, Inc.............. 20,300 1,073,362
Quaker Oats Co.................................. 33,200 1,132,950
Ralston-Ralston Purina Group.................... 26,440 1,695,465
Sara Lee Corp................................... 118,900 3,849,387
Sysco Corp...................................... 43,900 1,503,575
W. M. Wrigley, Jr. Co........................... 28,800 1,454,400
--------------
54,679,378
--------------
FOREST PRODUCTS -- 1.4%
Boise Cascade Corp.............................. 11,186 409,687
Champion International Corp..................... 23,600 985,300
Georgia-Pacific Corp............................ 22,800 1,618,800
International Paper Co.......................... 72,834 2,685,754
James River Corp. of Virginia................... 20,600 543,325
Kimberly-Clark Corp............................. 68,694 5,306,611
Louisiana-Pacific Corp.......................... 27,800 615,075
Mead Corp....................................... 12,700 658,812
Potlatch Corp................................... 7,000 273,875
Stone Container Corp............................ 23,566 324,032
Temple Inland, Inc.............................. 13,200 617,100
Union Camp Corp................................. 17,400 848,250
Westvaco Corp................................... 24,900 743,887
Weyerhaeuser Co................................. 48,200 2,048,500
Willamette Industries, Inc...................... 13,900 827,050
--------------
18,506,058
--------------
GAS PIPELINES -- 0.5%
+Columbia Gas System, Inc....................... 13,100 682,837
Consolidated Natural Gas Co..................... 23,400 1,222,650
Enron Corp...................................... 61,100 2,497,462
NorAm Energy Corp............................... 29,700 322,987
Peoples Energy Corp............................. 7,900 264,650
Williams Companies, Inc......................... 25,600 1,267,200
--------------
6,257,786
--------------
HOSPITAL MANAGEMENT -- 0.8%
+Beverly Enterprises, Inc....................... 22,200 266,400
Columbia/HCA Healthcare Corp.................... 108,832 5,808,908
Community Psychiatric Centers................... 7,900 75,050
+Humana, Inc.................................... 38,300 684,612
Manor Care, Inc................................. 15,850 624,094
Service Corp. International..................... 28,800 1,656,000
Shared Medical Systems Corp..................... 5,600 359,800
+Tenet Healthcare Corp.......................... 51,300 1,096,537
--------------
10,571,401
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc................. 8,600 495,575
Centex Corp..................................... 7,000 217,875
Fleetwood Enterprises, Inc...................... 11,800 365,800
Lowe's Companies, Inc........................... 39,800 1,437,775
Masco Corp...................................... 39,700 1,200,925
Maytag Corp..................................... 25,600 534,400
Stanley Works................................... 22,900 681,275
Tupperware Corporation.......................... 15,000 633,750
Whirlpool Corp.................................. 18,200 903,175
--------------
6,470,550
--------------
INSURANCE -- 3.9%
Aetna Life & Casualty Co........................ 28,100 2,009,150
Alexander & Alexander Services, Inc............. 10,400 205,400
Allstate Corp................................... 109,494 4,995,664
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
American General Corp........................... 51,700 $ 1,880,587
American International Group, Inc............... 116,237 11,463,874
Aon Corp........................................ 26,300 1,334,725
Chubb Corp...................................... 43,600 2,174,550
CIGNA Corp...................................... 18,500 2,180,687
General Re Corp................................. 19,950 3,037,387
+ITT Hartford Group, Inc........................ 29,200 1,554,900
Jefferson-Pilot Corp............................ 17,375 896,984
Lincoln National Corp........................... 26,200 1,211,750
Marsh & McLennan Companies, Inc................. 17,700 1,708,050
Providian Corp.................................. 22,900 981,838
SAFECO Corp..................................... 31,600 1,117,850
St. Paul Companies, Inc......................... 20,300 1,086,050
Torchmark Corp.................................. 17,300 756,875
Travelers Group, Inc............................ 116,596 5,319,693
U.S. Healthcare, Inc............................ 37,900 2,084,500
United Healthcare Corp.......................... 44,100 2,227,050
UNUM Corp....................................... 18,000 1,120,500
USF&G Corp...................................... 27,400 448,675
USLIFE Corp..................................... 8,500 279,438
--------------
50,076,177
--------------
LEISURE -- 1.2%
+Bally Entertainment Corporation................ 11,200 308,000
Brunswick Corp.................................. 25,200 504,000
+Harrah's Entertainment, Inc.................... 24,450 690,713
Hasbro, Inc..................................... 22,000 786,500
+King World Productions, Inc.................... 8,750 318,281
Mattel, Inc..................................... 67,381 1,928,781
Outboard Marine Corp............................ 3,900 70,688
Walt Disney Co.................................. 166,667 10,479,188
--------------
15,086,151
--------------
LODGING -- 0.4%
Hilton Hotels Corp.............................. 12,100 1,361,250
Loews Corp...................................... 28,400 2,240,050
Marriott International, Inc..................... 31,600 1,698,500
--------------
5,299,800
--------------
MACHINERY -- 1.2%
Briggs & Stratton Corp.......................... 7,700 316,663
Case Corp....................................... 17,400 835,200
Caterpillar, Inc................................ 48,000 3,252,000
Cincinnati Milacron, Inc........................ 9,000 216,000
Cooper Industries, Inc.......................... 27,000 1,120,500
Deere & Co...................................... 64,400 2,576,000
Dover Corp...................................... 28,200 1,300,725
Eaton Corp...................................... 19,200 1,125,600
Giddings & Lewis, Inc........................... 6,900 112,125
Harnischfeger Industries, Inc................... 11,100 369,075
Ingersoll-Rand Co............................... 26,900 1,176,875
PACCAR, Inc..................................... 9,730 476,770
Parker-Hannifin Corp............................ 17,550 743,681
Snap-On, Inc.................................... 10,200 483,225
Timken Co....................................... 7,500 290,625
+Varity Corp.................................... 10,010 481,731
--------------
14,876,795
--------------
MEDIA -- 1.9%
Comcast Corp. (Special Class 'A' Stock)......... 58,900 1,089,650
Dow Jones & Co., Inc............................ 24,400 1,018,700
Gannett Co., Inc................................ 34,500 2,440,875
Interpublic Group of Companies, Inc............. 19,900 932,813
Knight-Ridder, Inc.............................. 12,000 870,000
McGraw-Hill, Inc................................ 24,200 1,107,150
</TABLE>
B27
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Meredith Corp................................... 7,000 $ 292,250
New York Times Co. (Class 'A' Stock)............ 23,000 750,375
R. R. Donnelley & Sons Co....................... 37,300 1,300,838
+Tele-Communications, Inc. (Series 'A' Stock)... 159,900 2,898,188
Time Warner, Inc................................ 95,040 3,730,320
Times Mirror Co. (Class 'A' Stock).............. 26,800 1,165,800
Tribune Co...................................... 15,300 1,111,163
+US West Media Group............................ 116,000 2,117,000
+Viacom, Inc. (Class 'B' Stock)................. 90,367 3,513,017
--------------
24,338,139
--------------
MINERAL RESOURCES -- 0.9%
ASARCO, Inc..................................... 10,200 281,775
Barrick Gold Corporation........................ 86,500 2,346,313
Burlington Resources, Inc....................... 30,800 1,324,400
Cyprus Amax Minerals Co......................... 22,900 518,113
Echo Bay Mines, Ltd............................. 30,200 324,650
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 49,700 1,584,188
Homestake Mining Co............................. 34,600 592,525
Inco, Ltd....................................... 28,900 932,025
Newmont Mining Corp............................. 23,400 1,155,375
Phelps Dodge Corp............................... 16,700 1,041,663
Placer Dome, Inc................................ 58,500 1,396,688
Sante Fe Pacific Gold Corp...................... 34,916 493,189
--------------
11,990,904
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.4%
Browning-Ferris Industries, Inc................. 51,800 1,502,200
Crane Co........................................ 7,900 323,900
Ecolab, Inc..................................... 15,100 498,300
General Electric Co............................. 408,400 35,326,600
+General Instrument Corp........................ 30,300 874,913
General Signal Corp............................. 12,262 464,423
Illinois Tool Works, Inc........................ 29,200 1,974,650
+ITT Corp....................................... 28,600 1,894,750
ITT Industries, Inc............................. 29,000 728,625
Millipore Corp.................................. 11,000 460,625
NACCO Industries, Inc. (Class 'A' Stock)........ 2,500 138,438
Pall Corp....................................... 27,100 653,788
PPG Industries Inc.............................. 46,500 2,266,875
Teledyne, Inc................................... 13,600 491,300
Textron, Inc.................................... 20,600 1,645,425
Trinova Corp.................................... 7,200 240,300
TRW, Inc........................................ 16,100 1,446,988
Tyco International, Ltd......................... 37,600 1,532,200
WMX Technologies, Inc........................... 119,800 3,923,450
--------------
56,387,750
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 2.0%
American Greetings Corp. (Class 'A' Stock)...... 18,300 500,963
Black & Decker Corp............................. 21,900 845,888
Corning, Inc.................................... 56,000 2,149,000
Dial Corp....................................... 22,900 655,513
Eastman Kodak Co................................ 83,800 6,515,450
Jostens, Inc.................................... 9,900 195,525
Minnesota Mining & Manufacturing Co............. 102,400 7,065,600
Polaroid Corp................................... 11,800 538,375
Rubbermaid, Inc................................. 38,900 1,060,025
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Unilever N.V., ADR.............................. 39,200 $ 5,688,900
Whitman Corp.................................... 26,300 634,488
--------------
25,849,727
--------------
PETROLEUM -- 7.8%
Amerada Hess Corp............................... 22,800 1,222,650
Amoco Corp...................................... 122,130 8,839,159
Atlantic Richfield Co........................... 39,785 4,714,523
Chevron Corp.................................... 160,500 9,469,500
Exxon Corp...................................... 304,300 26,436,063
Kerr-McGee Corp................................. 12,200 742,675
Louisiana Land & Exploration Co................. 8,700 501,338
Mobil Corp...................................... 96,800 10,853,700
Occidental Petroleum Corp....................... 79,500 1,967,625
PanEnergy Corp.................................. 36,790 1,209,471
Pennzoil Co..................................... 11,300 522,625
Phillips Petroleum Co........................... 64,100 2,684,188
Royal Dutch Petroleum Co., ADR.................. 131,800 20,264,250
+Santa Fe Energy Resources, Inc................. 20,970 249,019
Sun Co., Inc.................................... 19,000 577,125
Tenneco, Inc.................................... 43,100 2,203,488
Texaco, Inc..................................... 64,500 5,409,938
Unocal Corp..................................... 60,300 2,035,125
USX-Marathon Group.............................. 69,100 1,390,638
--------------
101,293,100
--------------
PETROLEUM SERVICES -- 0.9%
Baker Hughes, Inc............................... 34,000 1,117,750
Dresser Industries, Inc......................... 43,600 1,286,200
Halliburton Co.................................. 27,800 1,542,900
Helmerich & Payne, Inc.......................... 6,600 241,725
McDermott International, Inc.................... 13,700 285,988
+Oryx Energy Co................................. 25,500 414,375
+Rowan Companies, Inc........................... 20,200 297,950
Schlumberger, Ltd............................... 59,400 5,004,450
Sonat, Inc...................................... 21,100 949,500
+Western Atlas, Inc............................. 13,200 768,900
--------------
11,909,738
--------------
RAILROADS -- 1.0%
Burlington Northern, Inc........................ 36,842 2,979,597
Conrail Inc..................................... 19,200 1,274,400
CSX Corp........................................ 51,912 2,504,754
Norfolk Southern Corp........................... 31,600 2,678,100
Union Pacific Corp.............................. 50,000 3,493,750
--------------
12,930,601
--------------
RESTAURANTS -- 0.7%
Darden Restaurants, Inc......................... 37,000 397,750
Luby's Cafeterias, Inc.......................... 5,550 130,425
McDonald's Corp................................. 169,700 7,933,475
+Ryan's Family Steak Houses, Inc................ 10,500 97,125
+Shoney's, Inc.................................. 7,900 85,913
Wendy's International, Inc...................... 31,700 590,413
--------------
9,235,101
--------------
RETAIL -- 5.2%
Albertson's, Inc................................ 61,700 2,552,838
American Stores Co.............................. 36,800 1,518,000
Brown Group, Inc................................ 3,000 52,125
Charming Shoppes, Inc........................... 23,300 164,556
Circuit City Stores, Inc........................ 23,100 834,488
Dayton-Hudson Corp.............................. 17,514 1,806,131
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 27,850 1,016,525
+Federated Department Stores, Inc............... 50,500 1,723,313
</TABLE>
B28
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Great Atlantic & Pacific Tea Co., Inc........... 9,100 $ 299,163
Harcourt General, Inc........................... 17,906 895,300
Home Depot, Inc................................. 116,149 6,272,046
J.C. Penney Co., Inc............................ 55,500 2,913,750
K mart Corp..................................... 113,100 1,399,613
+Kroger Co...................................... 30,900 1,220,550
Liz Claiborne, Inc.............................. 17,500 605,938
Longs Drug Stores, Inc.......................... 4,600 205,275
May Department Stores Co........................ 61,200 2,677,500
Melville Corp................................... 25,500 1,032,750
Mercantile Stores Co., Inc...................... 8,900 521,763
Newell Co....................................... 40,000 1,225,000
Nike, Inc. (Class 'B' Stock).................... 35,400 3,637,350
Nordstrom, Inc.................................. 19,600 872,200
Pep Boys-Manny, Moe & Jack...................... 14,900 506,600
+Price/Costco, Inc.............................. 48,466 1,048,078
Reebok International, Ltd....................... 18,600 625,425
Rite Aid Corp................................... 20,400 606,900
Sears, Roebuck & Co............................. 95,400 4,638,825
Sherwin-Williams Co............................. 20,700 962,550
Stride Rite Corp................................ 9,400 77,550
Supervalu, Inc.................................. 16,800 529,200
The Gap, Inc.................................... 70,300 2,258,388
The Limited, Inc................................ 72,448 1,557,632
TJX Companies, Inc.............................. 16,700 563,625
+Toys 'R' Us, Inc............................... 65,850 1,876,725
Wal-Mart Stores, Inc............................ 564,200 14,316,575
Walgreen Co..................................... 60,400 2,023,400
Winn Dixie Stores, Inc.......................... 37,200 1,315,950
Woolworth Corp.................................. 32,000 720,000
--------------
67,073,597
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 12,200 455,975
Cooper Tire & Rubber Co......................... 21,600 480,600
Goodyear Tire & Rubber Co....................... 37,500 1,809,375
--------------
2,745,950
--------------
STEEL -- 0.2%
+Armco, Inc..................................... 26,700 133,500
+Bethlehem Steel Corp........................... 27,600 327,750
Inland Steel Industries, Inc.................... 12,000 235,500
Nucor Corp...................................... 21,200 1,073,250
USX-U.S. Steel Group............................ 21,340 605,523
Worthington Industries, Inc..................... 21,600 450,900
--------------
2,826,423
--------------
TELECOMMUNICATIONS -- 4.8%
+Airtouch Communications, Inc................... 121,800 3,440,850
Alltel Corp..................................... 46,800 1,439,100
Ameritech Corp.................................. 135,700 8,057,188
+Andrew Corp.................................... 14,675 788,781
AT&T Corp....................................... 391,873 24,296,126
+DSC Communications Corp........................ 29,000 873,625
MCI Communications Corp......................... 167,500 4,292,188
Northern Telecom, Ltd........................... 62,300 3,387,563
SBC Communications, Inc......................... 148,900 7,333,325
Scientific-Atlanta, Inc......................... 19,500 302,250
Sprint Corp..................................... 106,900 4,489,800
+Tellabs, Inc................................... 21,700 1,451,188
Worldcom Inc.................................... 47,000 2,602,625
--------------
62,754,609
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TEXTILES -- 0.2%
+Fruit of the Loom, Inc. (Class 'A' Stock)...... 18,000 $ 459,000
National Service Industries, Inc................ 12,500 489,063
Russell Corp.................................... 10,600 292,825
Springs Industries, Inc......................... 5,000 252,500
V.F. Corp....................................... 15,818 943,148
--------------
2,436,536
--------------
TOBACCO -- 0.3%
American Brands, Inc............................ 43,700 1,982,888
UST, Inc........................................ 48,900 1,674,825
--------------
3,657,713
--------------
TRUCKING/SHIPPING -- 0.2%
Caliber System Inc.............................. 9,600 326,400
Consolidated Freightways, Inc................... 11,400 240,825
+Federal Express Corp........................... 14,100 1,156,200
Ryder System, Inc............................... 19,600 551,250
Yellow Corp..................................... 6,000 79,500
--------------
2,354,175
--------------
UTILITY - COMMUNICATIONS -- 3.1%
Bell Atlantic Corp.............................. 107,000 6,821,250
BellSouth Corp.................................. 244,500 10,360,688
GTE Corp........................................ 237,720 10,637,970
NYNEX Corp...................................... 105,800 5,025,500
Pacific Telesis Group........................... 104,700 3,533,625
U S West Communications, Inc.................... 115,000 3,665,625
--------------
40,044,658
--------------
UTILITY - ELECTRIC -- 3.2%
American Electric Power Co., Inc................ 46,100 1,965,013
Baltimore Gas & Electric Co..................... 36,650 1,039,944
Carolina Power & Light Co....................... 37,600 1,428,800
Central & South West Corp....................... 50,800 1,473,200
CINergy Corp.................................... 39,339 1,258,848
Consolidated Edison Co. of NY, Inc.............. 57,000 1,667,250
Dominion Resources, Inc......................... 43,850 1,754,000
Dte Energy Company.............................. 36,100 1,114,588
Duke Power Co................................... 50,700 2,598,375
Edison International............................ 107,600 1,896,450
Entergy Corp.................................... 56,300 1,597,513
FPL Group, Inc.................................. 44,900 2,065,400
General Public Utilities Corp................... 29,600 1,043,400
Houston Industries, Inc......................... 65,300 1,608,013
Niagara Mohawk Power Corp....................... 31,700 245,675
Northern States Power Co........................ 16,800 829,500
Ohio Edison Co.................................. 36,100 789,688
P P & L Resources, Inc.......................... 38,200 902,475
Pacific Enterprises............................. 21,300 631,013
Pacific Gas & Electric Co....................... 102,700 2,387,775
PacifiCorp...................................... 70,800 1,575,300
PECO Energy Co.................................. 55,100 1,432,600
Public Service Enterprise Group, Inc............ 61,000 1,669,875
Southern Co..................................... 165,600 4,077,900
Texas Utilities Co.............................. 55,329 2,365,315
Unicom Corp..................................... 52,400 1,460,650
Union Electric Company.......................... 24,400 982,100
--------------
41,860,660
--------------
TOTAL COMMON STOCKS
(Cost $843,576,557)............................................ 1,240,568,064
--------------
</TABLE>
B29
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.0% SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY
Teledyne, Inc. (Cum.), Series E................. 560 $ 8,610
--------------
(Cost $8,400)
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 5.0% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 4.8%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 62,592,000 62,592,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
U.S. Treasury Bills,
5.110%, 09/19/96.............................. 2,200,000 2,174,370
5.120%, 09/19/96.............................. 100,000 98,835
--------------
2,273,205
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 64,865,205
--------------
##
VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%...............
