<PAGE>
THE
PRUDENTIAL
SERIES FUND, INC.
[PHOTO]
SEMIANNUAL REPORT
TO CONTRACT OWNERS
JUNE 30, 1997
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
VARIABLE 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 Variable Universal Life
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-Registered Trademark-
VARIABLE ANNUITIES
Prudential's Discovery-Registered Trademark- Plus
Pruco Life's Discovery-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
<PAGE>
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Please note: This Semiannual Report includes the financial statements of The
Prudential Series Fund, Inc. It does not include the financial statements for
the separate account that corresponds to your product. If you would like
separate account financial statements as of June 30, 1997, please call the
appropriate number shown on the inside back cover of this report.
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This report may be used with the public only when preceded or accompanied by
current prospectuses for The Prudential Series Fund, Inc., the applicable
variable life or variable annuity product and the current Performance Data
Update for the applicable product. The Performance Data Update shows historical
investment performance after the deduction of investment management fees,
investment-related expenses and the product's Mortality and Expense Risk Charge.
For the variable life insurance products, additional contract charges include
the cost of insurance, administrative, sales and any applicable withdrawal or
surrender charges. These charges will reduce the rates of return shown on the
Performance Data Update. For the variable annuity products, the Performance Data
Update provides returns that are net of all contract charges, including
applicable surrender or withdrawal charges. The prospectuses contain complete
information concerning charges and expenses, including hypothetical performance
illustrations that show the effects of performance on various assumptions, and
should be read carefully before you invest or send money.
Variable life and variable annuity products are offered by Pruco Securities
Corp., a subsidiary of The Prudential Insurance Company of America. The
principal business address of Pruco Securities is 213 Washington Street,
Newark, NJ 07102-2992.
<PAGE>
TO OBTAIN ADDITIONAL COPIES OF THIS CONTRACT OWNER REPORT:
In the past, Contract Owners who held several variable contracts at the same
address received multiple copies of Annual and Semiannual Reports. In an effort
to lessen waste and reduce your fund's expenses of postage and printing, we will
now mail only one copy of all your related contracts at the same address. No
action on your part is necessary. Upon request, we will furnish you with
additional reports. The toll-free numbers listed on the inside back cover of
this report should be used to request any additional copies of The Prudential
Series Fund, Inc., Semiannual Report. Proxy material and tax information will
continue to be sent to each account of record.
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TABLE OF CONTENTS
I. LETTER TO CONTRACT OWNERS 2
1. Market Review 4
2. Investment Advisor's Outlook 8
3. Individual Portfolios
Money Market Portfolio 10
Diversified Bond Portfolio 12
Government Income Portfolio 14
Zero Coupon Bond 2000 Portfolio 16
Zero Coupon Bond 2005 Portfolio 17
Conservative Balanced Portfolio 18
Flexible Managed Portfolio 20
High Yield Bond Portfolio 22
Stock Index Portfolio 24
Equity Income Portfolio 26
Equity Portfolio 28
Prudential Jennison Portfolio 30
Small Capitalization Stock Portfolio 32
Global Portfolio 34
Natural Resources Portfolio 36
II. The Prudential Series Fund, Inc.
1. Financial Statements A1
2. Schedule of Investments B1
3. Notes to Financial Statements C1
4. Financial Highlights D1
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997
LETTER TO CONTRACT OWNERS
[PHOTO]
E. Michael Caulfield
President
DEAR CONTRACT OWNER:
We are pleased to provide our Semiannual Report to you on the investment
performance of the Portfolios that underlie your Prudential variable life or
variable annuity contract.
Once again, the news is outstanding. In the first half of this year, stock
prices surged nearly 21%, two times their rise in an average full year. In fact,
the Dow Jones Industrial Average broke through 8000 on July 16, two weeks after
the end of the first half. This certainly was not what most Wall Street experts
had predicted.
Bonds, too, performed favorably in the first half of 1997. Bonds returned 3.1%
over the last six months, as measured by the Lehman Brothers Aggregate Index.
Corporate high yield bonds in general were the strongest, returning 5.8% for the
period.
What led to such excellent performance? Conditions were idyllic for most
investors in the first half -- economic growth was strong and interest rates
were relatively stable, so corporate profits rose. Unemployment fell to a
23-year low and consumer confidence hit a 28-year high.
HOW DID OUR PORTFOLIOS PERFORM?
You'll be pleased to know that The Prudential Series Fund Portfolios delivered
returns similar to those of the broader markets and consistent with the
strategies around which they were designed. Through June 30, all of our
diversified stock portfolios had posted double-digit returns. Most of our bond
portfolios finished with solid results.
Several Portfolios had six-month returns higher than the average variable life
and variable annuity contracts in their respective categories, as reported by
Lipper Analytical Services, Inc.
IT'S LONG-TERM PERFORMANCE THAT COUNTS.
Although in this report we're focusing primarily on performance for the first
half of this year, remember that it's long-term performance that counts. Review
your Portfolio's performance so far in 1997, but also be sure to note its
longer-term record as well. You'll note that over the past three, five and 10
years many of our Portfolios have delivered excellent performance, both on an
absolute basis and in comparison with funds having similar objectives.
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"Conditions were idyllic for most investors in the first half -- economic growth
was strong and interest rates were relatively stable, so corporate profits
rose."
2
<PAGE>
Our goal is to achieve this kind of above-average investment performance over
time. Such consistency is important, because most people buy variable life and
variable annuity products to finance long-term goals. So when you consider how
to allocate either new or existing assets among these Portfolios, please look
closely at their performance over five and 10 years as well.
COULD THE THIRD TIME BE A CHARM?
When the U.S. stock market rose 37% in 1995, we doubted it would be repeated any
time soon. Then stocks advanced 23% in 1996. Again, we suggested that this kind
of performance was unlikely to be duplicated again. And now, through the first
half of 1997, stocks are already up nearly 21%.
It's clear that we -- and, we venture, most other investors -- cannot predict
the stock market. Nevertheless, it's even more important now to repeat what we
wrote six months ago -- that the U.S. stock market now sits at valuations beyond
all historic boundaries.
Now, more than ever, your asset allocations should be based on reasonable
expectations for those asset classes, not the most recent performance. What's
reasonable? Well, over the last 70 years the average annual return of U.S.
stocks is 10.7% as measured by the S&P 500.
With this in mind, you may want to reevaluate how you allocate your contract
funds among the available investment options. While stocks ought to remain the
investment of choice for most investors looking for long-term wealth
accumulation, now might be a good time to consider diversifying a portion of
your holdings. If you wish, contact your Prudential Representative/Pruco
Securities Registered Representative for assistance in structuring a program to
help meet your needs.
All of us at Prudential thank you for your business and look forward to helping
you plan for your future financial security.
/s/ E. Michael Caulfield /s/ Mendel A. Melzer
E. Michael Caulfield Mendel A. Melzer, CFA
President Chairman
July 23, 1997
[PHOTO]
MENDEL A. MELZER, CFA
CHAIRMAN
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IMPORTANT NOTE
The rates of return quoted on the following pages reflect the deduction of
investment management fees and investment-related expenses, but not product
charges. They reflect the reinvestment of dividend and capital gains
distributions. They are not an estimate or a guarantee of future performance.
Contract unit values increase or decrease based on the performance of the
Portfolio and, when redeemed, may be worth more or less than their original
cost. Changes in contract values depend not only on the investment performance
of the Portfolio but also on the insurance and administrative charges,
applicable sales charges, and the mortality and expense risk charge applicable
under the contract. These contract charges effectively reduce the dollar amount
of any net gains and increase the dollar amount of any net losses.
Your Prudential Representative/Pruco Securities Registered 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.
3
<PAGE>
1997 MARKET REVIEW
U.S. STOCKS
THE DOW: 6600, 6800, 7000, 7200, 7400, 7600 . . .
After rising 37% in 1995 and 23% in 1996, stock prices rose another 21% in the
first six months of 1997. This stunning performance prompted analysts and
economists alike to reach for superlatives.
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HOW THE MARKETS COMPARED.(1)
[GRAPH]
YEAR-TO-DATE 1997 AVERAGE RETURN OVER
PAST 20 YEARS (ANNUALIZED)
MONEY MARKET 2.5% 7.7%
BONDS 3.1% 9.5%
FOREIGN STOCKS 15.6% 15.1%
U.S. STOCKS 20.6% 15.9%
THIS CHART COMPARES THE 6-MONTH RETURN AS OF 6/30/97 FOR VARIOUS CATEGORIES OF
INVESTMENTS WITH THE AVERAGE ANNUAL TOTAL RETURN OVER 20 YEARS FOR THE SAME
INVESTMENT. AS YOU CAN SEE, STOCK AND BOND MARKET RETURNS CAN VARY CONSIDERABLY
FROM YEAR TO YEAR. UNLIKE STOCKS, BONDS GENERALLY OFFER A FIXED RATE OF RETURN
AND PRINCIPAL IF HELD TO MATURITY. AN INVESTMENT'S PAST PERFORMANCE SHOULD NEVER
BE USED TO PREDICT FUTURE RESULTS. THERE ARE DIFFERENT RISKS ASSOCIATED WITH
EACH INVESTMENT SECTOR, WHICH SHOULD BE CAREFULLY CONSIDERED BEFORE INVESTING.
(1) SOURCE: PRUDENTIAL. FOR PURPOSES OF COMPARISON ONLY. U.S. MONEY MARKETS AS
MEASURED BY LIPPER MONEY MARKET AVERAGE. BONDS AS MEASURED BY THE LEHMAN
BROTHERS AGGREGATE INDEX. FOREIGN STOCKS AS MEASURED BY THE MORGAN STANLEY
CAPITAL INTERNATIONAL WORLD INDEX. U.S. STOCKS AS MEASURED BY THE S&P 500 INDEX.
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The wonder was the economy. The current U.S. economic expansion is now in its
seventh year, the third longest in history. Unemployment is at its lowest since
1973. Inflation seems like a distant memory. All of this means higher corporate
revenues and stable corporate borrowing costs -- and as a result, higher
corporate profits. It's a nearly idyllic investment environment.
To be sure, the stock market did not rocket straight up in the first half of the
year. Stocks actually fell nearly 10% in the spring, amid short-lived fears of
higher interest rates. Back in March, the Federal Reserve increased short-term
interest rates (by a quarter of a percentage point), for the first time in two
years. The nation's central bankers feared that first-quarter economic growth
would set off a new round of inflation. Stocks recovered in April amid evidence
the growth rate was moderating.
LARGE STOCKS WERE THE LEADERS, AGAIN.
In the first half of the year, the biggest stocks were the best performers. The
five biggest companies in the S&P 500 gained 34% in the first half of the year,
while the top 25 companies gained 28%. Of the largest companies, the drug stocks
seemed to do the best as a group, with Warner Lambert up 67%, Eli Lilly rising
51%, Bristol-Myers Squibb climbing 49% and Pfizer advancing 45% during the
period.
Small company stocks trailed larger companies, as they have for several years
now, rising 10% in the first half of 1997 as measured by the Russell 2000*.
(These companies are generally defined as those whose outstanding stock is
valued at less than $1 billion.) Still, performance of these stocks has been
improving in recent months. Consumer growth stocks (powered by the
pharmaceutical companies) led the market, followed by financial and consumer
cyclical stocks (auto, retail and housing stocks whose fortunes tend to mirror
the ups and downs of the economy).
4
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U.S. STOCKS: CONSUMER GROWTH TOPS.
Y-T-D
6/30/97
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Consumer Growth 24.5%
Finance 23.6%
Consumer Cyclical 21.1%
Technology 21.0%
Industrials 19.4%
Energy 18.6%
Utilities 7.8%
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SOURCE: PRUDENTIAL.
CONSUMER GROWTH stocks rose almost 25% during the first half of 1997, powered
primarily by drug companies, beverages and household products. As stock prices
rose higher and higher, investors seemed to favor the very largest companies
that produce the most steadily predictable earnings and therefore stocks that
can be traded most easily. Widely owned Coca-Cola rose 30%. Another household
name, Gillette, rose 22%. Drug companies also did well, as previously
mentioned.
FINANCIAL stocks climbed nearly 24% for the period. Mergers and acquisitions
among financial companies continued to dominate (such as Morgan Stanley and Dean
Witter), helping to fuel interest in this area. A feeling that the Federal
Reserve would not raise short-term interest rates any further helped power bank
stocks higher.
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LARGE STOCKS OUTPERFORMED SMALL STOCKS.
Y-T-D 20-Year
6/30/97 Average
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S&P 500* 20.6% 15.9%
NASDAQ* 11.7% 14.3%
Russell 2000* 10.2% 15.7%
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* THE STANDARD & POOR'S 500, NASDAQ, AND
RUSSELL 2000 ARE UNMANAGED INDICES THAT
ARE CONSIDERED TO BE GENERALLY
REPRESENTATIVE OF U.S. STOCK MARKETS.
INVESTORS CANNOT INVEST DIRECTLY IN
INDICES OR MARKET AVERAGES. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
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THE DOW IN THE PAST TWELVE MONTHS.
[GRAPH]
The Dow rose 20% in
11 weeks,
closing at 7688.
The Dow marched from
5500 to 7000 in
8 months.
In March and April, fears of
higher interest rates shook the market.
Jul 5473.06
5679.83
5681.31
5689.45
5722.74
Aug 5616.21
5659.86
5838.52
5888.46
Sep 5872.92
5992.86
5969.38
6094.23
Oct 6007.02
6021.93
6219.82
6348.03
6471.76
Nov 6521.7
6381.94
6304.87
6484.4
Dec 6560.91
6544.09
6703.04
6833.1
6696.48
Jan 6813.09
6855.8
6988.96
6931.62
Feb 6877.74
7000.89
6935.46
6804.79
Mar 6740.59
6526.07
6391.69
6703.55
Apr 6738.87
7071.2
7169.53
7194.67
7345.91
May 7331.04
7435.78
7782.04
7796.51
Jun 7687.72
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WEEKLY CLOSE OF THE DOW JONES INDUSTRIAL AVERAGE FOR THE PAST TWELVE MONTHS.
CONSUMER CYCLICAL stocks ranked third, rising 21% during the period, as the U.S.
economy grew at 4.9% in the first quarter, and unemployment was at its lowest
since 1973. Retailers led, powered by major gainers Nordstrom, up 39%; Home
Depot, advancing 38%; and Dayton Hudson, climbing 37%.
5
<PAGE>
1997 MARKET REVIEW CONTINUED
U.S. BONDS
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30-YEAR U.S. TREASURY YIELDS.
[GRAPH]
Jul 6.97
Aug 7.12
Sep 6.92
Oct 6.64
Nov 6.35
Dec 6.64
Jan 6.79
Feb 6.8
Mar 7.1
Apr 6.96
May 6.91
Jun 6.78
Slower economic growth pushed yields down to 6.78% on June 30.
Yields bottomed at 6.35% on Nov. 29.
Inflation fears drove yields up to 7.17% on April 14.
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MONTHLY CLOSING YIELDS FOR THE PAST TWELVE MONTHS. SOURCE: LEHMAN BROTHERS, AS
OF 6/30/97.
INTEREST RATES: SOMEWHAT STABLE.
Long-term interest rates rose, then fell, in the first half of the year, ending
slightly higher at midyear. The Federal Reserve raised short-term interest rates
for the first time in two years, lifting the overnight bank lending rate by a
quarter of a percentage point in March to 5.5% as a precaution against
too-strong economic growth. In response, long-term interest rates at first rose.
Rates later eased as inflation worries subsided, along with concerns of further
action by the Federal Reserve.
Bonds returned 3.1% over the first six months of 1997 as measured by the Lehman
Brothers Aggregate Index. The yield on the bellwether 30-year U.S. Treasury bond
rose to 6.78% on June 30, 1997, from 6.64% on December 31, 1996. Short-term
rates, as measured by the three-month U.S. Treasury bill, actually fell
slightly, to 5.17% on June 30, 1997.
Corporate high yield bonds in general were the strongest, returning 5.8% for the
period. High yield corporate bonds fared well on solid economic growth, rising
corporate profits, minimal defaults and powerful demand as a broadening base of
institutional investors seeking higher yields became interested in this sector.
A large number of new issues were sold in the first half -- $55 billion -- only
$8 billion less than in all of last year. Better-rated high yield securities, as
a group, outperformed those with poorer credit ratings.
Solid economic growth, stable inflation and steady governments also helped
emerging markets bonds to a strong first half. Argentina led all of Latin
America, rising 11% as financial stability in the region improved generally.
Brazil, Mexico and Venezuela followed, as reported by Morgan Stanley.
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HIGH YIELD BONDS PERFORMED BEST.
High Yield Bonds 5.8%
Mortgage Bonds 3.9%
Aggregate Index 3.1%
Corporate Bonds 3.1%
Government Bonds 2.6%
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SOURCE: LEHMAN BROTHERS, AS OF 6/30/97.
6
<PAGE>
FOREIGN STOCKS
EUROPE STRONG; JAPAN AND PACIFIC REGION REBOUND.
Although stock markets in Europe and the Pacific couldn't match the torrid
performance of the U.S. market in the first half of 1997, European stocks were
strong and Pacific stock markets -- especially Japan, which represents
two-thirds of the region -- came alive in the second quarter.
In the Pacific, returns for the full first six months of the year were
comparatively subdued: Pacific stocks rose 7% and Japanese stocks climbed 9%.
But these returns masked a 24% gain by Japanese stocks for U.S. investors in the
second quarter, because the yen strengthened significantly against the U.S.
dollar.
LET'S DO EUROPE.
Europe was the best region outside the United States in the first six months (as
measured in dollars), as stocks of many more-efficient export-oriented companies
led markets higher. European stocks in general have benefited from the movement
toward monetary unity in 1999, which has forced governments to economize,
reducing interest rates. Export-oriented companies fared best, rising in the
second quarter.
JAPAN RISES.
A strengthening yen powered Japanese stocks to their highest levels since
December, igniting gains throughout the Pacific region. The U.S. dollar lost 12%
against the yen in just five weeks in May and June. This helped Japanese stocks
rise 24% for U.S. investors in the second quarter. But because Japanese stocks
had lost ground in the first quarter of 1997, they were ahead only 9% in U.S.
dollars for the first half of the year.
Hong Kong stocks also performed well, as investors overcame their fear of
turning over the British colony to China after more than 150 years.
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U.S. TOPS FOREIGN MARKETS.
Y-T-D
6/30/97
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MSCI World Index 15.6%
MSCI Europe Index 14.5%
MSCI EAFE Index 11.4%
MSCI Japan Index 9.2%
MSCI Pacific Index 7.3%
S&P 500 INDEX 20.6%
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SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL.
THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX IS A WEIGHTED,
UNMANAGED INDEX OF PERFORMANCE OF 1,472 SECURITIES LISTED ON THE STOCK EXCHANGES
OF THE U.S., EUROPE, CANADA, AUSTRALIA, NEW ZEALAND AND THE FAR EAST. INVESTORS
CANNOT INVEST DIRECTLY IN AN INDEX.
MORGAN STANLEY COUNTRY INDICES [EUROPE, ASIA, FAR EAST (EAFE), PACIFIC AND
JAPAN] ARE UNMANAGED INDICES THAT INCLUDE THOSE STOCKS MAKING UP THE LARGEST
TWO-THIRDS OF EACH COUNTRY'S TOTAL STOCK MARKET CAPITALIZATION. THIS CHART IS
FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT INDICATIVE OF THE PAST, PRESENT OR
FUTURE PERFORMANCE OF ANY SPECIFIC INVESTMENT. INVESTORS CANNOT INVEST DIRECTLY
IN STOCK INDICES.
THE STANDARD & POOR'S 500 IS A WEIGHTED, UNMANAGED INDEX COMPRISED OF 500
STOCKS, WHICH PROVIDES A BROAD INDICATOR OF STOCK PRICE MOVEMENTS.
7
<PAGE>
1997 INVESTMENT ADVISOR'S OUTLOOK
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ECONOMIC OUTLOOK.
Est.
1997
----
GDP 2.7%
Inflation 2.2%
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SOURCE: PRUDENTIAL ECONOMICS.
THE ECONOMY.
Our economists at Prudential suspect that growth will remain relatively subdued
for the rest of the year. Economic growth slowed sharply in the second quarter.
They also expect inflation will remain benign, below 3%. As a result, the
Federal Reserve will likely refrain from raising short-term interest rates any
further this year, and the central bankers may ultimately lower rates by early
next year, our economists predict.
U.S. STOCKS: WHAT'S AFTER 8000?
Now that the Dow Jones Industrial Average has hurdled 8000, with some analysts
now predicting a Dow of 10,000, it's only natural to wonder how long all this
good news can continue. After all, stock prices have doubled in the last two and
a half years.
At these high price levels, stock selection is even more crucial. So, too, is
understanding the objective, strategy and risks of the portfolio in which your
contract values are invested. Some stocks now sell at very high prices --
particularly those of large, well-known companies. But other stocks remain
attractive. Some of our managers like industrial companies, real estate
investment trusts and securities brokerages, because they believe they have room
to appreciate. Others like insurance, paper and retailing, thinking they are
undervalued. Our growth stock managers who have done very well with the
pharmaceuticals, also think that technology is due for an upswing after hitting
what seemed like a bottom in April.
8
<PAGE>
BONDS: WE'RE SEARCHING FOR YIELD.
We suspect that prices in the bond market will remain relatively stable through
the rest of the year, depending on the relative weakness or strength that
investors see in the economy.
We are focusing now on finding bonds that provide more yield than U.S. Treasurys
while offering comparatively little additional risk.
We are particularly interested in crossover bonds -- those with split ratings of
investment grade (BBB) by one rating agency and just below investment grade (BB)
by another. Frequently, we can buy these bonds at more attractive prices than
bonds rated below investment grade (high yield bonds), because of the
uncertainty over their credit strength.
We are also interested in emerging markets. Relative stability in governments,
economic growth and low inflation made emerging markets bonds the
best-performing bonds in the world in the first half of the year. We've added
Russian, South African, Panamanian and Polish bonds, among others, to our
portfolios.
FOREIGN STOCKS: LOOK FOR THE JAPANESE SURPRISE.
The Japanese stock market may be a pleasant surprise this year. We've
purchased stocks of domestically oriented Japanese companies that sell their
products and services within the country; they are more attractively priced than
export-oriented multinational companies.
In Europe, we see the opposite. We are invested in multinational stocks,
particularly those that are restructuring to increase efficiency. We believe
that the movement toward a common European currency will continue to constrain
economic growth rates within Europe, so we are most interested in companies
listed on European stock exchanges but that derive most of their revenues from
outside Europe.
In Hong Kong, we suspect that the new Chinese control will limit the escalation
of real estate prices. Since property-related stocks are about a third of the
market index, prices in general will have to struggle to move
higher.
A REALITY CHECK.
Stock prices in general have nearly doubled in the last two and a half years.
We're quite pleased with the unusually high returns that stocks have provided
for our Contract Owners over the past few years, and we are certain that you
are, too. Those types of returns bring you closer to your goals of financial
security faster than you might have expected.
Since 1926, the U.S. stock market's average return has been 10.7%, as measured
by the S&P 500. Yet, in recent years, returns have been much higher, as the
chart below shows.
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RETURNS OF THE U.S. STOCK
MARKET.
Average
Annual
Return
-------
LAST 70 YEARS
1926-1996 10.7%
LAST TWO YEARS
1995 37.4%
1996 23.0%
LAST SIX MONTHS
1997 20.6%
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SOURCE: PRUDENTIAL.
As much as we would like this tremendous performance to continue year after
year, we know it cannot. It's simply the law of averages.
9
<PAGE>
MONEY MARKET PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio got off to a solid start in 1997. On June 30, 1997, your
Portfolio's 7-day yield was 5.36%, up from 5.15% on December 31, 1996.
Its return of 2.61% for the first six months exceeded the 2.47% return of the
average money market fund tracked by Lipper Analytical Services.
Interest rates started to rise late in the first quarter when economic activity
accelerated. In March, the Federal Reserve increased the overnight bank lending
rate. Since then, yields have fallen amid signs of moderating U.S. economic
growth and a belief that the Federal Reserve will not raise interest rates again
for some time. Indeed, the central bank voted to hold rates steady at its
meetings on May 20 and July 2.
During this period of fluctuating interest rates, the Portfolio's performance
benefited from a decision to hold a mixture of very short term securities to
take advantage of rising interest rates and longer term money market securities
to lock in higher interest rates.
An investment in the Money Market Portfolio is neither insured nor guaranteed by
the U.S. government. There is no guarantee that the Portfolio will be able to
maintain a stable share value of $10.00.
<TABLE>
<CAPTION>
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AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market Portfolio(1) 2.61% 5.30% 5.36% 4.46% 5.87%
- ------------------------------------------------------------------------------------------------
Lipper (VIP) Money Market Avg.(2) 2.47% 5.04% 5.06% 4.21% 5.59%
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</TABLE>
MONEY MARKET PORTFOLIO INCEPTION DATE: 5/13/83.
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SHORT-TERM INTEREST RATES DURING THE PAST 12 MONTHS
[GRAPH]
MONEY MARKET PORTFOLIO AVERAGE MONEY MARKET FUND
Jul 5.05 4.82
5.02 4.87
5.05 4.79
5.05 4.82
Aug 5.06 4.79
5.01 4.83
5.05 4.82
5.04 4.83
Sep 5.06 4.81
5.09 4.86
5.09 4.81
5.12 4.82
5.12 4.8
Oct 5.11 4.82
5.06 4.85
5.11 4.82
5.11 4.86
Nov 5.11 4.82
5.12 4.88
5.11 4.82
5.1 4.82
5.11 4.83
Dec 5.15 4.9
5.23 4.89
5.18 4.82
5.13 4.82
Jan 5.13 4.82
5.1 4.87
5.11 4.81
5.11 4.81
Feb 5.08 4.8
5.21 4.84
5.08 4.8
5.17 4.81
Mar 5.14 4.83
5.16 4.96
5.21 4.91
5.22 4.93
5.18 4.94
Apr 5.18 4.96
5.19 4.96
5.17 4.98
5.28 4.98
May 5.31 4.99
5.28 5.02
5.33 5
5.33 5.03
Jun 5.34 5
- --------------------------------------------------------------------------------
Weekly 7-day current yields of the Money Market Portfolio and the IBC Financial
Data, Inc., Money Market Fund Average.
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) MONEY MARKET AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURNS OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY
PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT
NOT PRODUCT CHARGES.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Current income, stability of capital and maintenance of liquidity.
TYPES OF INVESTMENTS
Short-term money market securities that generally mature in 13 months or less.
These securities primarily consist of Certificates of Deposit (CDs); Commercial
Paper and Bankers' Acceptances, U.S. Treasury bills (T-bills) and other
instruments issued by or guaranteed by the U.S. government or its agencies.
PERFORMANCE REVIEW.
READY FOR THE RATE RISE. Late in the first quarter, Federal Reserve officials
began hinting that the central bank might act preemptively to slow economic
growth and keep inflation in check.
We heeded the warnings and began preparing your Portfolio for the possibility of
a rate increase by investing in very short-term securities. At the same time, we
purchased one-year corporate obligations in order to take advantage of the
recent rise in yields on these securities.
As expected, the central bank raised the rate banks pay to borrow funds by a
quarter of a percentage point, to 5.5%, on March 25. This was the first interest
rate rise in two years.
10
<PAGE>
STRATEGY SESSION.
A two-pronged approach. Expecting a Federal Reserve interest rate increase in
March, we focused on one-month and one-year money market securities as well as
securities whose coupons adjust periodically with changes in the London
Interbank Offered Rate (LIBOR).
Investing in the one-month sector allowed the Portfolio to reinvest those assets
in higher-yielding securities once the Federal Reserve increased shortterm
interest rates. Meanwhile, we also invested in higher-yielding corporate
obligations such as bank notes and CDs that mature in a year.
Although the U.S. economy grew rapidly in the first quarter, later reports on
retail sales, housing starts, producer and consumer prices indicated economic
growth eased in the second quarter and inflation remained tame.
The retail sales data are especially important, because consumer spending
accounts for two-thirds of gross domestic product in the United States. With the
U.S. economy apparently growing more slowly, interest rates edged lower in the
second quarter. As a result, the one-year corporate obligations we purchased
have appreciated in value.
OUTLOOK
PORTFOLIO MANAGER
MANOLITA BRASIL
GUARDEDLY OPTIMISTIC.
"I remain cautious. Unemployment is near historic lows, and although economic
growth appears to have slowed in the second quarter, the economy continues to
operate at a high capacity.
"So if consumers start buying again and demand rises, I believe the Federal
Reserve will feel compelled to raise interest rates. I think in the third
quarter, if demand picks up and job growth remains high, the Fed will raise
interest rates by another 25 basis points. If demand does not pick up and
inflation continues to be favorable, as it has been, then the Federal Reserve
will most likely keep interest rates where they are now."
[PHOTO]
PORTFOLIO MANAGER
MANOLITA BRASIL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Comm. Paper 54% 47%
Floating/Adj. Rate 18% 20%
Yankee Comm. Paper 12% 6%
Other Corp. Oblg. 10% 5%
Foreign Bank Oblg. 3% 17%
U.S. Bank Oblg. 2% 4%
Bank Holding Co. CP. 1% 1%
- ----------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A WORD ABOUT QUALITY.
AS OF JUNE 30, 1997, ALL OF THE PORTFOLIO'S INVESTMENTS WERE RATED IN THE
HIGHEST CATEGORY BY AT LEAST TWO MAJOR, INDEPENDENT RATING AGENCIES OR, IF
UNRATED, WERE DEEMED TO BE OF EQUIVALENT QUALITY BY OUR CREDIT RESEARCH STAFF.
INVESTMENTS DEEMED TO BE OF EQUIVALENT QUALITY THAT WERE NOT RATED WERE SUBJECT
TO RATIFICATION BY THE BOARD OF DIRECTORS.
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
11
<PAGE>
DIVERSIFIED BOND PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio performed better than its benchmarks in the first six months of
1997. With a six-month return of 4.11%, your Portfolio easily beat the 3.07%
total return on the average Lipper (VIP) Corporate Debt portfolio and the 3.09%
return of the Lehman Aggregate Index.
We were helped by our sizable holdings in corporate bonds, including those from
the media and cable industry. We also held higher-yielding U.S.
dollar-denominated bonds issued by foreign governments such as Mexico,
Argentina, Panama, Venezuela and South Africa.
Your Portfolio has performed better than the average corporate debt fund in
variable life and annuity products over the past one, three, five and 10 years.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE TEN
MONTHS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Diversified Bond Portfolio(1) 4.11% 10.38% 9.70% 7.85% 8.92%
- ------------------------------------------------------------------------------------------------
Lipper (VIP) Corp. BBB Avg.(2) 3.07% 8.59% 8.74% 7.45% 8.55%
- ------------------------------------------------------------------------------------------------
Lehman Aggregate Index(3) 3.09% 8.15% 8.53% 7.12% 8.82%
- ------------------------------------------------------------------------------------------------
DIVERSIFIED BOND PORTFOLIO INCEPTION DATE: 5/13/83.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
<TABLE>
<CAPTION>
$23,497 Diversified $22,946 Lipper (VIP) $23,284 Lehman
Bond Portfolio(1) Corp. BBB Avg.(2) Aggregate Index(3)
------------------- -------------------- ------------------
<S> <C> <C> <C>
87 10000 10000 10000
10122.3 10156.1 10292.7
88 10638.3 10660.7 10805.3
10951.7 10984.4 11104.3
89 11934 11909.2 12125.4
12428.5 12400.6 12717.8
90 12702.1 12707.6 13077.6
13463 13327.6 13857.3
91 14068.5 14028.7 14476.9
15676.4 15593.4 16074.9
92 16100.4 16030.3 16509.7
16802.3 16711.8 17264.7
93 18018.3 18017.5 18455.1
18504.4 18609.4 18947.9
94 17799.5 17754.4 18215
17906.7 17875 18395.3
95 20070.1 20072.2 20500.5
21619.1 21454.5 21793.7
96 21287.1 21059.2 21528.9
22569.6 22185.7 22584.9
97 23496.7 22945.8 23283.5
</TABLE>
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) CORPORATE BBB AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURNS OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY
PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT
NOT PRODUCT CHARGES.
(3) THE LEHMAN AGGREGATE INDEX (LAI) IS COMPRISED OF OVER 5,000 GOVERNMENT AND
CORPORATE BONDS. THE LAI IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL INTEREST BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE LAI MAY DIFFER SUBSTANTIALLY
FROM THE SECURITIES IN THE PORTFOLIO. THE LAI IS NOT THE ONLY INDEX THAT
MAY BE USED TO CHARACTERIZE PERFORMANCE OF INCOME FUNDS, AND OTHER INDICES
MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
High level of income over the long term while providing reasonable
safety of capital.
TYPES OF INVESTMENTS
U.S. government securities, mortgage backed bonds, both investment-grade and
high yield ("junk bond") corporate debt, and foreign securities (dollar and
non-dollar denominated).
INVESTMENT STYLE
This Portfolio seeks the highest yield while maintaining safety of capital, by
strategically allocating Portfolio assets among the above classes of bonds.
PERFORMANCE REVIEW.
WINNING CHOICES. Bond prices fell and interest rates rose both before and after
the Federal Reserve raised the overnight bank lending rate by a quarter of a
percentage point to 5.5% on March 25 to keep the economy from fueling higher
inflation. (Prices on older bonds typically fall as interest rates rise, because
newly issued bonds will carry higher coupons.)
Still, your Portfolio achieved exceptional results, primarily because we
carefully selected corporate bonds that performed well even though interest
rates rose somewhat. These bonds responded more to solid corporate earnings and
a lower-than-expected volume of new bond issues. With fewer bonds from which to
choose, prices on those available tended to gain.
12
<PAGE>
STRATEGY SESSION.
SPOTLIGHT ON MEDIA AND CABLE BONDS. We focused on bonds issued by companies in
the media and cable industry. Our holdings in Time Warner Inc. and
Telecommunications Inc. appreciated markedly as their financial positions
improved. For example, Time Warner reported that its cash flow surged a hefty
16% during the first quarter of 1997. Telecommunications Inc. is reducing debt
on its balance sheets and increasing cash flow by reducing capital expenditures
and expenses.
A new type of preferred security called a preferred trust security was first
sold in the market in November 1996 by some banks and insurance companies. These
were priced inexpensively to attract investors, so we bought them. We were not
disappointed, because prices have risen markedly since they were first issued.
KNOWING WHEN TO STAY PUT. Your Portfolio also performed well because we did not
try to predict the course of interest rates, which proved very volatile in the
first half of the year. We kept duration, a measure of the Portfolio's
sensitivity to changes in interest rates, in a tight range of 5.1 years to 5.3
years during the period.
The shorter the duration, the more the Portfolio's value is protected when
interest rates climb. So your Portfolio suffered only minimally when the Federal
Reserve raised the overnight bank lending rate, but its value improved as bond
prices rose in June.
OUTLOOK
PORTFOLIO MANAGER
BARBARA KENWORTHY
CROSSOVER CREDITS.
"Corporate bond issuance has been heavy, and given the positive performance in
the stock market and the reduced supply of government bonds, we've held more
corporate bonds than usual and have tried to pick the more attractive
opportunities in the market.
"Many of these companies are known as crossover credits, because at least one
rating agency considers them investment grade while another rater does not. By
investing in these bonds, we have kept both the yield and the quality of the
Portfolio relatively high. At the same time, we've been able to avoid holding
too many higher-yielding bonds that are of lower quality."
[PHOTO]
PORTFOLIO MANAGER
BARBARA KENWORTHY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
U.S. Corporates 59% 61%
Foreign (US$) 29% 17%
Mortgages 4% 4%
U.S. Treasurys 3% 13%
Other 3% 4%
U.S. Gov't. Agencies 2% 1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT QUALITY
6/30/97
-------
U.S. Gov't. Agencies 5%
AAA 5%
AA 2%
A 19%
BBB 52%
BB 16%
B 1%
Avg. Credit Quality BBB
Duration 5.27 Years
Avg. Maturity 16.2 Years
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
13
<PAGE>
GOVERNMENT INCOME PORTFOLIO+
PERFORMANCE SUMMARY.
Our emphasis on investing in bonds with higher yields than U.S. Treasurys
enabled your Portfolio to post a total return of 2.63%. Our holdings of
higher-yielding government agency bonds and asset-backed bonds appreciated in
value, which helped your Portfolio. Over the past one, three, and five years and
since inception, your Portfolio has placed above the average U.S. government
fund in variable life and variable annuity products.
The guarantee on U.S. government securities applies only to the underlying
securities of the Portfolio and not to the value of the Portfolio's shares.
Mortgage-backed bonds entail additional prepayment and extension risk.
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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
SIX ONE THREE FIVE SINCE
MONTHS YEAR YEARS YEARS INCEPTION*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government Income Portfolio(1) 2.63% 7.52% 7.98% 7.06% 8.53%
- ----------------------------------------------------------------------------------------------------
Lipper (VIP) General U.S. Gov't. Avg.(2) 2.65% 7.23% 7.56% 6.43% 8.34%
- ----------------------------------------------------------------------------------------------------
Lehman Gov't. Index(3) 2.63% 7.40% 7.95% 6.98% 8.76%
- ----------------------------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO INCEPTION DATE: 5/1/89.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$19,512 Government $19,240 Lipper (VIP) $19,851 Lehman
Income Portfolio(1) General U.S. Gov't. Avg.(2) Gov't. Index(3)
----------------------- --------------------------- ----------------
<S> <C> <C> <C>
10000 10000 10000
89 10714.8 10536.7 10577.3
11159.2 10985.9 11065.2
90 11288.2 11192.2 11309.9
11866.1 11841.5 12029.8
91 12118.4 12272.7 12456.2
13776.8 13742 13872.3
92 13877 14035.5 14168.6
14583.3 14700.3 14874.8
93 15907.6 15790.2 15996.5
16415.3 16147.2 16460.2
94 15495.4 15376.4 15782.7
15567.7 15489 15904.6
95 17432.1 17224.3 17685.9
18599.6 18317.4 18821.7
96 18147.7 17919.7 18484
19012 18756.2 19343.3
97 19512.1 19240.3 19851.3
</TABLE>
- --------------------------------------------------------------------------------
+ NOT AVAILABLE IN ALL CONTRACTS.
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/89.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GENERAL U.S. GOVERNMENT
AVERAGE IS CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE
INVESTMENT RETURNS OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND
ANNUITY PRODUCTS. THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND
EXPENSES BUT NOT PRODUCT CHARGES.
(3) THE LEHMAN 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
High level of income over the long term consistent with the preservation of
capital.
TYPES OF INVESTMENTS
Primarily intermediate and longer-term U.S. government bonds, including U.S.
Treasurys and agencies and mortgage-backed securities such as GNMA, FNMA and
FHLMC bonds, foreign government securities.
INVESTMENT STYLE
This Portfolio seeks high current return by selecting bonds that offer an
attractive combination of current income and price appreciation. The Portfolio
Manager's goal is to select bonds believed to offer the best value in a given
market climate.
PERFORMANCE REVIEW.
SLOWER ECONOMIC GROWTH HELPED. Bond prices fell and interest rates rose both
before and after the Federal Reserve increased the overnight bank lending rate
by a quarter percentage point to 5.5% on March 25 to keep the vibrant economy
from pushing up inflation. (Higher interest rates hurt older bonds, because
newly issued bonds will carry higher coupons.)
But as economic growth slowed in the second quarter, bond prices began to
recover and interest rates fell. Prices also improved on some of our
higher-yielding assets such as government agency bonds and asset backed bonds,
which aided our return for the first six months of 1997.
14
<PAGE>
STRATEGY SESSION.
HUNTING FOR HIGHER YIELDS. As investors waited for the Federal Reserve to
increase the overnight bank lending rate, demand grew for bonds that yielded
more than U.S. Treasurys, because the incremental returns add to total
performance. At the same time, bond prices were expected to remain in a range
which also whets investor appetite for higher yield. Amid these market
conditions, we decreased our holdings of U.S. Treasurys to about 33% of total
assets from 47% on December 31, 1996.
We earned incremental yield on Small Business Administration bonds that carry a
full U.S. government guarantee and on asset backed bonds. Prices on both types
of bonds gained in the second quarter, providing additional support to your
Portfolio.
More would have been merrier. Mortgage-backed bonds are issued by
quasi-government public agencies such as Fannie Mae and Freddie Mac or private
companies. When bond prices are moderately stable, investors are less concerned
that mortgage-backed bonds could be paid off early, because consumers are less
likely to refinance their underlying home loans if interest rates do not fall
significantly. With prepayment risk minimized, market conditions were nearly
ideal for investing in mortgage-backed bonds. The Portfolio would have performed
better if we had purchased even more.
OUTLOOK
PORTFOLIO MANAGER
BARBARA KENWORTHY
YIELDS VOLATILE, BUT WITHIN A RANGE.
"The economy has slowed enough to keep the Federal Reserve satisfied with
interest rates for now. In addition, Treasurys are in demand now because the
government has paid down a lot of debt this year. So we are optimistic that bond
prices will improve.
"We have extended duration (a measure of the Portfolio's sensitivity to interest
rate changes) a little bit. We've continued to add to longer maturities, because
we're looking for them to perform better than shorter maturities.
"We've also tried to find the better incremental yield opportunities in the
market that still meet our high quality investment criteria."
[PHOTO]
PORTFOLIO MANAGER
BARBARA KENWORTHY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- -------
U.S. Treasurys 33% 47%
Mortgages 30% 27%
U.S. Gov't. Agencies 22% 15%
Asset-backed 5% 3%
Corporates 5% 5%
CMOs 3% 2%
Cash 2% 1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT QUALITY
6/30/97
-------
U.S. Gov't. Agencies 53%
AAA 40%
AA 2%
BBB 3%
Cash 2%
Avg. Credit Quality AAA
Duration 5.08 Years
Avg. Maturity 9.10 Years
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
15
<PAGE>
ZERO COUPON BOND 2000 PORTFOLIO+
PERFORMANCE SUMMARY.
Despite a tough first quarter, your Portfolio's total return of 2.11% for the
last six months was in line with the Lipper (VIP) Target Maturity Average of
2.18%.
The Federal Reserve increased the overnight bank lending rate by a quarter of a
percentage point to 5.5% on March 25, pushing prices of zero coupon bonds lower.
Prices of these bonds generally tumble further than coupon-bearing bonds when
interest rates rise. That's because zero coupon bonds don't periodically pay
interest, which can cushion price changes.
Still, the Portfolio's comparatively short maturity helped its performance. When
interest rates climb and prices fall, bonds with shorter maturities typically
lose less than ones with longer maturities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
<TABLE>
<CAPTION>
Six One Three Five Ten
Months Year Years Years Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Zero Coupon 2000 Portfolio(1) 2.11% 6.37% 7.96% 7.96% 9.69%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Target Mat. Avg.(2) 2.18% 7.47% 8.85% 8.75% 9.63%
- -----------------------------------------------------------------------------------------------
Lehman Gov't. Index(3) 2.63% 7.40% 7.95% 6.98% 8.47%
- -----------------------------------------------------------------------------------------------
ZERO COUPON 2000 INCEPTION DATE: 2/12/86.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
<TABLE>
<CAPTION>
$25,209 Zero Coupon $25,060 Lipper (VIP) $22,548 Lehman
2000 Portfolio(1) Target Mat. Avg.(2) Gov't. Index(3)
--------------------- ------------------- ---------------
<S> <C> <C> <C>
87 10000 10000 10000
10025.4 10051.1 10280.3
88 10724.4 10698.8 10719.1
11185.4 11167.4 11003.2
89 12933.8 12920.2 12014.3
13464.9 13476.4 12568.5
90 13309 13325 12846.4
14152.6 14219.3 13664
91 14504.3 14545.4 14148.4
17083.8 17152.2 15756.9
92 17190.9 17222.4 16093.4
18552.1 18591.2 16895.6
93 20889 20880.6 18169.7
21548.3 21489.7 18696.4
94 20030.3 20006.7 17926.8
20002 19967.6 18065.3
95 22859.8 22770.9 20088.6
24315.2 24105.1 21378.7
96 23699.5 23532.3 20995.1
24687.8 24520.1 21971.2
97 25209 25060.1 22548.2
</TABLE>
- --------------------------------------------------------------------------------
+ NOT AVAILABLE IN ALL CONTRACTS.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Highest predictable compound investment return consistent with safety of
capital, if held to maturity.
TYPES OF INVESTMENTS
Primarily the debt obligations of the U.S. Treasury and investment-grade
corporations that have been issued without interest coupons or have been
stripped of interest coupons.
INVESTMENT STYLE
The Portfolio will allocate assets among U.S. Treasury and agency securities or
zero coupon issues sold by corporations to find the highest yield available in
bonds maturing in 2000.
PERFORMANCE REVIEW.
Difficult start, easier finish. Investors were on pins and needles in the first
quarter amid concern that stronger economic growth could ignite higher
inflation. Interest rates rose and bond prices fell as investors figured that
the Federal Reserve would soon increase the overnight bank lending rate to keep
the economy from overheating. Because zero coupon bonds are extremely sensitive
to interest rate fluctuations they declined, pulling down the value of your
Portfolio.
The situation changed abruptly in the second quarter. The economy that had raced
ahead in the first quarter grew more slowly in the second. As a result,
inflation jitters subsided, interest rates edged lower and zero coupon bond
prices began to recover. Your Portfolio erased its relatively modest declines to
finish the first half higher.
16
<PAGE>
ZERO COUPON BOND 2005 PORTFOLIO+
PERFORMANCE SUMMARY.
The Federal Reserve's decision to raise the overnight bank lending rate by a
quarter of a percentage point on March 25 pressured zero coupon bonds. Your
Portfolio posted a total return of 1.97% that lagged the Lipper (VIP) Target
Maturity Funds category of 2.18%. Historically, your Portfolio has outperformed
similar funds over the past one, three, and five years and since inception.
Zero coupon bonds tend to decline more than other types of bonds when interest
rates rise, because they do not have coupon payments that generally help cushion
price changes in other bonds.
Furthermore, your Portfolio's relatively long maturity also worked against it
earlier in the year. When interest rates climb and prices fall, bonds with
longer maturities typically decline more than those of bonds with shorter
maturities.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Since
Months Year Years Years Inception*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Zero Coupon 2005 Portfolio(1) 1.97% 8.38% 10.22% 10.11% 10.34%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Target Mat. Avg.(2) 2.18% 7.47% 8.85% 8.75% 10.31%
- -----------------------------------------------------------------------------------------------
Lehman Gov't. Index(3) 2.63% 7.40% 7.95% 6.98% 8.76%
- -----------------------------------------------------------------------------------------------
ZERO COUPON 2005 INCEPTION DATE: 5/1/89.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[Graph]
<TABLE>
<CAPTION>
$22,316 Zero Coupon $22,310 Lipper (VIP) $19,851 Lehman
2005 Portfolio(1) Target Mat. Avg.(2) Gov't. Index(3)
------------------- -------------------- --------------
<S> <C> <C> <C>
88
10000 10000 10000
89 10788.7 11131.6 10577.3
11166.6 11568.9 11065.2
90 10878.6 11304.6 11309.9
11453.2 12080 12029.8
91 11604.4 12174.3 12456.2
13872.6 14525.3 13872.3
92 13788.9 14515.2 14168.6
15212.8 15881.4 14874.8
93 17741.8 18177.3 15996.5
18550.1 18922.9 16460.2
94 16666.8 17249.9 15782.7
16768.2 17342.4 15904.6
95 20121 20311.5 17685.9
22108.6 22103.4 18821.7
96 20589.8 20988.4 18484
21884.8 22179.3 19343.3
97 22316.3 22310.5 19851.3
</TABLE>
- --------------------------------------------------------------------------------
+ NOT AVAILABLE IN ALL CONTRACTS.
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/89.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Highest predictable compound investment return consistent with safety of
capital, if held to maturity.
TYPES OF INVESTMENTS
Primarily the debt obligations of the U.S. Treasury and investment-grade
corporations that have been issued without interest coupons or have been
stripped of interest coupons.
INVESTMENT STYLE
The Portfolio will allocate assets among U.S. Treasury and agency securities or
zero coupon issues sold by corporations to find the highest yield available in
bonds maturing in 2005.
PERFORMANCE REVIEW.
Too far behind to catch up. Interest rates rose and bond prices fell as
investors feared that the Federal Reserve would soon increase the overnight bank
lending rate to keep the economy from overheating. Because zero coupon bonds are
extremely sensitive to interest rate fluctuations they declined, pulling down
the value of your Portfolio.
The situation changed abruptly in the second quarter. The economy that had raced
ahead in the first quarter grew more slowly in the second. As a result,
inflation jitters subsided, interest rates edged lower and zero coupon bond
prices began to recover. While your Portfolio also gained in the second quarter,
because it had to recoup losses from the first quarter it still trailed the
Lipper Target Maturity Average for the first six months.
17
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio produced a solid return of 7.80% for the first half of 1997,
between the 20.6% return of the S&P 500 and the 3.09% return of the Lehman
Aggregate Index. Your Portfolio -- which invests in a conservative mix of
stocks, bonds and money market securities -- returned less than the average
Balanced Portfolio tracked by Lipper Analytical Services. Your Portfolio's
conservative mandate requires a smaller proportion of stocks in its asset
allocation, and since the U.S. stock market rose so strongly, your Portfolio,
with fewer assets in stocks, trailed.
Returns were enhanced by a significantly larger proportion of intermediate-term
bonds than usual. Moreover, in a period when the stock market made two
significant changes of direction, we anticipated both with modest asset
allocation adjustments that contributed to performance.
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Ten
Months Year Years Years Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Conservative Balanced Portfolio(1) 7.80% 15.58% 13.02% 10.89% 9.78%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Balanced Avg.(2) 10.19% 18.94% 15.67% 12.18% 10.47%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 14.63%
- -----------------------------------------------------------------------------------------------
Lehman Aggregate Index(4) 3.09% 8.15% 8.53% 7.12% 8.82%
- -----------------------------------------------------------------------------------------------
CONSERVATIVE BALANCED PORTFOLIO INCEPTION DATE: 5/13/83.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
<TABLE>
<CAPTION>
$39,172 S&P 500(3) $27,098 Lipper (VIP) $25,418 Conservative $23,284 Lehman
Balanced Avg.(2) Balanced Portfolio(1) Aggregate Index(4)
------------------ -------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
87 10000 10000 10000 10000
9297.91 9227.35 10292.7 8258.57
88 10050.8 10239.6 10805.3 9307.13
10245.1 10501.7 11104.3 9626.4
89 11122.3 11658.6 12125.4 11216.8
11984.8 12406.7 12717.8 12671.4
90 12388 12645.1 13077.6 13061.5
12616.5 12647.5 13857.3 12277.4
91 13646.6 13523.6 14476.9 14024.3
15023.6 15054.9 16074.9 16009.8
92 15157.5 15167.8 16509.7 15902.2
16068.1 16248.8 17264.7 17227.9
93 17325.3 17093.7 18455.1 18065.9
18027.4 18022.3 18947.9 18960.4
94 17607.4 17350 18215 18318.9
17853.3 17718.8 18395.3 19209.5
95 19609.6 20130.1 20500.5 23087.1
20936.9 21847.7 21793.7 26419.5
96 21992.6 22880.2 21528.9 29085
23580.4 24632.2 22584.9 32481.5
97 25418.4 27097.8 23283.5 39171.8
</TABLE>
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) BALANCED 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 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Favorable total return consistent with a more conservatively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 35% stocks, 35%
bonds and 30% money market instruments.
PERFORMANCE REVIEW.
Good allocation moves, better bond and stock selection. The bond portion of the
Portfolio contributed significantly to overall return. We began the year with
53% of assets invested in bonds, higher than our usual 35%. We emphasized
intermediate maturity corporate obligations, which had higher yields than U.S.
Treasurys with little additional risk in a period of exceptionally high
corporate earnings.
We began the period near our normal allocation of 35% of assets in stocks, but
we modestly reduced that proportion before the market fell at the end of the
first quarter. As the market neared its bottom, we bought stocks, returning our
allocation to normal. We took gains in our stock portion of the Portfolio
throughout the second quarter.
18
<PAGE>
STRATEGY SESSION.
Our asset allocation changes correctly anticipated market movements over the
last six months. We finished the period once again reducing our allocations of
stocks to about 33%. We believed that the stock market was about 5-10%
overvalued as of June 30. The cost of buying a dollar of expected company
earnings is near historic highs, which is not surprising considering that
estimates of earnings growth are higher than at any point since the early 1980s.
If these estimates prove overly optimistic, though, the market may pull back. If
prices rise much from current levels, we will cut our stock allocation further;
we will increase the proportion of stocks again only if interest rates decline
or prospective earnings rise.
The stock market run in this half was led by consumer growth stocks, high-priced
companies with optimistic earnings projections, as investors counted on
continued earnings growth in that sector. Our stock portion, on the other hand,
emphasized value stocks, which are less expensive and thereby better protected
should their stock prices decline. These did not perform as well as growth
stocks in this period. Investors tended to favor large companies during the
first half of 1997, while we emphasized the mid-sized stocks that we believe
currently offer much better value.
With corporate earnings generally looking good and economic growth continuing
through the half year, we took advantage of the higher yields of corporate bonds
over U.S. Treasurys. Should the environment change, we will adjust this
strategy.
At the end of the period, we added a fourth portfolio manager, Patricia Bannan.
Her growth investment style favors large company stocks. This change is intended
to reduce the variability of returns when the stock market swings between
investment styles.
OUTLOOK
PORTFOLIO MANAGER
MARK STUMPP
VALUE AND GROWTH.
"There are two basic stock investment styles, value and growth. Value investors
look for stocks that are inexpensive in relation to current earnings, whereas
growth investors are willing to pay more for a company whose potential for
long-term earnings is thought to be exceptional. Research has shown that each
strategy enjoys varying periods where it will outperform the other for periods
of time that may last a few years. While it may seem tempting for a portfolio
manager to switch between investment styles, individual portfolio managers do
best when they stick to one preferred investment discipline.
"Economists consider diversification to be the only free lunch available to
investors -- that is, a benefit without cost or risk. By splitting your
Portfolio between managers with different investment styles, we increase the
likelihood of consistent returns. Whichever style has the advantage at any given
time will be represented in your Portfolio. Our second manager adds
diversification. Whereas Warren Spitz prefers mid-sized companies, Patricia
Bannan prefers large company stocks. This added diversification may also improve
the consistency of returns."
PORTFOLIO MANAGERS
[PHOTO]
MARK STUMPP
[PHOTO]
WARREN E. SPITZ
[PHOTO]
PATRICIA A. BANNAN
[PHOTO]
TONY RODRIGUEZ
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Bonds 60% 53%
Stocks 33% 37%
Money Market 7% 10%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP SECTORS - STOCKS
6/30/97
-------
Consumer Growth 10.6%
Industrial 6.7%
Technology 4.9%
Finance 4.7%
Energy 2.8%
Consumer Cyclical 2.7%
Utility 0.5%
TOP SECTORS - BONDS
6/30/97
-------
Industrial 25.7%
Foreign (US$) 13.2%
Financial 13.0%
Other 5.0%
U.S. Treasurys 3.1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 10.13% over the past six months, between the 20.6%
return of the S&P 500 and the 3.09% return of the Lehman Aggregate Index. Such a
return is well above that for asset allocation portfolios that invest in stocks,
bonds and money market instruments. In fact, such a return would have been good
even for a portfolio composed solely of stocks.
Your Portfolio performed in line with the average Flexible Portfolio tracked by
Lipper Analytical Services, which returned 10.35%. In a period when the stock
market changed direction twice, our ability to switch assets among stocks, bonds
and money market instruments proved helpful.
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Ten
Months Year Years Years Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flexible Managed Portfolio(1) 10.13% 19.07% 16.74% 13.85% 11.09%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Flexible Avg.(2) 10.35% 19.40% 16.98% 13.07% 11.10%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 14.63%
- -----------------------------------------------------------------------------------------------
Lehman Aggregate Index(4) 3.09% 8.15% 8.53% 7.12% 8.82%
- -----------------------------------------------------------------------------------------------
FLEXIBLE MANAGED PORTFOLIO INCEPTION DATE: 5/13/83.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 Invested Over Ten Years
[GRAPH]
<TABLE>
<CAPTION>
$28,911 Lipper (VIP) $28,634 Flexible $23,284 Lehman
$39,172 S&P 500(3) Flexible Avg.(2) Managed Portfolio(1) Aggregate Index4
------------------ -------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
87 10000 10000 10000 10000
8714.83 9178.15 10292.7 8258.57
88 9659.78 9951.25 10805.3 9307.13
9832.41 10168.6 11104.3 9626.4
89 11035.7 11262.6 12125.4 11216.8
11972.6 12206.4 12717.8 12671.4
90 12209.4 12547.1 13077.6 13061.5
12201.5 12384.2 13857.3 12277.4
91 13263.3 13651.4 14476.9 14024.3
15304.8 15481.8 16074.9 16009.8
92 14973.6 15431.7 16509.7 15902.2
16469.2 16583.5 17264.7 17227.9
93 17937.3 17705.5 18455.1 18065.9
19034.9 18688.3 18947.9 18960.4
94 17997.1 17890.8 18215 18318.9
18432.6 18350.3 18395.3 19209.5
95 20674.1 20791 20500.5 23087.1
22880.7 22829.6 21793.7 26419.5
96 24049.2 24116.3 21528.9 29085
26000.7 26204.8 22584.9 32481.5
97 28634.3 28911.5 23283.5 39171.8
</TABLE>
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) FLEXIBLE 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 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Favorable total return consistent with a more aggressively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 60% stocks, 35%
bonds and 5% money market instruments.
PERFORMANCE REVIEW.
Good allocation moves, better stock and bond selection. We modestly reduced our
stock allocation before the market fell at the end of the first quarter, and as
the market neared its bottom we bought back stocks, returning our allocation to
close to its normal 60%.
Our choice of individual stocks and bonds contributed significantly to our
overall Portfolio return. We emphasized large growth stocks, which tended to
perform better than the market overall.
We also emphasized corporate bonds, which had higher yields than U.S. Treasury
bonds with little additional risk in a period of exceptionally high corporate
earnings.
20
<PAGE>
STRATEGY SESSION.
Our asset allocation changes correctly anticipated market movements over the
last six months. We finished the period once again reducing our allocations of
stocks to about 57%. We believed that the stock market was about 5-10%
overvalued as of June 30. The cost of buying a dollar of expected company
earnings is near historic highs, which is not surprising considering that
estimates of earnings growth are higher than at any point since the early 1980s.
If these estimates prove overly optimistic, though, the market may pull back. If
prices rise much from current levels, we will cut our stock allocation further;
we will increase the proportion of stocks again only if interest rates decline
or prospective earnings rise.
The stock market run in this half was led by consumer growth stocks, high-priced
companies with optimistic earnings projections, as investors counted on
continued earnings growth in that sector. Our stock portion emphasized growth
stocks and large company stocks. This focus paid off well this period, as
investors also tended to favor large companies during the first half of 1997.
With corporate earnings generally looking good and economic growth continuing
through the half year, we took advantage of the higher yields of corporate bonds
over U.S. Treasurys. Should the environment change, we will adjust this
strategy.
At the end of the period, we added a fourth portfolio manager, Warren Spitz. His
value investment style favors mid-sized company stocks. This change is intended
to reduce the variability of your returns when the stock market swings between
investment styles.
OUTLOOK
PORTFOLIO MANAGER
MARK STUMPP
VALUE AND GROWTH.
"There are two basic stock investment styles, value and growth. Value investors
look for stocks that are inexpensive in relation to current earnings, whereas
growth investors are willing to pay more for a company whose potential for
long-term earnings is thought to be exceptional. Research has shown that each
strategy enjoys varying periods where it will outperform the other for periods
of time that may last a few years. While it may seem tempting for a portfolio
manager to switch between investment styles, individual portfolio managers do
best when they stick to one preferred investment discipline.
"Economists consider diversification to be the only free lunch available to
investors -- that is, a benefit without cost or risk. By splitting your
Portfolio between managers with different investment styles, we increase the
likelihood of consistent returns. Whichever style has the advantage at any given
time will be represented in your Portfolio. Our second manager adds
diversification. Whereas Patricia Bannan prefers large-caps, Warren Spitz
prefers mid-sized companies. This added diversification may also improve the
consistency of returns."
PORTFOLIO MANAGERS
[PHOTO]
MARK STUMPP
[PHOTO]
PATRICIA A. BANNAN
[PHOTO]
WARREN E. SPITZ
[PHOTO]
TONY RODRIGUEZ
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Composition
6/30/97 12/31/96
------- --------
Stocks 57% 62%
Bonds 37% 34%
Money Market 6% 4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP SECTORS - STOCKS
6/30/97
-------
Consumer Growth 15.2%
Industrial 13.5%
Technology 8.6%
Finance 7.1%
Energy 6.0%
Consumer Cyclical 5.9%
Utility 0.8%
TOP SECTORS - BONDS
6/30/97
Foreign (US$) 14.2%
Industrial 13.8%
Financial 6.2%
Utility 1.6%
Other 1.2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
21
<PAGE>
HIGH YIELD BOND PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 5.88% for the first six months of 1997, slightly lagging
behind the 6.10% return on the average high yield bond fund tracked by Lipper
Analytical Services. Although market conditions were generally favorable for
high yield bonds, the Portfolio's performance trailed our benchmark because we
focused on the telecommunications and cable industries, which did not perform as
well as other industries.