296,250
--------------
LIABILITIES -- (0.9%)
(net of other assets).......................................... (11,713,817)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $1,294,024,312
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
+No dividend was paid on this security during the 12 months ending June 30,
1996.
##Open futures contracts as of June 30, 1996 are as follows:
PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
S&P 500 Index Futures
(158 contracts)
$53,111,300 Sept 96 $53,467,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B30
<PAGE>
EQUITY INCOME PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 81.8% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.7%
Northrop Grumman Corp........................... 388,600 $ 26,473,375
Thiokol Corp.................................... 462,000 18,249,000
--------------
44,722,375
--------------
AIRLINES -- 2.7%
+AMR Corp....................................... 364,200 33,142,200
--------------
AUTOS - CARS & TRUCKS -- 3.5%
Chrysler Corp................................... 624,017 38,689,054
Ford Motor Co................................... 130,000 4,208,750
--------------
42,897,804
--------------
CHEMICALS -- 1.7%
Dow Chemical Co................................. 278,800 21,188,800
--------------
COMMERCIAL SERVICES -- 1.1%
Dun & Bradstreet Corp........................... 195,600 12,225,000
John H. Harland Co.............................. 32,400 797,850
--------------
13,022,850
--------------
COMPUTER SERVICES -- 1.3%
+Amdahl Corp.................................... 800,000 8,600,000
+Intergraph Corp................................ 607,700 7,368,362
--------------
15,968,362
--------------
DIVERSIFIED GAS -- 0.3%
British Gas, PLC, ADR........................... 110,600 3,096,800
Yankee Energy System, Inc....................... 30,400 661,200
--------------
3,758,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 3.9%
International Business Machines Corp............ 479,100 47,430,900
--------------
ELECTRICAL EQUIPMENT -- 3.4%
Kuhlman Corp.................................... 560,000 9,730,000
Westinghouse Electric Corp...................... 1,669,500 31,303,125
--------------
41,033,125
--------------
ELECTRONICS -- 5.0%
+Digital Equipment Corp......................... 319,100 14,359,500
+IMO Industries, Inc............................ 434,600 2,498,950
Micron Technology, Inc.......................... 451,000 11,669,625
+National Semiconductor Corp.................... 320,000 4,960,000
Newport Corp.................................... 297,700 2,939,787
Pacific Scientific Co........................... 185,700 2,924,775
Texas Instruments, Inc.......................... 429,000 21,396,375
--------------
60,749,012
--------------
FINANCIAL SERVICES -- 6.9%
A.G. Edwards, Inc............................... 211,000 5,723,375
Bear Stearns Companies, Inc..................... 434,049 10,254,408
Lehman Brothers Holdings, Inc................... 1,759,100 43,537,725
Salomon, Inc.................................... 560,000 24,640,000
--------------
84,155,508
--------------
FOREST PRODUCTS -- 0.7%
Fletcher Challenge, Ltd., ADR................... 62,400 772,200
Louisiana-Pacific Corp.......................... 71,700 1,586,362
Rayonier, Inc................................... 149,900 5,696,200
--------------
8,054,762
--------------
GAS PIPELINES -- 0.5%
TransCanada Pipelines, Ltd...................... 389,600 5,746,600
--------------
HOLDING COMPANY -- 0.9%
Hanson, PLC, ADR................................ 780,000 11,115,000
--------------
HOUSING RELATED -- 0.7%
Irvine Apartment Communities, Inc............... 400,000 8,050,000
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
INSURANCE -- 6.0%
Alexander & Alexander Services, Inc............. 812,000 $ 16,037,000
Fremont General Corp............................ 144,390 3,320,970
Marsh & McLennan Companies, Inc................. 243,800 23,526,700
Ohio Casualty Corp.............................. 314,900 10,942,775
SAFECO Corp..................................... 350,200 12,388,325
Selective Insurance Group, Inc.................. 198,800 6,461,000
--------------
72,676,770
--------------
MACHINERY -- 0.4%
+Esterline Technologies Corp.................... 188,700 4,717,500
--------------
MEDIA -- 0.7%
Gannett Co., Inc................................ 120,000 8,490,000
--------------
MINERAL RESOURCES -- 0.6%
Coeur D'Alene Mines Corp........................ 194,678 3,577,208
Echo Bay Mines, Ltd............................. 298,499 3,208,864
--------------
6,786,072
--------------
MISCELLANEOUS - BASIC INDUSTRY
United Industrial Corp.......................... 31,700 194,162
--------------
PETROLEUM -- 7.0%
Elf Aquitaine, ADR.............................. 1,200,000 44,100,000
KN Energy, Inc.................................. 261,900 8,773,650
Mobil Corp...................................... 600 67,275
PanEnergy Corp.................................. 299,600 9,849,350
Petroleum Heat and Power Co., Inc. (Class 'A'
Stock)........................................ 47,300 366,575
Tenneco, Inc.................................... 251,300 12,847,712
USX-Marathon Group.............................. 430,600 8,665,825
--------------
84,670,387
--------------
PETROLEUM SERVICES -- 6.8%
Baker Hughes, Inc............................... 908,200 29,857,075
**+Crestar Energy, Inc.......................... 200,000 3,505,298
Dresser Industries, Inc......................... 577,600 17,039,200
McDermott International, Inc.................... 1,091,400 22,782,975
Sonat, Inc...................................... 206,300 9,283,500
--------------
82,468,048
--------------
REAL ESTATE DEVELOPMENT -- 14.9%
Alexander Haagen Properties, Inc................ 420,000 5,355,000
Amli Residential Properties Trust............... 208,300 4,296,187
Avalon Properties, Inc.......................... 265,000 5,763,750
Beacon Properties Corp.......................... 184,800 4,735,500
Bradley Real Estate, Inc........................ 240,000 3,480,000
CarrAmerica Realty Corp......................... 26,500 636,000
Crescent Real Estate Equities, Inc.............. 717,000 26,349,750
Crown American Realty Trust..................... 675,100 5,232,025
Equity Residential Properties Trust............. 1,188,800 39,081,800
Essex Property Trust, Inc....................... 146,000 3,139,000
Gables Residential Trust........................ 435,800 10,241,300
Glimcher Realty Trust........................... 565,000 9,534,375
JDN Realty Corp................................. 293,200 6,560,350
JP Realty, Inc.................................. 84,000 1,795,500
Kimco Realty Corp............................... 56,250 1,589,063
Malan Realty Investors, Inc..................... 140,000 2,082,500
Manufactured Home Communities, Inc.............. 581,500 11,193,875
MGI Properties, Inc............................. 34,800 595,950
Patriot American Hospitality, Inc............... 181,900 5,388,788
Pennsylvania Real Estate Investment Trust....... 50,100 970,688
Security Capital Pacific Trust.................. 527,034 11,462,990
Simon Property Group, Inc....................... 214,300 5,250,350
Sunstone Hotel Investors, Inc................... 240,000 2,610,000
</TABLE>
B31
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Vornado Realty Trust............................ 278,800 $ 11,395,950
Weingarten Realty Investors..................... 62,500 2,421,875
--------------
181,162,566
--------------
RETAIL -- 3.6%
+Gibson Greetings, Inc.......................... 778,600 10,705,750
J.C. Penney Co., Inc............................ 549,800 28,864,500
K mart Corp..................................... 299,200 3,702,600
--------------
43,272,850
--------------
STEEL -- 2.5%
LTV Corp........................................ 90,000 1,023,750
USX-U.S. Steel Group............................ 1,059,400 30,060,475
--------------
31,084,225
--------------
TELECOMMUNICATIONS -- 0.5%
Telefonos de Mexico SA (Class 'L' Stock), ADR... 198,000 6,633,000
--------------
TEXTILES -- 0.8%
Garan, Inc...................................... 2,900 49,300
Kellwood Co..................................... 518,900 9,534,788
Oxford Industries, Inc.......................... 34,500 556,313
--------------
10,140,401
--------------
TOBACCO -- 0.3%
RJR Nabisco Holdings Corp....................... 121,100 3,754,100
--------------
TRANSPORTATION -- 0.6%
Alexander & Baldwin, Inc........................ 287,750 6,941,969
--------------
TRUCKING/SHIPPING -- 0.3%
Yellow Corp..................................... 259,700 3,441,025
--------------
UTILITY - ELECTRIC -- 0.5%
Centerior Energy Corp........................... 46,600 343,675
Central Louisiana Electric Co................... 6,100 162,413
Pacific Gas & Electric Co....................... 240,000 5,580,000
--------------
6,086,088
--------------
TOTAL COMMON STOCKS
(Cost $870,736,688)............................................ 993,554,461
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 11.9% SHARES VALUE
------------- --------------
<S> <C> <C>
AIRLINES -- 2.1%
Delta Air Lines................................. 400,000 25,200,000
--------------
ALUMINUM -- 0.9%
Kaiser Aluminum Corp. (Cum. Conv.).............. 319,900 3,398,937
Reynolds Metals Co. (Cum. Conv.)................ 146,900 6,812,487
--------------
10,211,424
--------------
DRUGS & HOSPITAL SUPPLIES -- 0.5%
**U.S. Surgical Corp. (Cum. Conv.).............. 208,300 6,483,338
--------------
ELECTRICAL EQUIPMENT -- 2.1%
**Westinghouse Electric Corp. (Cum. Conv.),
Series C...................................... 1,457,000 25,861,750
--------------
FINANCIAL SERVICES -- 0.5%
**Parker & Parsley Capital, LLC (Cum. Conv.).... 118,800 6,534,000
--------------
INSURANCE -- 0.6%
**Alexander & Alexander Services, Inc. (Cum.
Conv.), Series A.............................. 100,000 4,800,000
**Unocal Corp. (Cum. Conv.)..................... 30,800 1,728,650
USF&G Corp. (Conv. Ex.), Series A............... 10,900 549,088
--------------
7,077,738
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 0.2%
Hecla Mining Co. (Cum. Conv.), Series B......... 60,000 $ 2,527,500
--------------
PETROLEUM SERVICES -- 0.6%
**McDermott International, Inc. (Cum. Conv.),
Series C...................................... 88,000 3,696,000
Noble Drilling Corp. (Cum. Conv.)............... 88,200 3,109,050
--------------
6,805,050
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Security Capital Pacific Trust (Cum. Conv.),
Series A...................................... 54,500 1,430,625
--------------
RETAIL -- 1.1%
K mart Corp. (Cum. Conv.)....................... 247,300 13,416,025
--------------
STEEL -- 1.3%
**Bethlehem Steel Corp. (Cum. Conv.)............ 264,000 11,022,000
USX Corp. (Cum. Conv.).......................... 114,600 4,999,425
--------------
16,021,425
--------------
TEXTILES -- 0.3%
Fieldcrest Cannon, Inc. (Cum. Conv.), Series
A............................................. 85,000 3,867,500
--------------
TOBACCO -- 1.6%
RJR Nabisco Holdings Corp. (Conv.), Ser. C...... 2,955,000 19,207,500
--------------
TOTAL PREFERRED STOCKS
(Cost $141,145,465)............................................ 144,643,875
--------------
<CAPTION>
MARKET
RIGHTS SHARES VALUE
------------- --------------
<S> <C> <C>
MACHINERY
**+Terex Corp................................... 16,950 0
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 2.1% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL -- 2.0%
Baker Hughes, Inc.,
Zero Coupon, 05/05/08......................... $ 5,940,000 4,068,900
Cross Timbers Oil Co.,
5.250%, 11/01/03.............................. 2,809,000 3,160,125
Malan Realty Investors, Inc.,
9.500%, 07/15/04.............................. 3,000,000 2,797,500
Noble Affiliates, Inc.,
4.250%, 11/01/03.............................. 11,701,000 12,900,352
Oryx Energy Co.,
7.500%, 05/15/14.............................. 1,760,000 1,548,800
--------------
24,475,677
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Alexander Haagen Properties, Inc., Series A,
7.500%, 01/15/01.............................. 600,000 1,400,000
--------------
TOTAL CONVERTIBLE BONDS
(Cost $23,381,803)............................................. 25,875,677
--------------
</TABLE>
B32
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 3.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 47,718,000 $ 47,718,000
--------------
OTHER ASSETS -- 0.3%
(net of liabilities)........................................... 3,645,883
--------------
TOTAL NET ASSETS -- 100.0%....................................... $1,215,437,896
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
LLC Limited Liability Company
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $60,256,291. The aggregate value, $63,631,036 is
approximately 5.2% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B33
<PAGE>
EQUITY PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 68.9% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.3%
AAR Corp........................................ 650,000 $ 13,243,750
--------------
ALUMINUM -- 0.8%
Aluminum Co. of America......................... 600,000 34,425,000
--------------
AUTOS - CARS & TRUCKS -- 4.0%
Chrysler Corp................................... 1,963,910 121,762,420
General Motors Corp............................. 700,000 36,662,500
+Navistar International Corp.................... 395,200 3,902,600
PACCAR, Inc..................................... 139,700 6,845,300
--------------
169,172,820
--------------
BANKS AND SAVINGS & LOANS -- 6.6%
Bank of New York Company, Inc................... 900,000 46,125,000
BankAmerica Corp................................ 550,000 41,662,500
Chase Manhattan Corp............................ 624,000 44,070,000
First of America Bank Corp...................... 187,000 8,368,250
Great Western Financial Corp.................... 1,000,000 23,875,000
J.P. Morgan & Co., Inc.......................... 395,400 33,460,725
Mellon Bank Corp................................ 276,398 15,754,686
Mercantile Bankshares Corp...................... 279,600 7,129,800
NationsBank Corp................................ 600,000 49,575,000
Republic New York Corp.......................... 225,000 14,006,250
--------------
284,027,211
--------------
CHEMICALS - SPECIALTY -- 0.9%
Eastman Chemical Co............................. 466,550 28,401,231
Witco Corp...................................... 268,800 9,240,000
--------------
37,641,231
--------------
COMMERCIAL SERVICES -- 0.4%
Wellman, Inc.................................... 798,200 18,657,925
--------------
COMPUTER SERVICES -- 0.8%
Comdisco, Inc................................... 1,350,000 35,943,750
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 2.2%
Loews Corp...................................... 1,200,000 94,650,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 4.5%
+Amdahl Corp.................................... 4,000,000 43,000,000
+Digital Equipment Corp......................... 2,500,000 112,500,000
Gerber Scientific, Inc.......................... 419,800 6,769,275
International Business Machines Corp............ 300,000 29,700,000
--------------
191,969,275
--------------
ELECTRICAL EQUIPMENT
+Rexel, Inc..................................... 107,199 1,514,186
--------------
ELECTRONICS -- 0.4%
Harris Corp..................................... 300,000 18,300,000
--------------
FINANCIAL SERVICES -- 5.8%
American Express Co............................. 2,100,000 93,712,500
+Associates First Capital Corp.................. 211,600 7,961,450
Dean Witter Discover & Co....................... 1,600,000 91,600,000
Lehman Brothers Holdings, Inc................... 900,000 22,275,000
Salomon, Inc.................................... 700,000 30,800,000
--------------
246,348,950
--------------
FOREST PRODUCTS -- 8.4%
Georgia-Pacific Corp............................ 900,000 63,900,000
International Paper Co.......................... 1,350,000 49,781,250
James River Corp. of Virginia................... 560,000 14,770,000
Kimberly-Clark Corp............................. 574,200 44,356,950
Mead Corp....................................... 725,000 37,609,375
Rayonier, Inc................................... 125,000 4,750,000
Temple Inland, Inc.............................. 850,000 39,737,500
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Weyerhaeuser Co................................. 900,000 $ 38,250,000
Willamette Industries, Inc...................... 1,100,000 65,450,000
--------------
358,605,075
--------------
GAS PIPELINES -- 0.3%
NorAm Energy Corp............................... 1,300,000 14,137,500
--------------
HEALTHCARE -- 1.1%
+Foundation Health Corp......................... 1,330,700 47,738,862
--------------
HOSPITAL MANAGEMENT -- 1.6%
+Tenet Healthcare Corp.......................... 3,237,832 69,208,659
--------------
HOUSING RELATED -- 0.4%
Centex Corp..................................... 600,000 18,675,000
--------------
INSURANCE -- 10.7%
Alexander & Alexander Services, Inc............. 1,050,000 20,737,500
American Financial Group, Inc................... 303,700 9,148,962
American General Corp........................... 1,000,000 36,375,000
Chubb Corp...................................... 1,400,000 69,825,000
Citizens Corp................................... 700,000 13,125,000
Equitable Cos., Inc............................. 1,800,000 44,775,000
First Colony Corp............................... 1,253,600 38,861,600
Old Republic International Corp................. 1,500,885 32,269,027
Providian Corp.................................. 340,500 14,598,937
SAFECO Corp..................................... 1,600,000 56,600,000
St. Paul Companies, Inc......................... 476,900 25,514,150
Travelers Group, Inc............................ 1,350,000 61,593,750
Western National Corp........................... 1,624,300 29,846,513
--------------
453,270,439
--------------
MACHINERY -- 0.5%
+American Standard Co., Inc..................... 700,000 23,100,000
--------------
MINERAL RESOURCES -- 0.8%
+Amax Gold, Inc................................. 131,342 722,381
Cyprus Amax Minerals Co......................... 1,533,200 34,688,650
+Nord Resources Corp............................ 130,500 603,563
--------------
36,014,594
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
TRW, Inc........................................ 347,200 31,204,600
+Worldtex, Inc.................................. 107,199 643,194
--------------
31,847,794
--------------
MISCELLANEOUS - CONSUMER -- 0.2%
+Gibson Greetings, Inc.......................... 750,000 10,312,500
--------------
PETROLEUM SERVICES -- 5.3%
Amerada Hess Corp............................... 325,000 17,428,125
Atlantic Richfield Co........................... 400,000 47,400,000
Occidental Petroleum Corp....................... 1,100,000 27,225,000
+Oryx Energy Co................................. 1,600,000 26,000,000
Societe Nationale Elf Aquitaine, (ADR)
(France)...................................... 1,924,433 70,722,913
Total SA, (ADR)................................. 738,365 27,411,801
Union Texas Petroleum Holdings, Inc............. 504,500 9,837,750
--------------
226,025,589
--------------
RETAIL -- 6.7%
Dayton-Hudson Corp.............................. 119,600 12,333,750
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 2,300,000 83,950,000
K-Mart Corp..................................... 6,000,000 74,250,000
Petrie Stores Corp.............................. 540,000 1,518,750
Tandy Corp...................................... 1,218,000 57,702,750
</TABLE>
B34
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Toys 'R' Us, Inc............................... 854,000 $ 24,339,000
+Waban, Inc..................................... 1,300,000 31,037,500
--------------
285,131,750
--------------
STEEL -- 0.8%
+Bethlehem Steel Corp........................... 500,000 5,937,500
Birmingham Steel Corp........................... 1,468,400 24,045,050
Carpenter Technology Corp....................... 100,000 3,200,000
--------------
33,182,550
--------------
TELECOMMUNICATIONS -- 2.3%
360 Communication Co............................ 96,066 2,305,584
Loral Space & Communications Corp............... 1,800,000 24,525,000
Telefonica de Espana, SA, (ADR) (Spain),........ 1,300,000 71,662,500
--------------
98,493,084
--------------
TOBACCO -- 1.2%
RJR Nabisco Holdings Corp....................... 1,600,000 49,600,000
--------------
TRUCKING/SHIPPING -- 0.5%
+OMI Corp....................................... 1,000,000 8,625,000
Overseas Shipholding Group, Inc................. 600,000 10,875,000
--------------
19,500,000
--------------
UTILITIES -- 0.7%
American Electric Power Co., Inc................ 180,000 7,672,500
American Water Works Co., Inc................... 135,000 5,433,750
General Public Utilities Corp................... 500,000 17,625,000
--------------
30,731,250
--------------
TOTAL COMMON STOCKS
(Cost $2,223,973,280).......................................... 2,951,468,744
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 0.6% SHARES VALUE
------------- --------------
<S> <C> <C>
TOBACCO -- 0.6%
RJR Nabisco Holdings Corp., Ser. C (Conv.) (Cost
$25,999,610).................................. 4,000,000 26,000,000
--------------
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 30.3% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK NOTES -- 0.2%
First National Bank of Chicago,
5.320%, 07/22/96.............................. $ 4,000,000 3,999,862
United States National Bank of Oregon,
5.320%, 07/30/96.............................. 7,000,000 6,999,707
--------------
10,999,569
--------------
CERTIFICATES OF DEPOSIT -- YANKEE -- 0.7%
Bank of Nova Scotia,
5.500%, 07/01/96.............................. 21,575,000 21,575,000
Mitsubishi International Ltd.,
5.460%, 07/24/96.............................. 6,500,000 6,477,326
--------------
28,052,326
--------------
COMMERCIAL PAPER -- 16.2%
American Honda Finance Corp.,
5.400%, 07/25/96.............................. 12,000,000 11,956,800
Associates Corp. of North America,
5.600%, 07/01/96.............................. 42,000,000 42,000,000
AT&T Corp.,
5.320%, 07/12/96.............................. 3,710,000 3,703,969
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Barnett Banks, Inc.,
5.500%, 07/01/96.............................. $ 42,000,000 $ 42,000,000
Canadian Imperial Bank,
5.500%, 07/01/96.............................. 42,713,000 42,713,000
Ciesco, L.P.,
5.300%, 07/12/96.............................. 5,000,000 4,991,903
5.320%, 07/19/96-08/02/96..................... 31,000,000 30,884,438
Cooper Industries, Inc.,
5.600%, 07/01/96.............................. 42,713,000 42,713,000
Corporate Asset Funding Co., Inc.,
5.290%, 07/18/96.............................. 21,783,000 21,728,585
Countrywide Funding Corp.,
5.400%, 07/23/96.............................. 9,000,000 8,970,300
5.420%, 07/25/96.............................. 4,000,000 3,985,547
5.430%, 08/20/96.............................. 6,000,000 5,954,750
Duracell Inc.,
5.400%, 07/22/96.............................. 17,000,000 16,946,450
Finova Capital Corp.,
5.420%, 07/11/96-07/15/96..................... 16,000,000 15,968,082
5.450%, 07/17/96.............................. 1,000,000 997,578
5.470%, 08/09/96.............................. 7,700,000 7,654,371
First Data Corp.,
5.450%, 07/30/96.............................. 19,200,000 19,115,707
Ford Motor Credit Corp.,
5.380%, 08/20/96.............................. 42,000,000 41,686,167
GTE Corp.,
5.390%, 07/15/96.............................. 4,000,000 3,991,616
5.420%, 07/26/96.............................. 4,000,000 3,984,944
5.430%, 07/22/96.............................. 9,000,000 8,971,492
5.450%, 07/12/96.............................. 8,215,000 8,201,320
Heller Financial Services Inc.,
5.440%, 07/22/96.............................. 1,000,000 996,827
5.450%, 07/16/96.............................. 1,000,000 997,717
5.460%, 07/08/96.............................. 2,000,000 1,997,877
International Business Machines Credit Corp.,
5.290%, 07/10/96.............................. 9,000,000 8,988,097
Lowes Co.,
5.650%, 07/01/96.............................. 12,000,000 12,000,000
Merrill Lynch & Co. Inc,
5.400%, 07/12/96.............................. 42,000,000 41,930,700
Morgan Stanley Group, Inc.,
5.600%, 07/01/96.............................. 12,000,000 12,000,000
Nomura Holdings America, Inc.,
5.670%, 07/01/96.............................. 15,000,000 15,000,000
Norwest Corp.,
5.350%, 07/10/96.............................. 3,000,000 2,995,987
NYNEX Corp.,
5.420%, 07/22/96-08/16/96..................... 10,000,000 9,938,272
PHH Corp.,
5.320%, 07/17/96.............................. 13,250,000 13,218,671
5.340%, 07/08/96.............................. 5,300,000 5,294,497
5.600%, 07/01/96.............................. 12,190,000 12,190,000
Philip Morris Cos., Inc.,
5.390%, 07/25/96.............................. 10,000,000 9,964,067
Pitney-Bowes Credit Corp.,
5.450%, 07/12/96.............................. 7,390,000 7,377,694
PNC Funding Corp.,
5.400%, 07/11/96.............................. 6,000,000 5,991,000
5.430%, 07/08/96.............................. 1,000,000 998,944
Prefco,
5.370%, 07/22/96.............................. 8,000,000 7,974,940
</TABLE>
B35
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Preferred Receivables Funding Corp.,
5.300%, 07/11/96.............................. $ 5,252,000 $ 5,244,268
5.370%, 07/17/96.............................. 22,000,000 21,947,493
Riverwoods Funding Corp.,
5.300%, 07/02/96.............................. 9,000,000 8,998,675
Rockwell International Corp.,
5.450%, 07/16/96.............................. 19,822,000 19,776,987
Sears Roebuck Acceptance Corp.,
5.400%, 07/25/96.............................. 4,000,000 3,985,600
Smith Barney Inc.,
5.360%, 07/02/96.............................. 4,000,000 3,999,404
5.370%, 07/09/96.............................. 6,000,000 5,992,840
5.380%, 07/11/96.............................. 19,000,000 18,971,606
Transamerica Corp.,
5.340%, 07/09/96.............................. 19,000,000 18,977,453
United States West Commerce, Inc.,
5.450%, 07/15/96.............................. 6,625,000 6,610,959
Whirlpool Financial Corp.,
5.400%, 07/22/96-07/25/96..................... 21,777,000 21,701,202
--------------
695,181,796
--------------
LOAN PARTICIPATIONS -- 1.0%
Cargill Financial Services Corp.,
5.500%, 07/03/96.............................. 2,713,000 2,713,000
Cargill Inc.,
5.500%, 07/03/96.............................. 40,000,000 40,000,000
--------------
42,713,000
--------------
U.S. GOVERNMENT, AGENCY & INSTRUMENTALITY OBLIGATIONS -- DISCOUNT
-- 1.0%
Federal National Mortgage Assoc.,
5.260%, 09/09/96.............................. 21,200,000 20,974,644
5.270%, 09/03/96.............................. 20,985,000 20,787,321
--------------
41,761,965
--------------
REPURCHASE AGREEMENTS -- 11.2%
Joint Repurchase Agreement Account,
5.443%, 07/01/96.............................. 482,433,000 482,433,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,301,141,656
--------------
OTHER ASSETS -- 0.2%
(net of liabilities)........................................... 7,344,752
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,285,955,152
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
+No dividend was paid on this security during the 12 months ended June 30,
1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B36
<PAGE>
PRUDENTIAL JENNISON
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 97.3% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.0%
Boeing Co....................................... 48,900 $ 4,260,412
--------------
AIRLINES -- 2.2%
+AMR Corp....................................... 34,400 3,130,400
--------------
BEVERAGES -- 3.1%
Coca-Cola Co.................................... 27,900 1,363,612
PepsiCo, Inc.................................... 88,300 3,123,612
--------------
4,487,224
--------------
COMMERCIAL SERVICES -- 3.5%
+CUC International, Inc......................... 70,700 2,509,850
+Eagle River Interactive, Inc................... 84,600 1,670,850
Manpower, Inc................................... 23,400 918,450
--------------
5,099,150
--------------
COMMUNICATIONS -- 1.8%
+Clear Channel Communications, Inc.............. 31,100 2,561,862
--------------
COMPUTER SERVICES -- 17.9%
3Com Corp....................................... 60,700 2,777,025
+America Online, Inc............................ 55,100 2,410,625
Autodesk, Inc................................... 32,300 964,962
+Cisco Systems, Inc............................. 70,800 4,009,050
Computer Associates International, Inc.......... 47,300 3,370,125
Electronic Data Systems Corp.................... 30,100 1,617,875
+EMC Corp....................................... 56,800 1,057,900
First Data Corp................................. 27,273 2,171,613
+Intuit, Inc.................................... 30,900 1,460,025
+Microsoft Corp................................. 25,600 3,075,200
**SAP AG, ADR................................... 31,300 1,549,350
+Seagate Technology, Inc........................ 31,700 1,426,500
--------------
25,890,250
--------------
COSMETICS & SOAPS -- 1.5%
Gillette Co..................................... 34,200 2,133,225
--------------
DRUGS AND HOSPITAL SUPPLIES -- 11.5%
Astra AB (ADR A)................................ 47,700 2,086,875
+Chiron Corporation............................. 16,600 1,626,800
Ciba-Geigy AG, ADR.............................. 28,600 1,742,812
Eli Lilly & Co.................................. 45,900 2,983,500
Johnson & Johnson............................... 58,500 2,895,750
Pfizer, Inc..................................... 35,300 2,519,537
Smithkline Beecham PLC, ADR, UTS................ 49,300 2,680,687
--------------
16,535,961
--------------
ELECTRONICS -- 10.9%
Hewlett-Packard Co.............................. 41,100 4,094,588
Intel Corp...................................... 50,600 3,715,938
+International Rectifier Corp................... 85,600 1,380,300
+KLA Instruments Corp........................... 46,500 1,081,125
+LSI Logic Corp................................. 72,500 1,885,000
Macromedia Inc.................................. 38,000 831,250
Nokia AB Corp. (ADR A).......................... 29,600 1,095,200
+Symbol Technologies, Inc....................... 38,100 1,695,450
--------------
15,778,851
--------------
FINANCIAL SERVICES -- 1.3%
Federal National Mortgage Association........... 56,200 1,882,700
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 1.4%
Kimberly-Clark Corp............................. 25,400 $ 1,962,150
--------------
HOSPITAL MANAGEMENT -- 3.1%
+Healthsouth Rehablilitation.................... 61,700 2,221,200
+PhyCor, Inc.................................... 59,500 2,261,000
--------------
4,482,200
--------------
INSURANCE -- 6.4%
CIGNA Corp...................................... 22,000 2,593,250
MGIC Investment Corp............................ 37,000 2,076,625
Mutual Risk Management, Ltd..................... 55,666 1,739,563
United Healthcare Corp.......................... 57,100 2,883,550
--------------
9,292,988
--------------
LEISURE -- 2.6%
+Harrah's Entertainment, Inc.................... 21,400 604,550
Walt Disney Co.................................. 49,500 3,112,313
--------------
3,716,863
--------------
LODGING -- 1.5%
Hilton Hotels Corp.............................. 19,000 2,137,500
--------------
MACHINERY -- 1.0%
Harnischfeger Industries, Inc................... 43,300 1,439,725
--------------
MEDIA -- 3.9%
Omnicom Group, Inc.............................. 59,900 2,785,350
Reuters Holdings PLC, ADR....................... 39,400 2,856,500
--------------
5,641,850
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.0%
+ITT Corp....................................... 38,200 2,530,750
+Scholastic Corp................................ 29,300 1,816,600
--------------
4,347,350
--------------
PETROLEUM SERVICES -- 1.8%
Schlumberger, Ltd............................... 31,000 2,611,750
--------------
RESTAURANTS -- 1.4%
+Lone Star Steakhouse & Saloon.................. 52,800 1,993,200
--------------
RETAIL -- 8.1%
+AutoZone, Inc.................................. 74,200 2,578,450
+Corporate Express, Inc......................... 35,800 1,432,000
Home Depot, Inc................................. 47,900 2,586,600
+Kohl's Corp.................................... 44,900 1,644,463
+Micro Warehouse, Inc........................... 16,100 322,000
Nike, Inc. (Class 'B' Stock).................... 16,800 1,726,200
+Sunglass Hut International, Inc................ 59,000 1,438,125
--------------
11,727,838
--------------
TELECOMMUNICATIONS -- 6.4%
L.M. Ericsson Telephone Co.
(Class 'B' Stock), ADR........................ 71,000 1,526,500
+MCI Communications Corp........................ 71,100 1,821,938
+Picturetel Corp................................ 29,000 1,141,875
+Tellabs, Inc................................... 47,300 3,163,188
Vodafone Group PLC, ADR......................... 43,900 1,618,813
--------------
9,272,314
--------------
TOTAL COMMON STOCKS
(Cost $129,654,371)............................................ 140,385,763
--------------
</TABLE>
B37
<PAGE>
PRUDENTIAL JENNISON (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 6.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 9,604,000 $ 9,604,000
--------------
LIABILITIES -- (3.9%)
(net of other assets).......................................... (5,686,308)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 144,303,455
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company
UTS Unit Trust Shares
**Indicates a restricted security; the aggregate cost of the restricted
securities is $1,536,012. The aggregate value, $1,549,350 is approximately
1.07% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B38
<PAGE>
SMALL CAPITALIZATION STOCK
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 90.9% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.5%
AAR Corp........................................ 5,600 $ 114,100
+BE Aerospace, Inc.............................. 5,700 74,100
Kaman Corp. (Class 'A' Stock)................... 6,500 65,812
+Orbital Sciences Corp.......................... 9,100 147,875
+UNC, Inc....................................... 6,200 51,925
Watkins-Johnson Co.............................. 2,800 76,650
--------------
530,462
--------------
AIRLINES -- 0.6%
Comair Holdings, Inc............................ 15,525 419,175
+Mesa Airlines, Inc............................. 10,500 124,687
SkyWest, Inc.................................... 3,400 63,325
--------------
607,187
--------------
ALUMINUM -- 0.1%
+IMCO Recycling, Inc............................ 3,900 70,200
--------------
AUTOS - CARS & TRUCKS -- 1.2%
A.O. Smith Corp................................. 7,200 180,000
Breed Technologies, Inc......................... 10,800 241,650
+Custom Chrome, Inc............................. 1,700 45,687
Myers Industries, Inc........................... 5,720 106,535
Simpson Industries, Inc......................... 6,300 58,275
Spartan Motors, Inc............................. 4,400 33,000
Standard Motor Products, Inc.................... 4,400 78,650
Standard Products Co............................ 5,700 132,525
+TBC Corp....................................... 8,300 71,587
Wabash National Corp............................ 6,500 115,375
Wynn's International, Inc....................... 3,000 84,750
--------------
1,148,034
--------------
BANKS AND SAVINGS & LOANS -- 6.7%
+Astoria Financial Corp......................... 7,500 203,437
CCB Financial Corp.............................. 5,000 256,250
Center Financial Corp........................... 5,100 123,197
Centura Banks, Inc.............................. 8,200 301,350
+Coast Savings Financial, Inc................... 6,500 212,875
Collective Bancorp, Inc......................... 7,100 167,737
+Commercial Federal Corp........................ 5,100 195,075
Cullen/Frost Bankers, Inc....................... 7,400 205,350
Deposit Guaranty Corp........................... 6,500 286,000
Downey Financial Corp........................... 5,830 127,531
First Commercial Corp........................... 8,487 260,975
First Financial Corp............................ 10,500 236,250
First Michigan Bank Corp........................ 6,391 201,316
+FirstBank Puerto Rico.......................... 4,900 112,700
Firstmerit Corp................................. 11,600 368,300
JSB Financial, Inc.............................. 3,500 115,937
Keystone Financial, Inc......................... 8,400 281,400
Liberty Bancorp, Inc............................ 3,300 117,150
Magna Group, Inc................................ 9,300 223,200
Mark Twain Bancshares, Inc...................... 5,600 207,200
North American Mortgage Co...................... 5,000 86,875
ONBANcorp, Inc.................................. 4,700 153,925
Provident Bancorp, Inc.......................... 9,250 326,062
RCSB Financial, Inc............................. 4,600 119,025
+Riggs National Corp............................ 9,300 112,762
Roosevelt Financial Group, Inc.................. 14,700 282,975
Sovereign Bancorp, Inc.......................... 15,955 159,550
St. Paul Bancorp, Inc........................... 6,600 151,800
Union Planters Corp............................. 15,900 482,962
Whitney Holding Corp............................ 5,900 178,475
Zions Bancorp, Inc.............................. 5,100 371,025
--------------
6,628,666
--------------
BEVERAGES -- 0.1%
Coca Cola Bottling Co........................... 3,100 109,275
--------------
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
CHEMICALS -- 1.3%
Chemed Corp..................................... 3,300 $ 123,337
+Cytec Industries, Inc.......................... 5,800 495,900
+Hauser Chemical Research, Inc.................. 3,700 24,975
Lilly Industries, Inc. (Class 'A' Stock)........ 7,000 119,000
+McWhorter Technologies, Inc.................... 3,500 62,125
+Mycogen Corp................................... 10,700 160,500
+Puretec Corp................................... 9,900 32,175
Quaker Chemical Corp............................ 3,000 38,250
+Scotts Co. (Class 'A' Stock)................... 6,600 115,500
WD-40 Co........................................ 2,600 122,200
--------------
1,293,962
--------------
CHEMICALS - SPECIALTY -- 0.2%
First Mississippi Corp.......................... 7,200 160,200
Penwest, Ltd.................................... 2,300 41,400
--------------
201,600
--------------
COMMERCIAL SERVICES -- 2.9%
ABM Industries, Inc............................. 3,300 129,112
ADVO, Inc....................................... 8,100 84,037
Bowne & Company, Inc............................ 6,100 125,812
+CDI Corp....................................... 6,800 229,500
+Corrections Corp. of America................... 12,100 847,000
+Franklin Quest Co.............................. 7,600 157,700
+Insurance Auto Auction, Inc.................... 3,900 39,000
+Interim Services, Inc.......................... 5,400 232,200
LSB Industries, Inc............................. 4,500 21,375
Merrill Corp.................................... 2,600 65,000
+NFO Research, Inc.............................. 3,250 76,781
Norrell Corp.................................... 3,800 186,675
+Pharmaceutical Marketing Services, Inc......... 4,400 42,900
Plenum Publishing Corp.......................... 1,300 45,500
+Primark Corp................................... 8,200 267,525
Thomas Nelson, Inc.............................. 5,900 78,912
True North Communications, Inc.................. 8,200 182,450
--------------
2,811,479
--------------
COMPUTER SERVICES -- 8.5%
+Acxiom Corp.................................... 8,900 303,712
+American Management Systems, Inc............... 14,250 416,812
Amtech Corp..................................... 5,100 38,250
+Auspex Systems, Inc............................ 8,300 124,500
+BancTec, Inc................................... 7,100 143,775
+Banyan Systems, Inc............................ 5,900 42,775
+BBN Corp....................................... 6,000 130,500
+BISYS Group, Inc............................... 8,200 309,550
+Broderbund Software, Inc....................... 7,200 232,200
+Cerner Corp.................................... 11,400 243,675
+Chips & Technologies, Inc...................... 7,100 69,225
+Comverse Technology, Inc....................... 7,500 228,750
+Continuum Inc.................................. 8,200 475,600
+Control Data Systems, Inc...................... 4,700 100,462
Fair Issac & Company, Inc....................... 3,600 159,300
+FileNet Corp................................... 5,300 193,450
Gerber Scientific, Inc.......................... 7,900 127,387
+Hyperion Software Corp......................... 5,800 71,775
+Keane, Inc..................................... 5,500 202,812
+Komag, Inc..................................... 17,800 469,475
+Microcom Inc................................... 5,400 68,175