In addition, high yield bonds slumped along with other bonds as interest rates
rose in March and April, then rebounded later as the bond market recovered.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Ten
Months Year Years Years Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High Yield Bond Portfolio(1) 5.88% 12.55% 10.89% 11.29% 9.27%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) High Current Yield Avg.(2) 6.10% 15.40% 12.27% 11.44% 10.73%
- -----------------------------------------------------------------------------------------------
Lehman High Yield Index(3) 5.82% 13.89% 12.45% 11.29% 10.90%
- -----------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO INCEPTION DATE: 2/23/87.
</TABLE>
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
<TABLE>
<CAPTION>
$24,264 High Yield $27,898 Lipper (VIP) $28,135 Lehman
Bond Portfolio(1) High Current Yield Avg.(2) High Yield Index(3)
-------------------- --------------------------- -------------------
<S> <C> <C> <C>
87 10000 10000 10000
9447.05 9869.65 9957.87
88 10245.1 10739 10764.6
10691.5 11195.2 11205.8
89 11171.8 11850.1 11751.8
10472 11511.7 11299.2
90 10592.2 11727.6 11581
9231.67 10897.3 10215.8
91 11579.4 13141.9 13240
12846.6 14649.4 14933.7
92 14226.8 16122.3 16479.4
15100.6 16996.4 17286.1
93 16815.9 18929.3 19107.9
18009.2 20212.1 20244.8
94 17792.4 19671.9 19785.9
17500.2 19494.3 20036.4
95 19168.7 21661 22523.2
20573.9 23149.3 23878.2
96 21558.3 24314.4 24703.7
22917.2 26328.3 26588.7
97 24263.6 27898.4 28135.5
</TABLE>
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) HIGH CURRENT YIELD AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS.
THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE LEHMAN HIGH YIELD INDEX (LHYI) IS COMPRISED OF OVER 700
NONINVESTMENT-GRADE BONDS. THE LHYI IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL INTEREST BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE LHYI MAY DIFFER SUBSTANTIALLY
FROM THE SECURITIES IN THE PORTFOLIO. THE LHYI IS NOT THE ONLY INDEX THAT
MAY BE USED TO CHARACTERIZE PERFORMANCE OF INCOME FUNDS, AND OTHER INDICES
MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
High total return.
TYPES OF INVESTMENTS
Primarily noninvestment-grade bonds. These bonds have speculative
characteristics and are subject to greater credit and market risk than
higher-quality securities.
INVESTMENT STYLE
Concentrates primarily on junk bonds that appear to offer an attractive
combination of high current income and attractive total return.
PERFORMANCE REVIEW.
An increase in rates and new bonds. Investors pushed interest rates higher and
bond prices lower both before and after March 25, when the Federal Reserve
increased the overnight bank lending rate by a quarter percentage point to 5.5%
to prevent a pickup in inflation. As a result, prices of high yield bonds fell.
The Portfolio's performance was constrained by its holdings in
telecommunications and cable bonds. A large new supply of these bonds issued in
the first quarter depressed prices, because supply exceeded demand from
investors. Still, high yield bonds improved in the second quarter as the bond
market bounced back when interest rates fell as inflation fears subsided.
22
<PAGE>
STRATEGY SESSION.
SOME GOOD NEWS. We continued to emphasize bonds of large companies, particularly
those that may become involved in mergers and acquisitions or could become
candidates for a credit upgrade. In the second quarter, a flurry of good news
enabled two of our holdings -- Cablevision Systems and Comcast -- to fare
particularly well.
Cablevision Systems bonds appreciated in value after an announcement that News
Corp. and Telecommunications, Inc. will pay $850 million for a 40% stake in the
sports television business of Cablevision Systems to create a national chain of
cable television sports channels.
Comcast bonds benefited from a $1 billion investment by Microsoft to speed up
development of a two-way, broadband fiber-optic network. In fact, a credit
rating agency upgraded Comcast senior subordinated debentures and convertible
subordinated debentures in June, citing its improved financial flexibility.
OUTLOOK
PORTFOLIO MANAGER
GEORGE W. EDWARDS, CFA
CUTTING HERE, ADDING THERE.
"We are taking advantage of the recent rally in cable and telecommunications
bonds to sell some of our holdings to reduce our emphasis on those sectors to a
level that is closer to the market indices.
"We like the outlook for the bond market and particularly the high yield market
for the remainder of the year. As a result, we are reducing the Portfolio's cash
position by investing in new issues and attractive secondary offerings."
[PHOTO]
PORTFOLIO MANAGER
GEORGE W. EDWARDS, CFA
We are happy to announce that George W. Edwards, effective May 1997, has assumed
responsibility of The Prudential Series Fund High Yield Bond Portfolio. George
was awarded an M.B.A. from Temple University and holds a B.A. in history from
Hamilton College. George is a Chartered Financial Analyst.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP INDUSTRIES
6/30/97
-------
Communications 14.6%
Cable 8.2%
Consumer Cyclical 8.1%
Energy 6.9%
Media 6.3%
TOP ISSUERS
6/30/97
-------
Tenet Healthcare Corp. 1.7%
Cablevision Systems 1.4%
Gaylord Container Corp. 1.3%
HMH Properties, Inc. 1.2%
Ionica PLC 1.1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT QUALITY
6/30/97
-------
Ba 17%
B 49%
Caa 8%
Nonrated 18%
Equity/Other 5%
Cash 3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
23
<PAGE>
STOCK INDEX PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio finished the first half of 1997 with a return of 20.32%, an
upward sweep similar to the climb in the preceding two years, except for a
decline in March. The S&P 500 Index returned 20.6%.
Foreign investors and individual investors using mutual funds have poured cash
into the U.S. stock market, helping to power its prolonged climb. The demand for
S&P 500 stocks has driven up their prices even faster than earnings have risen.
The result is a market that has performed so well for so long that many
investment professionals doubt it can continue. For example, the S&P 500 Index
has become increasingly volatile recently and is particularly vulnerable to
earnings disappointments.
Standard & Poor's neither sponsors nor endorses the Stock Index Portfolio.
Investors cannot directly invest in any index, including the S&P 500.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Since
Months Year Years Years Inception*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stock Index Portfolio(1) 20.32% 34.12% 28.38% 19.34% 17.72%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) S&P 500 Index Avg.(2) 20.20% 34.14% 28.33% 19.20% 16.74%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 17.32%
- -----------------------------------------------------------------------------------------------
STOCK INDEX PORTFOLIO INCEPTION DATE: 10/19/87.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$48,654 Stock $44,482 Lipper (VIP)
Index Portfolio(1) S&P 500 Index Avg.(2) $46,833 S&P 500(3)
--------------------- ---------------------- ------------------
<S> <C> <C> <C>
87 10000 10000 10000
10735.8 9895.59 9873.68
88 11980.3 11108.1 11127.3
12393.1 11455.8 11509
89 14395.2 13257.6 13410.5
16226.3 14940.1 15149.5
90 16661.1 15350.8 15615.9
15636.4 14402.5 14678.5
91 17816.8 16432.7 16767
20283.8 18693.5 19140.8
92 20104.5 18544.6 19012.2
21731.1 20039.4 20597.1
93 22740.4 20994.5 21599
23831.9 21996.1 22668.5
94 22989.2 21212.2 21901.5
24072.1 22220.7 22966.2
95 28878.6 26654.5 27602.2
32993.9 30423.5 31586.3
96 36275.8 33437.7 34773.1
40439.1 37203.2 38833.8
97 48654.4 44482.4 46832.5
</TABLE>
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 10/31/87.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) S&P 500 INDEX AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS.
THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE S&P 500 IS NOT THE ONLY INDEX THAT MAY BE USED TO
CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO, AND OTHER INDICES MAY PORTRAY
DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Seeks results that correspond to the price and yield performance of the S&P 500
Index.(3)
TYPES OF INVESTMENTS
Primarily stocks in the S&P 500 Index.
INVESTMENT STYLE
This Portfolio attempts to hold the same stocks as the S&P 500 Index in
approximately the same proportions. As such, this Portfolio tends to reflect the
general trends of the overall U.S. equity market.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P 500 INDEX -- TOTAL RETURN BY SECTOR
Y-T-D
6/30/97
Consumer Growth/Staple 24.5%
Finance 23.6%
Consumer Cyclical 21.1%
Technology 21.0%
Industrials 19.4%
Energy 18.6%
Utility 7.8%
S&P 500 Index 20.6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL.
24
<PAGE>
PERFORMANCE REVIEW.
The Stock Index Portfolio attempts to duplicate the performance of the S&P 500
Index by holding all 500 stocks in the index. Portfolio Manager John W.
Moschberger manages the Portfolio by investing funds received, while trying to
minimize commissions and transaction costs.
A GALA OF GOOD NEWS DROVE UP PRICES. The market for large-capitalization stocks
resumed its steep climb at the end of April, after slowing in anticipation of
higher interest rates and an economic slowdown. Fears that interest rates would
rise abated when the economy showed only moderate growth rates, obviating any
action by the Federal Reserve to cool it down. This good news was accompanied by
first-quarter earnings reports that averaged about 18% higher than a year
earlier. With consumer confidence at a 28-year high and unemployment at its
lowest since 1973, the investment environment seemed idyllic.
FINANCIALS AND TECHNOLOGY JOINED BY CONSUMER GROWTH. The rise in the second
quarter was powered by the rebound of the technology sector from its
stutter-step earlier in the year, with energy and industrials also doing well.
For the year-to-date, consumer growth and staple finance and consumer cyclicals
were the leading sectors. Savings and loans as a group led the market. Computer
software and services, drugs and medical supplies, and the trucking and shipping
industry all rose by more than a third in just the half year.
UTILITIES STILL UNDERPERFORMING. Stocks for all sectors except utilities
averaged double-digit gains for the half year. Utilities are facing competition
and dramatic restructuring. Investors have not been enthusiastic about the
uncertainties.
A few scattered industries turned down, on average: gold, lodging, gaming
and energy exploration.
[PHOTO]
PORTFOLIO MANAGER
JOHN W. MOSCHBERGER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P 500 INDEX COMPOSITION
6/30/97
-------
Consumer Growth/Staple 30%
Technology 15%
Finance 15%
Industrials 15%
Utility 9%
Energy 9%
Consumer Cyclical 7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
General Electric Co. 3.1%
Coca-Cola Co. 2.5%
Exxon Corp. 2.2%
Microsoft Corp. 2.2%
Merck & Co. 1.8%
Royal Dutch Petroleum 1.7%
Intel Corp. 1.7%
Philip Morris Co. 1.6%
Procter & Gamble Co. 1.4%
IBM Inc. 1.3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
25
<PAGE>
EQUITY INCOME PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 17.47% over the past six months, above the Lipper (VIP)
Equity Income Average of 16.83%. Performance for the past 12 months, 33.59%,
also exceeded the average of comparable portfolios.
We use a bottom-up investment style and, in some cases, the performance of one
or two companies in a sector made significant contributions to performance this
half. Stock selection within the energy, technology and utility sectors
accounted for the good results.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Since
Months Year Years Years Inception*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Income Portfolio(1) 17.47% 33.59% 21.27% 18.60% 15.92%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Equity Income Avg.(2) 16.83% 29.45% 23.84% 18.57% 15.06%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 17.06%
- -----------------------------------------------------------------------------------------------
EQUITY INCOME PORTFOLIO INCEPTION DATE: 2/19/88.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$39,039 Equity $37,070 Lipper (VIP)
Income Portfolio(1) Equity Income Avg.(2) $43,500 S&P 500(3)
------------------- --------------------- ----------------
<S> <C> <C> <C>
10000 10000 10000
88 10469.1 10462.9 10335.5
10903.9 10790.5 10690
89 12484.1 12437.6 12456.2
13375.8 13259 14071.5
90 13290.6 13184.8 14504.7
12877.4 12166.1 13634
91 14644.5 13825.2 15573.9
16417.8 15516.8 17778.8
92 16636.4 15856.8 17659.3
18084 17173 19131.4
93 20902.4 18811.5 20062
22113.4 19892.6 21055.4
94 21885.8 19759.6 20343
22430.7 20346.6 21332
95 25596.5 23558.6 25638
27299 26482.5 29338.7
96 29223.5 28273.8 32298.7
33233.2 31423.8 36070.4
97 39039.4 37070.3 43499.9
</TABLE>
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 2/29/88.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) EQUITY INCOME AVERAGE IS
CALCULATED BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT
RETURN OF CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS.
THESE RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT THE
ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO,
AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Current income and capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks and convertible securities with prospects for income returns
above those of the S&P 500.3
INVESTMENT STYLE
The Portfolio uses a "value" investment approach to companies that are
attractively priced relative to book value, earnings, discretionary cash flow,
sales and other measures of value.
PERFORMANCE REVIEW.
An oil service company is likely to restructure. We expected McDermott
International to improve earnings by restructuring. A change in management made
this more likely, and also more apparent to investors, who pushed its stock
price higher.
Two privatized utilities moved up. We enjoyed excellent gains from a privatized
Latin American telephone company that had been undervalued by the market and is
now moving closer in price to similar companies. A British private utility faces
a friendlier rate structure that rose almost 40% in the half year.
We also took gains on semiconductor stocks in the first quarter.
26
<PAGE>
STRATEGY SESSION.
REITS OFFER STEADY DIVIDEND GROWTH. REITs (real estate investment trusts) buy
real estate and issue shares to the public, making it easier for individuals to
invest in the burgeoning real estate market. Ease of ownership increases the
pool of buyers and should push prices up. In addition, REITs have high dividend
yields at current prices and also offer the prospect of predictable dividend
growth. We believe that the market currently undervalues this attractive
feature.
SECURITIES BROKERAGES ARE IN PLAY. Thanks to changes in the regulatory
environment, securities brokerages have become takeover targets. We expected
consolidation and still do. Lehman Brothers, among our largest holdings, rose
almost 30% in the past half year. We bought our securities company holdings
cheaply and have seen nice gains. Nonetheless, they are still inexpensive in
comparison to their current earnings.
CONSUMER DEMAND MOVES UP THE CHAIN. We think pricing power is swinging from
consumer companies back toward the industrial companies that service them. So
far this has kept us from participating fully in the gains of the consumer
growth sector, but we expect it to pay off down the road.
OUTLOOK
PORTFOLIO MANAGER
WARREN E. SPITZ
SECURITIES FIRMS ATTRACTIVELY PRICED.
"Although the market prices of securities firms already have risen, we still
find them attractively priced compared with other financial firms. A dollar of
investment buys a relatively large amount of current earnings and also offers
solid exposure to the stock market.
"The market seems to be undervaluing these firms out of fear that their earnings
will fall if a long-term bear market occurs. With economic growth steady and
corporate earnings exceptionally high, that doesn't seem imminent. Moreover, the
industry is likely to consolidate before the stock market turns.
"The synergism of brokerages with other financial services makes them very
attractive as acquisition or merger candidates. There are many financial
services companies looking to buy securities firms and relatively few large
brokerages to buy. They have scarcity value. Right now, we think that makes an
attractive package."
[PHOTO]
PORTFOLIO MANAGER
WARREN E. SPITZ
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Finance 32% 33%
Industry 18% 14%
Technology 11% 15%
Consumer Growth 10% 11%
Energy 10% 8%
Consumer Cyclical 9% 9%
Utility 4% 4%
Cash 4% 4%
U.S. Treasurys 2% 2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Lehman Bros. 4.4%
Equity Residential 4.2%
IBM 4.2%
Westinghouse Electric 3.6%
McDermott International 3.3%
RJR Nabisco 3.1%
AMR Corp. 3.0%
Crescent Real Estate 3.0%
Elf Aquitaine 2.9%
USX U.S. Steel Group 2.7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
27
<PAGE>
EQUITY PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio returned 13.26% in the first half of 1997, slightly below the
Lipper (VIP) Growth Fund Average of 13.57%. Historically, your Portfolio has
outperformed similar funds over the past one, five and ten years, as reported by
Lipper Analytical Services, Inc.
During the first half, we held about 25% of your Portfolio in cash. While this
dampened our recent returns, our value discipline demands that we only purchase
demonstrably "cheap" securities. There are very few of these in today's market.
Our cushion also provided some protection when the market took a stutter-step at
the end of the first quarter.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Ten
Months Year Years Years Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Portfolio(1) 13.26% 25.09% 22.69% 18.78% 13.95%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Growth Avg.(2) 13.57% 23.63% 23.74% 17.87% 13.23%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 14.63%
- -----------------------------------------------------------------------------------------------
EQUITY PORTFOLIO INCEPTION DATE: 5/13/83.
</TABLE>
$10,000 INVESTED OVER TEN YEARS
[GRAPH]
<TABLE>
<CAPTION>
$34,683 Lipper (VIP)
$39,172 S&P 500(3) $36,906 Equity Portfolio(1) Growth Avg.(2)
------------------ --------------------------- ---------------------
<S> <C> <C> <C>
87 10000 10000 10000
8074.68 8305.76 8258.57
88 9473.72 9434.12 9307.13
9451.62 9520.65 9626.4
89 10909.8 11103.4 11216.8
12261.1 12215.5 12671.4
90 12313.4 12718.1 13061.5
11622.4 11643.1 12277.4
91 14014.4 13490.1 14024.3
14645.5 15883.5 16009.8
92 15612.4 15290.6 15902.2
16718.2 17037.5 17227.9
93 18836.5 17987.9 18065.9
20374.4 19441.5 18960.4
94 19981.5 18242.5 18318.9
20940.2 19032.6 19209.5
95 24413.1 22441.4 23087.1
27492.5 25214.5 26419.5
96 29503.1 27722.1 29085
32584 30417.8 32481.5
97 36905.9 34683 39171.8
</TABLE>
- --------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GROWTH AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN OF
CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT THE
ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO,
AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Capital appreciation.
TYPES OF INVESTMENTS
Primarily stocks of major, established companies.
INVESTMENT STYLE
This Portfolio uses a "deep value" investment approach to invest in stocks
believed to be temporarily undervalued relative to the companies' sales,
earnings, book value and cash flow.
PERFORMANCE REVIEW.
INSURANCE COSTS. Currently, share prices are very broadly high, and these prices
have been sustained by first-quarter earnings reports up about 18%, on average,
over a year earlier. Nonetheless, since mid-1994 stock prices have risen
substantially faster than their underlying earnings. Rarely have stocks been
this richly valued compared to bonds.
To make matters worse, the "cheap" stocks are currently not particularly
inexpensive compared to the average stock. Our time-tested investment discipline
tells us not to buy when prices are high.
The likelihood of above-average returns is limited and the risk of a price
decline is comparatively high. We're ready to buy as soon as some patches of
inexpensively priced companies appear.
28
<PAGE>
STRATEGY SESSION.
We've cut back our holdings in financial services, modestly reducing our
exposure to the banking industry. After severe lending problems in the early
1990s, the banking industry has come surging back to record profitability. While
the stocks remain relatively inexpensive compared to the overall market, they
would likely prove vulnerable to any change in the very favorable operating
environment they have been enjoying for the last several years.
We also cut back our holdings in American Express. The turnaround at the company
has been impressive and it has been accompanied by a sharp increase in the
market's assessment of its value. Although the stock still is slightly cheaper
in relation to earnings than the average company, the higher price argues
against maintaining as large a position as we have had.
Some of the proceeds from these sales were invested in health stocks and in food
and restaurant companies.
OUTLOOK
PORTFOLIO MANAGER
THOMAS R. JACKSON
DISCIPLINE COUNTS.
"Research shows that two basic investment styles, value investing and growth
investing, alternate in relative advantage, often for a few years at a time. For
the last couple of years, large-capitalization growth stocks such as Microsoft,
Intel, Coca-Cola, Cisco Systems, Merck and General Electric have been leading
the market. As the economic cycle has aged, high earnings growth has become
scarce and investors have concentrated on a relatively limited universe of
companies. As a result, these companies have been bid to very high levels, in
many cases levels that have not been seen since the early seventies. Even if
their earnings continue to grow, investors are paying a very high price for
those prospects.
"Value investors look for companies that sell at large discounts from the
average company, either because their strengths aren't appreciated or because
they are in a temporary earnings depression. We look for companies that sell at
low price/earnings ratios, price/book value ratios and price/cash flow ratios.
However, the long bull market has pushed up prices of almost all companies with
reasonable earnings prospects, leaving little for the disciplined value manager
to purchase.
"Research also shows that historically it has been wise to stick to one
investment style. Disciplined investors do better in the long run, whatever
their style. We believe that it is better to have exposure to both the growth
and value investment styles over the long run, rather than trying to switch
between the two. With this in mind, we are sticking to our discipline: not
buying expensive companies just because they are the only companies for sale and
keeping a cash supply to invest when good values appear."
[PHOTO]
PORTFOLIO MANAGER
THOMAS R. JACKSON
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Finance 27% 28%
Cash 25% 24%
Industry 13% 12%
Consumer Cyclical 12% 12%
Consumer Growth 8% 6%
Energy 6% 6%
Utility 5% 5%
Technology 4% 7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Loews Corp. 2.9%
Chubb Corp. 2.7%
Morgan Stanley/Dean Witter 2.5%
Elf Aquitane S.A. 2.4%
Travelers Group 2.1%
Digital Equipment Corp. 2.0%
Dillard's Inc. 1.9%
RJR Nabisco 1.9%
Tenet Healthcare Corp. 1.8%
Chrysler Corp. 1.7%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
29
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO
PERFORMANCE SUMMARY.
During the first six months of 1997, the Portfolio returned 16.98%. This
compares with an increase of 13.57% for the Lipper (VIP) Growth Average. Your
Portfolio has outperformed similar funds since its inception in 1995.
The period was especially volatile, as the S&P 500 declined early in the year,
only to recover to new highs by the end of June. Many of the technology stocks
that turned in disappointing performances during the first quarter rebounded in
the second, resulting in strong six-month numbers from this sector. Health care
stocks were also significant contributors to performance during the period.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Since
Months Year Inception
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prudential Jennison Portfolio(1) 16.98% 24.50% 27.07%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Growth Avg.(2) 13.57% 23.63% 25.88%
- -----------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 31.34%
- -----------------------------------------------------------------------------------------------
PRUDENTIAL JENNISON PORTFOLIO INCEPTION DATE: 5/1/95.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$16,651 Prudential $16,507 Lipper (VIP)
$18,053 S&P 500(3) Jennison Portfolio(1) Growth Avg.(2)
------------------ --------------------- --------------------
<S> <C> <C> <C>
10000 10000 10000
95 11175.2 10757 10640.2
12441.1 12038.6 12176
96 13374 13301.2 13404.5
14233.7 14523.4 14969.8
97 16651.2 16507 18053.2
</TABLE>
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/95.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GROWTH AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN OF
CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE S&P 500 IS A CAPITAL-WEIGHTED INDEX REPRESENTING THE AGGREGATE MARKET
VALUE OF THE COMMON EQUITY OF 500 STOCKS PRIMARILY TRADED ON THE NEW YORK
STOCK EXCHANGE. THE S&P 500 IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE S&P 500 MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE S&P 500 IS NOT THE
ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF THIS PORTFOLIO,
AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stocks of established companies with above-average growth
prospects.
INVESTMENT STYLE
This Portfolio uses a "growth" investment style to invest in the common stocks
of both mid-sized and large companies.
PERFORMANCE REVIEW.
The Portfolio invests in medium to large companies whose earnings we expect to
grow faster than the market average. Historically, this has been a favorable
investment strategy. Investors in the current market environment have put a high
premium on consistency, as shown by the performance of the large-cap S&P 500
Index versus the broader Wilshire 5000 Index.
WINNERS: The Portfolio benefited from its positions in rapidly growing
technology companies such as Dell Computer and Microsoft Corp. and global
pharmaceutical companies such as Bristol-Myers Squibb Co. and Eli Lilly & Co.
LOSERS: Technology also hurt the Portfolio performance, as networking companies
3 Com and Ascend Communications declined in value, reflecting the intense
competition and consolidation in that industry. In contrast, networking stocks
provided some of the best rates of return in the technology sector during 1996.
30
<PAGE>
STRATEGY SESSION.
As evidenced by our high weighting in the technology sector, we remain convinced
of the potential returns available in this area. Technology is one of the
fastest-growing parts of the economy, as demand for personal computers,
software, cellular phones, pagers, etc. remains high.
Technology also benefits from the tendency of the prices of these products to
fall over time, causing an expansion in the size of their potential markets.
However, investing in technology can be unsettling in the short term, as the
expectations of investors can change rapidly. In addition to technology, both
consumer companies and financial firms appear to offer high potential earnings
gains over the intermediate term of 12 to 18 months.
As the S&P 500 has increased more than 100% since early 1995, volatility will
remain high. However, we believe we have constructed a high-quality portfolio of
rapidly growing companies whose stocks offer significant return potential over
the next one to two years, especially in this environment of surprisingly low
inflation and steady, but slow, growth.
OUTLOOK
PORTFOLIO MANAGER
DAVID T. POIESZ
SOLID GROWTH PROSPECTS.
"The equity markets continue to be buoyed by the moderating growth in the
economy, which has given the Federal Reserve room to breathe easier and has
allowed long-term interest rates to move lower. The Federal budget balancing
agreement and tax cuts bode well for a continued solid equity market with the
best performing stocks likely being those which exhibit solid earnings growth
prospects. We are finding many attractively valued stocks with solid or
improving earnings growth prospects, despite the market's high valuation."
[PHOTO]
PORTFOLIO MANAGER
DAVID T. POIESZ
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Technology 33% 33%
Health Care 16% 14%
Financial Services 15% 10%
Consumer Staples 13% 19%
Goods and Services 11% 14%
Capital Spending 5% 4%
Energy 4% 3%
Cash 3% 3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Cisco Systems, Inc. 2.8%
Pfizer, Inc. 2.8%
Boeing Co. 2.7%
Hewlett-Packard Co. 2.5%
Eli Lilly & Co. 2.5%
Walt Disney Co. 2.5%
SmithKline Beecham 2.5%
Schlumberger Ltd. 2.4%
Intel Corp. 2.4%
Bristol-Myers Squibb Co. 2.2%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
31
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO+
PERFORMANCE SUMMARY.
Your Portfolio and the S&P 600 SmallCap Index (the unmanaged index it is
designed to track) both rose nicely in the first half of 1997. With a 11.51%
return for the half, your Portfolio outperformed the Lipper (VIP) Small Company
Growth Average, as it has since its inception. An excellent 17.79% return for
the second quarter more than offset a decline in the first.
Except for May, when the S&P 600 rose 11.8%, compared with the S&P 500's 6.1%,
performance has trailed the market for large-capitalization stocks.
Standard & Poor's neither sponsors nor endorses the Small Capitalization Stock
Portfolio. Investors cannot directly invest in any index, including the S&P 600
SmallCap Index.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Since
Months Year Inception*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Capitalization Stock Portfolio1 11.51% 21.16% 24.21%
- -----------------------------------------------------------------------------------------------
Lipper (VIP) Small Cap Avg.2 8.11% 14.19% 22.87%
- -----------------------------------------------------------------------------------------------
S&P 600 SmallCap Index3 11.56% 21.68% 25.75%
- -----------------------------------------------------------------------------------------------
SMALL CAPITALIZATION STOCK PORTFOLIO INCEPTION DATE: 5/1/95.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$16,428 S&P 600 $15,990 Small Capitalization $15,652 Lipper (VIP)
SmallCap Index(3) Stock Portfolio(1) Small Cap Avg.(2)
----------------- ---------------------------- --------------------
<S> <C> <C> <C>
10000 10000 10000
95 10659.9 10677.7 10713.4
11971.6 12020 12138.4
96 13197.4 13670.9 13500.7
14338.7 14170 14726.1
97 15989.7 15651.7 16427.9
</TABLE>
- --------------------------------------------------------------------------------
+ NOT AVAILABLE IN ALL CONTRACTS.
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND THE INDEX SINCE INCEPTION RETURNS REFLECT THE
PORTFOLIO'S CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/95.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) SMALL CAP 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 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Seeks long-term growth of capital that correspond to the price and yield
performance of the S&P 600 Index.(3)
TYPES OF INVESTMENTS
Primarily stocks of the S&P 600 Index.
INVESTMENT STYLE
This Portfolio attempts to hold stocks comprising the S&P 600 Index in
approximately the same proportions. The S&P 600 Index contains stocks of small
companies with market values generally less than $1 billion.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P 600 INDEX -- TOTAL RETURN BY SECTOR
Y-T-D
6/30/97
-------
Financial 20.9%
Transportation 19.4%
Capital Goods 19.3%
Materials and Services 19.0%
Technology 19.0%
Consumer Nondurables 17.8%
Consumer Durables 15.1%
Energy 12.0%
Utility 11.7%
S&P 600 Index 11.6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL.
32
<PAGE>
PERFORMANCE REVIEW.
The Small Capitalization Stock Portfolio attempts to duplicate the performance
of the S&P 600 SmallCap Index by holding all 600 stocks in the index. These are
stocks of companies with market values generally less than $1 billion. Such
stocks are more volatile than the shares of larger, more established companies.
Portfolio Manager Wai C. Chiang manages the Portfolio by investing funds
received, while trying to minimize commissions and transaction costs.
THE SMALL GET PUSHED AROUND. When fears of higher interest rates and a slowing
economy hit the U.S. markets in the first quarter, small company stocks felt the
impact more than large caps, falling significantly. But when sentiment turned,
it did so powerfully, driving small company stocks up in May by almost 12%. What
happened?
The tide turned on greater confidence that interest rates would not rise, hopes
of a cut in the capital gains tax and the increasingly rare opportunity to buy
inexpensive stocks. The upward swing was led by long-term care, transportation
manufacturers, financial companies and consumer goods manufacturers.
BUT THERE STILL ARE VALUES. The overall small-cap market rise was constrained by
falling prices for auto finance companies and for certain high-tech sectors,
such as software and computer peripherals. The market was erratic, with
investors running up some sectors, such as education, technology and consumer
stocks, while other sectors were lackluster or even declined.
Nonetheless, these often included companies with good earnings prospects for
1998. The result is that, at a time when values are hard to find among large-cap
stocks, there are bargains among the small caps.
Foreign investors and small investors using mutual funds have poured cash into
the U.S. stock market that has helped power its continuing rise over the past
few years.
These investors tend to favor familiar, large-capitalization stocks. In fact,
many invest through index funds designed to match the S&P 500.
The demand for S&P 500 stocks has driven up their price/earnings ratios -- a
measure of how much investors must pay for each dollar of earnings -- relative
to the price/earnings ratios of many small capitalization companies.
Consequently, your investments in small capitalization stocks are currently
buying a larger earnings stream than similar investments in large stocks.
[PHOTO]
PORTFOLIO MANAGER
WAI C. CHIANG
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
S&P 600 INDEX COMPOSITION
6/30/97
-------
Consumer Nondurables 22%
Materials and Services 20%
Technology 18%
Financial 17%
Energy 5%
Capital Goods 5%
Consumer Durables 5%
Utility 5%
Transportation 3%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Corrections Corp. 0.9%
Charter One Financial 0.7%
Omnicare Inc. 0.7%
Zions Bancorporation 0.6%
Phycor Inc. 0.6%
Camco Intl. Inc. 0.6%
CompUSA Inc. 0.6%
Sybron Corp. 0.5%
SCI Systems, Inc. 0.5%
Provident Bancorp, Inc. 0.5%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
33
<PAGE>
GLOBAL PORTFOLIO
PERFORMANCE SUMMARY.