National Data Corp.............................. 8,900 304,825
+Network General Corp........................... 15,200 326,800
+Norand Corp.................................... 2,700 54,000
+Paxar Corp..................................... 7,450 130,375
+Platinum Software Corp......................... 5,800 42,050
+PLATINUM Technology, Inc....................... 19,200 290,400
+Progress Software Corp......................... 4,500 73,687
</TABLE>
B39
<PAGE>
SMALL CAPITALIZATION STOCK (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Read-Rite Corp................................. 16,300 $ 230,237
+Standard Microsystems Corp..................... 4,600 70,150
+Sterling Software, Inc......................... 11,600 893,200
+SunGard Data Systems, Inc...................... 14,700 589,837
System Software Associates, Inc................. 14,800 251,600
+Tech Data Corp................................. 13,300 289,275
Telxon Corp..................................... 5,600 65,800
+Tricord Systems, Inc........................... 4,700 21,150
+Viewlogic Systems, Inc......................... 5,800 80,475
+Wall Data, Inc................................. 3,100 68,200
+Xircom, Inc.................................... 6,400 94,400
+Zebra Technologies Corp. (Class 'A' Stock)..... 8,500 150,875
+Zilog, Inc..................................... 6,800 163,200
--------------
8,342,696
--------------
CONSTRUCTION -- 0.6%
+BMC West Corp.................................. 4,000 68,500
+Insituform Technologies, Inc. (Class 'A'
Stock)........................................ 9,500 73,625
M.D.C. Holdings, Inc............................ 6,500 43,875
Ply-Gem Industries, Inc......................... 4,900 66,762
Republic Group, Inc............................. 3,700 52,725
+Southern Energy Homes, Inc..................... 3,275 70,412
Stone & Webster, Inc............................ 4,700 160,387
+Washington Const............................... 10,000 102,500
--------------
638,786
--------------
CONTAINERS -- 0.3%
AptarGroup Inc.................................. 6,100 184,525
+Shorewood Packaging Corp....................... 6,400 98,400
--------------
282,925
--------------
COSMETICS & SOAPS -- 0.2%
Nature's Sunshine Products, Inc................. 6,500 165,750
--------------
DIVERSIFIED GAS -- 4.7%
Atmos Energy Corp............................... 5,400 165,375
+Barrett Resources Corp......................... 9,610 285,897
+Benton Oil & Gas Co............................ 9,100 200,200
+Box Energy Corp. (Class 'B' Stock)............. 7,300 66,612
Cascade Natural Gas Corp........................ 3,222 46,316
Connecticut Energy Corp......................... 3,000 57,000
Cross Timbers Oil Co............................ 6,300 155,925
Daniel Industries............................... 4,000 58,000
Devon Energy Corp............................... 7,600 186,200
Energen Corp.................................... 3,800 84,075
+HS Resources, Inc.............................. 3,500 40,687
KCS Energy, Inc................................. 4,000 115,000
New Jersey Resources Corp....................... 6,300 181,125
Northwest Natural Gas Co........................ 4,900 171,500
+Oceaneering International, Inc................. 8,100 122,512
Pennsylvania Enterprises, Inc................... 1,600 63,600
+Plains Resources, Inc.......................... 5,400 70,200
Pogo Producing Co............................... 11,300 430,812
Public Service Company of North Carolina,
Inc........................................... 6,600 112,200
Snyder Oil Corp................................. 10,800 109,350
Sonat Offshore Drilling, Inc.................... 9,700 489,850
Southwest Gas Corp.............................. 8,900 142,400
Southwestern Energy Co.......................... 8,600 121,475
St. Mary Land & Exploration Co.................. 2,900 48,575
+Tuboscope Vetco International, Inc............. 12,300 136,837
United Cities Gas Co............................ 4,200 63,525
+United Meridian Corp........................... 9,600 345,600
Vintage Petroleum, Inc.......................... 8,100 206,550
Washington Energy Co............................ 5,500 108,625
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
WICOR, Inc...................................... 6,100 $ 230,275
Wiser Oil Co.................................... 3,100 39,137
--------------
4,655,435
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.1%
Nashua Corp..................................... 2,300 29,325
New England Business Service, Inc............... 5,100 99,450
--------------
128,775
--------------
DRUGS AND HOSPITAL SUPPLIES -- 7.4%
ADAC Laboratories............................... 6,000 136,500
+Advanced Tissue Sciences, Inc.................. 13,000 209,625
+Alliance Pharmaceutical Corp................... 9,600 158,400
Alpharma Inc. (Class 'A' Stock)................. 7,600 151,050
+American Medical Response, Inc................. 6,900 243,225
Ballard Medical Products........................ 9,400 179,775
+Calgene, Inc................................... 10,600 70,225
+CellPro, Inc................................... 5,000 90,000
+Cephalon, Inc.................................. 8,300 163,925
+Circon Corp.................................... 4,100 48,175
+Coherent Inc................................... 3,700 192,400
Collagen Corp................................... 3,000 57,375
+COR Therapeutics, Inc.......................... 6,800 77,350
+Cygnus, Inc.................................... 6,400 97,600
+Enzo Biochem, Inc.............................. 7,470 127,924
+IDEXX Laboratories, Inc........................ 12,800 502,400
+ImmuLogic Pharmaceutical Corp.................. 6,500 59,312
Invacare Corp................................... 10,200 239,700
+Liposome Company, Inc.......................... 10,500 196,875
+Medimmune, Inc................................. 7,200 122,400
Mentor Corp/Minn................................ 8,700 221,850
+Molecular Biosystems, Inc...................... 5,700 51,300
+NBTY, Inc...................................... 6,500 65,406
+North American Vaccine, Inc.................... 10,700 195,275
+Noven Pharmaceuticals, Inc..................... 6,900 110,400
Omnicare, Inc................................... 22,000 583,000
Owens & Minor, Inc.............................. 11,100 129,037
+Patterson Dental Co............................ 5,900 213,875
+Perseptive Biosystems, Inc..................... 5,600 52,150
+Pharmaceutical Resources, Inc.................. 6,400 32,000
+Protein Design Labs, Inc....................... 5,300 119,250
+Regeneron Pharmaceuticals, Inc................. 8,700 151,162
+Resound Corp................................... 5,500 70,125
+Respironics, Inc............................... 6,600 122,100
+Roberts Pharmaceutical Corp.................... 6,500 130,812
+SciClone Pharmaceuticals, Inc.................. 6,000 83,250
+Sequus Pharmaceuticals, Inc.................... 10,000 198,906
+SpaceLabs Medical, Inc......................... 3,600 83,700
+STERIS Corp.................................... 12,232 391,424
+Summit Technology, Inc......................... 10,600 148,400
+Sunrise Medical, Inc........................... 6,600 127,050
+Syncor International Corp...................... 3,600 46,800
+TECNOL Medical Products, Inc................... 7,000 134,750
+The Immune Response Corp....................... 5,900 67,850
+TheraTech, Inc................................. 4,700 90,475
+US Bioscience, Inc............................. 7,350 100,144
+Vertex Pharmaceuticals, Inc.................... 6,000 182,250
+VISX, Inc...................................... 5,300 180,862
Vital Signs, Inc................................ 4,600 94,300
+Zoll Medical Corp.............................. 2,100 33,600
--------------
7,335,739
--------------
ELECTRICAL EQUIPMENT -- 1.8%
Augat, Inc...................................... 6,900 131,962
Baldor Electric Co.............................. 8,750 196,875
Fluke Corp...................................... 2,700 109,012
+KEMET Corp..................................... 12,900 258,000
+Kent Electronics Corp.......................... 8,200 256,250
Kuhlman Corp.................................... 4,400 76,450
</TABLE>
B40
<PAGE>
SMALL CAPITALIZATION STOCK (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Microchip Technology, Inc...................... 11,800 $ 292,050
+Rexel, Inc..................................... 8,900 125,712
+Valence Technology, Inc........................ 7,600 38,950
+Vicor Corp..................................... 14,600 339,450
--------------
1,824,711
--------------
ELECTRONICS -- 4.6%
Allen Group, Inc................................ 9,300 202,275
Bell Industries, Inc............................ 2,521 42,227
+Benchmark Electronics, Inc..................... 1,400 40,600
BMC Industries, Inc............................. 9,400 270,250
+C-COR Electronics, Inc......................... 3,300 59,400
Core Industries, Inc............................ 3,600 51,750
+Cyrix Corp..................................... 6,700 115,575
Dallas Semiconductor Corp....................... 9,000 163,125
+Dionex Corp.................................... 4,500 145,125
+Dynatech Corp.................................. 6,400 208,000
+IMO Industries, Inc............................ 6,000 34,500
+Input/Output, Inc.............................. 14,800 479,150
+Integrated Circuit Systems, Inc................ 4,000 43,000
+Intermagnetics General Corp.................... 3,918 70,524
+International Rectifier Corp................... 17,700 285,412
+Itron, Inc..................................... 4,600 130,525
+Lattice Semiconductor Corp..................... 7,700 185,762
+Marshall Industries............................ 5,800 162,400
+Oak Industries, Inc............................ 6,100 180,712
Pacific Scientific Co........................... 4,000 63,000
Pioneer Standard Electronics, Inc............... 7,500 99,375
+Plexus Corp.................................... 2,200 33,550
+S3, Inc........................................ 16,400 201,925
+Sanmina Corp................................... 5,600 151,200
+SCI Systems, Inc............................... 10,300 418,437
+Three-Five Systems, Inc........................ 2,700 27,337
Tseng Laboratories, Inc......................... 6,600 63,525
+VLSI Technology, Inc........................... 16,000 222,000
Wyle Electronics................................ 4,400 145,750
X-Rite, Inc..................................... 7,300 111,325
Zero Corp....................................... 3,600 76,950
--------------
4,484,686
--------------
ENVIRONMENTAL SERVICES -- 1.4%
+Addington Resources, Inc....................... 5,300 132,500
+Allwaste, Inc.................................. 13,800 63,825
Dames & Moore, Inc.............................. 7,600 92,150
+Ionics, Inc.................................... 5,000 235,000
+OHM Corp....................................... 9,300 65,100
+Omega Environmental, Inc....................... 12,900 28,219
+Sanifill, Inc.................................. 8,400 413,700
+TETRA Technologies, Inc........................ 4,500 78,187
+United States Filter Corp...................... 9,000 312,750
--------------
1,421,431
--------------
FINANCIAL SERVICES -- 3.5%
Alex Brown, Inc................................. 5,400 305,100
+AMRESCO, Inc................................... 8,800 150,700
+Cal Fed Bancorp, Inc........................... 17,000 310,250
Charter One Financial, Inc...................... 15,740 548,932
Eaton Vance Corp................................ 3,100 112,375
+Envoy Corporation.............................. 4,100 119,925
Inter-Regional Financial Group, Inc............. 4,000 104,000
+Investors Financial Services Corp.............. 69 1,604
Legg Mason, Inc................................. 5,200 167,700
MAF Bancorp, Inc................................ 35 857
Pioneer Group, Inc.............................. 8,700 232,725
Piper Jaffray Companies, Inc.................... 6,100 76,250
Quick & Reilly Group, Inc....................... 8,725 283,562
Raymond James Financial, Inc.................... 7,300 165,162
SEI Corp........................................ 6,500 137,312
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TCF Financial Corp.............................. 12,200 $ 405,650
United States Trust Corp........................ 3,300 166,650
Waterhouse Investor Services, Inc............... 3,775 140,147
--------------
3,428,901
--------------
FOODS -- 1.7%
Chiquita Brands International, Inc.............. 18,800 244,400
Earthgrains Co.................................. 3,500 114,625
GoodMark Foods, Inc............................. 2,700 38,475
Interstate Bakeries Corp........................ 13,000 347,750
+J & J Snack Foods Corp......................... 3,100 35,650
Nash-Finch Co................................... 3,800 60,800
National Auto Credit, Inc....................... 9,990 113,636
Richfood Holdings, Inc.......................... 10,900 354,250
Rykoff-Sexton, Inc.............................. 9,300 133,687
Smith's Food & Drug Centers, Inc................ 3,492 83,371
+Smithfield Foods, Inc.......................... 6,300 159,075
Super Food Services, Inc........................ 3,800 36,100
--------------
1,721,819
--------------
FOREST PRODUCTS -- 0.5%
Caraustar Industries, Inc....................... 8,700 230,550
Mosinee Paper Corp.............................. 3,466 92,715
Pope & Talbot, Inc.............................. 4,500 68,062
Universal Forest Products, Inc.................. 5,700 59,137
--------------
450,464
--------------
FURNITURE -- 0.6%
+Ethan Allen Interiors, Inc..................... 4,800 118,800
Interface, Inc. (Class 'A' Stock)............... 6,100 94,550
Juno Lighting, Inc.............................. 6,100 103,700
La-Z-Boy Chair Co............................... 6,400 192,800
Thomas Industries, Inc.......................... 3,400 65,025
--------------
574,875
--------------
HEALTHCARE -- 0.8%
+Coventry Corp.................................. 11,400 179,550
+Sola International, Inc........................ 7,400 212,750
+Sybron International Corp...................... 16,100 402,500
--------------
794,800
--------------
HOSPITAL MANAGEMENT -- 3.7%
+Community Health Systems, Inc.................. 6,700 346,725
+Express Scripts, Inc. (Class 'A' Stock)........ 5,700 262,200
+Genesis Health Ventures, Inc................... 10,600 332,575
+GranCare, Inc.................................. 7,800 155,025
Integrated Health Services, Inc................. 7,800 185,250
+Lincare Holdings, Inc.......................... 9,700 380,725
+Living Centers of America, Inc................. 7,100 244,063
+Magellan Health Services, Inc.................. 9,900 212,850
+Mariner Health Group, Inc...................... 9,200 169,050
+PhyCor, Inc.................................... 18,875 717,250
+Universal Health Services, Inc. (Class 'B'
Stock)........................................ 9,500 248,188
+Vivra, Inc..................................... 12,800 420,800
--------------
3,674,701
--------------
HOUSING RELATED -- 1.0%
+Champion Enterprises, Inc...................... 10,700 223,363
Continental Homes Holding Corp.................. 2,300 49,450
Fedders Corp.................................... 13,500 96,188
Oakwood Homes Corp.............................. 15,600 321,750
Ryland Group, Inc............................... 5,300 79,500
Skyline Corp.................................... 3,700 92,500
Standard-Pacific Corp........................... 10,300 74,675
+U.S. Home Corp................................. 3,900 96,038
--------------
1,033,464
--------------
</TABLE>
B41
<PAGE>
SMALL CAPITALIZATION STOCK (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
INSURANCE -- 4.4%
Allied Group, Inc............................... 4,900 $ 213,150
American Bankers Insurance Group, Inc........... 7,100 309,738
Arthur J. Gallagher and Co...................... 5,500 176,000
Capital Re Corp................................. 5,500 202,125
Capitol American Financial Corp................. 6,100 153,263
CMAC Investment Corp............................ 3,700 212,750
Enhance Financial Services Group, Inc........... 6,300 176,400
Fidelity National Financial, Inc................ 4,190 63,374
First American Financial Corp................... 3,900 131,625
Fremont General Corp............................ 8,870 204,010
Frontier Insurance Group, Inc................... 4,860 167,670
Hilb, Rogal and Hamilton Co..................... 4,700 65,213
Integon Corp.................................... 5,300 106,663
Life Partners Group, Inc........................ 9,700 220,675
Life Re Corp.................................... 4,700 145,113
Mutual Risk Management, Ltd..................... 6,000 187,500
National Re Corp................................ 5,700 215,175
Orion Capital Corp.............................. 4,700 239,700
Protective Life Corp............................ 10,800 379,350
Selective Insurance Group, Inc.................. 4,800 156,000
+Sierra Health Services, Inc.................... 5,900 185,850
Trenwick Group, Inc............................. 2,100 105,000
Washington National Corp........................ 4,300 110,725
Zenith National Insurance Corp.................. 6,000 164,250
--------------
4,291,319
--------------
LEISURE -- 2.5%
+Alliance Gaming Corp. (Class 'B' Stock)........ 118 399
Arctco, Inc..................................... 9,400 117,500
+Aztar Corp..................................... 13,300 152,950
+Bell Sports Corp............................... 4,800 34,800
+Boomtown, Inc.................................. 2,900 14,138
+Carmike Cinemas, Inc. (Class 'A' Stock)........ 3,700 99,900
+Casino Magic Corp.............................. 12,300 67,650
+Cineplex Odeon Corp............................ 46,600 93,200
+GC Companies, Inc.............................. 2,700 100,575
+Grand Casinos, Inc............................. 14,550 374,663
+Hollywood Park, Inc............................ 6,100 58,713
Huffy Corp...................................... 4,700 60,513
+K2, Inc........................................ 5,800 157,325
+Players International, Inc..................... 10,200 99,450
+Regal Cinemas, Inc............................. 6,150 281,363
+Roadmaster Industries, Inc..................... 15,900 23,850
+Score Board, Inc............................... 4,300 20,425
Showboat, Inc................................... 5,300 159,663
Sturm Ruger & Company, Inc...................... 4,700 218,550
Thor Industries, Inc............................ 3,000 61,500
Winnebago Industries, Inc....................... 8,800 72,600
+WMS Industries, Inc............................ 8,100 199,463
--------------
2,469,190
--------------
LODGING -- 0.4%
Marcus Corp..................................... 6,850 172,106
+Prime Hospitality Corp......................... 10,900 179,850
--------------
351,956
--------------
MACHINERY -- 2.0%
AGCO Corp....................................... 18,800 521,700
+Astec Industries, Inc.......................... 3,500 32,375
+Cognex Corp.................................... 14,000 225,750
+Global Industrial Technologies, Inc............ 7,800 124,800
Kysor Industrial Corp........................... 2,000 48,500
+Lindsay Manufacturing Co....................... 2,250 90,563
Manitowoc Company, Inc.......................... 2,600 93,275
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Novellus Systems, Inc.......................... 5,600 $ 201,600
Regal Beloit Corp............................... 7,100 140,225
Roper Industries, Inc........................... 5,000 243,750
+Royal Appliance Manufacturing Co............... 8,000 46,000
SPX Corp........................................ 4,400 107,800
Toro Co......................................... 4,100 135,813
--------------
2,012,151
--------------
MEDIA -- 0.6%
+Catalina Marketing Corp........................ 3,200 292,800
+International Family Entertainment, Inc. (Class
'B' Stock).................................... 15,700 290,450
+NTN Communications, Inc........................ 8,100 47,588
--------------
630,838
--------------
METALS - DIVERSIFIED -- 0.6%
Amcast Industrial Corp.......................... 2,900 58,725
AMCOL International Corp........................ 6,400 96,800
Brenco, Inc..................................... 3,600 58,050
+Castech Aluminum Group, Inc.................... 4,500 66,375
Glamis Gold, Ltd................................ 9,300 66,263
Handy & Harman.................................. 4,800 81,600
+Hecla Mining Co................................ 17,700 123,900
--------------
551,713
--------------
MINERAL RESOURCES -- 0.5%
Coeur D'Alene Mines Corp........................ 7,700 141,488
Dravo Corp...................................... 4,900 72,888
+Getchell Gold Co............................... 6,100 201,300
+Sunshine Mining and Refining Co................ 64,300 80,375
--------------
496,051
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 5.5%
+Air & Water Technologies Corp. (Class 'A'
Stock)........................................ 11,100 66,600
Air Express International Corp.................. 6,200 175,150
+Alliant Techsystems, Inc....................... 4,300 202,638
AMTROL, Inc..................................... 2,000 48,000
Apogee Enterprises, Inc......................... 4,700 160,975
Aquarion Co..................................... 2,300 56,925
Bassett Furniture Industries, Inc............... 4,700 125,725
Butler Manufacturing Co......................... 2,700 91,125
BW/IP, Inc. (Class 'A' Stock)................... 8,500 161,500
Clarcor, Inc.................................... 5,000 123,750
Consumers Water Co.............................. 3,000 46,500
+Cyrk International, Inc........................ 3,600 49,050
Expeditors International of Washington, Inc..... 4,200 130,200
+Fibreboard Corp................................ 2,800 77,350
+Figgie International, Inc. (Class 'A' Stock)... 6,400 96,800
Fisher Scientific International, Inc............ 5,600 210,000
+Flow International Corp........................ 5,100 40,800
+Gentex Corp.................................... 12,000 234,000
+Geon Co........................................ 8,500 191,250
Greenfield Industries, Inc...................... 5,700 188,100
+Griffon Corp................................... 6,800 55,250
Harmon Industries, Inc.......................... 2,400 39,000
Insteel Industries, Inc......................... 2,600 19,175
+Intermet Corp.................................. 8,800 122,650
+Jan Bell Marketing, Inc........................ 9,000 23,625
Justin Industries, Inc.......................... 9,000 118,125
K-Swiss, Inc. (Class 'A' Stock)................. 2,200 23,925
+L.A. Gear, Inc................................. 7,800 24,375
+Lydall, Inc.................................... 6,100 134,200
Medusa Corp..................................... 5,700 176,700
+Mohawk Industries, Inc......................... 11,600 205,900
+Mueller Industries, Inc........................ 6,100 253,150
O'Sullivan Corp................................. 5,500 65,313
</TABLE>
B42
<PAGE>
SMALL CAPITALIZATION STOCK (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Paragon Trade Brands, Inc...................... 4,000 $ 86,000
Rollins Environmental Services, Inc............. 21,100 81,763
+SPS Technologies, Inc.......................... 1,900 133,950
Standex International Corp...................... 4,600 131,100
Texas Industries, Inc........................... 3,700 253,913
+Timberland Co. (Class 'A' Stock)............... 3,900 90,675
TJ International, Inc........................... 5,700 102,600
Tredegar Industries, Inc........................ 4,250 128,563
Valmont Industries, Inc......................... 4,500 153,000
Walbro Corp..................................... 3,000 60,750
+Whittaker Corp................................. 3,700 68,450
+Wolverine Tube, Inc............................ 4,800 168,000
Wolverine World Wide, Inc....................... 6,250 203,125
--------------
5,399,715
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.5%
+DeVRY, Inc..................................... 5,400 243,000
Hughes Supply, Inc.............................. 3,100 107,725
Ideon Group, Inc................................ 9,700 130,950
+Mail Boxes, Etc................................ 3,900 89,213
+Merisel, Inc................................... 10,400 39,000
Philadelphia Suburban Corp...................... 4,100 101,475
Premark International, Inc...................... 21,600 399,600
Southern California Water Co.................... 2,600 57,200
+Valassis Communications, Inc................... 14,900 275,650
--------------
1,443,813
--------------
PETROLEUM -- 0.5%
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 7,700 133,788
KN Energy, Inc.................................. 9,600 321,600
--------------
455,388
--------------
PETROLEUM SERVICES -- 2.0%
Camco International, Inc........................ 8,300 281,163
+Landmark Graphics Corp......................... 6,100 117,425
+Mesa, Inc...................................... 21,900 120,450
+Newfield Exploration Co........................ 6,000 233,250
+Noble Drilling Corp............................ 33,000 457,875
+Offshore Logistics, Inc........................ 6,800 94,350
Piedmont Natural Gas Company, Inc............... 10,100 233,563
+Pool Energy Services Co........................ 4,900 58,188
+Pride Petroleum Services, Inc.................. 8,700 123,975
Production Operators Corp....................... 3,500 118,125
+Seitel, Inc.................................... 3,222 88,202
--------------
1,926,566
--------------
RAILROADS -- 0.1%
+RailTex, Inc................................... 3,000 77,250
--------------
REAL ESTATE DEVELOPMENT -- 0.2%
+Toll Brothers, Inc............................. 11,600 189,950
--------------
RESTAURANTS -- 1.3%
Applebee's International, Inc................... 10,900 350,163
+Au Bon Pain, Inc. (Class 'A' Stock)............ 4,100 30,750
+Bertucci's, Inc................................ 2,900 15,588
+Checkers Drive-In Restaurants, Inc............. 17,800 17,800
+Cheesecake Factory............................. 3,800 104,500
+Flagstar Companies, Inc........................ 14,800 46,250
+Foodmaker, Inc................................. 13,500 116,438
+IHOP Corp...................................... 3,100 83,700
Ruby Tuesday Inc................................ 6,100 138,013
+Showbiz Pizza Time, Inc........................ 6,450 101,588
+Sonic Corp..................................... 4,450 107,913
+Taco Cabana (Class 'A' Stock).................. 800 5,800
TCBY Enterprises, Inc........................... 8,800 37,400
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+TPI Enterprises, Inc........................... 7,200 $ 25,875
+Triarc Companies, Inc. (Class 'A' Stock)....... 10,500 120,750
--------------
1,302,528
--------------
RETAIL -- 4.9%
Arbor Drugs, Inc................................ 8,750 182,656
Big B, Inc...................................... 6,500 61,750
+Bombay Company, Inc............................ 13,100 81,875
+Books-A-Million, Inc........................... 6,100 51,088
Casey's General Stores, Inc..................... 9,100 180,863
Cash America International, Inc................. 9,800 63,700
Cato Corp. (Class 'A' Stock).................... 10,000 60,000
+CompUSA, Inc................................... 15,800 539,175
+Damark International, Inc...................... 3,100 43,400
+Designs, Inc................................... 5,500 33,000
+Discount Auto Parts, Inc....................... 5,600 142,100
+Dress Barn, Inc................................ 7,800 81,900
+Eagle Hardware & Garden, Inc................... 8,000 122,000
Fabri-Centers of America (Class 'A' Stock)...... 6,500 107,250
Fay's, Inc...................................... 7,000 55,125
+Filene's Basement Corp......................... 7,200 35,100
+Gottschalks, Inc............................... 3,400 22,950
Hechinger Co. (Class 'A' Stock)................. 14,800 64,750
+Hi-Lo Automotive, Inc.......................... 3,500 16,188
J. Baker, Inc................................... 4,900 36,750
+Lechters, Inc.................................. 900 5,850
+Levitz Furniture, Inc.......................... 10,400 48,100
Lillian Vernon Corp............................. 3,400 43,350
+Michaels Stores, Inc........................... 8,200 139,400
+MicroAge, Inc.................................. 5,000 68,125
+Musicland Stores Corp.......................... 11,900 38,675
+O'Reilly Automotive, Inc....................... 3,500 126,875
Oshkosh B' Gosh, Inc. (Class 'A' Stock)......... 4,200 75,600
+Payless Cashways, Inc.......................... 14,000 63,000
Pier 1 Imports, Inc............................. 13,600 202,300
+Proffitt's, Inc................................ 6,700 237,850
Regis Corp...................................... 6,200 193,750
Ross Stores, Inc................................ 8,500 295,375
Russ Berrie & Company, Inc...................... 7,200 132,300
+Shoe Carnival, Inc............................. 4,600 25,300
Shopko Stores, Inc.............................. 11,000 177,375
+Sports & Recreation, Inc....................... 6,700 61,138
Sports Authority, Inc........................... 7,100 232,525
+Stein Mart, Inc................................ 7,800 142,350
Strawbridge & Clothier (Class 'A' Stock)........ 3,700 60,125
+Swiss Army Brand............................... 2,900 38,425
+Tyco Toys, Inc................................. 12,100 62,013
Venture Stores, Inc............................. 6,000 39,000
+Whole Foods Market, Inc........................ 4,900 129,850
+Williams-Sonoma, Inc........................... 8,900 210,263
--------------
4,830,534
--------------
STEEL -- 0.8%
+Acme Metals, Inc............................... 3,300 56,100
Birmingham Steel Corp........................... 9,700 158,838
Commercial Metals Co............................ 5,100 169,575
+Material Sciences Corp......................... 5,200 89,700
+Northwestern Steel and Wire Co................. 8,600 46,225
Quanex Corp..................................... 4,600 108,675
Steel Technologies, Inc......................... 4,000 61,500
+WHX Corp....................................... 9,200 83,950
--------------
774,563
--------------
</TABLE>
B43
<PAGE>
SMALL CAPITALIZATION STOCK (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 2.6%
+Aspect Telecommunications Corp................. 7,300 $ 361,350
+BroadBand Technologies, Inc.................... 4,600 148,350
+California Microwave, Inc...................... 5,600 85,400
+Cellular Communications, Inc. (Class 'A'
Stock)........................................ 9,200 488,750
+Centigram Communications Corp.................. 2,400 38,100
+CommNet Cellular, Inc.......................... 4,800 144,000
+Compression Labs, Inc.......................... 5,400 31,050
+Digi International, Inc........................ 4,600 123,050
+Digital Microwave Corp......................... 5,500 91,438
+Geotek Communications, Inc..................... 20,000 273,750
+InterVoice, Inc................................ 5,500 109,313
+Network Equipment Technologies, Inc............ 7,000 148,750
+Picturetel Corp................................ 11,400 448,875
+Symmetricom, Inc............................... 5,400 72,900
--------------
2,565,076
--------------
TEXTILES -- 1.9%
+Ashworth, Inc.................................. 4,200 24,938
Authentic Fitness Corp.......................... 7,000 130,375
+Cone Mills Corp................................ 9,300 104,625
Delta Woodside Industries, Inc.................. 8,500 43,563
Dixie Yarns, Inc................................ 3,900 19,013
+Fieldcrest Cannon, Inc......................... 3,000 58,875
G & K Services, Inc. (Class 'A' Stock).......... 7,100 202,350
+Galey & Lord, Inc.............................. 4,100 37,413
Guilford Mills, Inc............................. 4,900 122,500
Haggar Corp..................................... 3,000 40,500
+Hartmarx Corp.................................. 11,300 70,625
Johnston Industries, Inc........................ 3,700 31,913
Kellwood Co..................................... 7,300 134,138
+Nautica Enterprises, Inc....................... 13,300 382,375
Oxford Industries, Inc.......................... 2,900 46,763
Phillips-Van Heusen Corp........................ 9,300 118,575
+Pillowtex Corp................................. 3,500 43,313
St. John Knits, Inc............................. 5,600 249,900
+Tultex Corp.................................... 10,300 48,925
--------------
1,910,679
--------------
TOBACCO -- 0.3%
Dimon, Inc...................................... 14,600 270,100
--------------
TRUCKING/SHIPPING -- 1.4%
+American Freightways, Inc...................... 10,800 120,150
Arkansas Best Corp.............................. 6,800 50,150
Frozen Food Express Industries, Inc............. 5,700 64,125
+Heartland Express, Inc......................... 7,033 188,133
+Kirby Corp..................................... 9,200 155,250
+Landstar Systems, Inc.......................... 4,500 130,500
+M.S. Carriers, Inc............................. 4,300 88,150
Rollins Truck Leasing Corp...................... 15,500 160,813
USFreightways Co................................ 7,700 150,150
Werner Enterprises, Inc......................... 8,800 228,800
--------------
1,336,221
--------------
UTILITY - ELECTRIC -- 1.7%
Bangor Hydro-Electric Co........................ 2,600 27,950
Central Hudson Gas & Electric Corp.............. 5,900 184,375
Central Vermont Public Service Corp............. 4,100 52,275
Cilcorp Inc..................................... 4,600 196,650
Commonwealth Energy System...................... 7,300 187,975
Eastern Utilities Associates.................... 6,900 135,413
Green Mountain Power Corp....................... 1,700 41,225
Interstate Power Co............................. 3,200 102,800
Orange & Rockland Utilities, Inc................ 4,600 169,050
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Sierra Pacific Resources........................ 10,200 $ 258,825
TNP Enterprises, Inc............................ 3,600 102,150
United Illuminating Co.......................... 4,700 175,663
--------------
1,634,351
--------------
TRANSPORTATION -- 0.2%
Pittston Burling................................ 7,300 157,863
--------------
TOTAL COMMON STOCKS
(Cost $83,059,963)............................................. 89,438,638
--------------
<CAPTION>
MARKET
PREFERRED STOCKS SHARES VALUE
------------- --------------
<S> <C> <C>
LEISURE
Alliance Gaming Corp............................ 74 5,203
--------------
(Cost $5,351)
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 11.4% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 11.1%
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. $ 10,962,000 10,962,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.3%
US Treasury Bills,
5.100%, 09/19/96.............................. 200,000 197,670
5.110%, 09/19/96.............................. 50,000 49,418
--------------
247,088
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 11,209,088
--------------
##
VARIATION MARGIN ON OPEN FUTURES CONTRACTS.......................
96,200
--------------
LIABILITIES -- (2.4%)
(net of other assets).......................................... (2,333,032)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 98,416,097
--------------
--------------
+No dividend was paid on this security during the 12 months ending June 30, 1996.
##Open futures contracts as of June 30, 1996 are as follows:
PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
MIDCAP 400 Index Futures
(74 contracts)
$8,931,250 Sep 96 $8,765,300
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B44
<PAGE>
GLOBAL PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 93.8% SHARES VALUE
------------- --------------
<S> <C> <C>
ARGENTINA -- 1.3%
Banco Frances Del Rio De La Plata
(Banks and Savings & Loans)................... 341,200 $ 3,242,616
Basil De Distrub., ADR
(Retail)...................................... 190,000 3,135,000
--------------
6,377,616
--------------
AUSTRALIA -- 4.4%
Brambles Industries, Ltd.
(Miscellaneous - Basic Industry).............. 478,400 6,655,265
Broken Hill Proprietary Co., Ltd.
(Metals - Diversified)........................ 449,731 6,217,511
Coca-Cola Amatil, Ltd.
(Foods)....................................... 772,632 8,590,270
Publishing and Broadcasting, Ltd.
(Media)....................................... 185,200 816,058
--------------
22,279,104
--------------
BELGIUM -- 0.9%
Bekaert, SA
(Miscellaneous - Basic Industry).............. 5,700 4,589,346
--------------
FEDERAL REPUBLIC OF GERMANY -- 3.5%
Hoechst, AG
(Chemicals)................................... 154,000 5,215,029
Linde, AG
(Machinery)................................... 9,740 6,328,203
Siemens, AG
(Electrical Equipment)........................ 109,000 5,815,718
--------------
17,358,950
--------------
FINLAND -- 0.7%
Nokia Corp. (Class 'A' Stock)
(Telecommunications).......................... 89,300 3,290,601
--------------
FRANCE -- 6.1%
Carrefour Supermarche, SA
(Retail)...................................... 17,100 9,578,790
Imetal
(Mineral Resources)........................... 21,836 3,096,102
**Lafarge, SA
(Construction)................................ 1,210 73,209
Lafarge, SA
(Construction)................................ 75,991 4,597,688
Legrand, SA
(Electrical Equipment)........................ 32,700 5,843,255
Plastic Omnium
(Autos - Cars & Trucks)....................... 7,265 632,169
Sgs Thomson Microelectronics
(Electronics)................................. 4,400 154,686
Valeo, SA
(Autos - Cars & Trucks)....................... 122,485 6,554,262
--------------
30,530,161
--------------
HONG KONG -- 6.7%
CDL Hotels International, Ltd.
(Real Estate Development)..................... 6,016,145 3,303,140
Citic Pacific, Ltd.
(Miscellaneous - Basic Industry).............. 2,272,000 9,186,973
Guoco Group, Ltd.
(Financial Services).......................... 1,851,000 8,823,737
Hung Hing Printing Group, Ltd.
(Miscellaneous - Basic Industry).............. 3,452,000 914,207
Hutchison Whampoa, Ltd.
(Miscellaneous - Basic Industry).............. 749,000 4,712,274
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
New World Development Co., Ltd.
(Real Estate Development)..................... 1,452,000 $ 6,734,120
--------------
33,674,451
--------------
ITALY -- 1.4%
Telecom Italia Mobile SpA
(Telecommunications).......................... 3,281,800 7,321,733
--------------
JAPAN -- 17.4%
Daibiru Corp.
(Real Estate Development)..................... 189,000 2,517,701
Eisai Co., Ltd.
(Drugs and Hospital Supplies)................. 262,000 4,948,358
Honda Motor Co.
(Autos - Cars & Trucks)....................... 335,000 8,680,657
Jgc Corp.
(Construction)................................ 159,000 2,089,051
Keyence Corp.
(Electrical Equipment)........................ 34,800 4,731,022
Mitsui Fudosan
(Real Estate Development)..................... 486,000 6,562,774
Nichiei Co., Ltd.
(Financial Services).......................... 94,000 6,260,949
Nichirei Corp.
(Foods)....................................... 640,000 4,583,942
Nippon Television Network
(Media)....................................... 21,700 6,731,752
Nissan Chemicals Inds.
(Chemicals)................................... 663,000 4,821,268
Nissan Motor Co.
(Autos - Cars & Trucks)....................... 577,000 5,122,454
Onward Kashiyama Co., Ltd.
(Textiles).................................... 480,000 7,839,416
Sony Corp.
(Electronics)................................. 146,000 9,604,562
Sony Music Entertainment, Inc.
(Leisure)..................................... 91,800 4,271,715
Toyota Motor Corp.
(Autos - Cars & Trucks)....................... 320,000 8,000,000
--------------
86,765,621
--------------
MALAYSIA -- 2.6%
I.J.M. Corp. Berhad
(Construction)................................ 3,180,000 5,508,260
Renong Berhad
(Miscellaneous - Basic Industry).............. 1,559,000 2,487,899
Resorts World Berhad
(Leisure)..................................... 880,000 5,045,710
--------------
13,041,869
--------------
MEXICO -- 1.6%
Apasco, SA de CV
(Miscellaneous - Basic Industry).............. 571,100 3,157,741
Cifra, SA de CV (Class 'B' Stock)
(Retail)...................................... 1,687,200 2,438,844
Fomento Economico Mexicano, SA de CV (Class 'B'
Stock)
(Miscellaneous - Basic Industry).............. 809,400 2,322,923
--------------
7,919,508
--------------
NETHERLANDS -- 3.0%
Heineken, N.V.
(Beverages)................................... 41,625 9,290,340
Royal Dutch Petroleum
(Petroleum)................................... 35,800 5,522,365
--------------
14,812,705
--------------
</TABLE>
B45
<PAGE>
GLOBAL PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
NEW ZEALAND -- 0.1%
Fletcher Challenge Forestry Division
(Forest Products)............................. 293,204 $ 364,352
--------------
SINGAPORE -- 3.4%
Overseas Chinese Banking Corp., Ltd.