Your Portfolio got off to a good start in 1997, returning 12.48% for the first
six months, in line with the Lipper (VIP) Global Average of 12.50%. It
outperformed the Lipper (VIP) Global Average over the past twelve months and
five years. The world's major stock markets all posted handsome gains during
this period, particularly in the second quarter.
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risks of currency fluctuation and the impact of social, political and
economic change.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Since
Months Year Years Years Inception*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Portfolio(1) 12.48% 22.12% 15.57% 15.48% 11.34%
- ------------------------------------------------------------------------------------------------
Lipper (VIP) Global Avg.(2) 12.50% 18.46% 16.14% 13.96% 11.96%
- ------------------------------------------------------------------------------------------------
Morgan Stanley World Index(3) 15.62% 22.81% 17.57% 16.15% 11.39%
- ------------------------------------------------------------------------------------------------
GLOBAL PORTFOLIO INCEPTION DATE: 9/19/88.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
27,282 Lipper (VIP) $25,703 Morgan $25,669 Global
Global Avg.(2) Stanley World Index(3) Portfolio(1)
------------------- ---------------------- ---------------
<S> <C> <C> <C>
88 10000 10000 10000
10857 10333.9 11142.4
89 11376.7 10968 11259.2
12900.4 12488.3 13058.2
90 12426.4 12864.3 12121.3
11235.3 11748.3 10901.2
91 11715.5 12368.1 11598.7
12515.1 13710.7 12968.9
92 12503.5 13903.2 12158.7
12086.2 13758 12364.6
93 13740.4 15616.3 14276.9
17301.8 18172 15224.4
94 16629.7 17761.3 15814.4
16455.9 17962.4 16074.2
95 18011.1 19098.3 17588.6
19068.7 20575.1 19500.7
96 21023 22301.4 20929.8
22823.8 23948.3 22230
97 25668.8 27281.6 25703.2
</TABLE>
- --------------------------------------------------------------------------------
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 9/30/88.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) GLOBAL AVERAGE IS CALCULATED
BY LIPPER ANALYTICAL SERVICES, INC., AND REFLECTS THE INVESTMENT RETURN OF
CERTAIN PORTFOLIOS UNDERLYING VARIABLE LIFE AND ANNUITY PRODUCTS. THESE
RETURNS ARE NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(3) THE MORGAN STANLEY INDEX IS A WEIGHTED INDEX COMPRISED OF APPROXIMATELY
1,500 COMPANIES LISTED ON THE STOCK EXCHANGES OF THE U.S.A., EUROPE,
CANADA, AUSTRALIA, NEW ZEALAND AND THE FAR EAST. THE COMBINED MARKET
CAPITALIZATION OF THESE COMPANIES REPRESENTS APPROXIMATELY 60% OF THE
AGGREGATE MARKET VALUE OF THE STOCK EXCHANGES IN THE COUNTRIES COMPRISING
THE WORLD INDEX. THE WORLD INDEX IS AN UNMANAGED INDEX AND INCLUDES THE
REINVESTMENT OF ALL DIVIDENDS BUT DOES NOT REFLECT THE PAYMENT OF
TRANSACTION COSTS AND ADVISORY FEES ASSOCIATED WITH AN INVESTMENT IN THE
PORTFOLIO. THE SECURITIES THAT COMPRISE THE WORLD INDEX MAY DIFFER
SUBSTANTIALLY FROM THE SECURITIES IN THE PORTFOLIO. THE WORLD INDEX IS NOT
THE ONLY INDEX THAT MAY BE USED TO CHARACTERIZE PERFORMANCE OF GLOBAL
FUNDS, AND OTHER INDICES MAY PORTRAY DIFFERENT COMPARATIVE PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily common stock and common stock equivalents of U.S. and foreign
corporations.
INVESTMENT STYLE
This Portfolio uses a "growth" investment approach, coupled with a
theme-oriented view of the markets, to identify companies that seem best
positioned to take advantage of global changes.
PERFORMANCE REVIEW.
The U.S. and European stock markets were buoyant. In Europe, we emphasized
companies that have strong international revenues and companies that can
leverage large earnings gains from small increases in sales. Our relatively
light holdings in the U.S. were concentrated in technology stocks, which took a
stutter-step in the first quarter but finished the half on an upswing.
Japan changes course. We had de-emphasized Japan, where stocks fell sharply in
the first quarter. We avoided the financial sector, where the worst damage
occurred, and were adding domestically-oriented stocks when the Japanese market
rebounded. We did exceptionally well in Japan this period, and in the smaller
Pacific countries as well.
The Mexican market rose sharply. Our investments there also served us well, as
its free-market economy strengthened.
34
<PAGE>
STRATEGY SESSION.
Good for production, not for sales. In Europe, we focused on well-managed
companies, many of which had recently reorganized to improve productivity. We
preferred companies that were selling into the world market, where they could
profit from economic acceleration anywhere. European growth has been slow for
some time, resulting in high unemployment, which restrained labor costs and
domestic sales revenues. So we own companies that produce in Europe and sell
primarily elsewhere.
We also look for companies where small increases in sales can produce
disproportionate increases in earnings. For example, we like software companies,
firms that have been through productivity-increasing reorganizations and
manufacturers of telecommunications equipment.
JAPAN'S DOMESTIC MARKET LOOKS UP. We began 1997 underrepresented in Japan, with
a strategy there much like our European strategy. But now we expect more
domestic economic activity in Japan, where the government appears to be
committed to encouraging greater productivity in industries that historically
have been protected from competition. Moreover, in part because the yen has
declined substantially from its highs, Japanese consumers have been spending
less abroad. What's more, Japanese interest rates remain low. These factors all
portend greater economic activity. In response, we have shifted our investment
focus in Japan to companies that service their domestic market.
PROSPECTING IN LATIN AMERICA. Latin American countries finally are allowing
market forces to push their economies ahead. We are currently focusing on
Mexico.
OUTLOOK
PORTFOLIO MANAGER
DANIEL J. DUANE
DIFFERENT PATHS FOR JAPAN AND EUROPE.
"Japan's legendary high productivity has historically been concentrated in
export-oriented companies, leaving products for the home market quite expensive.
The yen has fallen, but the Japanese -- especially those who have traveled --
have gotten a taste of low-priced consumer items. They are ready to spend
heavily on domestic goods if the prices are right. New government policies will
encourage restructuring of firms that sell to this domestic market. We have seen
the benefits of this process elsewhere, and we expect it to provide good
opportunities for our growth strategy.
"The European domestic markets are likely to be weakened by resistance to more
competitive economic practices. Investors who had been anticipating the benefits
of a single large market and a strong single European currency have been shocked
by the Socialist election victory in France. We will continue to focus on
efficient companies that are not dependent on domestic market growth."
[PHOTO]
PORTFOLIO MANAGER
DANIEL J. DUANE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GEOGRAPHIC ALLOCATION
6/30/97 12/31/96
------- --------
Continental Europe 32% 26%
United States 22% 21%
Japan 19% 14%
United Kingdom 10% 13%
Asia (Ex-Japan) 7% 13%
Mexico 4% 2%
Australia 4% 4%
Other 1% 1%
Cash 1% 6%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Hennes & Mauritz 2.4%
Microsoft Corp. 2.2%
Carrefour Supermarche 2.1%
Oracle Corp. 2.0%
Telecom Italia Mobile 1.9%
Daibiru Corp. 1.9%
Nokia 1.9%
Vodafone Group 1.8%
Mattel Inc. 1.8%
Mobil Corp. 1.8%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
35
<PAGE>
NATURAL RESOURCES PORTFOLIO+
PERFORMANCE SUMMARY.
Your Portfolio declined 1.48% for the half year, in line with the Lipper (VIP)
Natural Resource Average, which fell 1.34%. Over the one, three, and five years
and since inception your Portfolio has outperformed the Lipper Average.
The sustained low level of worldwide inflation has contained prices of natural
resources stocks. Typically, these investments serve as a hedge against
inflation. In the absence of strong upward price pressures, these stocks
performed as expected. However, any resurgence in inflation would likely lead to
improved performance from natural resource stocks.
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1997
Six One Three Five Since
Months Year Years Years Inception*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Natural Resources Portfolio(1) -1.48% 7.95% 17.09% 14.40% 13.24%
- ------------------------------------------------------------------------------------------------
Lipper (VIP) Nat. Res. Avg.(2) -1.34% 6.16% 9.54% 10.24% 1.81%
- ------------------------------------------------------------------------------------------------
S&P 500(3) 20.60% 34.68% 28.83% 19.76% 17.66%
- ------------------------------------------------------------------------------------------------
NATURAL RESOURCES PORTFOLIO INCEPTION DATE: 5/1/88.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$10,000 INVESTED SINCE INCEPTION*
[GRAPH]
<TABLE>
<CAPTION>
$31,255 Natural $12,278 Lipper (VIP)
$44,393 S&P 500(3) Resources Portfolio(1) Nat. Res. Avg.(2)
------------------ ---------------------- --------------------
<S> <C> <C> <C>
10000 10000 10000
88 10456.1 10019.8 10547.8
10541.9 8673.87 10909.6
89 12287.5 9001.5 12712.1
14298.5 10603.5 14360.5
90 13942.4 9311.86 14802.6
13475 9016.12 13914.1
91 14472.5 9221.28 15893.8
14862 8887.88 18143.9
92 15955.2 8993.09 18022
15946.5 8838.49 19524.4
93 19405.6 11560.2 20474.1
19957.7 11731 21487.9
94 19466.6 11064.5 20760.9
19099.8 10990.5 21770.2
95 22152.9 11582.1 26164.6
24241.4 11855.7 29941.3
96 28954 13115.4 32962.1
31726.3 12970 36811.3
97 31255.5 12278.1 44393.4
</TABLE>
- --------------------------------------------------------------------------------
+ NOT AVAILABLE IN ALL CONTRACTS.
* LIPPER PROVIDES DATA ON A MONTHLY BASIS, SO FOR COMPARATIVE PURPOSES THE
LIPPER AVERAGE AND INDEX SINCE INCEPTION RETURNS REFLECT THE PORTFOLIO'S
CLOSEST CALENDAR MONTH-END PERFORMANCE OF 4/30/88.
(1) PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. PORTFOLIO
PERFORMANCE IS NET OF INVESTMENT FEES AND FUND EXPENSES BUT NOT PRODUCT
CHARGES.
(2) THE LIPPER VARIABLE INSURANCE PRODUCTS (VIP) 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CHART COMPARING RELATIVE RISK OF INVESTMENT TYPES]
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Long-term growth of capital.
TYPES OF INVESTMENTS
Primarily stocks of companies that operate within, or do business with, the
natural resources sector of the economy.
INVESTMENT STYLE
This Portfolio uses a "contrarian" investment approach to invest in out-of-favor
sectors of natural resource markets throughout the world. It hopes to capture
growth from companies that discover and develop new natural resources.
PERFORMANCE REVIEW.
METALS: USEFUL, GOOD; DECORATIVE, BAD. We invested significantly in two metals
in the past six months: platinum/palladium and aluminum, both of which already
have performed well for us.
FOREST PRODUCTS BOLSTER EARNINGS. We haven't changed our view about forest
products; the sector added significantly to the period's returns.
AFTER EXPLORATION AND PRODUCTION. We have been reducing our investments in oil
exploration and production stocks, because we believe oil prices in the
mid-twenty-dollar range are unsustainable now.
36
<PAGE>
STRATEGY SESSION.
WE ARE FOCUSING ON PLATINUM/PALLADIUM - AND GOLD. Platinum/palladium demand is
strong and growing - especially for auto catalysts - and world stockpiles are
dwindling. Prices have already moved significantly higher this year.
In gold, central bank and hedge fund selling has depressed the price. Investors
are extremely bearish, gold stocks are cheap, but gold demand continues to grow
strongly. Our analysis indicates that gold stocks represent the greatest value
in the world natural resource markets today.
OIL MOVES TO A NEW STAGE. The oil industry is moving to a new stage. Investments
in oil drilling have paid off in recent years, but the newly found fields will
now have to be developed. We have about 10% of the Portfolio in companies that
specialize in field development.
FROM BUST TO BOOM? The Canadian natural gas industry is presently in a down
cycle because there has been too much drilling and not enough pipeline capacity
to get the gas out. Natural gas drilling has dropped significantly over the past
two years, supply has fallen and new pipelines are now being built. This is
likely to lead to much higher prices for Canadian natural gas.
OUTLOOK
PORTFOLIO MANAGER
LEIGH R. GOEHRING
GOLD: FAR FROM GLOOMY.
"Gold, traditionally an inflation hedge, has looked bad for almost two decades.
Inflation is slowing. The market for gold companies still is poor. However, in
Asia people have used gold both as an adornment in large pieces of jewelry and
as a long-term investment. New wealth is building in these countries, with a
taste for luxuries and a suspicion of financial institutions. Current gold
consumption considerably exceeds production. We are optimistic about the
industry's prospects."
[PHOTO]
PORTFOLIO MANAGER
LEIGH R. GOEHRING
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
6/30/97 12/31/96
------- --------
Energy 42% 45%
Precious Metals 27% 24%
Forest Products 14% 12%
Base Metals 14% 8%
Diversified Resources 2% 8%
Cash 1% 2%
Misc. Nonresources 0% 1%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
6/30/97
-------
Champion Int'l. 4.4%
Stillwater Mining Co. 4.0%
Western Gas Resources 3.4%
ALCOA 3.1%
Rustenberg Platinum 3.0%
MacMillan Bloedel 2.9%
Noble Affiliates 2.7%
Newmont Mining 2.6%
Potash Corp. 2.4%
Mesa Inc. 2.4%
- --------------------------------------------------------------------------------
SOURCE: PRUDENTIAL. HOLDINGS ARE SUBJECT TO CHANGE.
37
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments (amortized cost:
$669,335,272)............................ $ 669,335,272
Cash....................................... 381,784
Interest receivable........................ 3,360,098
--------------
Total Assets............................. 673,077,154
--------------
LIABILITIES
Payable to investment adviser.............. 694,105
Accrued expenses........................... 174,067
--------------
Total Liabilities........................ 868,172
--------------
NET ASSETS................................... $ 672,208,982
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 672,209
Paid-in capital, in excess of par........ 671,536,773
--------------
Net assets, June 30, 1997.................. $ 672,208,982
--------------
--------------
Net asset value and redemption price per
share, 67,220,898 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 10.00
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 18,951,300
---------------
EXPENSES
Investment advisory fee.................... 1,345,133
Shareholders' reports...................... 57,000
Accounting fees............................ 35,000
Custodian expense.......................... 31,000
Audit fees................................. 6,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 367
---------------
Total expenses........................... 1,475,500
Less: custodian fee credit................. (13,367)
---------------
Net expenses............................. 1,462,133
---------------
NET INVESTMENT INCOME........................ 17,489,167
---------------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on investments........... 5,235
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 17,494,402
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 17,489,167 $ 31,843,235
Net realized gain on investments....................................................... 5,235 1,246
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 17,494,402 31,844,481
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (17,489,167) (31,843,235)
Distributions from net realized capital gains.......................................... (5,235) (1,246)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (17,494,402) (31,844,481)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [10,926,600 and 18,464,000 shares, respectively].................... 109,266,000 184,644,000
Capital stock issued in reinvestment of dividends and distributions [1,749,386 and
3,184,448 shares, respectively]....................................................... 17,493,861 31,844,481
Capital stock repurchased [(12,331,900) and (16,104,000) shares, respectively]......... (123,319,000) (161,040,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 3,440,861 55,448,481
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 3,440,861 55,448,481
NET ASSETS:
Beginning of period.................................................................... 668,768,121 613,319,640
------------------ -------------------
End of period.......................................................................... $ 672,208,982 $ 668,768,121
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$725,599,146)............................ $ 737,275,021
Cash....................................... 6,037,643
Receivable for investments sold............ 12,476,830
Interest receivable........................ 13,565,437
Receivable for investments sold short (Note
2)....................................... 12,645,897
Due from broker -- variation margin........ 370,344
--------------
Total Assets............................. 782,371,172
--------------
LIABILITIES
Payable for investments purchased.......... 28,789,283
Payable to investment adviser.............. 742,316
Accrued expenses........................... 168,503
Payable for capital stock repurchased...... 185,305
Investments sold short at value (proceeds
$12,645,897 including accrued interest)
(Note 2)................................. 12,633,936
--------------
Total Liabilities........................ 42,519,343
--------------
NET ASSETS................................... $ 739,851,829
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 659,259
Paid-in capital, in excess of par........ 709,038,810
--------------
709,698,069
Undistributed net investment income........ 13,270,064
Accumulated net realized gains on
investments.............................. 6,720,485
Net unrealized appreciation on
investments.............................. 10,163,211
--------------
Net assets, June 30, 1997.................. $ 739,851,829
--------------
--------------
Net asset value and redemption price per
share, 65,925,849 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 11.22
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 27,716,633
---------------
EXPENSES
Investment advisory fee.................... 1,426,411
Shareholders' reports...................... 57,000
Accounting fees............................ 46,000
Custodian expense.......................... 34,000
Audit fees................................. 6,000
Miscellaneous expenses..................... 2,134
Directors' fees............................ 1,000
Legal fees................................. 200
---------------
Total expenses........................... 1,572,745
Less: custodian fee credit................. (16,120)
---------------
Net expenses............................. 1,556,625
---------------
NET INVESTMENT INCOME........................ 26,160,008
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 5,842,458
Futures.................................. 900,140
---------------
6,742,598
Net change in unrealized appreciation on:
Investments.............................. (2,502,107)
Futures.................................. (1,524,625)
Short sales.............................. (223,969)
---------------
(4,250,701)
---------------
NET GAIN ON INVESTMENTS...................... 2,491,897
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 28,651,905
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 26,160,008 $ 46,726,825
Net realized gain on investments....................................................... 6,742,598 3,227,785
Net change in unrealized depreciation on investments................................... (4,250,701) (18,849,028)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 28,651,905 31,105,582
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (14,947,137) (44,766,756)
Distributions from net realized capital gains.......................................... (3,152,774) --
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (18,099,911) (44,766,756)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,258,442 and 78,594,183 shares, respectively]..................... 35,403,359 78,594,183
Capital stock issued in reinvestment of dividends and distributions [44,766,756 and
3,793,654 shares, respectively]....................................................... 18,099,911 44,766,756
Capital stock repurchased [(1,233,092) and (3,376,822) shares, respectively]........... (44,420,016) (45,319,610)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 9,083,254 78,041,329
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 19,635,248 64,380,155
NET ASSETS:
Beginning of period.................................................................... 720,216,581 655,836,426
------------------ -------------------
End of period.......................................................................... $ 739,851,829 $ 720,216,581
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A2
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$422,392,473)............................ $ 422,215,284
Cash....................................... 1,357,124
Receivable for investments sold............ 32,836,757
Interest receivable........................ 5,638,432
Due from broker -- variation margin........ 28,125
--------------
Total Assets............................. 462,075,722
--------------
LIABILITIES
Payable for investments purchased.......... 32,792,523
Payable to investment adviser.............. 458,127
Accrued expenses........................... 116,432
Payable for capital stock repurchased...... 9,651
--------------
Total Liabilities........................ 33,376,733
--------------
NET ASSETS................................... $ 428,698,989
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 378,763
Paid-in capital, in excess of par........ 430,073,006
--------------
430,451,769
Undistributed net investment income........ 7,124,152
Accumulated net realized loss on
investments.............................. (8,583,025)
Net unrealized depreciation on
investments.............................. (293,907)
--------------
Net assets, June 30, 1997.................. $ 428,698,989
--------------
--------------
Net asset value and redemption price per
share, 37,876,334 outstanding shares of
common stock (authorized 90,000,000
shares).................................. $ 11.32
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 15,590,225
---------------
EXPENSES
Investment advisory fee.................... 890,426
Accounting fees............................ 49,000
Shareholders' reports...................... 36,000
Custodian expense.......................... 23,000
Audit fees................................. 4,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 1,588
---------------
Total expenses........................... 1,005,014
Less: custodian fee credit................. (7,571)
---------------
Net expenses............................. 997,443
---------------
NET INVESTMENT INCOME........................ 14,592,782
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on:
Investments.............................. (586,484)
Futures.................................. (79,250)
---------------
(665,734)
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. (2,529,099)
Futures.................................. (116,718)
---------------
(2,645,817)
---------------
NET LOSS ON INVESTMENTS...................... (3,311,551)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 11,281,231
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 14,592,782 $ 31,242,011
Net realized gain (loss) on investments................................................ (665,734) 14,328,542
Net change in unrealized depreciation on investments................................... (2,645,817) (35,068,717)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 11,281,231 10,501,836
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (7,501,797) (30,988,878)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [221,865 and 863,496 shares, respectively].......................... 2,490,184 8,926,475
Capital stock issued in reinvestment of dividends and distributions [675,499 and
2,693,392 shares, respectively]....................................................... 7,501,797 30,988,878
Capital stock repurchased [(6,279,001) and (7,346,525) shares, respectively]........... (67,107,866) (39,168,176)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (57,115,885) 747,177
------------------ -------------------
TOTAL DECREASE IN NET ASSETS............................................................. (53,336,451) (19,739,865)
NET ASSETS:
Beginning of period.................................................................... 482,035,440 501,775,305
------------------ -------------------
End of period.......................................................................... $ 428,698,989 $ 482,035,440
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$32,206,973)............................. $ 33,207,315
Cash....................................... 249
Interest receivable........................ 166
--------------
Total Assets............................. 33,207,730
--------------
LIABILITIES
Payable to investment adviser.............. 37,409
Accrued expenses........................... 17,026
--------------
Total Liabilities........................ 54,435
--------------
NET ASSETS................................... $ 33,153,295
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 25,786
Paid-in capital, in excess of par........ 30,772,238
--------------
30,798,024
Undistributed net investment income........ 465,569
Accumulated net realized gains on
investments.............................. 889,360
Net unrealized appreciation on
investments.............................. 1,000,342
--------------
Net assets, June 30, 1997.................. $ 33,153,295
--------------
--------------
Net asset value and redemption price per
share, 2,578,616 outstanding shares of
common stock (authorized 15,000,000
shares).................................. $ 12.86
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 1,132,936
---------------
EXPENSES
Investment advisory fee.................... 81,136
Accounting fees............................ 20,000
Custodian expense.......................... 7,000
Shareholders' reports...................... 4,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 909
Legal fees................................. 100
---------------
Total expenses........................... 114,145
Less: custodian fee credit................. (317)
---------------
Net expenses............................. 113,828
---------------
NET INVESTMENT INCOME........................ 1,019,108
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 889,360
Net change in unrealized depreciation on
investments.............................. (1,208,343)
---------------
NET LOSS ON INVESTMENTS...................... (318,983)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 700,125
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 1,019,108 $ 1,457,437
Net realized gain on investments....................................................... 889,360 350,896
Net change in unrealized depreciation on investments................................... (1,208,343) (913,982)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 700,125 894,351
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (561,923) (1,464,562)
Distributions from net realized capital gains.......................................... (350,896) --
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (912,819) (1,464,562)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [118,434 and 1,886,245 shares, respectively]........................ 1,524,000 24,377,000
Capital stock issued in reinvestment of dividends and distributions [72,173 and 114,738
shares, respectively]................................................................. 912,819 1,464,562
Capital stock repurchased [(1,075,599) and (440,396) shares, respectively]............. (13,810,000) (5,791,000)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (11,373,181) 20,050,562
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (11,585,875) 19,480,351
NET ASSETS:
Beginning of period.................................................................... 44,739,170 25,258,819
------------------ -------------------
End of period.......................................................................... $ 33,153,295 $ 44,739,170
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$31,279,274)............................. $ 33,022,964
Cash....................................... 133,932
--------------
Total Assets............................. 33,156,896
--------------
LIABILITIES
Payable to investment adviser.............. 33,840
Accrued expenses........................... 12,834
--------------
Total Liabilities........................ 46,674
--------------
NET ASSETS................................... $ 33,110,222
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 26,834
Paid-in capital, in excess of par........ 30,686,624
--------------
30,713,458
Undistributed net investment income........ 507,171
Accumulated net realized gain on
investments.............................. 145,903
Net unrealized appreciation on
investments.............................. 1,743,690
--------------
Net assets, June 30, 1997.................. $ 33,110,222
--------------
--------------
Net asset value and redemption price per
share, 2,683,369 outstanding shares of
common stock (authorized 40,000,000
shares).................................. $ 12.34
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 997,827
---------------
EXPENSES
Investment advisory fee.................... 61,410
Accounting fees............................ 20,000
Custodian expense.......................... 7,000
Shareholders' reports...................... 3,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 243
---------------
Total expenses........................... 92,653
Less: custodian fee credit................. (1,362)
---------------
Net expenses............................. 91,291
---------------
NET INVESTMENT INCOME........................ 906,536
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 145,903
Net change in unrealized appreciation on
investments.............................. (163,948)
---------------
NET LOSS ON INVESTMENTS...................... (18,045)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 888,491
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 906,536 $ 1,314,357
Net realized gain on investments....................................................... 145,903 278,534
Net change in unrealized appreciation on investments................................... (163,948) (1,746,280)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 888,491 (153,389)
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (459,698) (1,273,302)
Distributions from net realized capital gains.......................................... -- (278,534)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (459,698) (1,551,836)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [1,102,580 and 205,219 shares, respectively]........................ 13,295,001 2,571,000
Capital stock issued in reinvestment of dividends and distributions [38,252 and 128,813
shares, respectively]................................................................. 459,698 1,551,836
Capital stock repurchased [(564,048) and (20,262) shares, respectively]................ (6,888,000) (250,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 6,866,699 3,872,836
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 7,295,492 2,167,611
NET ASSETS:
Beginning of period.................................................................... 25,814,730 23,647,119
------------------ -------------------
End of period.......................................................................... $ 33,110,222 $ 25,814,730
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A5
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,505,243,603).......................... $4,658,500,606
Receivable for investments sold............ 84,334,561
Interest and dividends receivable.......... 60,688,590
Receivable for investments sold short (Note
2)....................................... 14,574,078
Due from broker -- variation margin........ 2,594,875
--------------
Total Assets............................. 4,820,692,710
--------------
LIABILITIES
Payable for investments purchased.......... 91,060,104
Investments sold short, at value (proceeds
$14,574,078 including accrued interest)
(Note 2)................................. 14,554,648
Payable to investment adviser.............. 6,259,161
Accrued expenses and other liabilities..... 1,021,050
Bank overdraft............................. 455,644
Payable for capital stock repurchased...... 51,335
--------------
Total Liabilities........................ 113,401,942
--------------
NET ASSETS................................... $4,707,290,768
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,869,657
Paid-in capital, in excess of par........ 4,066,004,126
--------------
4,068,873,783
Undistributed net investment income........ 53,738,618
Accumulated net realized gains on
investments.............................. 441,588,232
Net unrealized appreciation on
investments.............................. 143,090,135
--------------
Net assets, June 30, 1997.................. $4,707,290,768
--------------
--------------
Net asset value and redemption price per
share, 286,965,697 outstanding shares of
common stock (authorized 350,000,000
shares).................................. $ 16.40
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 105,301,477
Dividends (net of $128,721 foreign
withholding tax)......................... 10,818,797
---------------
116,120,274
---------------
EXPENSES
Investment advisory fee.................... 12,320,204
Shareholders' reports...................... 363,000
Custodian expense.......................... 127,000
Accounting fees............................ 57,000
Audit fees................................. 40,000
Legal fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 392
---------------
Total expenses........................... 12,910,596
Less: custodian fee credit................. (67,226)
---------------
Net expenses............................... 12,843,370
---------------
NET INVESTMENT INCOME........................ 103,276,904
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 437,081,265
Futures.................................. 8,167,821
---------------
445,249,086
---------------
Net change in unrealized appreciation on:
Investments.............................. (196,672,499)
Futures.................................. (10,370,656)
Short sales.............................. (1,120,130)
---------------
(208,163,285)
---------------
NET GAIN ON INVESTMENTS...................... 237,085,801
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 340,362,705
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 103,276,904 $ 173,283,574
Net realized gain on investments....................................................... 445,249,086 270,107,246
Net change in unrealized appreciation (depreciation) on investments.................... (208,163,285) 61,403,321
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 340,362,705 504,794,141
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (49,538,286) (174,034,704)
Distributions from net realized capital gains.......................................... (33,869,018) (273,593,225)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (83,407,304) (447,627,929)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,746,170 and 10,561,256 shares, respectively]..................... 43,446,276 167,668,924
Capital stock issued in reinvestment of dividends and distributions [5,385,619 and
29,086,855 shares, respectively]...................................................... 83,407,304 447,627,929
Capital stock repurchased [(9,803,795) and (8,429,995) shares, respectively]........... (155,326,746) (134,428,797)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (28,473,166) 480,868,056
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 228,482,235 538,034,268
NET ASSETS:
Beginning of period.................................................................... 4,478,808,533 3,940,774,265
------------------ -------------------
End of period.......................................................................... $ 4,707,290,768 $ 4,478,808,533
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A6
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,908,586,669).......................... $5,293,779,835
Cash....................................... 30,644,779
Receivable for investments sold............ 74,257,831
Interest and dividends receivable.......... 41,116,672
Receivable for investments sold short (Note
2)....................................... 36,863,906
Due from broker -- variation margin........ 1,386,563
--------------
Total Assets............................. 5,478,049,586
--------------
LIABILITIES
Payable for investments purchased.......... 138,814,151
Investments sold short, at value (proceeds
$36,863,906 including accrued interest)
(Note 2)................................. 36,851,320
Payable to investment adviser.............. 7,559,217
Accrued expenses and other liabilities..... 1,154,567
Payable for capital stock repurchased...... 31,911
--------------
Total Liabilities........................ 184,411,166
--------------
NET ASSETS................................... $5,293,638,420
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,747,266
Paid-in capital, in excess of par........ 4,262,982,239
--------------
4,265,729,505
Undistributed net investment income........ 40,488,776
Accumulated net realized gains on
investments.............................. 607,829,856
Net unrealized appreciation on
investments.............................. 379,590,283
--------------
Net assets, June 30, 1997.................. $5,293,638,420
--------------
--------------
Net asset value and redemption price per
share of 274,726,588 outstanding shares
of common stock (authorized 350,000,000
shares).................................. $ 19.27
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 73,606,290
Dividends (net of $494,476 foreign
withholding tax)......................... 19,341,725
---------------
92,948,015
---------------
EXPENSES
Investment advisory fee.................... 14,909,611
Shareholders' reports...................... 407,000
Custodian expense.......................... 204,000
Accounting fees............................ 55,000
Audit fees................................. 43,000
Legal fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 185
---------------
Total expenses........................... 15,621,796
Less: custodian fee credit................. (87,672)
---------------
Net expenses............................. 15,534,124
---------------
NET INVESTMENT INCOME........................ 77,413,891
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 604,731,125
Futures.................................. 6,570,528
Short sales.............................. 2,635,423
---------------
613,937,076
---------------
Net change in unrealized appreciation on:
Investments.............................. (196,100,431)
Futures.................................. (5,615,469)
Short sales.............................. (1,155,985)
---------------
(202,871,885)
---------------
NET GAIN ON INVESTMENTS...................... 411,065,191
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 488,479,082
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 77,413,891 $ 139,211,865
Net realized gain on investments....................................................... 613,937,076 408,046,131
Net change in unrealized appreciation (depreciation) on investments.................... (202,871,885) 41,728,823
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 488,479,082 588,986,819
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (36,348,186) (142,089,785)
Distributions from net realized capital gains.......................................... (44,702,972) (458,909,559)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (81,051,158) (600,999,344)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,496,113 and 8,998,637 shares, respectively]...................... 45,671,248 166,455,957
Capital stock issued in reinvestment of dividends and distributions [4,526,896 and
34,012,173 shares, respectively]...................................................... 81,051,158 600,999,344
Capital stock repurchased [(7,485,580) and (6,420,074) shares, respectively]........... (137,434,597) (119,724,926)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (10,712,191) 647,730,375
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 396,715,733 635,717,850
NET ASSETS:
Beginning of period.................................................................... 4,896,922,687 4,261,204,837
------------------ -------------------
End of period.......................................................................... $ 5,293,638,420 $ 4,896,922,687
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A7
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$467,809,560)............................ $ 483,759,468
Cash....................................... 542,940
Interest and dividends receivable.......... 9,012,963
--------------
Total Assets............................. 493,315,371
--------------
LIABILITIES
Payable for investments purchased.......... 11,301,815
Payable to investment adviser.............. 670,519
Accrued expenses........................... 104,754
--------------
Total Liabilities........................ 12,077,088
--------------
NET ASSETS................................... $ 481,238,283
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 591,644
Paid-in capital, in excess of par........ 475,334,869
--------------
475,926,513
Undistributed net investment income........ 11,755,861
Accumulated net realized loss on
investments.............................. (22,424,456)
Net unrealized appreciation on
investments.............................. 15,980,365
--------------
Net assets, June 30, 1997.................. $ 481,238,283