(Banks and Savings & Loans)................... 440,000 5,144,558
Overseas Union Bank, Ltd.
(Banks and Savings & Loans)................... 1,030,000 7,079,790
Sembawang Maritime, Ltd.
(Trucking/Shipping)........................... 883,500 2,391,560
Wing Tai Holdings, Ltd.
(Miscellaneous - Basic Industry).............. 1,180,250 2,509,035
--------------
17,124,943
--------------
SPAIN -- 2.3%
Acerinox, SA
(Steel)....................................... 33,300 3,475,766
Banco Popular Espanol, SA
(Banks and Savings & Loans)................... 27,500 4,896,148
Centros Commerciales Pryca, SA
(Retail)...................................... 128,662 3,209,416
--------------
11,581,330
--------------
SWEDEN -- 4.2%
Astra, AB (Series 'B' Free)
(Drugs and Hospital Supplies)................. 140,180 6,100,046
Hennes & Mauritz (Series 'B' Free)
(Retail)...................................... 74,500 6,898,912
Mo Och Domsjo, AB (Series 'B' Free)
(Forest Products)............................. 135,800 3,476,145
Skandinaviska Enskilda Bank (Series A)
(Financial Services).......................... 567,200 4,526,487
--------------
21,001,590
--------------
THAILAND -- 0.5%
Thai Telephone & Telecom
(Telecommunications).......................... 1,130,000 2,425,275
--------------
UNITED KINGDOM -- 11.3%
Bank Of Ireland
(Banks and Savings & Loans)................... 850,800 5,816,096
British Sky Broadcasting Group, PLC
(Media)....................................... 855,300 5,830,276
Dixons Group, PLC
(Retail)...................................... 689,000 5,631,728
Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 623,270 9,550,915
**Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 22,870 350,457
Hays, PLC
(Commercial Services)......................... 450,000 3,168,693
Reed International, PLC
(Miscellaneous - Basic Industry).............. 258,000 4,307,701
Siebe, PLC
(Machinery)................................... 657,440 9,330,158
Standard Chartered, PLC
(Financial Services).......................... 502,200 4,992,827
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Vodafone Group, PLC
(Telecommunications).......................... 2,072,900 $ 7,700,088
--------------
56,678,939
--------------
UNITED STATES -- 22.4%
Case Corp.
(Machinery)................................... 100,000 4,800,000
+Cisco Systems, Inc.
(Computer Services)........................... 147,400 8,346,525
Gucci Group
(Textiles).................................... 129,900 8,378,550
Mattel, Inc.
(Leisure)..................................... 322,658 9,236,085
MCI Communications Corp.
(Telecommunications).......................... 306,100 7,843,812
+Microsoft Corp.
(Computer Services)........................... 81,300 9,766,162
+Mirage Resorts, Inc.
(Leisure)..................................... 100,700 5,437,800
Mobil Corp.
(Petroleum)................................... 77,400 8,678,475
Motorola, Inc.
(Electronics)................................. 59,600 3,747,350
+Oracle Corp.
(Computer Services)........................... 240,600 9,488,662
SGS Thomson Microelectronics, N.V.
(Electronics)................................. 88,000 3,157,000
+Silicon Graphics, Inc.
(Computer Services)........................... 291,700 7,000,800
Texas Instruments, Inc.
(Electronics)................................. 101,800 5,077,275
Tiffany & Co.
(Retail)...................................... 47,600 3,474,800
Time Warner, Inc.
(Media)....................................... 165,100 6,480,175
+Viacom, Inc. (Class 'A' Stock)
(Media)....................................... 139,600 5,322,250
Walt Disney Co.
(Leisure)..................................... 88,100 5,539,288
--------------
111,775,009
--------------
TOTAL COMMON STOCKS
(Cost $402,389,660)............................................ 468,913,103
--------------
<CAPTION>
MARKET
WARRANTS -- 0.5% SHARES VALUE
------------- --------------
<S> <C> <C>
MALAYSIA
Renong Berhad, Expire 11/21/00,
(Miscellaneous - Basic Industry).............. 185,625 84,104
--------------
SINGAPORE -- 0.5%
United Overseas Bank Ltd., Expire 06/17/96
(Banks and Savings & Loans)................... 566,800 2,249,207
--------------
TOTAL WARRANTS
(Cost $2,717,008).............................................. 2,333,311
--------------
</TABLE>
B46
<PAGE>
GLOBAL PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 5.2% AMOUNT VALUE
------------- --------------
<S> <C> <C>
UNITED STATES
)Smith Barney Triparty Repurchase Agreement,
5.500%, 07/01/96.............................. $ 26,362,000 $ 26,362,000
--------------
OTHER ASSETS -- 0.5%
(net of liabilities)........................................... 2,355,133
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 499,963,547
--------------
--------------
<FN>
The following abbreviations are used in portfolio descriptions:
AB Akiteboiag (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
**Indicates a restricted security; the aggregate cost of the restricted
securities is $216,115. The aggregate value, $423,666 is approximately
0.1% of net assets. (See Note 2)
+No dividend was paid on this security during the 12 months ending June 30,
1996.
)Smith Barney Triparty Repurchase Agreement, repurchase price $26,374,083,
due 7/01/96. The value of the collateral was $26,889,731.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B47
<PAGE>
NATURAL RESOURCES PORTFOLIO
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 94.6% SHARES VALUE
------------- --------------
<S> <C> <C>
ALUMINUM -- 4.2%
Aluminum Co. of America......................... 198,000 $ 11,360,250
Comalco, Ltd., ADR.............................. 134,900 3,928,409
--------------
15,288,659
--------------
CHEMICALS - SPECIALTY -- 2.2%
First Mississippi Corp.......................... 155,000 3,448,750
+Viridian, Inc.................................. 365,000 4,817,952
--------------
8,266,702
--------------
CONSTRUCTION -- 1.5%
J. Ray McDermott, SA............................ 226,100 5,652,500
--------------
DIVERSIFIED GAS -- 11.3%
+Beau Canada Exploration, Ltd. (Class 'A'
Stock)........................................ 1,010,900 1,519,705
Cross Timbers Oil Co............................ 220,200 5,449,950
+Rigel Energy Corp.............................. 318,600 3,076,481
Sonat Offshore Drilling, Inc.................... 132,700 6,701,350
+Talisman Energy, Inc........................... 316,500 7,369,101
Tidewater, Inc.................................. 92,818 4,072,390
USX-Delhi Group................................. 139,200 1,705,200
+Weatherford Enterra, Inc....................... 103,174 3,095,220
Western Gas Resources, Inc...................... 544,400 8,846,500
--------------
41,835,897
--------------
ENVIRONMENTAL SERVICES -- 0.6%
+Core Laboratories N.V.......................... 161,200 2,337,400
--------------
FOREST PRODUCTS -- 6.7%
+Asia Pacific Resource International Holdings
Ltd........................................... 441,700 3,312,750
Fletcher Challenge, Ltd., ADR................... 431,200 5,336,100
Louisiana-Pacific Corp.......................... 270,000 5,973,750
+Pacific Forest Products Ltd.................... 18,300 228,138
Rayonier, Inc................................... 188,200 7,151,600
Timberwest Forest, Ltd.......................... 244,700 2,691,673
--------------
24,694,011
--------------
GAS PIPELINES -- 3.4%
Enron Oil & Gas Co.............................. 98,900 2,756,837
+Reading & Bates Offshore Drilling Co........... 253,500 5,608,722
+Seagull Energy Corp............................ 161,900 4,047,500
--------------
12,413,059
--------------
METALS - DIVERSIFIED -- 7.8%
Cambior, Inc. (Canada).......................... 352,500 4,652,953
Cambior, Inc.................................... 380,000 5,082,500
Cameco Corporation.............................. 166,300 7,841,521
Kloof Gold Mining Company Ltd., ADR............. 257,900 2,498,406
+Stillwater Mining Co........................... 360,800 8,523,900
--------------
28,599,280
--------------
MINERAL RESOURCES -- 23.0%
Agnico-Eagle Mines, Ltd......................... 464,500 7,548,125
Barrick Gold Corporation........................ 229,953 6,237,475
+Barrington Petroleum Ltd....................... 623,400 1,965,768
Battle Mountain Gold Co......................... 154,200 1,117,950
Coeur D'Alene Mines Corp........................ 90,525 1,663,397
CRA Limited, ADR................................ 70,627 4,349,140
Freeport-McMoRan Copper & Gold, Inc. (Class 'A'
Stock)........................................ 147,200 4,397,600
+Getchell Gold Co............................... 177,211 5,847,963
Inco, Ltd....................................... 134,000 4,321,500
Newmont Mining Corp............................. 120,007 5,925,346
</TABLE>
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Pegasus Gold, Inc.............................. 163,400 $ 2,001,650
Placer Dome, Inc................................ 189,700 4,529,087
+Rio Alto Exploration Ltd....................... 343,200 1,887,581
Sante Fe Pacific Gold Corp...................... 443,300 6,261,612
+Seacor Holdings................................ 88,300 3,951,425
+Tesco Corporation.............................. 293,800 2,466,916
+Tom Brown, Inc................................. 300,000 5,137,500
+TVX Gold, Inc.................................. 570,000 4,132,500
Vaal Reefs Exploration & Mining Company Ltd.,
ADR........................................... 350,000 2,800,000
Western Deep Levels Ltd......................... 90,000 3,262,500
+Western Mining Corp. Holdings, Ltd., ADR....... 178,100 5,120,375
--------------
84,925,410
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.6%
TJ International, Inc........................... 131,400 2,365,200
--------------
PETROLEUM -- 7.7%
Alberta Energy Company Ltd...................... 80,000 1,504,785
Anadarko Petroleum Corp......................... 90,300 5,237,400
HCO Energy Ltd.................................. 927,392 877,305
NGC Corp........................................ 553,045 8,295,675
+Northstar Energy Corp.......................... 668,400 6,494,555
Parker & Parsley Petroleum Co................... 137,800 3,823,950
+Stolt Comex Seaway, SA......................... 209,000 2,063,875
--------------
28,297,545
--------------
PETROLEUM SERVICES -- 25.6%
+3-D Geophysical, Inc........................... 240,000 2,580,000
+Abacan Resource Corp........................... 522,600 2,180,222
Baker Hughes, Inc............................... 200,000 6,575,000
+Cairn Energy USA, Inc.......................... 252,500 3,629,688
Camco International, Inc........................ 125,000 4,234,375
Coflexip, ADR................................... 270,299 4,696,445
Crestar Energy, Inc............................. 228,000 3,996,040
+Dawson Production Services, Inc................ 74,100 852,150
+Diamond Offshore Drilling, Inc................. 125,400 7,179,150
+ENSCO International, Inc....................... 175,800 5,713,500
+Falcon Drilling Company, Inc................... 184,300 4,999,138
ICO, Inc........................................ 123,300 693,563
+Marine Drilling Co., Inc....................... 1,147,900 11,622,488
+Mesa, Inc...................................... 1,247,000 6,858,500
+Newfield Exploration Co........................ 164,200 6,383,275
Noble Affiliates, Inc........................... 374,900 14,152,475
+Noble Drilling Corp............................ 193,600 2,686,200
+PetroCorp, Inc................................. 206,600 2,066,000
+Pride Petroleum Services, Inc.................. 227,000 3,234,750
--------------
94,332,959
--------------
TOTAL COMMON STOCKS
(Cost $263,462,687)............................................ 349,008,622
--------------
<CAPTION>
MARKET
PREFERRED STOCKS -- 4.0% SHARES VALUE
------------- --------------
<S> <C> <C>
MINERAL RESOURCES -- 1.0%
Amax Gold, Inc. (Conv.), Series B............... 47,500 2,434,375
Freeport - McMoRan Copper & Gold, Inc........... 57,000 1,246,875
--------------
3,681,250
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.0%
Hecla Mining Co. (Cum. Conv.), Series B......... 82,700 3,483,737
--------------
</TABLE>
B48
<PAGE>
NATURAL RESOURCES PORTFOLIO (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
PETROLEUM SERVICES -- 2.0%
Noble Drilling Corp. (Cum. Conv.)............... 142,500 $ 5,023,125
Reading & Bates Corp. (Cum. Conv.).............. 37,900 2,468,238
--------------
7,491,363
--------------
TOTAL PREFERRED STOCKS
(Cost $12,008,616)............................................. $ 14,656,350
--------------
<CAPTION>
PAR MARKET
CONVERTIBLE BOND -- 1.1% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL -- 1.1%
Coeur d'Alene Mines Corp.,
6.375%, 01/31/04.............................. $ 4,099,000 4,058,010
--------------
(Cost $3,933,131)
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENT -- 1.3% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.443%, 07/01/96 (see Note 4)................. 4,677,000 4,677,000
--------------
LIABILITIES -- (1.0%)
(net of other assets).......................................... (3,668,064)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 368,731,918
--------------
--------------
<FN>
The following abbreviations is used in portfolio descriptions:
ADR American Depository Receipt
+No dividend was paid on this security during the 12 months ending June 30,
1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C1 THROUGH C13.
B49
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of fifteen Portfolios, each with a separate series of
capital stock: Money Market Portfolio, Diversified Bond Portfolio (formerly Bond
Portfolio), Government Income Portfolio (formerly Government Securities
Portfolio), Zero Coupon Bond 2000 Portfolio, Zero Coupon Bond 2005 Portfolio,
Conservative Balanced Portfolio (formerly Conservatively Managed Flexible
Portfolio), Flexible Managed Portfolio (formerly Aggressively Managed Flexible
Portfolio), High Yield Bond Portfolio, Stock Index Portfolio, Equity Income
Portfolio (formerly High Dividend Stock Portfolio), Equity Portfolio (formerly
Common Stock Portfolio), Prudential Jennison Portfolio (formerly Growth Stock
Portfolio), Small Capitalization Stock Portfolio, Global Portfolio (formerly
Global Equity Portfolio) and Natural Resources Portfolio. Shares in the Series
Fund are currently sold only to certain separate accounts of The Prudential
Insurance Company of America ("The Prudential"), Pruco Life Insurance Company
and Pruco Life Insurance Company of New Jersey (together referred to as the
"Companies") to fund benefits under certain variable life insurance and variable
annuity contracts issued by the Companies.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SECURITIES VALUATION: Equity securities are valued at market. Securities traded
on a national securities exchange are valued at the last sales price on such
exchange as of the close of the New York Stock Exchange or, in the absence of
recorded sales, at the mean between the most recently quoted bid and asked
prices. For any securities not traded on a national securities exchange but
traded in the over-the-counter market, the securities are valued at the mean
between the most recently quoted bid and asked prices, except that securities
for which quotations are furnished through a nationwide automated quotation
system approved by the National Association of Securities Dealers, Inc.
("NASDAQ") are valued at the last sales price or if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices.
Convertible debt securities are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. High yield
bonds are valued either by quotes received from principal market makers or by an
independent pricing service which determines prices by analysis of quality,
coupon, maturity and other adjustment factors. Long-term bonds are valued at
market, based on valuation prices by an independent pricing service which
determines prices by analysis of quality, coupon, maturity and other adjustment
factors. Short-term investments are valued at amortized cost, which with accrued
interest approximates market value. Amortized cost is computed using the cost on
the date of purchase adjusted for constant amortization of discount or premium
to maturity. The interest rates shown for Commercial Paper, Promissory Notes,
and certain U.S. Government Agency Obligations on the Schedules of Investments
are the discount rates paid at the time of purchase. Any security for which a
quotation is unavailable is valued at fair value as determined in good faith by
or under the direction of the Series Fund's Board of Directors.
The ability of issuers of debt securities held by specific Portfolios of the
Series Fund to meet their obligations may be affected by economic developments
in a specific country or industry.
Each portfolio, other than the Money Market Portfolio, may invest up to 15% of
its net assets in securities which are subject to legal or contractual
restrictions on resale or for which no readily available market exists
("restricted securities"). The Money Market Portfolio may invest up to 10% of
its net assets in restricted securities. Restricted securities are valued
pursuant to the valuation procedures noted above.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
C1
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS: The Series Fund may engage in various
portfolio strategies to seek increased returns by hedging the portfolios against
adverse movements in the equity, debt, and currency markets. Losses may arise
due to changes in the value of the contract or if the counterparty does not
perform under the contract.
OPTION WRITING: When the Series Fund sells an option, an amount equal to the
premium received is recorded as a liability and is subsequently adjusted to the
current market value of the option written. Premiums received from writing
options which expire unexercised are treated on the expiration date as gains
from the sale of securities. As to options which are closed, the difference
between the premium and the amount paid on effecting a closing purchase
transaction, including brokerage commissions, is also treated as a gain, or if
the premium received is less than the amount paid for the closing purchase
transaction, as a loss. If a call option is exercised, the premium is added to
the proceeds from the sale in determining whether a gain or loss has been
realized.
The Series Fund's use of written options involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the Series
Fund's involvement in these financial instruments. Risks arise from the possible
movements in foreign exchange rates and securities values underlying these
instruments.
STOCK INDEX FUTURES: Portfolios of the Fund may attempt to reduce the risk of
investment in equity securities by hedging a portion of their equity portfolios
through the use of stock index futures traded on a commodities exchange or board
of trade. A stock index futures contract is an agreement in which the seller of
the contract agrees to deliver to the buyer an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement was made. Upon entering into a futures contract, a
Portfolio is required to pledge to the broker liquid assets equal to the minimum
"initial margin," approximately 5% of the contract amount. The Portfolio further
agrees to receive or pay to the broker an amount of cash equal to the futures
contract's daily fluctuation in value. These receipts or payments are known as
the "variation margin" and are recorded as unrealized gains or losses. When a
futures contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed.
FOREIGN CURRENCY TRANSACTIONS: 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
mid daily rate of exchange as reported by a major New York City bank;
(ii) purchases and sales of investment securities, income and expenses at the
rate of exchange prevailing on the respective dates of such transactions.
Since the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, it is not practical
to isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from change
in the market prices of securities held at the end of the fiscal period.
Similarly, it is not practical to isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of equities sold during the fiscal period.
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 government supervision and regulation of foreign security markets.
The Global Portfolio may invest up to 100% of its total assets in common stock
and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Diversified Bond and High Yield Bond Portfolios
may each invest up to 20% of their assets in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
In addition, the bond components of the Conservative Balanced and Flexible
Managed Portfolios may each invest up to 20% of their assets in such securities.
Further, the Equity Income and Flexible Managed Portfolios may invest up to 30%
of their total assets in debt and equity securities denominated in a foreign
currency and issued by foreign or domestic issuers. In addition, Equity and
Natural Resources Portfolios may invest up to 30% of their total assets in non-
United States currency denominated common stock and fixed-income securities
convertible into common stock of foreign and U.S. issuers.
C2
<PAGE>
Net realized gains and losses on foreign currency transactions represent net
foreign exchange gains and losses from holding foreign currencies; currency
gains or losses realized between the trade and settlement dates on security
transactions; and the difference between the amounts of the dividends and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets and liabilities at fiscal period end
exchange rates are reflected as a component of unrealized gain or loss on
foreign currencies.
FORWARD FOREIGN EXCHANGE CONTRACTS: The Series Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series Fund's records. However, the effect on operations is recorded from the
date the Series Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on both long-term bonds
and short-term investments. Interest income also includes net amortization from
the purchase of fixed-income securities. Long-term security and option
transactions are recorded on the first business day following the trade date,
except that transactions on the last business day of the reporting cycle are
recorded on that date. Short-term security and futures transactions are recorded
on trade date. Realized gains and losses from security transactions are
determined and accounted for on the basis of identified cost.
DISTRIBUTIONS AND TAXES: The Portfolios of the Series Fund intend to continue
to qualify for and elect the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code, thereby relieving the
Series Fund of Federal income taxes. To so qualify, the Series Fund intends to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carry forward. As of
December 31, 1995, the High Yield Bond Portfolio had a net capital loss carry
forward of $20,149,504 ($1,791,028 expiring in 1999, $3,273,984 expiring in
2002, and $15,084,492 expiring in 2003). The Government Income Portfolio had a
net capital loss carry forward of $22,575,392 ($6,265,349 expiring in 2002,
$16,310,043 expiring in 2003). These amounts will be available to offset any
future taxable gains.
The Money Market Portfolio declares dividends of net investment income
(including realized and unrealized gains and losses on Portfolio securities) on
each business day. These dividends are reinvested in additional full and
fractional shares of the Portfolio. This policy enables the Money Market
Portfolio to maintain a net asset value of $10.00 per share. Dividends from
investment income of the other Portfolios will normally be declared and
reinvested in additional full and fractional shares two times annually.
Dividends from net realized capital gains are declared and reinvested in
additional full and fractional shares twice a year.
EXPENSES: Each Portfolio pays for certain expenses incurred in its individual
operation, and also pays a portion of the Series Fund's general administrative
expenses allocated on the basis of the asset size of the respective Portfolios.
The Series Fund has an arrangement with Chemical Banking Corporation, a
custodian bank. On a daily basis, cash balances which are not invested earn a
credit which is used to offset custody charges on a Portfolio basis, exclusive
of the Global Portfolio, for which Brown Brothers Harriman & Co. is the
custodian bank.
NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
INVESTMENT MANAGEMENT AND ACCOUNTING FEES: Pursuant to an investment advisory
agreement (the "Agreement"), The Prudential receives an investment management
fee, calculated daily, at an effective annual rate of 0.35% of the average daily
net assets of the Stock Index Portfolio: 0.40% of the average daily net assets
of the Money Market, Diversified Bond, Government Income, Zero Coupon Bond 2000,
Zero Coupon Bond 2005, Equity Income and Small Capitalization Stock Portfolios;
0.45% of average daily net assets of the Equity and Natural Resources
Portfolios; 0.55% of the average daily net assets of the Conservative Balanced
and the High Yield Bond Portfolios; 0.60% of the average daily net assets of the
Flexible Managed and Prudential Jennison Portfolios; and 0.75% of the average
daily net assets of the Global Portfolio. Under the Agreement, The Prudential
has agreed to refund to a portfolio (other than the Global Portfolio), the
portion of the management 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.
C3
<PAGE>
DIRECTORS' EXPENSES: The Series Fund pays for the fees and expenses of those
members of the Series Fund's Board of Directors who are not officers or
employees of The Prudential or its affiliates.
BROKERAGE COMMISSIONS: For the six months ended June 30, 1996, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$109,165 in brokerage commissions from Portfolio transactions executed on behalf
of the Series Fund.
OTHER TRANSACTIONS WITH AFFILIATES: As of June 30, 1996, The Prudential had
investments of $13,494,370 in the Prudential Jennison Portfolio and $13,223,809
in the Small Capitalization Stock Portfolio.
NOTE 4: JOINT REPURCHASE AGREEMENT ACCOUNT
The portfolios of the Series Fund (excluding Global Portfolio) transfer
uninvested cash balances into a single joint repurchase 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
investment in the joint repurchase agreement account represented, in principal,
$1,065,000,000 as of June 30, 1996. The Portfolios of the Series Fund with cash
invested in the joint account had the following percentage participation in the
account:
<TABLE>
<S> <C>
Equity Portfolio.............................................. 45.30%
Flexible Managed Portfolio.................................... 21.27%
Conservative Balanced Portfolio............................... 8.50%
Stock Index Portfolio......................................... 5.88%
Government Income Portfolio................................... 4.97%
Diversified Bond Portfolio.................................... 4.58%
Equity Income Portfolio....................................... 4.48%
High Yield Bond Portfolio..................................... 2.54%
Small Capitalization Stock Portfolio.......................... 1.03%
Prudential Jennison Portfolio................................. 0.90%
Natural Resources Portfolio................................... 0.44%
Zero Coupon Bond 2005 Portfolio............................... 0.08%
Zero Coupon Bond 2000 Portfolio............................... 0.03%
----------
100.00%
</TABLE>
Bear Stearns Repurchase Agreement, 5.40%, in the principal amount of
$205,000,000, repurchase price $205,092,250, due 7/1/96. The value of the
collateral including accrued interest was $208,116,237.
J.P. Morgan Securities Repurchase Agreement, 5.45%, in the principal amount of
$350,000,000, repurchase price $350,158,958, due 7/1/96. The value of the
collateral including accrued interest was $357,218,750.
SBC Warburg Repurchase Agreement, 5.45%, in the principal amount of
$250,000,000, repurchase price $250,113,542, due 7/1/96. The value of the
collateral including accrued interest was $253,951,870.
UBS Securities Repurchase Agreement, 5.46%, in the principal amount of
$260,000,000, repurchase price $260,118,300, due 7/1/96. The value of the
collateral including accrued interest was $265,281,250.
C4
<PAGE>
NOTE 5: PURCHASE AND SALE OF SECURITIES
The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the six months ended June 30, 1996 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
ZERO ZERO HIGH
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE YIELD
BOND INCOME 2000 2005 BALANCED MANAGED BOND
------------ ------------ ----------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $597,479,906 $262,236,071 0 0 $5,029,271,853 $4,110,547,138 $175,752,252
Equity
Securities...... 0 0 0 0 $ 192,122,829 $1,586,427,147 $ 6,776,094
</TABLE>
<TABLE>
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
------------ ------------ ----------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... 0 0 0 0 0 0 0
Equity
Securities...... $162,838,872 $185,980,758 $266,606,992 $960,015,293 $ 46,369,827 $ 179,154,305 $ 48,625,711
</TABLE>
Proceeds From Sales:
<TABLE>
<CAPTION>
ZERO ZERO HIGH
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE YIELD
BOND INCOME 2000 2005 BALANCED MANAGED BOND
------------ ------------ ----------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $562,496,816 $261,617,402 0 0 $4,551,462,546 $3,669,119,487 $169,945,524
Equity
Securities...... 0 0 0 0 $ 281,380,348 $1,737,698,635 $ 6,070,202
</TABLE>
<TABLE>
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
------------ ------------ ----------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... 0 $ 40,147,409 0 0 0 0 0
Equity
Securities...... $ 7,045,384 $ 78,166,640 $253,264,625 $20,321,973 $ 5,258,977 $ 126,935,429 $ 24,965,107
</TABLE>
Transactions in options written during the six months ended June 30, 1996 were
as follows:
<TABLE>
<CAPTION>
NATURAL RESOURCES
------------------------
CALL OPTIONS WRITTEN
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------- -----------
<S> <C> <C>
Options outstanding at
December 31, 1995....... 440 $ 163,675
Options written........... 134 43,147
Options terminated in
closing purchase
transactions............ (574) (206,822)
----------- -----------
Options outstanding at
June 30, 1996........... 0 0
----------- -----------
----------- -----------
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of June 30, 1996 were as follows:
<TABLE>
<CAPTION>
ZERO ZERO
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE
BOND INCOME 2000 2005 BALANCED MANAGED
------------- ------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 9,376,413 $ 5,806,290 $ 1,899,083 $ 1,543,839 $347,292,563 $425,312,892
Gross Unrealized Depreciation... 6,583,523 7,454,035 0 182,891 74,798,202 62,116,107
Total Net Unrealized............ 2,792,890 (1,647,745) 1,899,083 1,360,948 272,494,361 363,196,785
Tax Basis....................... 669,714,649 485,564,233 22,776,430 22,754,152 3,902,670,743 4,171,361,918
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION
INDEX INCOME EQUITY JENNISON STOCK GLOBAL
------------- ------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 407,469,144 $173,008,787 $777,223,075 $14,864,777 $ 10,571,558 $ 81,112,725
Gross Unrealized Depreciation... 10,478,102 44,198,730 49,736,821 4,133,385 4,193,108 14,972,979
Total Net Unrealized............ 396,991,042 128,810,057 727,486,254 10,731,392 6,378,450 66,139,746
Tax Basis....................... 908,450,837 1,082,981,956 3,551,124,146 139,258,371 94,274,479 431,468,668
<CAPTION>
HIGH
YIELD
BOND
--------------
<S> <C>
Gross Unrealized Appreciation... $ 12,656,560
Gross Unrealized Depreciation... 7,393,163
Total Net Unrealized............ 5,263,397
Tax Basis....................... 383,974,369
NATURAL
RESOURCES
--------------
<S> <C>
Gross Unrealized Appreciation... $ 98,444,786
Gross Unrealized Depreciation... 10,126,238
Total Net Unrealized............ 88,318,548
Tax Basis....................... 284,081,434
</TABLE>
C5
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS
The following average per share data, ratios and supplemental information by
Portfolio have been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
MONEY MARKET
-------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 10.000 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.253 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.253 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.253) (0.564) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630)
Distributions from
realized gains......... 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.253) (0.563) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 10.000 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 2.56 % 5.80 % 4.05 % 2.95 % 3.79 % 6.16 % 8.16 % 9.25 % 7.35 % 6.52 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $602.5 $613.3 $583.3 $474.7 $528.7 $529.6 $434.2 $236.1 $155.9 $107.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 %** 0.44 % 0.47 % 0.45 % 0.47 % 0.46 % 0.50 % 0.55 % 0.57 % 0.53 %
Ratio of net investment
income to average net
assets................. 5.09 %** 5.64 % 4.02 % 2.90 % 3.72 % 5.96 % 7.80 % 8.77 % 7.17 % 6.30 %
Number of shares
outstanding at end of
period (in millions)... 60.2 61.3 58.3 47.5 52.9 53.0 43.4 23.6 15.6 10.7
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED BOND
-------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $11.313 $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $ 10.038 $ 11.048
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.367 0.763 0.682 0.686 0.761 0.797 0.825 0.886 0.875 0.859
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ (0.545) 1.293 (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069) (0.821)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... (0.178) 2.056 (0.358) 1.084 0.774 1.639 0.821 1.310 0.806 0.038
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.310) (0.755) (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902) (0.990)
Distributions from net
realized gains......... 0.000 (0.026) (0.024) (0.153) (0.219) (0.190) 0.000 (0.077) 0.000 (0.058)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.310) (0.781) (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902) (1.048)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (0.488) 1.275 (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096) (1.010)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $10.825 $11.313 $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $ 10.038
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... (1.54 %) 20.73 % (3.23 %) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19 % 0.29 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $673.1 $655.8 $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8 $139.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 %** 0.44 % 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53 % 0.53 %
Ratio of net investment
income to average net
assets................. 6.81 %** 7.00 % 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52 % 8.15 %
Portfolio turnover
rate................... 90.55 % 199.09 % 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20 % 238.41 %
Number of shares
outstanding at end of
period (in millions)... 62.1 58.0 54.0 51.9 39.6 29.0 22.0 18.5 15.0 13.9
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment returns for
periods of less than one full year are not annualized.
**Annualized.
C6
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT INCOME
----------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $11.719 $10.461 $11.784 $11.094 $11.133 $10.146 $10.324 $10.017
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.356 0.741 0.703 0.700 0.731 0.736 0.791 0.545
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ (0.645) 1.275 (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.289) 2.016 (0.608) 1.378 0.639 1.583 0.614 1.158
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.302) (0.758) (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net
realized gains......... 0.000 0.000 0.008 (0.046) (0.085) 0.000 (0.023) (0.362)
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.302) (0.758) (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (0.591) 1.258 (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $11.128 $11.719 $10.461 $11.784 $11.094 $11.133 $10.146 $10.324
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:*............... (2.43 %) 19.48 % (5.16 %) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $490.7 $501.8 $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 %** 0.45 % 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment
income to average net
assets................. 6.28 %** 6.55 % 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover
rate................... 57.36 % 195.49 % 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares
outstanding at end of
period (in millions)... 44.1 42.8 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND 2000
-------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/01/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $13.273 $11.862 $13.715 $12.550 $12.402 $11.279 $11.883 $11.004 $ 10.685 $ 12.476
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.306 0.592 0.927 0.850 0.892 0.908 1.114 0.919 0.919 0.934
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ (0.645) 1.944 (1.907) 1.157 0.140 1.308 (0.593) 1.277 0.292 (1.623)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... (0.339) 2.536 (0.980) 2.007 1.032 2.216 0.521 2.196 1.211 (0.689)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.257) (0.593) (0.850) (0.837) (0.884) (0.944) (1.125) (0.915) (0.892) (1.102)
Distributions from net
realized gains......... 0.000 (0.532) (0.023) (0.005) 0.000 (0.149) 0.000 (0.402) 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.257) (1.125) (0.873) (0.842) (0.884) (1.093) (1.125) (1.317) (0.892) (1.102)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (0.596) 1.411 (1.853) 1.165 0.148 1.123 (0.604) 0.879 0.319 (1.791)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $12.677 $13.273 $11.862 $13.715 $12.550 $12.402 $11.279 $11.883 $ 11.004 $ 10.685
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... (2.53 %) 21.56 % (7.18 %) 16.15 % 8.59 % 20.71 % 5.11 % 20.38 % 11.56 % (5.51 %)
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $24.6 $25.3 $20.6 $22.2 $16.7 $14.6 $13.9 $13.1 $10.9 $9.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.50 %** 0.48 % 0.51 % 0.62 % 0.66 % 0.68 % 0.75 % 0.75 % 0.75 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.72 %** 4.53 % 6.69 % 6.21 % 7.24 % 7.77 % 9.99 % 7.73 % 8.24 % 8.19 %
Portfolio turnover
rate................... 0.00 % 70.68 % 9.41 % 0.53 % 0.00 % 0.00 % 0.00 % 38.62 % 0.00 % 0.00 %
Number of shares
outstanding at end of
period (in millions)... 1.9 1.9 1.7 1.6 1.3 1.2 1.2 1.1 1.0 0.8
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C7
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
ZERO COUPON BOND 2005
---------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO TO
06/01/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $13.190 $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457 $10.017
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.313 0.655 0.752 0.768 0.804 0.820 0.850 0.561
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ (1.226) 2.733 (1.967) 1.623 0.207 1.143 (0.649) 0.598
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.913) 3.388 (1.215) 2.391 1.011 1.963 0.201 1.159
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.264) (0.656) (0.715) (0.741) (0.792) (0.827) (0.860) (0.531)
Distributions from net
realized gains......... 0.000 (0.286) (0.003) (0.002) (0.064) (0.060) 0.000 (0.188)
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.264) (0.942) (0.718) (0.743) (0.856) (0.887) (0.860) (0.719)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.177) 2.446 (1.933) 1.648 0.155 1.076 (0.659) 0.440
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $12.013 $13.190 $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:*............... (6.87 %) 31.85 % (9.61 %) 21.94 % 9.66 % 21.16 % 2.56 % 11.67 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $24.1 $23.6 $16.5 $14.5 $9.8 $8.7 $7.3 $7.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.51 %** 0.49 % 0.60 % 0.66 % 0.75 % 0.75 % 0.75 % 0.49 %
Ratio of net investment
income to average net
assets................. 5.24 %** 5.32 % 6.53 % 6.17 % 7.46 % 8.08 % 8.83 % 5.25 %
Portfolio turnover
rate................... 0.00 % 69.15 % 5.94 % 3.62 % 11.48 % 5.76 % 4.36 % 59.90 %
Number of shares
outstanding at end of
period (in millions)... 2.0 1.8 1.5 1.1 0.9 0.8 0.7 0.7
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $ 12.571
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.315 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.454 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.769 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.255) (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709)
Distributions from net
realized gains......... 0.000 (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.255) (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 0.514 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $15.823 $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $ 12.295 $ 11.889
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 5.04 % 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $4,198.8 $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 %** 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65 % 0.66 %
Ratio of net investment
income to average net
assets................. 4.04 %** 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 %
Portfolio turnover
rate................... 160.94 % 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 %
Number of shares
outstanding at end of
period (in millions)... 265.4 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6
Average commission rate
paid per share......... $0.0598 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C8
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $ 12.326 $ 13.555
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.279 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.630 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.909 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.228) (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673)
Distributions from net
realized gains......... 0.000 (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.228) (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 0.681 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $18.540 $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $ 13.123 $ 12.326
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 5.11 % 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %)
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $4,540.2 $4,261.2 $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9 $1,062.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 %** 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 %
Ratio of net investment
income to average net
assets................. 3.06 %** 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 %
Portfolio turnover
rate................... 136.33 % 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 %
Number of shares
outstanding at end of
period (in millions)... 244.9 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2
Average commission rate
paid per share......... $0.0564 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND
-------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 02/23/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $ 7.800 $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $ 8.742 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.407 0.812 0.869 0.822 0.824 0.836 0.936 1.071 1.066 0.968
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ (0.034) 0.460 (1.102) 0.632 0.415 1.397 (1.792) (1.223) 0.065 (1.428)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.373 1.272 (0.233) 1.454 1.239 2.233 (0.856) (0.152) 1.131 (0.460)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.383) (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
Distributions from net
realized gains......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.383) (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (0.010) 0.434 (1.040) 0.687 0.507 1.374 (1.835) (1.231) 0.162 (1.258)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $ 7.790 $ 7.800 $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $ 8.742
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 4.78 % 17.56 % (2.72 %) 19.27 % 17.54 % 39.71 % (11.84 %) (2.05 %) 13.17 % (4.91 %)
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $394.9 $367.9 $306.2 $282.9 $153.7 $78.7 $49.8 $60.0 $65.8 $40.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.61 %** 0.61 % 0.65 % 0.65 % 0.70 % 0.75 % 0.75 % 0.71 % 0.75 % 0.73 %
Ratio of net investment
income to average net
assets................. 10.13 %** 10.34 % 9.88 % 9.91 % 10.67 % 12.05 % 13.42 % 12.29 % 11.60 % 10.13 %
Portfolio turnover
rate................... 47.93 % 139.34 % 68.67 % 95.52 % 75.04 % 57.21 % 34.66 % 60.59 % 70.73 % 16.58 %
Number of shares
outstanding at end of
period (in millions)... 50.7 47.2 41.6 33.6 19.9 10.9 8.5 7.8 7.4 4.6
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C9
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
STOCK INDEX
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 10/19/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $19.956 $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531 $ 8.071
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.197 0.403 0.377 0.361 0.350 0.351 0.357 0.326 0.357 0.047
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.785 5.126 (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951 0.548
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... 1.982 5.529 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308 0.595
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.167) (0.384) (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385) (0.135)
Distributions from net
realized gains......... 0.000 (0.146) (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.167) (0.530) (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385) (0.135)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... 1.815 4.999 (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923 0.460
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
period................. $21.771 $19.956 $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:*............... 9.95 % 37.06 % 1.01 % 9.66 % 7.13 % 29.72 % (3.63 %) 30.93 % 15.44 % 7.35 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $1,294.0 $1,031.3 $664.5 $615.1 $433.5 $236.9 $104.5 $53.8 $36.0 $24.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.37 %** 0.38 % 0.42 % 0.42 % 0.46 % 0.47 % 0.60 % 0.69 % 0.78 % 0.45 %
Ratio of net investment
income to average net
assets................. 1.98 %** 2.27 % 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87 % 0.53 %
Portfolio turnover
rate................... 0.63 % 1.16 % 1.74 % 0.60 % 0.43 % 1.10 % 17.80 % 14.54 % 15.62 % 0.47 %
Number of shares
outstanding at end of
period (in millions)... 59.4 51.7 44.4 40.5 30.5 17.4 9.7 4.6 3.8 2.9
Average commission rate
paid per share......... $0.0250 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME
-------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 02/19/88
TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period $16.271 $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621 $10.132
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.273 0.644 0.664 0.551 0.582 0.578 0.509 0.539 0.452
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.874 2.495 (0.453) 2.459 0.723 2.430 (0.980) 1.841 0.684
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 1.147 3.139 0.211 3.010 1.305 3.008 (0.471) 2.380 1.136
-------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.237) (0.618) (0.562) (0.501) (0.515) (0.542) (0.461) (0.462) (0.420)
Distributions from net
realized gains......... -- (0.734) (0.820) (0.527) (0.326) (0.498) (0.081) (0.285) (0.227)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.237) (1.352) (1.382) (1.028) (0.841) (1.040) (0.542) (0.747) (0.647)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 0.910 1.787 (1.171) 1.982 0.464 1.968 (1.013) 1.633 0.489
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $17.181 $16.271 $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:*............... 7.05 % 21.70 % 1.44 % 22.28 % 10.14 % 27.50 % (3.73 %) 22.67 % 11.31 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $1,215.4 $1,110.0 $859.7 $602.8 $234.4 $106.9 $55.5 $34.9 $11.3
Ratio of expenses net of
reimbursement to
average net assets..... 0.43 %** 0.43 % 0.52 % 0.54 % 0.57 % 0.57 % 0.60 % 0.74 % 0.64 %
Ratio of net investment
income to average net
assets................. 3.24 %** 4.00 % 3.92 % 3.56 % 4.32 % 4.53 % 4.53 % 4.48 % 4.08 %
Portfolio turnover
rate................... 10.53 % 63.55 % 62.66 % 41.43 % 39.98 % 60.12 % 54.79 % 56.65 % 61.31 %
Number of shares
outstanding at end of
period (in millions)... 70.7 68.2 59.4 38.5 17.1 8.1 4.9 2.9 1.1
Average commission rate
paid per share......... $0.0533 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C10
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
EQUITY
-----------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+ 12/31/87+
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $25.640 $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $ 13.620 $ 14.815
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.349 0.546 0.512 0.417 0.444 0.482 0.577 0.474 0.402 0.393
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.527 5.891 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909 (0.065)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 1.876 6.437 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311 0.328
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.256) (0.515) (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468) (0.496)
Distributions from net
realized gains......... -- (0.944) (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0.000 (1.027)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.256) (1.459) (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468) (1.523)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.620 4.978 (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843 (1.195)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $27.260 $25.640 $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $ 15.463 $ 13.620
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:*............... 7.31 % 31.29 % 2.78 % 21.87 % 14.17 % 26.01 % (5.21 %) 29.73 % 17.05 % 1.67 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $4,286.0 $3,813.8 $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1 $451.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.47 %** 0.48 % 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57 % 0.51 %
Ratio of net investment
income to average net
assets................. 2.66 %** 2.28 % 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67 % 2.34 %
Portfolio turnover
rate................... 8.63 % 17.65 % 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35 % 79.91 %
Number of shares
outstanding at end of
period (in millions)... 157.2 148.7 126.7 101.8 74.9 57.7 45.3 36.4 32.3 33.1
Average commission rate
paid per share......... $0.0543 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
PRUDENTIAL JENNISON
-------------------
01/01/96 04/25/95***
TO TO
06/30/96 12/31/95+
-------- --------
<S> <C> <C>
Net Asset Value at
beginning of period $12.547 $10.000
-------- --------
Income From Investment
Operations:
Net investment income.... 0.017 0.018
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.924 2.535
-------- --------
Total from investment
operations........... 0.941 2.553
-------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.015) (0.006)
Distributions from net
realized gains......... 0.000 0.000
-------- --------
Total
distributions........ (0.015) (0.006)
-------- --------
Net increase (decrease)
in Net Asset Value..... 0.926 2.547
-------- --------
Net Asset Value at end of
period................. $13,473 $12.547
-------- --------
-------- --------
Total Investment Rate of
Return:*............... 7.50 % 24.42 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $144.3 $63.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 %** 0.79 %
Ratio of net investment
income to average net
assets................. 0.43 %** 0.15 %
Portfolio turnover
rate................... 21.75 % 37.45 %
Number of shares
outstanding at end of
period (in millions)... 10.7 5.0
Average commission rate
paid per share......... $0.0610 N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total return for periods of less
than one year are not annualized.