--------------
--------------
Net asset value and redemption price per
share, 59,164,363 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 8.13
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 22,393,786
Dividends.................................. 1,017,891
---------------
23,411,677
---------------
EXPENSES
Investment advisory fee.................... 1,228,898
Accounting fees............................ 62,000
Shareholders' reports...................... 35,500
Custodian expense.......................... 19,000
Audit fees................................. 4,000
Directors' fees............................ 1,400
Miscellaneous expenses..................... 542
---------------
Total expenses........................... 1,351,340
Less: custodian fee credit................. (9,627)
---------------
Net expenses............................. 1,341,713
---------------
NET INVESTMENT INCOME........................ 22,069,964
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (679,137)
Net change in unrealized appreciation on
investments.............................. 4,907,581
---------------
NET GAIN ON INVESTMENTS...................... 4,228,444
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 26,298,408
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 22,069,964 $ 39,424,947
Net realized loss on investments....................................................... (679,137) (1,288,395)
Net change in unrealized appreciation on investments................................... 4,907,581 4,580,936
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 26,298,408 42,717,488
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (10,651,431) (39,126,995)
Dividends in excess of net investment income........................................... -- (495,859)
------------------ -------------------
TOTAL DIVIDENDS........................................................................ (10,651,431) (39,622,854)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,116,289 and 5,685,336 shares, respectively]...................... 56,714,000 45,754,000
Capital stock issued in reinvestment of dividends and distributions [1,371,101 and
5,088,084 shares, respectively]....................................................... 10,651,431 39,622,854
Capital stock repurchased [(4,342,720) and (2,919,156) shares, respectively]........... (34,641,000) (23,514,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 32,724,431 61,862,854
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 48,371,408 64,957,488
NET ASSETS:
Beginning of period.................................................................... 432,866,875 367,909,387
------------------ -------------------
End of period.......................................................................... $ 481,238,283 $ 432,866,875
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A8
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,268,708,983).......................... $2,113,744,622
Cash....................................... 3,107,295
Interest and dividends receivable.......... 2,402,793
Receivable for investments sold............ 444,885
--------------
Total Assets............................. 2,119,699,595
--------------
LIABILITIES
Payable for investments purchased.......... 6,910,378
Payable to investment adviser.............. 1,653,442
Due to broker -- variation margin.......... 594,675
Accrued expenses........................... 355,248
Payable for capital stock repurchased...... 28,300
--------------
Total Liabilities........................ 9,542,043
--------------
NET ASSETS................................... $2,110,157,552
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 741,409
Paid-in capital, in excess of par........ 1,244,398,338
--------------
1,245,139,747
Undistributed net investment income........ 7,742,696
Accumulated net realized gains on
investments.............................. 12,980,945
Net unrealized appreciation on
investments.............................. 844,294,164
--------------
Net assets, June 30, 1997.................. $2,110,157,552
--------------
--------------
Net asset value and redemption price per
share, 74,140,959 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 28.46
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $136,260 foreign
withholding tax)......................... $ 16,113,847
Interest................................... 1,804,994
---------------
17,918,841
---------------
EXPENSES
Investment advisory fee.................... 3,117,991
Shareholders' reports...................... 146,000
Accounting fees............................ 45,000
Custodian expense.......................... 20,000
Audit fees................................. 15,000
Directors' fees............................ 1,000
Legal fees................................. 500
Miscellaneous expenses..................... 308
---------------
Total expenses............................. 3,345,799
---------------
NET INVESTMENT INCOME........................ 14,573,042
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 2,389,643
Futures.................................. 11,348,745
---------------
13,738,388
---------------
Net change in unrealized appreciation on:
Investments.............................. 311,858,680
Futures.................................. (1,457,675)
---------------
310,401,005
---------------
NET GAIN ON INVESTMENTS...................... 324,139,393
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 338,712,435
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 14,573,042 $ 24,969,455
Net realized gain on investments....................................................... 13,738,388 12,465,185
Net change in unrealized appreciation on investments................................... 310,401,005 226,522,837
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 338,712,435 263,957,477
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (6,830,346) (25,100,782)
Distributions from net realized capital gains.......................................... -- (17,273,757)
Distributions in excess of net realized capital gains.................................. -- (196,333)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (6,830,346) (42,570,872)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,610,505 and 14,156,009 shares, respectively]..................... 223,936,307 310,087,550
Capital stock issued in reinvestment of dividends and distributions [265,759 and
1,875,670 shares, respectively]....................................................... 6,830,346 42,570,872
Capital stock repurchased [(1,334,717) and (1,109,676) shares, respectively]........... (33,871,497) (23,942,788)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 196,895,156 328,715,634
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 528,777,245 550,102,239
NET ASSETS:
Beginning of period.................................................................... 1,581,380,307 1,031,278,068
------------------ -------------------
End of period.......................................................................... $ 2,110,157,552 $ 1,581,380,307
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A9
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,187,577,407).......................... $1,617,948,092
Cash....................................... 219,792
Interest and dividends receivable.......... 9,225,734
--------------
Total Assets............................. 1,627,393,618
--------------
LIABILITIES
Payable to investment adviser.............. 1,484,304
Payable for investments purchased.......... 453,942
Accrued expenses........................... 302,854
--------------
Total Liabilities........................ 2,241,100
--------------
NET ASSETS................................... $1,625,152,518
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 756,269
Paid-in capital, in excess of par........ 1,147,080,906
--------------
1,147,837,175
Undistributed net investment income........ 12,133,848
Accumulated net realized gains on
investments.............................. 34,810,810
Net unrealized appreciation on
investments.............................. 430,370,685
--------------
Net assets, June 30, 1997.................. $1,625,152,518
--------------
--------------
Net asset value and redemption price per
share, 75,626,899 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 21.49
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $216,981 foreign
withholding tax)......................... $ 22,830,853
Interest................................... 2,882,586
---------------
25,713,439
---------------
EXPENSES
Investment advisory fee.................... 2,858,841
Shareholders' reports...................... 116,000
Accounting fees............................ 44,000
Custodian expense.......................... 21,000
Audit fees................................. 12,000
Miscellaneous expenses..................... 1,849
Directors' fees............................ 1,000
---------------
Total expenses........................... 3,054,690
Less: custodian fee credit................. (14,324)
---------------
Net expenses............................. 3,040,366
---------------
NET INVESTMENT INCOME........................ 22,673,073
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 35,096,343
Net change in unrealized appreciation on
investments.............................. 182,243,487
---------------
NET GAIN ON INVESTMENTS...................... 217,339,830
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 240,012,903
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 22,673,073 $ 40,888,718
Net realized gain on investments....................................................... 35,096,343 35,305,154
Net change in unrealized appreciation on investments................................... 182,243,487 167,448,548
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 240,012,903 243,642,420
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (10,675,085) (49,702,706)
Distributions from net realized capital gains.......................................... (6,001,320) (35,958,853)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (16,676,405) (85,661,559)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,042,189 and 3,768,657 shares, respectively]...................... 59,734,000 65,526,000
Capital stock issued in reinvestment of dividends and distributions [878,273 and
4,848,028 shares, respectively]....................................................... 16,676,405 85,661,559
Capital stock repurchased [(1,955,785) and (3,172,162) shares, respectively]........... (38,069,000) (55,657,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 38,341,405 95,530,559
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 261,677,903 253,511,420
NET ASSETS:
Beginning of period.................................................................... 1,363,474,615 1,109,963,195
------------------ -------------------
End of period.......................................................................... $ 1,625,152,518 $ 1,363,474,615
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A10
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,019,334,597).......................... $5,475,604,129
Cash....................................... 43,403
Interest and dividends receivable.......... 16,929,818
Receivable for investments sold............ 1,265,084
--------------
Total Assets............................. 5,493,842,434
--------------
LIABILITIES
Payable to investment adviser.............. 5,848,344
Payable for investments purchased.......... 1,999,419
Accrued expenses........................... 1,503,636
Payable for capital stock repurchased...... 132,677
--------------
Total Liabilities........................ 9,484,076
--------------
NET ASSETS................................... $5,484,358,358
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,818,344
Paid-in capital, in excess of par........ 3,788,111,645
--------------
3,789,929,989
Undistributed net investment income........ 36,433,895
Accumulated net realized gains on
investments.............................. 201,724,710
Net unrealized appreciation on investments
and foreign currencies................... 1,456,269,764
--------------
Net assets, June 30, 1997.................. $5,484,358,358
--------------
--------------
Net asset value and redemption price per
share, 181,834,408 outstanding shares of
common stock (authorized 250,000,000
shares).................................. $ 30.16
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C>
INVESTMENT INCOME
Dividends (net of $875,560 foreign
withholding tax)......................... $ 42,293,442
Interest................................... 32,868,910
---------------
75,162,352
---------------
EXPENSES
Investment advisory fee.................... 11,330,858
Shareholders' reports...................... 408,000
Custodian expense.......................... 60,000
Accounting fees............................ 44,000
Audit fees................................. 43,000
Legal fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 855
---------------
Total expenses........................... 11,889,713
Less: custodian fee credit................. (48,908)
---------------
Net expenses............................. 11,840,805
---------------
NET INVESTMENT INCOME........................ 63,321,547
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on:
Investments.............................. 201,724,710
Foreign currencies....................... 81,727
---------------
201,806,437
---------------
Net change in unrealized appreciation on:
Investments.............................. 374,264,366
Foreign currencies....................... 233
---------------
374,264,599
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 576,071,036
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 639,392,583
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 63,321,547 $ 108,378,560
Net realized gain on investments and foreign currencies................................ 201,806,437 344,149,867
Net change in unrealized appreciation on investments and foreign currencies............ 374,264,599 282,410,872
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 639,392,583 734,939,299
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (30,209,733) (107,745,221)
Distributions from net realized capital gains.......................................... (32,529,334) (422,203,368)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (62,739,067) (529,948,589)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,382,381 and 13,547,538 shares, respectively]..................... 153,065,406 368,210,773
Capital stock issued in reinvestment of dividends and distributions [2,253,344 and
20,011,095 shares, respectively]...................................................... 62,739,067 529,948,589
Capital stock repurchased [(4,328,618) and (3,776,507) shares, respectively]........... (122,068,707) (102,985,123)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 93,735,766 795,174,239
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 670,389,282 1,000,164,949
NET ASSETS:
Beginning of period.................................................................... 4,813,969,076 3,813,804,127
------------------ -------------------
End of period.......................................................................... $ 5,484,358,358 $ 4,813,969,076
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A11
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
PRUDENTIAL JENNISON PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$270,422,944)............................ $ 333,722,142
Cash....................................... 975
Receivable for investments sold............ 2,345,051
Interest and dividends receivable.......... 228,584
--------------
Total Assets............................. 336,296,752
--------------
LIABILITIES
Payable for investments purchased.......... 3,748,039
Payable to investment adviser.............. 436,713
Accrued expenses........................... 52,156
--------------
Total Liabilities........................ 4,236,908
--------------
NET ASSETS................................... $ 332,059,844
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 198,412
Paid-in capital, in excess of par........ 265,267,991
--------------
265,466,403
Undistributed net investment income........ 225,423
Accumulated net realized gains on
investments.............................. 3,068,820
Net unrealized appreciation on
investments.............................. 63,299,198
--------------
Net assets, June 30, 1997.................. $ 332,059,844
--------------
--------------
Net asset value and redemption price per
share, 19,841,223 outstanding shares of
common stock (authorized 40,000,000
shares).................................. $ 16.74
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $45,970 foreign
withholding tax)......................... $ 1,108,513
Interest................................... 242,474
---------------
1,350,987
---------------
EXPENSES
Investment advisory fee.................... 802,523
Accounting fees............................ 26,000
Shareholders' reports...................... 22,000
Custodian expense.......................... 9,000
Audit fees................................. 2,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 976
Legal fees................................. 100
---------------
Total expenses........................... 863,599
Less: custodian fee credit................. (2,623)
---------------
Net expenses............................. 860,976
---------------
NET INVESTMENT INCOME........................ 490,011
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 6,161,331
Net change in unrealized appreciation on
investments.............................. 37,641,354
---------------
NET GAIN ON INVESTMENTS...................... 43,802,685
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 44,292,696
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 490,011 $ 270,664
Net realized gain (loss) on investments................................................ 6,161,331 (3,092,511)
Net change in unrealized appreciation on investments................................... 37,641,354 21,613,425
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 44,292,696 18,791,578
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (327,375) (373,490)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,494,205 and 11,292,685 shares, respectively]..................... 68,616,000 151,529,000
Capital stock issued in reinvestment of dividends and distributions [21,913 and 27,287
shares, respectively]................................................................. 327,375 373,490
Capital stock repurchased [(491,424) and (531,868) shares, respectively]............... (7,392,000) (6,868,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 61,551,375 145,034,490
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 105,516,696 163,452,578
NET ASSETS:
Beginning of period.................................................................... 226,543,148 63,090,570
------------------ -------------------
End of period.......................................................................... $ 332,059,844 $ 226,543,148
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A12
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
SMALL CAPITALIZATION STOCK PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$182,115,289)............................ $ 212,478,624
Cash....................................... 600,452
Interest and dividends receivable.......... 104,135
--------------
Total Assets............................. 213,183,211
--------------
LIABILITIES
Payable for investments purchased.......... 566,386
Payable to investment adviser.............. 182,117
Due to broker -- variation margin.......... 67,425
Accrued expenses........................... 64,619
--------------
Total Liabilities........................ 880,547
--------------
NET ASSETS................................... $ 212,302,664
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 138,798
Paid-in capital in excess of par......... 176,183,247
--------------
176,322,045
Undistributed net investment income........ 368,656
Accumulated net realized gains on
investments.............................. 5,058,828
Net unrealized appreciation on
investments.............................. 30,553,135
--------------
Net assets, June 30, 1997.................. $ 212,302,664
--------------
--------------
Net asset value and redemption price per
share of 13,879,783 outstanding shares of
common stock (authorized 40,000,000
shares).................................. $ 15.30
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $482 foreign withholding
tax)..................................... $ 747,688
Interest................................... 373,352
---------------
1,121,040
---------------
EXPENSES
Investment advisory fee.................... 338,496
Accounting fees............................ 36,000
Custodian expense.......................... 35,000
Shareholders' reports...................... 14,000
Audit fees................................. 1,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 1,399
---------------
Total expenses........................... 426,895
Less: custodian fee credit................. (397)
---------------
Net expenses............................. 426,498
---------------
NET INVESTMENT INCOME........................ 694,542
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on:
Investments.............................. 3,930,375
Futures.................................. 1,087,960
---------------
5,018,335
---------------
Net change in unrealized appreciation on:
Investments.............................. 15,073,615
Futures.................................. 232,850
---------------
15,306,465
---------------
NET GAIN ON INVESTMENTS...................... 20,324,800
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 21,019,342
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 694,542 $ 788,546
Net realized gain on investments....................................................... 5,018,335 2,844,341
Net change in unrealized appreciation on investments................................... 15,306,465 12,638,510
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 21,019,342 16,271,397
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (325,886) (821,179)
Distributions from net realized capital gains.......................................... (596,295) (2,604,153)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (922,181) (3,425,332)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,122,242 and 7,144,721 shares, respectively]...................... 43,927,999 92,968,000
Capital stock issued in reinvestment of dividends and distributions [70,040 and 259,822
shares, respectively]................................................................. 922,181 3,425,332
Capital stock repurchased [(36,085) and (692,228) shares, respectively]................ (543,000) (8,808,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 44,307,180 87,585,332
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 64,404,341 100,431,397
NET ASSETS:
Beginning of period.................................................................... 147,898,323 47,466,926
------------------ -------------------
End of period.......................................................................... $ 212,302,664 $ 147,898,323
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A13
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$507,170,994)............................ $ 671,065,239
Foreign currency, at value (cost:
$20,224,553)............................. 20,126,806
Receivable for investments sold............ 2,131,929
Forward currency contracts -- amount
receivable from counterparties........... 1,203,237
Receivable for capital stock sold.......... 980,462
Dividends and interest receivable.......... 898,858
Other assets............................... 561,757
--------------
Total Assets............................. 696,968,288
--------------
LIABILITIES
Payable for investments purchased.......... 17,354,835
Payable to investment adviser.............. 1,180,769
Bank overdraft............................. 406,525
Accrued expenses........................... 318,650
Payable for capital stock repurchased...... 82,000
--------------
Total Liabilities........................ 19,342,779
--------------
NET ASSETS................................... $ 677,625,509
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 339,602
Paid-in capital, in excess of par........ 492,739,762
--------------
493,079,364
Undistributed net investment income........ 3,621,935
Accumulated net realized gain on
investments.............................. 15,858,079
Net unrealized appreciation on investments
and foreign currencies................... 165,066,131
--------------
Net assets, June 30, 1997.................. $ 677,625,509
--------------
--------------
Net asset value and redemption price per
share of 33,960,199 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 19.95
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $497,908 foreign
withholding tax)......................... $ 4,955,891
Interest................................... 331,992
---------------
5,287,883
---------------
EXPENSES
Investment advisory fee.................... 2,270,416
Custodian expense.......................... 215,000
Accounting fees............................ 106,000
Shareholders' reports...................... 65,000
Audit fees................................. 4,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 996
Legal fees................................. 200
---------------
Total expenses............................. 2,662,612
---------------
NET INVESTMENT INCOME........................ 2,625,271
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES
Net realized gain on:
Investments.............................. 15,860,036
Foreign currencies....................... 659,433
---------------
16,519,469
---------------
Net change in unrealized appreciation on:
Investments.............................. 53,284,579
Foreign currencies....................... 557,953
---------------
53,842,532
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 70,362,001
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 72,987,272
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 2,625,271 $ 3,109,922
Net realized gain on investments and foreign currencies................................ 16,519,469 19,772,496
Net change in unrealized appreciation on investments and foreign currencies............ 53,842,532 65,301,446
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 72,987,272 88,183,864
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (1,190,321) (3,109,922)
Distributions from net realized capital gains.......................................... (1,184,014) (19,019,488)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (2,374,335) (22,129,410)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,999,930 and 7,307,979 shares, respectively]...................... 55,082,123 123,508,873
Capital stock issued in reinvestment of dividends and distributions [131,150 and
1,310,966 shares, respectively]....................................................... 2,374,335 22,129,410
Capital stock repurchased [(1,690,535) and (1,820,909) shares, respectively]........... (31,073,925) (30,587,232)
Initial capitalization repurchased [0 and (36,088) shares, respectively]............... 0 (575,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 26,382,533 114,476,051
------------------ -------------------
TOTAL INCREASE IN NET ASSETS........................................................... 96,995,470 180,530,505
NET ASSETS:
Beginning of period.................................................................... 580,630,039 400,099,534
------------------ -------------------
End of period.......................................................................... $ 677,625,509 $ 580,630,039
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A14
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$386,579,305)............................ $ 447,880,987
Cash....................................... 20,249
Receivable for investments sold............ 904,155
Interest and dividends receivable.......... 879,248
--------------
Total Assets............................. 449,684,639
--------------
LIABILITIES
Payable to investment adviser.............. 496,474
Payable for investments purchased.......... 419,677
Accrued expenses........................... 105,856
--------------
Total Liabilities........................ 1,022,007
--------------
NET ASSETS................................... $ 448,662,632
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 237,521
Paid-in capital, in excess of par........ 377,978,302
--------------
378,215,823
Undistributed net investment income........ 549,219
Accumulated net realized gain on
investments.............................. 8,589,157
Net unrealized appreciation on investments
and foreign currencies................... 61,308,433
--------------
Net assets, June 30, 1997.................. $ 448,662,632
--------------
--------------
Net asset value and redemption price per
share of 23,752,146 outstanding shares of
common stock (authorized 75,000,000
shares).................................. $ 18.89
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $156,653 foreign
withholding tax)......................... $ 2,280,426
Interest................................... 187,784
---------------
2,468,210
---------------
EXPENSES
Investment advisory fee.................... 993,141
Accounting fees............................ 42,000
Shareholders' reports...................... 36,000
Custodian expense.......................... 16,000
Audit fees................................. 4,000
Directors' fees............................ 1,000
Miscellaneous expenses..................... 1,080
---------------
Total expenses........................... 1,093,221
---------------
NET INVESTMENT INCOME........................ 1,374,989
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on:
Investments.............................. 8,654,420
Foreign currencies....................... (1,916)
---------------
8,652,504
---------------
Net change in unrealized appreciation on:
Investments.............................. (16,886,885)
Foreign currencies....................... 6,771
---------------
(16,880,114)
---------------
NET LOSS ON INVESTMENTS AND FOREIGN
CURRENCIES................................... (8,227,610)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 6,852,621)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 1,374,989 $ 2,785,067
Net realized gain on investments and foreign currencies................................ 8,652,504 55,113,208
Net change in unrealized appreciation (depreciation) on investments and foreign
currencies............................................................................ (16,880,114) 36,052,334
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (6,852,621) 93,950,609
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (872,426) (2,609,058)
Distributions from net realized capital gains.......................................... (11,800,773) (50,936,196)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (12,673,199) (53,545,254)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [1,371,071 and 2,914,136 shares, respectively]...................... 26,789,015 60,203,000
Capital stock issued in reinvestment of dividends and distributions [714,399 and
2,739,322 shares, respectively]....................................................... 12,673,199 53,545,254
Capital stock repurchased [(512,738) and (448,045) shares, respectively]............... (9,659,000) (8,940,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 29,803,214 104,808,254
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 10,277,394 145,213,609
NET ASSETS:
Beginning of period.................................................................... 438,385,238 293,171,629
------------------ -------------------
End of period.......................................................................... $ 448,662,632 $ 438,385,238
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A15
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 53.7%
AC Acquisition Holding Co....................... 5.58% 08/19/97 $ 3,217 $ 3,192,567
American Home Products Corp..................... 5.60% 07/14/97 2,000 1,995,956
American Honda Finance Corp..................... 5.63% 07/24/97 4,592 4,575,483
American Honda Finance Corp..................... 5.63% 08/25/97 11,000 10,905,385
American Honda Finance Corp..................... 5.65% 07/28/97 1,395 1,389,089
American Honda Finance Corp..................... 5.65% 08/12/97 3,000 2,980,225
Aristar, Inc.................................... 5.63% 07/01/97 4,354 4,354,000
Aristar, Inc.................................... 5.66% 07/07/97 1,365 1,363,712
Associates Corp. of North America............... 5.55% 07/03/97 6,000 5,998,150
Associates Corp. of North America............... 6.19% 07/01/97 17,000 17,000,000
Bank of Montreal................................ 5.53% 07/07/97 9,000 8,991,705
Barton Capital Corp............................. 5.65% 08/15/97 7,126 7,075,673
Bear, Stearns Cos., Inc......................... 5.57% 07/07/97 8,000 7,992,573
Chrysler Financial Corp......................... 5.70% 08/21/97 20,000 19,838,500
CIT Group Holdings, Inc......................... 5.54% 07/07/97 26,000 25,975,993
Citicorp........................................ 5.70% 07/10/97 10,000 9,985,750
Coca Cola Enterprises, Inc...................... 5.59% 08/04/97 2,000 1,989,441
Coca Cola Enterprises, Inc...................... 5.66% 08/13/97 1,761 1,749,095
Corestates Capital Corp. (a).................... 5.63% 12/19/97 2,000 2,000,000
Countrywide Home Loan, Inc...................... 5.60% 08/07/97 5,000 4,971,222
Eiger Capital Corp.............................. 5.60% 07/22/97 4,018 4,004,874
Falcon Asset Securitization Corp................ 5.60% 07/10/97 3,345 3,340,317
Falcon Asset Securitization Corp................ 5.60% 08/22/97 2,875 2,851,744
Finova Capital Corp. (a)........................ 5.60% 07/09/97 2,000 1,997,511
Finova Capital Corp. (a)........................ 5.65% 07/25/97 5,000 4,981,167
Finova Capital Corp. (a)........................ 5.71% 07/15/97 5,000 4,988,897
Ford Motor Credit Co............................ 5.55% 07/09/97 31,000 30,961,767
General Electric Capital Corp................... 5.75% 10/27/97 20,000 19,623,056
General Motors Acceptance Corp.................. 5.82% 11/07/97 1,320 1,292,471
General Motors Acceptance Corp.................. 5.84% 10/20/97 2,300 2,258,585
GTE Funding, Inc................................ 5.55% 07/07/97 1,122 1,120,962
GTE Funding, Inc................................ 5.59% 07/23/97 1,000 996,584
GTE Corp........................................ 5.61% 07/22/97 4,000 3,986,910
ITT Hartford Group, Inc......................... 5.57% 07/01/97 8,390 8,390,000
John Deere Capital Corp......................... 5.54% 07/09/97 2,000 1,997,538
Johnson Controls, Inc........................... 5.63% 07/14/97 1,000 997,967
Lehman Brothers Holdings, Inc................... 5.75% 07/02/97 9,000 8,998,562
Lehman Brothers Holdings, Inc................... 6.40% 07/01/97 3,055 3,055,000
MCI Communications Corp......................... 5.45% 07/07/97 3,960 3,956,403
MCI Communications Corp......................... 5.54% 07/07/97 6,000 5,994,460
Mitsubishi International Corp................... 5.60% 07/16/97 1,000 997,667
National Bank of Canada......................... 5.41% 07/07/97 8,000 7,992,787
Nationwide Building Society..................... 5.57% 07/07/97 5,000 4,995,358
Newell Co....................................... 5.60% 08/20/97 2,000 1,984,444
NYNEX Credit Co................................. 5.60% 07/21/97 792 789,536
NYNEX Corp...................................... 6.30% 07/01/97 3,238 3,238,000
Preferred Receivables Funding Corp.............. 5.57% 07/08/97 5,000 4,994,585
Sears Roebuck Acceptance Corp................... 6.20% 07/01/97 6,000 6,000,000
Short Term Card Account Trust 1996-1 (a)........ 5.50% 01/15/98 24,000 24,000,000
Short Term Repackaged Asset Trust (a)........... 6.03% 12/15/97 9,000 8,999,119
Smith Barney, Inc............................... 5.55% 07/07/97 5,000 4,995,375
UBS Finance Corp................................ 6.20% 07/01/97 20,000 20,000,000
WCP Funding, Inc................................ 5.60% 07/14/97 12,000 11,975,733
--------------
361,081,898
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS -- 22.6%
Abbey National Treasury Services, PLC........... 5.60% 11/26/97 $ 10,000 $ 9,995,905
American General Finance Corp................... 6.10% 10/01/97 4,250 4,259,018
American General Finance Corp................... 6.32% 03/02/98 2,700 2,720,101
Beneficial Corp., M.T.N. (a).................... 5.50% 08/05/97 9,000 9,000,550
Capital Equipment Receivable Trust.............. 5.58% 10/15/97 944 944,396
Capital Equipment Receivable Trust.............. 5.60% 10/15/97 1,322 1,322,067
Chrysler Financial Corp......................... 6.01% 10/15/97 5,000 4,989,712
CIT Group Holdings, Inc......................... 6.16% 04/15/98 2,000 2,038,869
Countrywide Home Loan, Inc...................... 5.73% 07/08/97 9,475 9,475,000
Ford Motor Credit Co............................ 6.14% 07/21/97 500 500,082
General Motors Acceptance Corp.................. 5.61% 07/10/97 5,000 5,001,385
General Motors Acceptance Corp.................. 5.81% 10/08/97 1,000 999,815
General Motors Acceptance Corp. (a)............. 5.56% 02/02/98 11,000 10,997,621
General Motors Acceptance Corp. (a)............. 5.78% 02/02/98 2,000 2,003,264
Goldman Sachs Group, L.P., M.T.N. (a)........... 5.62% 06/29/98 30,000 30,000,000
Hertz Corp...................................... 6.31% 02/02/98 2,000 2,022,097
Household Finance Corp.......................... 6.10% 10/15/97 1,000 1,000,412
International Lease Finance Corp. (a)........... 5.56% 10/15/97 1,000 1,001,077
International Lease Finance Corp. (a)........... 5.53% 10/15/97 3,000 3,003,447
Merrill Lynch & Co., Inc., M.T.N. (a)........... 5.44% 10/01/97 5,000 4,999,632
Merrill Lynch & Co., Inc., M.T.N. (a)........... 5.44% 10/16/97 3,000 3,000,270
Morgan Stanley Group, Inc. (a).................. 3.41% 07/15/98 4,000 4,000,000
Morgan Stanley Group, Inc. (a).................. 3.53% 06/15/98 5,000 5,000,000
Morgan Stanley Group, Inc. (a).................. 3.59% 06/15/98 2,000 2,000,000
PNC Student Loan Trust 1 1997-2 (a)............. 5.63% 07/20/98 10,000 10,000,000
SMM Trust Notes 1997-Q.......................... 5.68% 01/15/98 20,000 20,000,000
Transamerica Finance Corp....................... 6.14% 08/15/97 1,750 1,751,225
--------------
152,025,945
--------------
TIME DEPOSIT - EURODOLLAR -- 1.0%
First National Bank of Chicago.................. 6.25% 07/01/97 6,762 6,762,000
--------------
BANK NOTES -- 7.0%
American Express Centurion Bank (a)............. 5.37% 10/09/97 1,000 999,973
American Express Centurion Bank (a)............. 5.41% 12/09/97 3,000 3,000,000
American Express Centurion Bank (a)............. 5.52% 10/24/97 2,000 2,000,323
American Express Centurion Bank (a)............. 5.61% 12/22/97 1,000 999,953
Comerica Bank of Detroit (a).................... 5.40% 02/11/98 9,000 8,996,248
Comerica Bank of Detroit (a).................... 5.40% 02/05/98 2,000 1,999,246
First Bank, N.A., Minneapolis (a)............... 5.35% 10/24/97 2,000 1,999,564
First Bank, N.A., Minneapolis (a)............... 5.40% 04/10/98 4,000 3,998,793
First Bank, N.A., Minneapolis (a)............... 5.59% 10/15/97 4,000 4,000,000
Key Bank, N.A. (a).............................. 5.63% 08/21/97 4,000 3,999,881
Morgan Guaranty Trust Co. (a)................... 5.45% 11/14/97 4,000 3,998,913
National Australia Bank, Ltd.................... 5.63% 10/03/97 1,000 1,000,147
Wachovia Bank, N.A.............................. 6.14% 06/01/98 10,000 10,000,000
--------------
46,993,041
--------------
CERTIFICATES OF DEPOSIT-DOMESTIC -- 0.3%
Corestates Bank, N.A. (a)....................... 5.58% 12/18/97 1,000 999,789
Corestates Bank, N.A. (a)....................... 5.53% 01/23/98 1,000 1,000,000
--------------
1,999,789
--------------
CERTIFICATE OF DEPOSIT-EURODOLLAR -- 2.7%
Bayerische Landesbank Girozentrate.............. 5.48% 07/07/97 2,000 2,000,004
Berliner Handels -- UND Frankfurter Bank........ 5.61% 08/11/97 6,000 6,000,067
Berliner Handels -- UND Frankfurter Bank........ 5.71% 07/21/97 1,000 1,000,005
Deutsche Bank................................... 5.54% 07/02/97 8,000 8,000,000
Toronto Dominion Bank........................... 5.48% 07/07/97 1,000 999,996
--------------
18,000,072
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 12.3%
ABN-Amro Bank................................... 5.975% 12/23/97 2,500 2,495,230
Commerzbank..................................... 6.11% 05/27/98 8,000 7,997,583
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B2
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
Creditanstalt Bankverein........................ 5.56% 07/07/97 $ 10,000 $ 10,000,008
Deutsche Bank................................... 5.60% 07/08/97 1,000 1,000,042
Landesbank Hessen-Thuringen Girozentrale........ 6.00% 06/19/98 10,000 9,994,454
Landesbank Hessen-Thuringen Girozentrale........ 6.25% 04/01/98 10,000 9,991,333
National Westminister Bank, PLC................. 6.11% 05/26/98 5,000 4,997,850
Royal Bank of Canada............................ 5.97% 06/17/98 5,000 4,997,242
Societe Generale................................ 5.70% 12/22/97 14,000 14,003,220
Societe Generale................................ 6.04% 06/16/98 10,000 9,997,252
Societe Generale................................ 6.25% 05/06/98 2,000 1,998,996
Swiss Bank Corp................................. 6.00% 03/19/98 5,000 4,999,317
--------------
82,472,527
--------------
TOTAL INVESTMENTS -- 99.6%
(amortized cost: $669,335,272; (b))........................................... 669,335,272
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%................................... 2,873,710
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 672,208,982
</TABLE>
The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (West German Stock Company)
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
(a) Indicates a variable rate security. The maturity date presented for these
instruments is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at June 30, 1997.
(b) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
<TABLE>
<S> <C> <C>
The industry classification of portfolio holdings and other assets in excess of liabilities shown
as a percentage of net assets as of June 30, 1997 was as follows:
Commercial Bank 35.3%
Short Term Business Credit 14.7%
Personal Credit 13.2%
SEC Brokers/Dealers 10.7%
Asset backed 8.1%
Fire Insurance 4.7%
Mortgage Banker 3.3%
Phone Communication 2.9%
Home Loans 2.1%
BHC U.S. 1.7%
Pharmaceutical 0.8%
Equipment Rental & Leasing 0.6%
Chemical & Allied Products 0.6%
Metal Cans 0.3%
Auto Rental & Leasing 0.3%
Regulation Controls 0.2%
Commodity Trading Firms 0.1%
------------
99.6%
Other assets in excess of liabilities 0.4%
------------
100.0%
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B3
<PAGE>
DIVERSIFIED BOND PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 98.6%
<S> <C> <C> <C> <C> <C>
MOODY'S INTEREST MATURITY AMOUNT VALUE
RATING RATE DATE (000) (NOTE 2)
LONG-TERM BONDS
<CAPTION>
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 0.3%
Agco Corp.,..................................... Ba1 8.50% 03/15/06 $ 2,250 $ 2,307,803
--------------
AIRLINES -- 5.0%
Boeing Co.,..................................... A1 8.75% 08/15/21 6,250 7,211,938
Delta Air Lines, Inc., M.T.N.................... Baa3 7.79% 12/01/98 1,000 1,019,570
Delta Air Lines, Inc., M.T.N.................... Baa3 8.38% 06/12/98 2,000 2,036,500
Delta Air Lines, Inc.,.......................... Baa3 9.875% 05/15/00 6,000 6,466,560
United Air Lines, Inc.,......................... Baa3 9.75% 08/15/21 4,500 5,372,910
United Air Lines, Inc.,......................... Baa3 10.67% 05/01/04 7,000 8,217,440
United Air Lines, Inc.,......................... Baa3 11.21% 05/01/14 5,000 6,545,950
--------------
36,870,868
--------------
BANKS AND SAVINGS & LOANS -- 6.7%
Banco de Commercio Exterior de Colombia, SA,
M.T.N., (Columbia)............................ Baa3 8.625% 06/02/00 2,000 2,065,000
Banco Ganadero, SA, M.T.N., (Colombia),......... Baa3 9.75% 08/26/99 4,100 4,294,750
Bangkok Bank, (Thailand)........................ A3 8.375% 01/15/27 12,000 11,454,000
Chase Manhattan Corp.,.......................... A1 8.00% 06/05/99 2,000 2,057,960
Chemical Bank,.................................. Aa3 6.625% 08/15/05 2,000 1,934,940
Compass Trust Bank,............................. A3 8.23% 01/15/27 4,500 4,451,872
First Tennessee National Corp., B.A.,........... A3 8.07% 01/06/27 4,500 4,382,887
Kansallis-Osake Pankki, N.Y., (Finland)......... A3 8.65% 12/29/49 5,000 5,187,500
Kansallis-Osake Pankki, N.Y., (Finland)......... A3 10.00% 05/01/02 5,000 5,607,250
Skandinaviska Enskilda Bank, (Sweden)........... Baa1 7.50% 03/29/49 5,000 4,975,000
Svenska Handelsbank, (Sweden)................... A1 7.125% 03/29/49 3,500 3,433,500
--------------
49,844,659
--------------
CABLE & PAY TELEVISION SYSTEMS -- 0.6%
Rogers Cablesystems, Inc........................ Ba3 10.00% 03/15/05 4,000 4,320,000
--------------
COMPUTERS -- 1.0%
Seagate Technology, Inc.,....................... Baa3 7.45% 03/01/37 5,000 5,023,800
Digital Equipment Corp.,........................ Ba1 7.125% 10/15/02 2,800 2,741,788
--------------
7,765,588
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.4%
RJR Nabico, Inc................................. Baa3 8.25% 07/01/04 3,000 2,985,000
--------------
FINANCIAL SERVICES -- 25.0%
Advanta Mortgage Loan Trust, Ser. 1994-3........ Aaa 8.49% 01/25/26 8,500 8,879,844
American General Finance, Inc.,................. A1 8.125% 03/15/46 15,000 15,097,050
Aon Capital Trust,.............................. A3 8.205% 01/01/27 9,000 9,235,980
Aristar, Inc.,.................................. A3 5.75% 07/15/98 2,000 1,992,540
Aristar, Inc.,.................................. Baa1 7.50% 07/01/99 2,000 2,039,240
Arkwright Corp.,................................ Baa3 9.625% 08/15/26 5,000 5,494,500
Chrysler Financial Corp.,....................... A3 9.50% 12/15/99 5,000 5,335,850
Conseco, Inc.,.................................. Ba2 8.70% 11/15/26 1,500 1,535,235
Conseco, Inc.,.................................. Ba2 8.796% 04/01/27 14,000 14,260,120
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa3 7.00% 06/15/00 9,000 9,063,090
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 7.875% 03/15/98 5,000 5,056,450
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 8.75% 12/15/99 3,000 3,143,430
Ford Motor Credit Co.,.......................... A1 5.75% 01/25/01 4,000 3,880,640
Ford Motor Credit Co.,.......................... A1 6.25% 02/26/98 3,000 3,004,230
General Motors Acceptance Corp.,................ A3 8.40% 10/15/99 3,700 3,852,625
Green Tree Financial Corp.,..................... NR 7.90% 03/15/28 7,694 7,827,443
J.P. Morgan & Co., Inc.,........................ Aa2 7.54% 01/15/27 4,000 3,827,080
Liberty Mutual Insurance Co.,................... A2 8.20% 05/04/07 8,250 8,787,982
Lumbermens Mutual Casualty Co.,................. Baa1 9.15% 07/01/26 5,000 5,466,025
Nationwide CSN Trust,........................... A1 9.875% 02/15/25 5,000 5,501,350
Polysindo Int'l. Finance Co., (Netherlands)..... Ba3 11.375% 06/15/06 4,000 4,405,000
PT Alatief Freeport Financial Co.,
(Netherlands)................................. Ba1 9.75% 04/15/01 5,750 6,239,670
Reliastar Financial Corp.,...................... A3 6.625% 09/15/03 5,000 4,901,300
Riggs National Corp.,........................... Baa3 8.875% 03/15/27 2,200 2,233,000
Salomon, Inc.,.................................. Baa1 6.50% 03/01/00 10,000 9,949,600
Salomon, Inc.,.................................. Baa1 6.59% 02/21/01 10,000 9,883,900
Salomon, Inc.,.................................. Baa1 7.25% 05/01/01 2,250 2,276,100
SunAmerica, Inc.,............................... Baa1 6.20% 10/31/99 5,000 4,960,400
Union Planters Corp.,........................... Baa1 8.20% 12/15/26 5,000 4,893,100
Vesta Insurance Group,.......................... Baa3 8.525% 01/15/27 12,000 12,228,000
--------------
185,250,774
--------------
FOREST PRODUCTS -- 0.8%
Westvaco Corp.,................................. A1 9.75% 06/15/20 5,000 6,153,350
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B4
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS(CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL -- 0.4%
Compania Sud Americana de Vapores, SA,
(Chile)....................................... NR 7.375% 12/08/03 $ 3,000 $ 2,940,000
--------------
MEDIA -- 15.6%
Grupo Televisa, SA, (Mexico).................... Ba3 Zero 05/15/08 6,500 4,550,000
Impsat Corp..................................... B2 12.125% 07/15/03 3,000 3,217,500
McLeod, Inc..................................... B3 Zero 03/01/07 5,000 3,187,500
News America Holdings, Inc.,.................... Baa3 7.50% 03/01/00 6,000 6,119,160
News America Holdings, Inc.,.................... Baa3 7.75% 12/01/45 7,000 6,552,070
Paramount Communications, Inc.,................. Ba2 7.50% 01/15/02 5,000 5,009,200
TCI Communications, Inc.,....................... Ba1 6.875% 02/15/06 10,000 9,458,300
TCI Communications, Inc.,....................... Ba1 8.75% 08/01/15 15,000 15,721,500
Tele-Communications, Inc.,...................... Ba1 7.875% 08/01/13 800 781,080
Tele-Communications, Inc.,...................... Ba1 10.125% 04/15/22 6,300 7,363,377
Time Warner, Inc.,.............................. Ba1 7.75% 06/15/05 9,800 9,959,250
Time Warner, Inc.,.............................. Ba1 8.18% 08/15/07 4,000 4,164,440
Time Warner, Inc.,.............................. Baa1 8.375% 07/15/33 6,000 6,126,660
Turner Broadcasting System, Inc.,............... Ba1 7.40% 02/01/04 13,500 13,533,750
Viacom, Inc.,................................... Ba2 7.75% 06/01/05 5,000 4,962,150
Total Access Communications, (Thailand)......... Ba1 8.375% 11/04/06 15,000 14,671,050
--------------
115,376,987
--------------
MISCELLANEOUS -- 2.4%
International Bank for Reconstruction and
Development,.................................. Aaa 12.375% 10/15/02 750 939,113
Reliance Industries, Ltd.,...................... Baa3 10.375% 06/24/16 7,000 7,857,500
Reliance Industries, Ltd.,...................... Baa3 10.50% 08/06/46 8,000 9,010,000
--------------
17,806,613
--------------
MISCELLANEOUS CONSUMER GROWTH -- 0.4%
Whitman Corp.,.................................. Baa2 7.50% 08/15/01 3,000 3,051,360
--------------
OFFICE EQUIPMENT -- 0.8%
Xerox Corp.,.................................... A2 8.00% 02/01/27 6,250 6,250,000
--------------
OIL & GAS -- 2.9%
B.J. Services Co.,.............................. Baa3 7.00% 02/01/06 5,000 4,905,000
Occidental Petroleum Corp.,..................... Baa2 10.125% 11/15/01 5,000 5,608,250
Occidental Petroleum Corp.,..................... Baa2 11.125% 08/01/10 5,000 6,572,850
Parker & Parsley Petroleum Co.,................. Baa3 8.25% 08/15/07 4,000 4,192,600
--------------
21,278,700
--------------
RAILROADS -- 1.8%
CSX Corp.,...................................... Baa2 7.95% 05/01/27 3,000 3,099,750
Norfolk Southern Corp.,......................... Baa1 7.80% 05/15/27 10,000 10,295,000
--------------
13,394,750
--------------
RESTAURANTS -- 1.2%
Darden Restaurants, Inc.,....................... Baa1 7.125% 02/01/16 10,000 8,869,900
--------------
RETAIL -- 3.4%
Federated Department Stores, Inc.,.............. Baa2 8.125% 10/15/02 6,250 6,524,500
Federated Department Stores, Inc.,.............. Baa2 8.50% 06/15/03 11,800 12,520,036
Kmart Corp.,.................................... Ba3 9.80% 06/15/98 2,000 2,030,000
Rite Aid Corp.,................................. A3 6.70% 12/15/01 4,000 3,948,500
--------------
25,023,036
--------------
UTILITIES -- 5.0%
Arkla, Inc., M.T.N.............................. Baa3 9.32% 12/18/00 2,000 2,116,940
Cleveland Electric Illuminating Company,........ Ba2 7.67% 07/01/04 5,000 5,018,750
Cleveland Electric Illuminating Company,........ Ba2 7.19% 07/01/00 4,000 4,014,160
Commonwealth Edison Co.,........................ Baa 7.625% 01/15/07 7,525 7,544,113
El Paso Electric Company,....................... Ba3 9.40% 05/01/11 4,000 4,354,840
Pennsylvania Power & Light Co.,................. A3 9.375% 07/01/21 1,150 1,273,694
Quezon Power, (Philippines)..................... Ba1 8.86% 06/15/17 8,000 8,000,000
Transco Energy Co.,............................. Baa2 9.375% 08/15/01 4,000 4,353,360
--------------
36,675,857
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.7%
Federal Farm Credit Bank,....................... 8.65% 10/01/99 150 157,266
Resolution Funding Corp.,....................... Zero 10/15/15 17,100 4,731,741
Resolution Funding Corp.,....................... 8.125% 10/15/19 700 785,750
Resolution Funding Corp.,....................... 8.625% 01/15/21 200 236,500
United States Treasury Notes, (c)............... 6.125% 07/31/00 10,000 9,965,600
United States Treasury Notes,................... 6.25% 01/31/02 2,500 2,486,325
United States Treasury Notes,................... 6.50% 11/15/26 8,400 8,056,104
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B5
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS(CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
United States Treasury Notes,................... 6.625% 06/30/01 $ 7,430 $ 7,499,619
United States Treasury Notes,................... 12.50% 08/15/14 5,500 8,087,585
--------------
42,006,490
--------------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES -- 4.3%
Federal National Mortgage Association,.......... Zero 07/24/06 9,000 4,893,750
10/01/16
-
Federal National Mortgage Association,.......... 9.00% 09/01/21 569 601,372
05/20/02
-
Government National Mortgage Association,....... 7.50% 02/15/26 25,641 26,044,941
--------------
31,540,063
--------------
FOREIGN GOVERNMENT BONDS -- 14.9%
City of St. Petersburg, (Russia)................ NR 9.50% 06/18/02 5,000 5,000,000
Republic of Argentina, (Argentina).............. B1 6.75% 03/31/05 10,780 9,318,596
Republic of Colombia, (Columbia)................ Baa3 8.00% 06/14/01 1,600 1,626,432
Republic of Colombia, (Columbia)................ Baa3 8.75% 10/06/99 3,500 3,660,545
Republic of Panama, (Panama).................... Ba1 3.50% (a) 07/17/14 8,000 6,170,000
Republic of Panama, (Panama).................... Ba1 7.875% (a) 02/13/02 11,000 10,931,250
Republic of Philippines, (Philippines).......... Ba1 8.60% 06/15/27 10,000 9,835,200
Republic of Poland, (Poland).................... Baa3 4.00% (a) 10/27/14 11,000 9,391,250
Republic of South Africa, (South Africa)........ Baa3 8.50% 06/23/17 6,500 6,467,500
Republic of Venezuela, (Venezuela).............. Ba2 6.75% (a) 12/18/07 17,000 15,767,500
Rio De Janeiro, (Brazil)........................ B1 10.375% 07/12/99 5,000 5,206,250
Russian Ministry of Finance, (Russia),.......... Ba2 10.00% 06/26/07 9,000 8,968,500
United Mexican States, (Mexico)................. Baa3 7.875% 08/06/01 12,000 12,019,200
United Mexican States, (Mexico)................. Ba2 11.50% 05/15/26 5,000 5,710,000
--------------
110,072,223
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $718,108,146)......................................................................... 729,784,021
--------------
SHORT-TERM INVESTMENT -- 1.0%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account.............. 5.88% 07/01/97 7,491 7,491,000
--------------
(cost $7,491,000; Note 5)
TOTAL INVESTMENTS BEFORE SHORT SALES -- 99.7%
(cost $725,599,146; Note 6)............................................................... 737,275,021
--------------
INVESTMENTS SOLD SHORT -- (1.7)%
United States Treasury Bond,.................... 6.625% 05/15/07 7,950 (8,015,826)
United States Treasury Bond,.................... 6.625% 06,30/02 1,500 (1,491,090)
United States Treasury Bond,.................... 7.25% 05/15/04 3,000 (3,127,020)
--------------
(proceeds $12,645,897; Note 2)............................................................ (12,633,936)
--------------
TOTAL INVESTMENTS, NET OF SHORT SALES -- 97.9%................................................ 724,641,085
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (D) -- 0.1%........................................ 370,344
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES -- 2.0%........................................... 14,840,400
--------------
TOTAL NET ASSETS -- 100.0%.................................................................... $ 739,851,829
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
B.A. Bankers' Acceptances
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Indicates a variable rate security.
(b) Deposited with the custodian to cover on open short sale transaction.
(c) Security segregated as collateral for futures contracts.
(d) Open future contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Long
Positions:
341 U.S. T-Note Sep 97 $36,785,375 $36,310,688 ($474,687)
450 U.S. Bond Sep 97 $49,978,125 $48,928,188 ($1,049,938)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B6
<PAGE>
GOVERNMENT INCOME PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 96.4% INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 5.2%
Chase Manhattan Credit Card Master Trust, Series
1995-2 (a).................................... 5.735% 08/15/01 $ 12,500 $ 12,503,875
Equicon Home Equity Loan Trust, Series 1994-2... 7.85% 03/18/14 1,785 1,815,001
Merck & Co...................................... 5.76% 05/03/37 8,000 8,081,520
Team Financing Corp., Series 1997-1, Class A
(b)........................................... 7.35% 05/15/03 10,000 10,150,000
--------------
32,550,396
--------------
COLLATERALIZED MORTGAGE OBLIGATION -- 2.3%
Main Place Funding (b).......................... 5.877% 07/17/98 10,000 10,012,500
--------------
FOREIGN GOVERNMENT BONDS -- 3.4%
United Mexican States........................... 7.563% 08/06/01 14,500 14,523,200
--------------
MORTGAGE PASS-THROUGHS -- 30.6%
Federal Home Loan Mortgage Corp., ARM (a)....... 7.387% 06/01/25 9,661 9,983,630
Federal National Mortgage Association........... 6.25% 8/12/03 15,000 14,519,550
03/01/22
-
Federal National Mortgage Association........... 8.00% 05/01/26 23,849 24,423,337
05/01/24
-
Federal National Mortgage Association........... 8.50% 04/01/25 27,634 28,783,874
02/01/25
-
Federal National Mortgage Association........... 9.00% 04/01/25 11,792 12,470,235
12/15/25
-
Government National Mortgage Association........ 7.50% 02/15/26 19,018 19,102,593
09/15/23
-
Government National Mortgage Association........ 8.00% 10/15/25 21,128 21,669,686
--------------
130,952,905
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 54.9%
03/15/06
-
Israel AID...................................... Zero 08/15/09 38,272 18,849,059
Resolution Funding Corp......................... Zero 07/15/16 30,000 7,860,900
Resolution Funding Corp......................... 8.125% 10/15/19 4,200 4,714,500
Small Business Administration Participation
Certificate................................... 7.15% 01/01/17 19,402 19,479,608
Small Business Administration Participation
Certificate................................... 7.20% 10/01/16 19,712 19,843,697
Tennesee Valley Authority....................... 3.375% 01/15/07 15,120 14,586,113
United States Treasury Bond..................... 8.125% 08/15/19 28,000 31,941,840
United States Treasury Bond..................... 12.00% 08/15/13 25,100 35,332,266
United States Treasury Note..................... 6.50% 08/31/01 10,000 10,048,400
United States Treasury Note..................... 6.625% 02/15/27 15,000 14,676,600
United States Treasury Note..................... 7.75% 12/31/99 35,000 36,252,300
United States Treasury Note..................... 10.625% 08/15/15 5,000 6,954,700
United States Treasury Note..................... 6.50% 11/15/26 5,000 4,795,300
--------------
225,335,283
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $413,551,473)........................................................... 413,374,284
--------------
SHORT-TERM INVESTMENT -- 2.1%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account.............. 5.88% 07/01/97 8,841 8,841,000
--------------
(cost $8,841,000)
TOTAL INVESTMENTS -- 98.5%
(cost $422,392,473; Note 6)................................................... 422,215,284
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C).................................. 28,125
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%................................... 6,455,580
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 428,698,989
--------------
--------------
</TABLE>
(a) The interest rate shown reflects the current rate of a variable rate
instrument.
(b) Private placement restricted as for resale (represents 2.4% of net assets).
(c) Open futures contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Short
position:
U.S. Treasury
50 Bond Sep 97 $5,436,406 $5,553,124 ($116,718)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B7
<PAGE>
ZERO COUPON BOND 2000 PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 97.1% INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS
Federal National Mortgage Association........... Zero 01/24/02 $ 7,777 $ 5,796,276
Federal National Mortgage Association........... Zero 07/24/02 4,527 3,262,246
United States Treasury Bond..................... Zero 02/15/00 5,000 4,255,900
United States Treasury Bond..................... Zero 11/15/00 16,780 13,599,519
United States Treasury Bond..................... Zero 02/15/02 7,050 5,275,374
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $31,188,973)............................................................ 32,189,315
--------------
SHORT-TERM INVESTMENT -- 3.1%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account, (Note 5).... 5.88% 07/01/97 1,018 1,018,000
--------------
TOTAL INVESTMENTS -- 100.2%
(cost $32,206,973; Note 6).................................................... 33,207,315
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%) (54,020)
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 33,153,295
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B8
<PAGE>
ZERO COUPON BOND 2005 PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 99.7% INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 99.7%
Federal National Mortgage Association........... Zero 01/24/05 $ 1,400 $ 846,118
Federal National Mortgage Association........... Zero 01/24/06 2,320 1,302,100
Financing Corp.................................. Zero 03/07/04 3,350 2,147,618
Resoluton Funding Corp.......................... Zero 07/15/07 4,350 2,227,418
United States Treasury Bond..................... Zero 11/15/04 11,000 6,820,220
United States Treasury Bond..................... Zero 05/15/05 14,000 8,384,180
United States Treasury Bond..................... Zero 11/15/05 2,000 1,159,840
United States Treasury Bond..................... Zero 02/15/06 7,000 3,981,740
United States Treasury Bond..................... Zero 05/15/06 11,000 6,153,730
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $31,279,274; Note 6).................................................... 33,022,964
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3% 87,258
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 33,110,222
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B9
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 93.8%
VALUE
COMMON STOCKS -- 32.8% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.2%
AlliedSignal, Inc............................... 233,600 $ 19,622,400
Boeing Co....................................... 239,600 12,713,775
GenCorp, Inc.................................... 105,000 2,428,125
Litton Industries, Inc. (a)..................... 40,300 1,946,994
Parker-Hannifin Corp............................ 30,650 1,860,072
UNC, Inc. (a)................................... 46,500 680,062
United Technologies Corp........................ 193,600 16,068,800
--------------
55,320,228
--------------
AIRLINES -- 0.3%
AMR Corp. (a)................................... 114,600 10,600,500
USAir Group, Inc. (a)........................... 120,600 4,221,000
--------------
14,821,500
--------------
AUTOS - CARS & TRUCKS -- 0.4%
Chrysler Corp................................... 155,100 5,089,219
Ford Motor Co................................... 49,400 1,864,850
General Motors Corp............................. 77,500 4,315,781
Mascotech, Inc.................................. 100,800 2,104,200
Smith (A.O.) Corp............................... 75,000 2,667,187
Titan International, Inc........................ 108,050 1,904,381
--------------
17,945,618
--------------
BANKS AND SAVINGS & LOANS -- 1.2%
BankAmerica Corp................................ 94,700 6,114,069
Chase Manhattan Corp............................ 199,700 19,383,381
First Union Corp.,.............................. 179,800 16,631,500
PNC Bank Corp.,................................. 299,500 12,466,687
--------------
54,595,637
--------------
CHEMICALS -- 0.8%
E.I. du Pont de Nemours & Co.................... 231,600 14,561,850
Ferro Corp...................................... 95,900 3,554,294
IMC Global, Inc................................. 249,600 8,736,000
M.A. Hanna Co................................... 109,950 3,167,934
Millennium Chemicals, Inc. (a).................. 156,327 3,556,439
OM Group, Inc................................... 67,600 2,239,250
--------------
35,815,767
--------------
CHEMICALS - SPECIALTY -- 0.6%
Morton International, Inc....................... 419,300 12,657,619
Praxair, Inc.................................... 289,500 16,212,000
--------------
28,869,619
--------------
COMMERCIAL SERVICES -- 0.0%
BW/IP, Inc. (Class 'A' Stock)................... 60,400 1,226,875
IMO Industries, Inc. (a)........................ 100,100 588,087
--------------
1,814,962
--------------
COMPUTER SERVICES -- 1.4%
Cabletron Systems, Inc. (a)..................... 39,500 1,118,344
Cadence Design Systems, Inc. (a)................ 509,200 17,058,200
Ceridian Corp. (a).............................. 389,400 16,452,150
Computer Associates International, Inc.......... 229,600 12,785,850
Computer Sciences Corp. (a)..................... 64,500 4,652,062
Oracle Corp. (a)................................ 242,300 12,205,862
--------------
64,272,468
--------------
COMPUTERS -- 1.3%
Compaq Computer Corp. (a)....................... 162,100 16,088,425
Digital Equipment Corp. (a)..................... 98,000 3,472,875
International Business Machines Corp.,.......... 203,300 18,335,118
Sun Microsystems, Inc. (a)...................... 609,000 22,666,219
--------------
60,562,637
--------------
CONSTRUCTION -- 0.2%
Halter Marine Group,............................ 19,343 464,232
Oakwood Homes Corp.............................. 148,600 3,566,400
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Standard Pacific Corp........................... 164,400 $ 1,685,100
Webb Corp....................................... 149,800 2,434,250
--------------
8,149,982
--------------
CONSUMER SERVICES -- 0.1%
ADT Ltd. (a).................................... 96,100 3,171,300
SPS Transaction Services, Inc. (a).............. 31,200 577,200
--------------
3,748,500
--------------
CONTAINERS & PACKAGING -- 0.0%
Sealed Air Corp. (a)............................ 9,300 441,750
--------------
COSMETICS & SOAPS -- 0.3%
Procter & Gamble Co............................. 99,800 14,096,750
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.1%
RJR Nabisco Holdings Corp....................... 132,000 4,356,000
--------------
DIVERSIFIED OPERATIONS -- 1.0%
Cognizant Corp.................................. 319,300 12,931,650
Energy Group, PLC, ADR, (United Kingdom)........ 53,662 2,273,927
General Electric Co............................. 459,200 30,020,200
Whitman Corp.................................... 141,700 3,586,781
--------------
48,812,558
--------------
DRUGS AND MEDICAL SUPPLIES -- 3.8%
Amgen, Inc. (a)................................. 383,900 22,314,187
Baxter International, Inc....................... 279,500 14,603,875
Biogen, Inc. (a)................................ 586,600 19,871,075
Guidant Corp.................................... 186,000 15,810,000
Johnson & Johnson............................... 109,800 7,068,375
Medtronic, Inc.................................. 207,600 16,815,600
Merck & Co., Inc................................ 198,200 20,513,700
Novartis Corp., AG ADR (Switzerland)............ 179,700 14,376,000
Pfizer, Inc.,................................... 109,000 13,025,500
Smithkline Beecham, PLC, ADR (United Kingdom)... 229,600 21,037,100
United States Surgical Corp..................... 56,700 2,112,075
Warner-Lambert Co............................... 79,900 9,927,575
--------------
177,475,062
--------------
ELECTRICAL EQUIPMENT -- 0.2%
Belden, Inc..................................... 71,600 2,438,875
Westinghouse Electric Corp...................... 248,200 5,739,625
--------------
8,178,500
--------------
ELECTRONICS -- 0.6%
Honeywell, Inc.................................. 259,500 19,689,562
Maxim Integrated Products, Inc. (a)............. 109,800 6,244,875
--------------
25,934,437
--------------
ENGINEERING & CONSTRUCTION -- 0.0%
Giant Cement Holdings, Inc. (a)................. 63,600 1,192,500
--------------
ENVIRONMENTAL SERVICES -- 0.5%
U.S.A. Waste Services, Inc. (a)................. 573,800 22,163,025
--------------
FINANCIAL SERVICES -- 1.8%
Federal National Mortgage Association........... 359,400 15,678,825
Lehman Brothers Holdings, Inc.,................. 266,500 10,793,250
Merrill Lynch & Co., Inc.,...................... 62,100 3,702,712
Morgan Stanley, Dean Witter, Discover & Co...... 365,290 15,730,301
Salomon, Inc.................................... 108,500 6,035,312
Schwab (Charles) Corp.,......................... 306,700 12,478,856
Signet Banking, Corp............................ 294,600 10,605,600
State Street Boston Corp........................ 159,700 7,386,125
--------------
82,410,981
--------------
FOOD & BEVERAGES -- 0.5%
Anheuser-Busch Companies, Inc................... 309,500 12,979,656
Quaker Oats Co.................................. 279,500 12,542,562
--------------
25,522,218
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B10
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 0.3%
Champion International Corp.,................... 101,000 $ 5,580,250
Louisiana-Pacific Corp.,........................ 101,000 2,133,625
Mead Corp....................................... 50,600 3,149,850
Willamette Industries, Inc...................... 36,900 2,583,000
--------------
13,446,725
--------------
HOSPITAL MANAGEMENT -- 0.5%
Healthsouth Corp., (a).......................... 858,500 21,408,844
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.2%
Gillette Co..................................... 71,600 6,784,100
Leggett & Platt, Inc............................ 61,200 2,631,600
--------------
9,415,700
--------------
HOUSING RELATED -- 0.1%
Hanson, PLC ADR (United Kingdom)................ 54,662 1,366,550
Owens Corning................................... 105,200 4,536,750
--------------
5,903,300
--------------
INSURANCE -- 2.5%
Aetna, Inc...................................... 199,700 20,444,287
Allstate Corp................................... 229,600 16,760,800
Berkley (WR) Corp............................... 30,100 1,772,137
Chubb Corp...................................... 239,600 16,023,250
CIGNA Corp...................................... 39,900 7,082,250
Equitable of Iowa Companies..................... 57,800 3,236,800
Financial Security Assurance Holdings, Ltd...... 36,400 1,417,325
PennCorp Financial Group, Inc................... 85,700 3,299,450
Provident Companies, Inc........................ 28,500 1,524,750
Reinsurance Group of America, Inc............... 82,200 4,726,500
TIG Holdings, Inc............................... 91,300 2,853,125
Travelers Group Inc............................. 233,600 14,731,400
Trenwick Group, Inc............................. 70,950 2,660,625
United Healthcare Corp.......................... 319,500 16,614,000
Western National Corp........................... 141,200 3,785,925
--------------
116,932,624
--------------
LEISURE -- 0.5%
Carnival Corp. (Class 'A' Stock)................ 439,300 18,121,125
Hilton Hotels Corp.............................. 263,800 7,007,187
--------------
25,128,312
--------------
MACHINERY -- 0.6%
Case Corp.,..................................... 312,400 21,516,550
DT Industries, Inc.............................. 38,200 1,365,650
Global Industrial Technologies, Inc. (a)........ 67,100 1,375,550
Paxar Corp...................................... 196,260 3,704,407
--------------
27,962,157
--------------
MANUFACTURING -- 0.7%
Illinois Tool Works, Inc........................ 199,700 9,972,519
Tyco International, Ltd......................... 326,100 22,684,331
--------------
32,656,850
--------------
MEDIA -- 0.3%
Central Newspapers, Inc.