**Annualized.
***Commencement of business.
C11
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
SMALL
CAPITALIZATION
STOCK
-------------------
01/01/96 04/25/95***
TO TO
06/30/96 12/31/95+
-------- --------
<S> <C> <C>
Net Asset Value at
beginning of period.... $11.833 $10.000
-------- --------
Income From Investment
Operations:
Net investment income.... 0.047 0.077
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.165 1.916
-------- --------
Total from investment
operations........... 1.212 1.993
-------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.041) (0.044)
Distributions from net
realized gains......... 0.000 (0.116)
-------- --------
Total
distributions........ (0.041) (0.160)
-------- --------
Net increase (decrease)
in Net Asset Value..... 1.171 1.833
-------- --------
Net Asset Value at end of
period................. $13.004 $11.833
-------- --------
-------- --------
Total Investment Rate of
Return:*............... 10.24 % 19.74 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $98.4 $47.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.47 %** 0.60 %
Ratio of net investment
income to average net
assets................. 1.07 %** 0.68 %
Portfolio turnover
rate................... 8.40 % 31.79 %
Number of shares
outstanding at end of
period (in millions)... 7.6 4.0
Average commission rate
paid per share......... $0.0325 N/A
</TABLE>
<TABLE>
<CAPTION>
GLOBAL
-------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 09/19/88
TO TO TO TO TO TO TO TO TO
06/30/96 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period $15.533 $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508 $ 9.818
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.049 0.065 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.541 2.138 (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 1.590 2.203 (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
-------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.049) (0.242) (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net
realized gains......... (0.408) (0.307) (0.025) (0.106) 0.000 (0.090) (0.015) (0.773) 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.457) (0.549) (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.133 1.654 (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $16.666 $15.533 $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:*............... 10.25 % 15.88 % (4.89 %) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $500.0 $400.1 $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to
average net assets..... 1.03 %** 1.06 % 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment
income to average net
assets................. 0.63 %** 0.44 % 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover
rate................... 29.21 % 58.52 % 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares
outstanding at end of
period (in millions)... 30.0 25.7 24.9 8.8 3.3 3.2 2.7 2.5 2.6
Average commission rate
paid per share......... $0.0290 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
***Commencement of business.
C12
<PAGE>
NOTE 6: FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NATURAL RESOURCES
-------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 05/01/88
TO TO TO TO TO TO TO TO TO
06/30/96+ 12/31/95+ 12/31/94+ 12/31/93+ 12/31/92+ 12/31/91+ 12/31/90+ 12/31/89+ 12/31/88+
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $17.272 $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141 $ 9.910
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.081 0.204 0.183 0.227 0.319 0.368 0.417 0.364 0.254
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.276 3.662 (0.850) 3.004 0.588 0.821 (1.143) 3.216 0.274
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 3.357 3.866 (0.667) 3.231 0.907 1.189 (0.726) 3.580 0.528
-------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.057) (0.209) (0.150) (0.207) (0.309) (0.361) (0.336) (0.358) (0.252)
Distributions from net
realized gains......... -- (0.828) (0.302) (0.411) (0.099) 0.000 (0.021) (0.658) (0.045)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.057) (1.037) (0.452) (0.618) (0.408) (0.361) (0.357) (1.016) (0.297)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 3.300 2.829 (1.119) 2.613 0.499 0.828 (1.083) 2.564 0.231
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $20.572 $17.272 $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:*............... 19.44 % 26.92 % (4.30 %) 25.15 % 7.30 % 10.30 % (5.76 %) 35.64 % 5.42 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $368.7 $293.2 $227.3 $158.8 $77.5 $62.6 $50.6 $17.9 $9.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.49 %** 0.50 % 0.61 % 0.60 % 0.72 % 0.68 % 0.75 % 0.86 % 0.58 %
Ratio of net investment
income to average net
assets................. 0.85 %** 1.25 % 1.09 % 1.50 % 2.44 % 2.97 % 3.45 % 3.04 % 2.46 %
Portfolio turnover
rate................... 7.39 % 46.11 % 18.10 % 19.64 % 29.20 % 21.33 % 42.18 % 49.17 % 59.33 %
Number of shares
outstanding at end of
period (in millions)... 17.9 17.0 15.7 10.2 6.0 5.0 4.4 1.4 0.9
Average commission rate
paid per share......... $0.0428 N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
+Calculations are based on average month-end shares outstanding, where
applicable.
*Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns. Total investment return for
periods of less than a full year are not annualized.
**Annualized.
C13
<PAGE>
GLOSSARY OF TERMS FOR THE REPORT TO CONTRACT OWNERS
(NOTE: ADDITIONAL EXPLANATIONS WILL BE FOUND IN NOTES TO FINANCIAL STATEMENTS)
ACCUMULATION UNIT -- The measure for determining the Contract owner's share in
the separate account of a deferred variable annuity during the accumulation
period before annuity benefits begin to be paid. Contract owner transactions
such as purchase payments, transfers, and withdrawals result in changes to the
number of accumulation units credited to the Contract owner. Investment results
and daily charges affect the value of the accumulation unit.
ANNUITY UNIT -- The measure of the fixed number of benefit units purchased by
the accumulation units when annuitizing via a variable payout annuity.
AMERICAN DEPOSITORY RECEIPT (ADR) -- A certificate issued by an American bank to
evidence ownership of a block of foreign shares. The certificate can be traded
like a share of stock.
BOND -- A debt security which obligates the issuer to pay interest at specific
intervals and to redeem the bond for a specified amount on the maturity date. A
bond can be categorized based on the time interval between issue date and
maturity date. Short-term bond: 2 years or less; medium-term bond: 2 - 10 years;
long-term bond: 10 years or more.
CERTIFICATE OF DEPOSIT (CD) -- A short-term, interest-bearing bond issued by a
bank or a savings and loan.
COMMERCIAL PAPER -- A short-term, unsecured promissory note issued by either a
corporation or bank.
COMMON STOCK -- The basic unit of ownership of a public corporation which
entitles stockholders to dividend payments, although amount and frequency of
dividends are not guaranteed. (see also Stock)
CONVERTIBLE BOND -- A bond that is exchangeable for another type of security
(usually common stock).
COUPON RATE -- The annual rate of interest the issuer of a bond will pay
bondholders.
DEFAULTED SECURITY -- A bond which fails to make interest payments in a timely
manner.
FUTURES CONTRACT -- A contract calling for the delivery of a specified quantity
of cash, a financial security or a commodity. The contract includes a specific
price and future time at which the exchange may take place.
LOAN PARTICIPATION -- A loan to a corporation which is sold by a bank in the
form of a short-term, unsecured promissory note.
NET ASSETS -- The term used to designate the total value of securities owned,
cash, receivables, and other assets less any liabilities.
MARKET VALUE -- The dollar value of a security on a given day, usually based on
the last sales price of that given day.
OPTION CONTRACT -- A contract giving the investor the right to buy or sell an
underlying security at a fixed price before the expiration date. An option which
grants the investor the right to buy the underlying security is a Call Option; a
Put Option gives the investor the right to sell the underlying security.
PIK BOND/STOCK (PAY IN KIND) -- A security which has the option to pay interest
or dividends in the form of either additional bonds or shares of stock.
PREFERRED STOCK -- A high quality unit of ownership of a public corporation
which entitles the holder to preference over common stock holders in the payment
of dividends. (see also Stock)
PORTFOLIO TURNOVER -- A measure of portfolio trading activity.
REALIZED GAIN/LOSS -- The amount of profit or loss from the sale of securities.
Calculated as the sale price minus the purchase price.
I
<PAGE>
REPURCHASE AGREEMENT -- An agreement where an investor loans cash to a bank in
exchange for a Treasury security held as collateral and interest on the loan.
The agreement indicates that the cash and collateral are exchanged back the
following day. These securities are used to invest idle cash.
RESTRICTED SECURITY -- A security which is sold privately because it is not
registered with the SEC.
RIGHT -- Privilege granted to stockholders of a company to buy shares of a new
issue of common stock (at a price below the public offering price) before it is
offered to the public.
STOCK -- Unit of ownership in a public corporation. The value of a share of
stock varies, according to how buyers and sellers of the stock view the
corporation's future success. Shareholders generally receive dividend payments,
which are their part of the corporation's earnings. (see also Common Stock;
Preferred Stock)
TIME DEPOSIT (TD) -- A non-negotiable short-term, interest bearing bond issued
by a bank or savings & loan. The maturity period can be from 1 day to 6 months.
UNREALIZED GAIN/LOSS -- The increase or decrease in the value of a security,
based on its daily market price and its original purchase price. A gain or loss
is "unrealized" until the sale of the security.
VARIATION MARGIN -- A term used in the daily valuation of futures contracts. It
refers to the difference between the current and previous day's settling price.
WARRANT -- A security which entitles the holder to buy additional shares of
common stock at a specified price (usually higher than the market price at the
time of issuance), over a period of years.
II
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, PhD. CEO,
THE PRUDENTIAL SERIES EXECUTIVE VICE PRUDENTIAL PREFERRED
FUND, INC. PRESIDENT, FINANCIAL SERVICES;
FAIRLEIGH DICKINSON PRESIDENT, SERIES FUND
UNIVERSITY
SAUL K. FENSTER, PhD. JOSEPH WEBER, PhD.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
- --------------------------------------------------------------------------------
BOARD OF
DIRECTORS THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
FRANKLIN E. AGNEW ROGER A. ENRICO ARTHUR F. RYAN
BUSINESS CONSULTANT VICE CHAIRMAN AND CEO, CHAIRMAN OF THE BOARD,
FREDERIC K. BECKER PEPSICO WORLDWIDE CEO,
PRESIDENT, RESTAURANTS AND PRESIDENT,
WILENTZ, GOLDMAN, & ALLAN D. GILMOUR THE PRUDENTIAL
SPITZER FORMER VICE CHAIRMAN, CHARLES R. SITTER
WILLIAM W. BOESCHENSTEIN FORD MOTOR COMPANY RETIRED PRESIDENT,
RETIRED CHAIRMAN, WILLIAM H. GRAY III EXXON CORPORATION
OWENS-CORNING PRESIDENT AND CEO, DONALD L. STAHELI
FIBERGLAS CORPORATION THE COLLEGE FUND/UNCF CHAIRMAN AND CEO,
LISLE C. CARTER, JR. JON F. HANSON CONTINENTAL GRAIN
FORMER SENIOR VICE CHAIRMAN, HAMPSHIRE COMPANY
PRESIDENT MANAGEMENT COMPANY RICHARD M. THOMSON
AND GENERAL COUNSEL, CONSTANCE J. HORNER CHAIRMAN AND CEO,
UNITED WAY OF AMERICA GUEST SCHOLAR, THE TORONTO-DOMINION
JAMES G. CULLEN THE BROOKINGS BANK
VICE CHAIRMAN, INSTITUTION JAMES A. UNRUH
BELL ATLANTIC ALLEN F. JACOBSON CHAIRMAN AND CEO,
CORPORATION RETIRED CHAIRMAN AND UNISYS CORPORATION
CAROLYNE K. DAVIS, PhD. CEO, P. ROY VAGELOS, M.D.
NATIONAL AND MINNESOTA MINING AND FORMER CHAIRMAN AND
INTERNATIONAL MANUFACTURING (3M) CEO,
HEALTH CARE ADVISOR, GARNETT L. KEITH, JR. MERCK & CO., INC.
ERNST & YOUNG, LLP VICE CHAIRMAN, STANLEY C. VAN NESS
THE PRUDENTIAL COUNSELOR AT LAW
BURTON G. MALKIEL PICCO HERBERT KENNEDY
PROFESSOR, PAUL A. VOLCKER
PRINCETON UNIVERSITY CONSULTANT
JOSEPH H. WILLIAMS
DIRECTOR,
THE WILLIAMS COMPANIES,
INC.
III
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, PhD. CEO,
THE PRUDENTIAL SERIES EXECUTIVE VICE PRUDENTIAL PREFERRED
FUND, INC. PRESIDENT, FINANCIAL SERVICES;
FAIRLEIGH DICKINSON PRESIDENT, SERIES FUND
UNIVERSITY
SAUL K. FENSTER, PhD. JOSEPH WEBER, PhD.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
- --------------------------------------------------------------------------------
BOARD OF
DIRECTORS PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
E. MICHAEL CAULFIELD GARNETT L. KEITH, JR. I. EDWARD PRICE
CEO, VICE CHAIRMAN, CEO,
PRUDENTIAL PREFERRED THE PRUDENTIAL PRUDENTIAL
FINANCIAL SERVICES INSURANCE COMPANY OF INTERNATIONAL INSURANCE
AMERICA WILLIAM F. YELVERTON
IRA J. KLEINMAN CEO,
PRESIDENT, INDIVIDUAL INSURANCE
PRUDENTIAL SELECT GROUP
MARKETING COMPANY
ESTHER H. MILNES
SENIOR VICE PRESIDENT,
PRUDENTIAL INSURANCE
AND
FINANCIAL SERVICES;
PRESIDENT, PRUCO LIFE
AND
PRUCO LIFE OF NEW
JERSEY
IV
<PAGE>
The toll-free numbers shown below can be used to make transfers and
reallocations. Unit values for each investment option are available to all
contract owners from the 800 number.
However, you must be enrolled to allocate premiums, transfer funds or get the
following information by telephone:
- How your premiums are being allocated
- Current investment option values in your contract
The phone lines are open each business day during the hours shown.
Please be sure to have your contract number available when you call.
1-800-634-7879
8am-4pm Central Time
1-800-356-4050
8am-4pm Eastern Time
1-800-635-9587
8am-4pm Eastern Time
- --------------------------------------------------------------------------------
In the past, contract owners who held several contracts of the same type, at
the same address, received multiple copies of Annual Reports and Semi-Annual
Reports. In an effort to lessen waste and to reduce your Fund's expense of
postage and printing, we will now mail only one copy of each contract owner
report for your related contracts at the same address. No action on your
part is necessary. Upon request, we will furnish you with additional
reports. The above toll-free numbers should be used to request any
additional copies. Proxy material and tax information will continue to be
sent to each account of record.
If you purchased your contract from a Prudential Securities Financial Advisor
and have any questions, please call the following telephone number:
1-800-445-4571
7AM-5PM CENTRAL TIME