(Class 'A' Stock)............................. 53,400 3,824,775
Gannett Co., Inc................................ 30,700 3,031,625
Houghton Mifflin Co............................. 31,300 2,089,275
Knight-Ridder, Inc.............................. 62,100 3,046,781
Lee Enterprises, Inc............................ 54,300 1,432,163
--------------
13,424,619
--------------
METALS - FERROUS -- 0.2%
Bethlehem Steel Corp. (a)....................... 144,300 1,506,131
LTV Corp........................................ 218,700 3,116,475
Material Sciences Corp., (a).................... 103,400 1,596,238
National Steel Corp. (Class 'B' Stock) (a)...... 45,000 756,563
USX-U.S. Steel Group............................ 64,900 2,275,556
--------------
9,250,963
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
METALS - NON FERROUS -- 0.3%
Aluminum Company of America..................... 124,400 $ 9,376,650
Potash Corp. of Saskatchewan, Inc. (Canada)..... 87,800 6,590,488
--------------
15,967,138
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.2%
Coltec Industries, Inc.......................... 46,600 908,700
Donaldson, Co................................... 58,200 2,211,600
IDEX Corp....................................... 64,200 2,118,600
Mark IV Industries, Inc......................... 92,342 2,216,208
Trinity Industries, Inc......................... 55,700 1,768,475
Wolverine Tube, Inc. (a)........................ 40,400 1,126,150
York International Corp......................... 28,700 1,320,200
--------------
11,669,933
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.4%
Unilever N.V., ADR, (United Kingdom)............ 83,900 18,290,200
--------------
OIL & GAS -- 1.2%
Basin Exploration, Inc. (a)..................... 18,500 143,375
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 94,500 1,665,563
Cross Timbers Oil Co............................ 317,500 6,111,875
Elf Aquitaine SA, ADR (France).................. 133,300 7,256,519
Enron Oil & Gas Co.............................. 51,600 935,250
Mesa, Inc., (a)................................. 467,100 2,685,825
Murphy Oil Corp................................. 29,600 1,443,000
Noble Affiliates Inc.,.......................... 214,000 8,279,125
Seagull Energy Corp. (a)........................ 65,600 1,148,000
Total SA, (Class 'B' Stock), (France)........... 139,700 7,072,313
Unocal Corp..................................... 429,300 16,662,206
Western Gas Resources, Inc.,.................... 110,000 2,145,000
--------------
55,548,051
--------------
OIL & GAS SERVICES -- 1.6%
Apache Corporation,............................. 549,100 17,845,750
Coflexip, ADR, (France)......................... 111,300 3,352,913
Halliburton Co.................................. 339,400 26,897,450
ICO, Inc........................................ 82,100 425,894
J. Ray McDermott, SA............................ 174,800 4,719,600
McDermott International, Inc.................... 331,100 9,663,981
Oryx Energy Co. (a)............................. 131,700 2,782,163
Parker & Parsley Petroleum Co................... 252,800 8,942,800
Weatherford Enterra, Inc. (a)................... 49,753 1,915,491
--------------
76,546,042
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Crescent Operating, Inc......................... 17,460 209,520
Crescent Real Estate Equities, Inc.............. 174,600 5,543,550
--------------
5,753,070
--------------
RETAIL -- 3.7%
American Stores Co.............................. 479,200 23,660,500
Bombay Company, Inc. (a)........................ 148,500 742,500
Charming Shoppes, Inc. (a)...................... 865,900 4,518,916
Costco Companies, Inc........................... 429,300 14,113,238
CVS Corp........................................ 259,500 13,299,375
Dillards, Inc. (Class 'A' Stock)................ 33,900 1,173,788
Federated Department Stores, Inc. (a)........... 387,400 13,462,150
Home Depot, Inc................................. 259,500 17,889,281
Jan Bell Marketing, Inc. (a).................... 161,500 393,656
K mart Corp. (a)................................ 319,300 3,911,425
Kroger Co. (a).................................. 559,100 16,213,900
Liz Claiborne, Inc.............................. 309,500 14,430,438
Rite Aid Corp................................... 199,700 9,960,038
Safeway, Inc. (a)............................... 449,200 20,719,350
Sears, Roebuck & Co............................. 299,500 16,098,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B11
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Tandy Corp...................................... 25,000 $ 1,400,000
Toys 'R' Us, Inc. (a)........................... 93,100 3,258,500
--------------
175,245,180
--------------
RUBBER -- 0.1%
Goodyear Tire & Rubber Co....................... 41,800 2,646,463
--------------
SOFTWARE -- 0.3%
Microsoft Corp., (a)............................ 99,800 12,612,225
--------------
TELECOMMUNICATIONS -- 1.5%
Alcatel Alsthom, ADR, (France).................. 133,400 3,368,350
Ascend Communications, Inc. (a)................. 287,500 11,320,313
Deutsche Telekom, ADR, (Germany)................ 48,100 1,160,413
Qualcomm Inc.................................... 329,400 16,758,225
Tellabs, Inc. (a)............................... 329,400 18,405,225
Worldcom Inc.................................... 638,900 20,444,800
--------------
71,457,326
--------------
TEXTILES -- 0.2%
Fieldcrest Cannon, Inc. (a)..................... 71,300 1,354,700
Fruit of the Loom, Inc. (Class 'A' Stock) (a)... 77,500 2,402,500
Owens-Illinois, Inc. (a)........................ 61,300 1,900,300
Phillips-Van Heusen Corp........................ 101,100 1,516,500
Tultex Corp. (a)................................ 94,200 576,975
--------------
7,750,975
--------------
TOBACCO -- 0.5%
Bat Industries, PLC, ADR, (United Kingdom)...... 112,500 2,060,156
Phillip Morris Co. Inc.,........................ 488,200 21,659,438
UST, Inc........................................ 38,600 1,071,150
--------------
24,790,744
--------------
TOYS -- 0.5%
Hasbro Inc...................................... 399,300 11,330,138
Mattel Inc...................................... 400,551 13,568,665
--------------
24,898,803
--------------
TRUCKING/SHIPPING -- 0.0%
Yellow Corp..................................... 76,800 1,718,400
--------------
TOTAL COMMON STOCKS
(cost $1,411,014,017).......................................... 1,536,925,343
--------------
PREFERRED STOCKS -- 0.9%
FINANCIAL SERVICES -- 0.7%
Central Hispano Corp............................ 225,900 6,099,300
Central Hispano Financial Services.............. 1,000,000 25,700,000
--------------
31,799,300
--------------
LEISURE -- 0.2%
Hilton Hotels (Conv.)........................... 427,800 10,801,950
--------------
OIL & GAS -- 0.0%
Mesa, Inc....................................... 169,210 1,131,592
--------------
TOTAL PREFERRED STOCKS
(cost $42,991,696)............................................. 43,732,842
--------------
PRINCIPAL
MOODY'S AMOUNT
LONG-TERM BONDS -- 60.1% RATING (000)
------------ ---------
AGRICULTURAL PRODUCTS & SERVICES -- 0.1%
Agco Corp.,
8.50%, 03/15/06............................... Ba1 $ 4,875 5,000,239
--------------
AIRLINES -- 3.2%
Delta Air Lines, Inc.,
10.125%, 05/15/10............................. Baa3 20,000 24,441,400
10.375%, 02/01/11............................. Baa3 28,405 35,521,021
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
United Air Lines, Inc.,
9.75%, 08/15/21............................... Baa3 $ 10,125 $ 12,089,047
10.67%, 05/01/04.............................. Baa3 46,665 54,780,977
11.21%, 05/01/14.............................. Baa3 18,433 24,132,299
--------------
150,964,744
--------------
ASSET-BACKED SECURITIES -- 0.2%
Banc One Credit Card Master Trust,
7.75%, 12/15/99............................... A2 5,100 5,138,250
Standard Credit Card Master Trust,
5.95%, 10/07/04............................... Aaa 4,650 4,450,887
--------------
9,589,137
--------------
BANKS AND SAVINGS & LOANS -- 3.8%
Banco de Commercio Exterior de Colombia, SA,
M.T.N., (Columbia),
8.625%, 06/02/00.............................. Baa3 5,500 5,678,750
Banco Ganadero, S.A., M.T.N., (Colombia),
9.75%, 08/26/99............................... Baa3 7,300 7,646,750
Bangkok Bank, (Thailand),
7.25%, 09/15/05............................... A3 10,000 9,531,300
8.25%, 03/15/16............................... A3 7,500 7,182,188
8.375%, 01/15/27.............................. A3 40,000 38,180,000
Kansallis-Osake Pankki, N.Y., (Finland),
6.125%, 05/15/98.............................. A3 6,160 6,153,840
8.65%, 01/01/49............................... A3 10,000 10,375,000
9.75%, 12/15/98............................... A3 16,950 17,716,988
Okobank, (Finland),
7.27%, 10/29/49............................... A3 9,000 9,180,000
7.375%, 09/27/49.............................. A3 18,750 19,078,125
7.387%, 10/29/49.............................. A3 3,500 3,570,000
Siam Commercila, (Thailand),
7.50%, 03/15/06............................... A3 14,500 13,898,613
Svenska Handelsbank, (Sweden),
7.125%, 03/29/49.............................. A1 10,000 9,810,000
Thai Farmers Bank, (Thailand),
8.25%, 08/21/16............................... A3 20,000 19,090,500
--------------
177,092,054
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.9%
Comcast Corp.,
8.375%, 05/01/07.............................. Ba1 5,000 5,193,750
Continental Cablevision, Inc.,
8.50%, 09/15/01............................... Baa2 5,545 5,856,740
TCI-Communications, Inc.,
6.875%, 02/15/06.............................. Ba1 10,000 9,458,300
8.25%, 01/15/03............................... Ba1 2,000 2,069,660
8.75%, 08/01/15............................... Ba1 15,450 16,193,145
9.80%, 02/01/12............................... Ba1 29,750 34,051,552
9.875%, 06/15/22.............................. Ba1 12,900 14,751,537
--------------
87,574,684
--------------
CONSULTING -- 1.3%
Comdisco, Inc., M.T.N.,
5.54%, 01/26/98............................... Baa1 12,500 12,459,500
6.09%, 11/09/98............................... Baa1 34,000 33,963,960
6.29%, 10/22/98............................... Baa1 5,000 5,008,600
6.689%, 05/22/98.............................. Baa1 9,000 9,038,880
--------------
60,470,940
--------------
CONSUMER PRODUCTS -- 0.4%
James River Corp.,
7.75%, 11/15/23............................... Baa3 17,800 17,011,282
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B12
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CONSUMER SERVICES -- 0.2%
Digital Equipment Corp.,
7.125%, 10/15/02.............................. Ba1 $ 6,700 $ 6,560,707
Service Corp. International,
7.00%, 06/01/15............................... Baa1 2,500 2,497,300
--------------
9,058,007
--------------
ENERGY -- 0.2%
Gulf Canada Resources, (Canada),
8.25%, 03/15/17............................... Ba1 7,500 7,687,500
--------------
FINANCIAL SERVICES -- 15.9%
American General
Finance, Inc.,
7.57%, 12/01/45............................... A1 22,200 20,956,800
8.125%, 03/15/46.............................. A1 50,000 50,323,500
Aon Corp.,
8.205%, 01/01/27.............................. A3 29,200 29,965,622
Arkwright Corp.,
9.625%, 08/15/26.............................. Baa3 8,000 8,791,200
Bear Stearns & Co.,
6.50%, 07/05/00............................... A2 20,000 19,946,200
Capital One Bank,
6.66%, 08/17/98............................... Baa3 10,050 10,096,029
Central Hispano Financial Services (Portugal)
6.125%, 04/28/05.............................. A3 10,000 10,009,000
Conseco, Inc.,
8.70%, 11/15/26............................... Ba2 37,513 38,393,669
8.796%, 04/01/27.............................. Ba2 20,000 20,371,600
Cullen Frost Capital Inc.,
8.42%, 02/01/27............................... NR 33,450 33,533,625
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa2 11,500 11,329,455
6.95%, 03/01/04............................... Baa2 27,500 27,242,187
7.00%, 06/15/00............................... Baa3 30,000 30,210,300
7.50%, 06/15/03............................... Baa2 5,000 5,098,650
7.875%, 03/15/98.............................. Baa2 9,925 10,037,053
8.75%, 12/15/99............................... Baa2 5,000 5,239,050
First Tennessee National Corp., B.A.,
8.07%, 01/06/27............................... A3 11,150 10,859,821
First Union Corp.,
9.45%, 06/15/99............................... A3 4,000 4,218,160
First USA Bank,
5.763%, 01/13/98.............................. Aa2 20,000 20,014,200
8.20%, 02/15/98............................... Aa2 11,500 11,628,800
Great Western Financial,
8.206%, 02/01/27.............................. Baa2 19,300 19,246,346
GreenPoint Financial Corp.,
9.10%, 06/01/27............................... Ba1 12,500 12,588,750
Lehman Brothers Holdings, Inc.,
6.71%, 10/12/99 (b)........................... Baa1 6,000 6,014,700
6.84%, 09/25/98 (b)........................... Baa1 30,000 30,217,500
6.89%, 10/10/00 (b)........................... Baa1 10,545 10,574,421
7.125%, 07/15/02 (b).......................... Baa1 16,000 15,949,440
Long Island Savings Bank,
7.00%, 06/13/02............................... Baa3 15,000 14,998,800
Lumbermens Mutual Casualty Co.,
9.15%, 07/01/26............................... Baa1 37,625 41,131,838
Merita Bank, Ltd.,
7.50%, 12/29/49............................... A3 15,000 15,017,100
PT Alatief Freeport Financial Co.,
(Netherlands),
9.75%, 04/15/01............................... Ba1 8,950 9,712,182
Riggs National Corp.,
8.875%, 03/15/27.............................. Baa3 14,650 14,869,750
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Salomon, Inc.,
6.50%, 03/01/00............................... Baa1 $ 38,500 $ 38,305,960
6.59%, 02/21/01............................... Baa1 42,500 42,006,575
6.75%, 02/15/03............................... Baa1 5,000 4,894,250
7.00%, 03/04/02............................... Baa1 32,000 31,851,200
7.25%, 05/01/01............................... Baa1 8,625 8,725,050
Sears Roebuck Acceptance Corp., M.T.N.,
6.38%, 02/16/99............................... A2 25,000 25,053,500
SunAmerica, Inc.,
6.20%, 10/31/99............................... Baa1 9,000 8,928,720
Union Planters Corp.,
8.20%, 12/15/26............................... Baa1 20,750 20,306,365
--------------
748,657,368
--------------
FOOD & BEVERAGE -- 0.4%
Coca-Cola Enterprises, Inc.,
6.50%, 11/15/97............................... A3 3,750 3,757,162
RJR Nabisco, Inc.,
8.125%, 09/27/05.............................. Baa3 5,000 4,983,350
8.50%, 07/01/07............................... Baa3 6,000 5,980,020
8.75%, 08/15/05............................... Baa3 4,000 4,059,800
--------------
18,780,332
--------------
INDUSTRIAL -- 0.9%
Compania Sud Americana de Vapores, S.A. (Chile),
7.375%, 12/08/03.............................. NR 7,600 7,448,000
Reliance Industries Ltd.,
8.125%, 09/27/05.............................. Baa3 15,000 15,037,500
8.25%, 01/15/27............................... Baa3 19,000 19,047,500
--------------
41,533,000
--------------
MEDIA -- 7.9%
News America Holdings, Inc.,
7.375%, 10/17/08.............................. Baa3 28,000 27,718,600
7.75%, 12/01/45............................... Baa3 19,000 17,784,190
8.15%, 10/17/36............................... Baa3 21,500 21,196,205
9.25%, 02/01/13............................... Baa3 25,550 28,487,483
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 6,425 6,436,822
Time Warner, Inc.,
7.75%, 06/15/05............................... Ba1 15,000 15,243,750
8.11%, 08/15/06............................... Ba1 23,250 24,142,568
8.18%, 08/15/07............................... Ba1 38,415 39,994,241
8.375%, 07/15/33.............................. Baa1 37,450 38,240,570
9.125%, 01/15/13.............................. Ba1 14,270 15,778,624
Turner Broadcasting Co.,
8.375%, 07/01/13.............................. Baa1 5,325 5,522,824
Viacom, Inc.,
6.75%, 01/15/03............................... Baa1 71,325 68,586,120
7.75%, 06/01/05............................... Ba2 62,025 61,555,471
--------------
370,687,468
--------------
OFFICE EQUIPMENT -- 1.0%
Xerox Corp.,
8.00%, 02/01/27............................... A2 48,450 48,450,000
--------------
OIL & GAS -- 0.8%
B.J. Services Co.,
7.00%, 02/01/06............................... Baa3 4,000 3,924,000
Empresa Colombia de Petroleos, (Colombia),
7.25%, 07/08/98............................... NR 8,250 8,250,000
Parker & Parsley
Petroleum Co.,
8.25%, 08/15/07............................... Baa3 3,000 3,144,450
Petroliam Nasional, (Malaysia),
6.625%, 10/18/01.............................. NR 22,000 21,805,080
--------------
37,123,530
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B13
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
PAPER & FOREST -- 0.4%
Fort Howard Corp.,
8.25%, 02/01/02............................... Baa3 $ 7,000 $ 7,315,000
9.25%, 03/15/01............................... Baa3 11,300 12,034,500
--------------
19,349,500
--------------
RAILROADS -- 0.5%
Norfolk Southern Corp. BD,
7.05%, 05/01/37............................... Baa1 25,000 25,375,000
--------------
RETAIL -- 2.6%
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Baa2 60,530 63,188,478
8.50%, 06/15/03............................... Baa2 36,600 38,833,332
10.00%, 02/15/01.............................. Baa2 15,350 16,839,717
Rite Aid Corp.,
6.70%, 12/15/01............................... A3 5,000 4,935,625
--------------
123,797,152
--------------
TECHNOLOGY -- 0.4%
Comdisco, Inc., M.T.N.,
6.375%, 11/30/01.............................. Baa1 21,500 21,046,135
--------------
TELECOMMUNICATIONS -- 2.9%
Southern New England Telephone Co.,
7.25%, 12/15/33............................... Aa2 35,000 33,075,000
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. Ba1 9,350 9,128,872
8.25%, 01/15/03............................... Ba1 20,000 20,696,600
9.25%, 04/15/02............................... Ba1 9,500 10,193,690
9.80%, 02/01/12............................... Ba1 21,500 24,608,685
Total Access Communications, (Thailand),
8.375%, 11/04/06.............................. Ba1 33,000 32,276,310
Worldcom, Inc.,
7.75%, 04/01/27............................... Ba1 4,500 4,709,430
--------------
134,688,587
--------------
TOBACCO -- 1.0%
Phillip Morris Co. Inc.,
6.375%, 02/01/06.............................. A2 17,675 16,713,126
7.20%, 02/01/07............................... A2 31,915 31,637,978
--------------
48,351,104
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.1%
Federal Express Corp., M.T.N.,
10.00%, 06/01/98.............................. Baa2 3,000 3,096,000
10.05%, 06/15/99.............................. Baa2 500 530,995
--------------
3,626,995
--------------
UTILITIES -- 2.6%
Arkla, Inc., M.T.N.,
9.25%, 12/18/97............................... Baa3 3,000 3,033,960
Clevland Electric Illuminating Company,
7.19%, 07/01/00............................... Ba2 19,000 19,067,260
Commonwealth Edison Co.,
7.375%, 01/15/04.............................. Baa3 41,000 40,942,190
7.375%, 01/15/07.............................. Baa 5,000 5,012,700
7.625%, 01/15/07.............................. Baa 16,000 16,040,640
Quezon Power, (Philippines),
8.86%, 06/15/17............................... Ba1 5,000 5,000,000
Southern California, Edison Co.,
7.125%, 07/15/25.............................. A1 35,000 32,850,650
--------------
121,947,400
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 4.1%
Federal National Mortgage Association,
7.17%, 06/26/07............................... $ 15,000 $ 14,920,350
Fleet Financial Group, Inc.,
7.35%, 05/15/03............................... 11,000 11,165,000
United States Treasury Notes,
5.875%, 01/31/99.............................. 35,000 34,928,950
5.875%, 02/15/04.............................. 25 24,223
6.25%, 07/31/98............................... 17,500 17,571,050
6.25%, 06/30/02............................... 17,400 17,296,644
6.25%, 02/15/03............................... 2,450 2,430,865
6.50%, 04/30/99............................... 11,000 11,082,500
6.50%, 10/15/06............................... 3,200 3,186,496
6.50%, 11/15/26............................... 37,600 36,060,656
7.125%, 09/30/99.............................. 38,000 38,777,860
7.25%, 05/15/04............................... 3,000 3,127,020
--------------
190,571,614
--------------
FOREIGN GOVERNMENT BONDS -- 7.3%
City of St. Petersburg, (Russia),
9.50%, 06/18/02............................... NR 10,000 10,000,000
Republic of Argentina,
6.75%, 03/31/05 (b)........................... B1 21,340 20,059,600
Republic of Colombia,
7.125%, 05/11/98.............................. Baa3 2,775 2,795,813
7.625%, 02/15/07.............................. Baa3 45,000 43,848,000
8.00%, 06/14/01............................... Baa3 2,250 2,287,170
8.75%, 10/06/99............................... Baa3 12,325 12,890,348
Republic of Panama,
3.50%, 07/17/14............................... Ba1 25,000 19,281,250
Republic of Poland,
4.00%, 10/27/14............................... Baa3 155,500 132,758,125
Republic of South Africa,
8.50%, 06/23/17............................... Baa3 31,000 30,845,000
Republic of Venezuela,
6.75%, 12/18/07............................... Ba2 36,000 33,390,000
Royal Bank of Canada,
6.75%, 10/24/11............................... Aa3 17,400 16,860,600
Russian Ministry of Finance,
10.00%, 06/26/07.............................. Ba2 17,000 16,940,500
--------------
341,956,406
--------------
TOTAL LONG-TERM BONDS
(cost $2,793,785,647).................................................... 2,820,390,178
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,247,791,360).................................................... 4,401,048,363
--------------
SHORT-TERM INVESTMENTS -- 5.5%
BANK-RELATED INSTRUMENTS
Avco Financial Services, Inc.,
5.46%, 11/17/97............................... P1 $ 2,000 1,999,891
--------------
BANK NOTES -- 0.2%
American Express Centurian Bank,
5.408%, 12/09/97.............................. NR 4,000 4,000,000
First Bank National Association,
5.28%, 10/24/97............................... P3 2,000 1,999,564
5.585%, 11/19/97.............................. P3 2,000 2,000,000
Key Bank, N.A.,
5.608%, 08/21/97.............................. NR 1,000 999,970
--------------
8,999,534
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B14
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - EURO -- 0.1%
Abbey National, Plc,
5.50%, 11/21/97............................... P1 $ 1,000 $ 999,184
Australia - New Zealand,
5.52%, 06/16/97............................... P3 2,000 2,000,067
--------------
2,999,251
--------------
CERTIFICATES OF DEPOSIT - YANKEE -- 0.9%
Banque Nationale De Paris, (France)
5.58%, 04/02/97............................... NR 3,000 2,999,993
5.74%, 08/20/97............................... NR 1,000 1,000,000
Berliner Handels, (Germany),
5.62%, 08/11/97............................... P3 3,000 3,000,034
Canadian Imperial Bank, (Canada),
5.60%, 08/25/97............................... P3 10,000 10,000,000
5.68%, 08/19/97............................... P3 1,000 1,000,000
Corestates Financial Corp.,
5.533%, 01/23/98.............................. NR 1,000 1,000,000
5.626%, 12/19/97.............................. P3 1,000 1,000,000
Creditanstalt, (Germany)
5.43%, 04/07/97............................... NR 5,000 5,000,013
Deutsche Bank (Germany),
5.69%, 10/28/97............................... P3 13,000 12,999,937
Royal Bank of Canada,
5.91%, 06/17/98............................... P3 3,000 2,998,345
Societe Generale, (France)
5.75%, 12/22/97............................... P1 2,000 2,000,346
--------------
42,998,668
--------------
COMMERCIAL PAPER -- 3.3%
Acquisition Holding Company,
5.60%, 07/16/97............................... NR 1,000 997,667
Aetna Services, Inc.,
5.57%, 07/15/97............................... NR 1,000 997,834
American General Financial Corp.,
5.55%, 07/07/97............................... P1 1,000 999,075
9.50%, 08/01/97............................... P1 1,500 1,504,345
American Honda Finance Corp.,
5.60%, 07/30/97............................... P1 8,800 8,760,302
Aristar, Inc.,
5.70%, 07/24/97............................... P2 1,000 996,358
Asset Securitization Corp.,
5.56%, 08/18/97............................... NR 1,000 992,587
Associates Corp. of North America,
5.55%, 07/03/97............................... P1 2,000 1,999,383
Bear, Stearns & Co.,
5.58%, 07/08/97............................... P1 1,000 998,915
BP America, M.T.N.,
8.875%, 12/01/97.............................. P3 1,000 1,011,106
Ciesco Corp.,
5.60%, 08/14/97............................... P1 1,000 993,156
Coca Cola Enterprises, Inc.,
5.58%, 07/14/97............................... NR 1,000 997,985
5.66%, 08/13/97............................... NR 4,131 4,103,072
Commerzbank AG,
5.67%, 08/21/97............................... P3 1,000 991,968
Corporate Asset Funding Corp.,
5.62%, 08/07/97............................... P1 4,000 3,976,896
Corporate Receivables Corp.,
5.55%, 07/10/97............................... NR 1,000 998,613
5.625%, 08/20/97.............................. NR 2,000 1,984,375
Countrywide Home Loans,
5.60%, 08/07/97............................... NR 5,000 4,971,222
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CXC, Inc.,
5.65%, 08/05/97............................... NR $ 4,138 $ 4,115,270
Dillard Investment Corp.,
5.55%, 07/23/97............................... P3 9,300 9,268,458
Enterprise Funding Corp.,
5.55%, 07/03/97............................... NR 2,000 1,999,383
Falcon Asset Securitization,
5.55%, 07/08/97............................... P1 3,927 3,922,762
Finova Capital Corp.,
5.60%, 07/09/97............................... NR 1,000 998,756
5.71%, 07/15/97............................... NR 1,000 997,779
First Chicago Corp.,
5.56%, 08/19/97............................... P3 1,000 992,432
First Data Corp.,
5.68%, 08/19/97............................... NR 1,000 992,269
Ford Motor Credit,
5.55%, 07/09/97............................... P1 8,200 8,189,887
General Electric Capital Services, Inc.,
5.70%, 11/05/97............................... P1 5,000 4,899,458
5.70%, 01/12/98............................... P1 5,000 4,845,625
General Motors Acceptance Corp.,
5.59%, 07/07/97............................... P1 5,000 4,995,342
General Signal Corp.,
5.58%, 07/08/97............................... NR 1,693 1,691,163
5.58%, 07/18/97............................... NR 2,585 2,578,189
Indosuez N. A., Inc,
5.66%, 07/07/97............................... NR 1,270 1,268,802
John Deere Capital Corp.,
5.54%, 07/09/97............................... P1 1,000 998,769
Johnson Controls Inc.,
5.60%, 07/07/97............................... P2 9,525 9,516,110
Lehman Brothers Holdings, Inc.,
5.75%, 07/02/97............................... NR 3,000 2,999,521
MCI Communications Corp.,
5.45%, 07/07/97............................... NR 1,000 999,092
5.54%, 07/07/97............................... NR 3,000 2,997,230
Mitsubishi International Corp.,
6.00%, 07/08/97............................... P1 780 779,090
National Australia Bank,
5.80%, 10/03/97............................... NR 4,000 4,000,588
National Bank of Canada,
5.41%, 07/07/97............................... P3 3,000 2,997,295
Newell Co.,
5.60%, 08/20/97............................... NR 1,000 992,222
NYNEX Corp.,
5.65%, 07/14/97............................... P3 3,000 2,993,879
Potomac Electric Power Co.,
5.52%, 07/28/97............................... P1 6,000 5,975,160
Rank Xerox Capital PLC.,
5.56%, 08/20/97............................... NR 1,000 992,278
Rubbermaid, Inc.,
5.57%, 08/05/97............................... NR 1,362 1,354,624
Short Term Repack Asset,
6.00%, 12/15/97............................... NR 4,000 3,999,608
Smith Barney,
5.55%, 07/07/97............................... NR 2,415 2,412,766
Societe Generale,
5.70%, 12/19/97............................... P1 7,900 7,898,452
Sonoco Products,
6.30%, 07/01/97............................... P1 1,360 1,360,000
Svenska Handelsbanken,
5.62%, 08/14/97............................... NR 9,000 8,938,180
Triple-A One Plus Funding,
5.70%, 07/07/97............................... NR 4,000 3,996,200
--------------
156,231,498
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B15
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS -- 0.1%
Barton Capital Corp.,
5.70%, 08/15/97............................... NR $ 1,968 $ 1,953,978
Capital Equipment Receivable Trust,
5.60%, 10/15/97............................... NR 944 944,395
Credit Agricole Indosue,
5.63%, 08/11/97............................... NR 1,000 1,000,028
--------------
3,898,401
--------------
REPURCHASE AGREEMENTS -- 0.9%
Joint Repurchase Agreement Account,
5.88%, 07/01/97 (cost $40,325,000; Note 5).... 40,325 40,325,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $257,452,243)...................................................... 257,452,243
--------------
TOTAL INVESTMENTS BEFORE SHORT SALE -- 99.3%
(cost $4,505,243,603; Note 6)............................................ 4,658,500,606
--------------
PRINCIPAL
AMOUNT VALUE
INVESTMENTS SOLD SHORT -- (0.3%) (000) (NOTE 2)
------------- --------------
United States Treasury Notes,
6.25%, 06/30/02............................... 4,600 (4,572,676)
6.625%, 05/15/07.............................. 9,900 (9,981,972)
--------------
TOTAL INVESTMENTS SOLD SHORT
(proceeds $14,574,078; Note 2)................................. (14,554,648)
--------------
TOTAL INVESTMENTS, NET OF SHORT SALES -- 99.0%...................
4,643,945,958
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C) -- 0.1%...........
2,594,875
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%....................
60,749,935
--------------
TOTAL NET ASSETS -- 100.0%....................................... $4,707,290,768
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
M.T.N. Medium Term Note
ADR American Depository Receipt
PLC Public Limited Company
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a variable rate security.
(c) Open futures contracts as of June 30, 1997 are as follows:.
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 APPRECIATION
Long
Positions:
U.S. Long
3,716 Bond Sep 97 $404,381,438 $412,708,250 $8,326,812
U.S. 10 Yr
1,468 TNote Sep 97 $156,316,656 $158,360,500 $2,043,844
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 94.2%
VALUE
COMMON STOCKS -- 56.7% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.8%
AlliedSignal, Inc............................... 325,700 $ 27,358,800
Boeing Co....................................... 334,000 17,722,875
GenCorp, Inc.................................... 428,200 9,902,125
Litton Industries, Inc. (a)..................... 164,400 7,942,575
Parker-Hannifin Corp............................ 125,000 7,585,937
UNC, Inc. (a)................................... 189,800 2,775,825
United Technologies Corp........................ 270,100 22,418,300
--------------
95,706,437
--------------
AIRLINES -- 1.1%
AMR Corp. (a)................................... 466,000 43,105,000
USAir Group, Inc. (a)........................... 491,700 17,209,500
--------------
60,314,500
--------------
APPAREL MANUFACTURING -- 0.5%
Liz Claiborne, Inc.............................. 431,400 20,114,025
Phillips-Van Heusen Corp........................ 412,600 6,189,000
--------------
26,303,025
--------------
AUTOS - CARS & TRUCKS -- 1.4%
Chrysler Corp................................... 632,700 20,760,469
Ford Motor Co................................... 201,300 7,599,075
General Motors Corp............................. 316,400 17,619,525
Mascotech, Inc.................................. 411,300 8,585,887
Smith (A.O.) Corp............................... 306,300 10,892,794
Titan International, Inc........................ 440,700 7,767,337
--------------
73,225,087
--------------
BANKS AND SAVINGS & LOANS -- 1.7%
BankAmerica Corp................................ 132,600 8,560,987
Chase Manhattan Corp............................ 278,400 27,022,200
First Union Corp................................ 250,600 23,180,500
PNC Bank Corp................................... 417,600 17,382,600
Signet Banking, Corp............................ 411,400 14,810,400
--------------
90,956,687
--------------
CHEMICALS -- 1.6%
E.I. du Pont de Nemours & Co.................... 323,000 20,308,625
Ferro Corp...................................... 391,300 14,502,556
IMC Global, Inc................................. 348,000 12,180,000
M.A. Hanna Co................................... 448,200 12,913,762
Millennium Chemicals, Inc. (a).................. 637,700 14,507,675
OM Group, Inc................................... 275,900 9,139,187
--------------
83,551,805
--------------
CHEMICALS - SPECIALTY -- 0.7%
Morton International, Inc....................... 584,600 17,647,612
Praxair, Inc.................................... 403,700 22,607,200
--------------
40,254,812
--------------
COMMERCIAL SERVICES -- 0.1%
BW/IP, Inc. (Class 'A' Stock)................... 246,400 5,005,000
IMO Industries, Inc. (a)........................ 408,500 2,399,937
--------------
7,404,937
--------------
COMPUTER SERVICES -- 2.0%
Cabletron Systems, Inc. (a)..................... 62,700 1,775,194
Cadence Design Systems, Inc. (a)................ 709,800 23,778,300
Ceridian Corp. (a).............................. 542,800 22,933,300
Computer Associates International, Inc.......... 320,100 17,825,569
Computer Sciences Corp. (a)..................... 90,000 6,491,250
Microsoft Corp. (a)............................. 139,200 17,591,400
Oracle Corp. (a)................................ 368,800 18,578,300
--------------
108,973,313
--------------
COMPUTERS -- 2.2%
Compaq Computer Corp. (a)....................... 226,100 22,440,425
Digital Equipment Corp. (a)..................... 399,700 14,164,369
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
International Business Machines Corp............ 507,700 $ 45,788,194
Sun Microsystems, Inc. (a)...................... 849,000 31,598,719
--------------
113,991,707
--------------
CONSUMER SERVICES -- 0.3%
ADT Ltd. (a).................................... 392,300 12,945,900
SPS Transaction Services, Inc. (a).............. 127,100 2,351,350
--------------
15,297,250
--------------
CONSTRUCTION -- 0.6%
Halter Marine Group............................. 79,100 1,898,400
Oakwood Homes Corp.............................. 606,400 14,553,600
Standard Pacific Corp........................... 670,400 6,871,600
Webb Corp....................................... 611,100 9,930,375
--------------
33,253,975
--------------
CONTAINERS & PACKAGING -- 0.2%
Owens-Illinois, Inc. (a)........................ 250,000 7,750,000
Sealed Air Corp. (a)............................ 37,800 1,795,500
--------------
9,545,500
--------------
COSMETICS & SOAPS -- 0.4%
Procter & Gamble Co............................. 139,200 19,662,000
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.3%
RJR Nabisco Holdings Corp....................... 538,700 17,777,100
--------------
DIVERSIFIED OPERATIONS -- 1.6%
Cognizant Corp.................................. 445,700 18,050,850
Energy Group, PLC, ADR, (United Kingdom)........ 218,900 9,275,887
General Electric Co............................. 640,300 41,859,612
Whitman Corp.................................... 578,000 14,630,625
--------------
83,816,974
--------------
DRUGS AND MEDICAL SUPPLIES -- 4.8%
Amgen, Inc. (a)................................. 535,400 31,120,125
Baxter International, Inc....................... 389,700 20,361,825
Biogen, Inc. (a)................................ 817,800 27,702,975
Guidant Corp.................................... 258,600 21,981,000
Johnson & Johnson............................... 153,100 9,855,812
Medtronic, Inc.................................. 289,600 23,457,600
Merck & Co., Inc................................ 277,500 28,721,250
Novartis Corp., AG, ADR (Switzerland)........... 250,600 20,048,000
Pfizer, Inc..................................... 152,000 18,164,000
Smithkline Beecham, PLC, ADR (United Kingdom)... 320,100 29,329,162
United States Surgical Corp..................... 231,300 8,615,925
Warner-Lambert Co............................... 111,400 13,841,450
--------------
253,199,124
--------------
ELECTRICAL EQUIPMENT -- 0.6%
Baldor Electric Co.............................. 1 30
Belden, Inc..................................... 292,200 9,953,062
Westinghouse Electric Corp...................... 1,012,600 23,416,375
--------------
33,369,467
--------------
ELECTRONICS -- 0.7%
Honeywell, Inc.................................. 362,000 27,466,750
Maxim Integrated Products, Inc. (a)............. 153,100 8,707,562
--------------
36,174,312
--------------
ENGINEERING & CONSTRUCTION -- 0.1%
Giant Cement Holdings, Inc. (a)................. 259,600 4,867,500
--------------
ENVIRONMENTAL SERVICES -- 0.6%
U.S.A. Waste Services, Inc. (a)................. 800,200 30,907,725
--------------
FINANCIAL SERVICES -- 3.1%
Federal National Mortgage Association........... 501,100 21,860,487
Lehman Brothers Holdings, Inc................... 1,087,300 44,035,650
Merrill Lynch & Co., Inc........................ 253,100 15,091,087
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Morgan Stanley Group, Inc....................... 234,995 $ 10,119,472
Morgan Stanley, Dean Witter Discover & Co....... 431,800 18,594,387
Salomon, Inc.................................... 442,900 24,636,312
Schwab (Charles) Corp........................... 427,500 17,393,906
State Street Boston Corp........................ 222,700 10,299,875
--------------
162,031,176
--------------
FOOD & BEVERAGES -- 0.7%
Anheuser-Busch Companies, Inc................... 431,400 18,091,837
Quaker Oats Co.................................. 389,700 17,487,787
--------------
35,579,624
--------------
FOREST PRODUCTS -- 1.0%
Champion International Corp.,................... 412,200 22,774,050
Louisiana-Pacific Corp.......................... 412,200 8,707,725
Mead Corp....................................... 206,600 12,860,850
Willamette Industries, Inc...................... 150,800 10,556,000
--------------
54,898,625
--------------
HOSPITAL MANAGEMENT -- 0.6%
Healthsouth Corp. (a)........................... 1,197,100 29,852,681
--------------
HOUSEHOLD PRODUCTS -- 0.4%
Gillette Co..................................... 100,000 9,475,000
Leggett & Platt, Inc............................ 249,500 10,728,500
--------------
20,203,500
--------------
HOUSING RELATED -- 0.4%
Hanson, PLC, ADR (United Kingdom)............... 223,100 5,577,500
Owens Corning................................... 429,000 18,500,625
--------------
24,078,125
--------------
INSURANCE -- 4.4%
Aetna, Inc...................................... 278,400 28,501,200
Allstate Corp................................... 320,100 23,367,300
Berkley (WR) Corp............................... 124,300 7,318,162
Chubb Corp...................................... 334,000 22,336,250
CIGNA Corp...................................... 55,600 9,869,000
Equitable of Iowa Companies..................... 235,800 13,204,800
Financial Security Assurance Holdings, Ltd...... 148,500 5,782,219
PennCorp Financial Group, Inc................... 349,600 13,459,600
Provident Companies, Inc........................ 116,300 6,222,050
Reinsurance Group of America, Inc............... 335,400 19,285,500
TIG Holdings, Inc............................... 372,300 11,634,375
Travelers Group Inc............................. 325,701 20,539,519
Trenwick Group, Inc............................. 289,700 10,863,750
United Healthcare Corp.......................... 445,400 23,160,800
Western National Corp........................... 575,900 15,441,319
--------------
230,985,844
--------------
LEISURE -- 0.7%
Carnival Corp. (Class 'A' Stock)................ 612,400 25,261,500
Hilton Hotels Corp.............................. 369,100 9,804,219
--------------
35,065,719
--------------
MACHINERY -- 1.4%
Case Corp....................................... 684,700 47,158,712
DT Industries, Inc.............................. 155,600 5,562,700
Global Industrial Technologies, Inc. (a)........ 273,600 5,608,800
Paxar Corp...................................... 809,500 15,279,313
--------------
73,609,525
--------------
MANUFACTURING -- 0.9%
Illinois Tool Works, Inc........................ 278,400 13,902,600
Tyco International, Ltd......................... 454,601 31,623,182
--------------
45,525,782
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MEDIA -- 1.0%
Central Newspapers, Inc. (Class 'A' Stock)...... 217,600 $ 15,585,600
Gannett Co., Inc................................ 125,300 12,373,375
Houghton Mifflin Co............................. 127,600 8,517,300
Knight-Ridder, Inc.............................. 253,000 12,412,813
Lee Enterprises, Inc............................ 221,400 5,839,425
--------------
54,728,513
--------------
METALS-FERROUS -- 0.7%
Bethlehem Steel Corp. (a)....................... 588,900 6,146,644
LTV Corp........................................ 892,000 12,711,000
Material Sciences Corp. (a)..................... 421,800 6,511,538
National Steel Corp. (Class 'B' Stock) (a)...... 183,200 3,080,050
USX-U.S. Steel Group............................ 265,100 9,295,069
--------------
37,744,301
--------------
METALS-NON FERROUS -- 0.9%
Aluminum Company of America..................... 507,400 38,245,275
Potash Corp. of Saskatchewan, Inc. (Canada)..... 122,500 9,195,156
--------------
47,440,431
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.9%
Coltec Industries, Inc.......................... 190,000 3,705,000
Donaldson, Co................................... 237,800 9,036,400
IDEX Corp....................................... 261,500 8,629,500
Mark IV Industries, Inc......................... 376,900 9,045,600
Trinity Industries, Inc......................... 227,000 7,207,250
Wolverine Tube, Inc. (a)........................ 164,600 4,588,225
York International Corp......................... 117,200 5,391,200
--------------
47,603,175
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.5%
Unilever N.V., ADR (United Kingdom)............. 116,800 25,462,400
--------------
OIL & GAS -- 3.0%
Basin Exploration, Inc. (a)..................... 75,700 586,675
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 385,700 6,797,963
Cross Timbers Oil Co............................ 442,600 8,520,050
Enron Oil & Gas Co.............................. 210,600 3,817,125
J. Ray McDermott, SA............................ 713,300 19,259,100
McDermott International, Inc.................... 1,345,700 39,277,619
Mesa, Inc., (a)................................. 1,905,400 10,956,050
Murphy Oil Corp................................. 120,900 5,893,875
Noble Affiliates, Inc........................... 444,100 17,181,119
Seagull Energy Corp. (a)........................ 260,200 4,553,500
Total SA (Class'B' Stock) (France).............. 194,700 9,856,688
Unocal Corp..................................... 598,400 23,225,400
Western Gas Resources, Inc.,.................... 448,500 8,745,750
--------------
158,670,914
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.6%
Elf Aquitaine SA, ADR (France).................. 544,200 29,624,888
--------------
OIL & GAS SERVICES -- 2.5%
Apache Corporation.............................. 765,500 24,878,750
Coflexip, ADR (France).......................... 454,300 13,685,788
Halliburton Co.................................. 473,200 37,501,100
ICO, Inc........................................ 335,100 1,738,331
Oryx Energy Co. (a)............................. 537,500 11,354,688
Parker & Parsley Petroleum Co................... 1,031,300 36,482,238
Weatherford Enterra, Inc. (a)................... 203,300 7,827,050
--------------
133,467,945
--------------
REAL ESTATE DEVELOPMENT -- 0.4%
Crescent Operating, Inc......................... 71,240 854,880
Crescent Real Estate Equities, Inc.............. 712,400 22,618,700
--------------
23,473,580
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
RETAIL -- 5.0%
American Stores Co.............................. 668,100 $ 32,987,438
Bombay Company, Inc. (a)........................ 605,900 3,029,500
Charming Shoppes, Inc. (a)...................... 3,532,600 18,435,756
Costco Companies, Inc........................... 598,400 19,672,400
CVS Corp........................................ 362,000 18,552,500
Dillards, Inc. (Class 'A' Stock)................ 138,100 4,781,713
Federated Department Stores, Inc. (a)........... 540,000 18,765,000
Home Depot, Inc................................. 362,000 24,955,375
Jan Bell Marketing, Inc. (a).................... 658,700 1,605,581
K mart Corp. (a)................................ 1,302,600 15,956,850
Kroger Co. (a).................................. 779,500 22,605,500
Rite Aid Corp................................... 278,400 13,885,200
Safeway, Inc. (a)............................... 626,400 28,892,700
Sears, Roebuck & Co............................. 417,600 22,446,000
Tandy Corp...................................... 101,900 5,706,400
Toys 'R' Us, Inc. (a)........................... 379,600 13,286,000
--------------
265,563,913
--------------
RUBBER -- 0.2%
Goodyear Tire & Rubber Co....................... 170,800 10,813,775
--------------
TELECOMMUNICATIONS -- 2.1%
Alcatel Alsthom, ADR (France)................... 543,800 13,730,950
Ascend Communications, Inc. (a)................. 400,800 15,781,500
Deutsche Telekom, ADR (Germany)................. 196,100 4,730,913
Qualcomm Inc.................................... 459,300 23,366,888
Tellabs, Inc. (a)............................... 459,300 25,663,388
Worldcom Inc.................................... 890,700 28,502,400
--------------
111,776,039
--------------
TEXTILES -- 0.3%
Fieldcrest Cannon, Inc. (a)..................... 291,200 5,532,800
Fruit of the Loom, Inc. (Class 'A' Stock) (a)... 316,400 9,808,400
Tultex Corp. (a)................................ 384,400 2,354,450
--------------
17,695,650
--------------
TOBACCO -- 0.9%
Bat Industries, PLC, ADR (United Kingdom)....... 458,600 8,398,113
Philip Morris Companies, Inc.................... 799,100 35,460,063
UST, Inc........................................ 107,500 2,983,125
--------------
46,841,301
--------------
TOYS -- 0.7%
Hasbro Inc...................................... 556,700 15,796,363
Mattel Inc...................................... 558,500 18,919,188
--------------
34,715,551
--------------
TRUCKING/SHIPPING -- 0.1%
Yellow Corp. (b)................................ 313,300 7,010,088
--------------
TOTAL COMMON STOCKS
(cost $2,641,205,395).......................................... 3,003,016,302
--------------
PREFERRED STOCKS -- 0.9%
FINANCIAL SERVICES -- 0.5%
Central Hispano Financial Services.............. 1,000,000 25,700,000
--------------
OIL & GAS -- 0.1%
Mesa, Inc....................................... 690,098 4,615,030
--------------
LEISURE -- 0.3%
Hilton Hotels (Conv.)........................... 611,400 15,437,850
--------------
TOTAL PREFERRED STOCKS
(cost $44,602,115)............................................. 45,752,880
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS -- 36.6% RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 0.1%
Agco Corp.,
8.50%, 03/15/06............................... Ba1 $ 4,875 $ 5,000,239
--------------
AIRLINES -- 2.1%
Delta Air Lines, Inc.,
10.125%, 05/15/10............................. Baa3 19,335 23,628,723
10.375%, 02/01/11............................. Baa3 25,750 32,200,890
United Air Lines, Inc.,
9.75%, 08/15/21............................... Baa3 10,125 12,089,047
10.67%, 05/01/04.............................. Baa3 19,500 22,891,440
11.21%, 05/01/14.............................. Baa3 17,500 22,910,825
--------------
113,720,925
--------------
ASSET-BACKED SECURITIES -- 0.1%
Standard Credit Card Master Trust,
5.95%, 10/07/04............................... Aaa 4,500 4,307,310
--------------
BANKS AND SAVINGS & LOANS -- 2.8%
Banco de Commercio Exterior de Colombia, SA,
M.T.N. (Colombia)
8.625%, 06/02/00.............................. Baa3 5,500 5,678,750
Banco Ganadero, S.A., M.T.N. (Colombia)
9.75%, 08/26/99 (c)........................... Baa3 7,300 7,646,750
Bangkok Bank (Thailand),
7.25%, 09/15/05............................... A3 10,000 9,531,300
8.25%, 03/15/16............................... A3 7,500 7,182,187
8.375%, 01/15/27.............................. A3 43,000 41,043,500
Kansallis-Osake Pankki, (Finland),
8.65%, 01/01/49(b)............................ A3 9,000 9,337,500
Okobank (Finland),
7.27%, 10/29/49(b)............................ A3 9,000 9,180,000
7.375%, 09/27/49.............................. A3 18,750 19,078,125
7.387%, 10/29/49(b)........................... A3 3,500 3,570,000
Siam Commercila (Thailand)
7.50%, 03/15/06............................... A3 14,500 13,898,612
Svenska Handelsbank (Sweden),
7.125%, 03/29/49.............................. A1 5,000 4,905,000
Thai Farmers Bank (Thailand),
8.25%, 08/21/16............................... A3 20,000 19,090,500
--------------
150,142,224
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.4%
Comcast Corp.,
8.375%, 05/01/07.............................. Ba1 5,000 5,193,750
Rogers Cablesystems, Inc., Sr. Sec'd. Notes
(Canada),
10.00%, 03/15/05.............................. Ba3 2,000 2,160,000
TCI-Communications, Inc.,
8.25%, 01/15/03............................... Ba1 8,000 8,278,640
8.75%, 08/01/15............................... Ba1 17,950 18,813,395
9.80%, 02/01/12............................... Ba1 20,750 23,750,242
9.875%, 06/15/22.............................. Ba1 12,878 14,726,379
--------------
72,922,406
--------------
CHEMICALS -- 0.6%
Reliance Industries Ltd. (India),
9.375%, 06/24/26.............................. Baa3 12,000 13,125,000
10.25%, 01/15/2097............................ Baa3 15,000 16,260,000
--------------
29,385,000
--------------
CONSUMER PRODUCTS -- 0.1%
James River Corp.,
7.75%, 11/15/23............................... Baa3 5,000 4,778,450
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CONSUMER SERVICES -- 0.2%
Digital Equipment Corp.,
7.125%, 10/15/02.............................. Ba1 $ 9,800 $ 9,596,258
Service Corp. International,
7.00%, 06/01/15............................... Baa1 2,500 2,497,300
--------------
12,093,558
--------------
ENERGY -- 0.5%
Gulf Canada Resources (Canada),
8.25%, 03/15/17............................... Ba1 24,890 25,512,250
--------------
FINANCIAL SERVICES -- 7.3%
American General Finance, Inc.,
7.57%, 12/01/45............................... A1 20,050 18,927,200
8.25%, 03/15/46............................... A1 60,000 60,388,200
Central Hispano Financial Services (Portugal),
6.352%, 04/28/05.............................. NR 5,000 5,004,500
Conseco, Inc.,
8.70%, 11/15/26............................... Ba2 37,538 38,419,256
8.796%, 04/01/27.............................. Ba2 25,000 25,464,500
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa2 20,700 20,393,019
6.95%, 03/01/04............................... Baa2 7,500 7,429,688
7.00%, 06/15/00............................... Baa3 13,500 13,594,635
First Tennessee National Corp., B.A.,
8.07%, 01/06/27............................... A3 11,150 10,859,821
Great Western Financial,
8.206%, 02/01/27.............................. Baa2 14,200 14,160,524
GreenPoint Financial Corp.,
9.10%, 06/01/27............................... Ba1 12,500 12,588,750
Lumbermens Mutual Casualty Co.,
9.15%, 07/01/26............................... Baa1 20,975 22,929,975
Merita Bank, Ltd.,
7.50%, 12/29/49............................... A3 12,000 12,013,680
PT Alatief Freeport Financial Co.,
(Netherlands),
9.75%, 04/15/01............................... Ba1 7,600 8,247,216
Riggs National Corp.,
8.875%, 03/15/27.............................. Baa3 14,650 14,869,750
Salomon, Inc.,
6.50%, 03/01/00............................... Baa1 19,000 18,904,240
6.59%, 02/21/01............................... Baa1 35,000 34,593,650
6.75%, 08/15/03............................... Baa1 5,000 4,885,800
7.00%, 03/04/02............................... Baa1 18,000 17,916,300
7.25%, 05/01/01............................... Baa1 8,625 8,725,050
Union Planters Corp.,
8.20%, 12/15/26............................... Baa1 20,750 20,306,365
--------------
390,622,119
--------------
FOOD & BEVERAGE -- 0.2%
RJR Nabisco, Inc.,
8.50%, 07/01/07............................... Baa3 6,750 6,727,523
8.75%, 08/15/05............................... Baa3 3,000 3,044,850
--------------
9,772,373
--------------
INDUSTRIAL -- 0.1%
Compania Sud Americana de Vapores, S.A. (Chile),
7.375%, 12/08/03.............................. NR 5,650 5,537,000
--------------
MEDIA -- 4.8%
News America Holdings, Inc.,
7.375%, 10/17/08.............................. Baa3 2,000 1,979,900
7.75%, 12/01/45............................... Baa3 10,000 9,360,100
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
8.15%, 10/17/36............................... Baa3 $ 8,500 $ 8,379,895
9.25%, 02/01/13............................... Baa3 33,700 37,574,489
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 9,100 9,116,744
Time Warner, Inc.,
8.11%, 08/15/06............................... Ba1 28,250 29,334,518
8.18%, 08/15/07............................... Ba1 13,000 13,534,430
8.375%, 07/15/33.............................. Baa1 32,800 33,492,408
9.125%, 01/15/13.............................. Ba1 12,040 13,312,869
Turner Broadcasting Co.,
8.375%, 07/01/13.............................. BA 5,300 5,496,895
Viacom, Inc.,
6.75%, 01/15/03............................... Baa1 23,350 22,453,360
7.75%, 06/01/05............................... Ba2 68,800 68,279,184
--------------
252,314,792
--------------
OFFICE EQUIPMENT -- 0.8%
Xerox Corp.,
8.00%, 02/01/27............................... A2 40,500 40,500,000
--------------
OIL & GAS -- 0.3%
B.J. Services Co.,
7.00%, 02/01/06............................... Baa3 4,000 3,924,000
Empresa Colombia de Petroleos (Colombia),
7.25%, 07/08/98............................... NR 8,250 8,250,000
Parker & Parsley Petroleum Co.,
8.25%, 08/15/07............................... Baa3 3,000 3,144,450
--------------
15,318,450
--------------
PAPER & FOREST -- 0.3%
Fort Howard Corp.,
9.25%, 03/15/01............................... Baa3 13,700 14,590,500
--------------
RETAIL -- 1.5%
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Baa2 4,600 4,802,032
8.50%, 06/15/03............................... Baa2 63,290 67,151,956
10.00%, 02/15/01.............................. Baa2 8,000 8,776,400
--------------
80,730,388
--------------
TECHNOLOGY -- 0.1%
Comdisco, Inc., M.T.N.,
6.375%, 11/30/01.............................. Baa1 2,700 2,643,003
--------------
TELECOMMUNICATIONS -- 0.8%
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. Ba1 32,150 31,389,653
Total Access Communications (Thailand),
8.375%, 11/04/06.............................. Ba1 4,000 3,912,280
Worldcom, Inc.,
7.75%, 04/01/27............................... Ba1 6,000 6,279,240
--------------
41,581,173
--------------
TOBACCO -- 1.1%
Phillip Morris Co., Inc.,
7.20%, 02/01/07............................... A2 10,000 9,913,200
7.50%, 04/01/04............................... A2 50,000 50,804,000
--------------
60,717,200
--------------
UTILITIES -- 1.2%
Cleveland Electric Illuminating Company,
7.19%, 07/01/00............................... Ba2 7,000 7,024,780
7.67%, 07/01/04............................... Ba2 54,000 54,202,500
Quezon Power, (Philippines),
8.86%, 06/15/17............................... Ba1 5,000 5,000,000
--------------
66,227,280
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B20
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.3%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... Aaa $ 11,800 $ 2,463,250
United States Treasury Notes,
6.25%, 02/15/03(c)............................ Aaa 3,000 2,976,570
6.50%, 11/15/26............................... Aaa 5,200 4,987,112
6.625%, 05/15/07(c)........................... Aa 1,875 1,890,525
6.75%, 08/15/26(c)............................ Aaa 3,000 2,969,070
--------------
15,286,527
--------------
FOREIGN GOVERNMENT BONDS -- 9.9%
City of St. Petersburg (Russia),
9.50%, 06/18/02............................... NR 35,000 35,000,000
Republic of Argentina (Argentina),
6.75%, 03/31/05............................... B1 77,600 72,944,000
Republic of Colombia (Colombia),
7.125%, 05/11/98.............................. Baa3 2,700 2,720,250
7.625%, 02/15/07.............................. Baa3 25,000 24,360,000
8.00%, 06/14/01............................... Baa3 2,150 2,185,518
8.75%, 10/06/99............................... Baa3 12,300 12,864,201
Republic of Panama (Panama),
3.50%, 07/17/14............................... Ba1 101,000 77,896,250
Republic of the Philippines (The Philippines),
8.60%, 06/15/27............................... Ba1 80,000 78,681,600
Republic of Poland (Poland),
3.00%, 10/27/24............................... Baa3 25,000 14,437,500
4.00%, 10/27/14............................... Baa3 53,000 45,248,750
Republic of South Africa (South Africa),
8.50%, 06/23/17............................... Baa3 31,000 30,845,000
Republic of Venezuela (Venezuela),
6.75%, 12/18/07............................... Ba2 79,250 73,504,375
Royal Bank of Canada (Canada),
6.75%, 10/24/11............................... Aa3 5,000 4,845,000
Russian Ministry of Finance (Russia),
10.00%, 06/26/07.............................. Ba2 19,975 19,905,088
United Mexican States, (Mexico),
11.50%, 05/15/26.............................. Ba2 25,000 28,550,000
--------------
523,987,532
--------------
TOTAL LONG-TERM BONDS
(cost $1,915,479,790).................................................... 1,937,690,699
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,601,287,300).................................................... 4,986,459,881
--------------
VALUE
SHORT-TERM INVESTMENTS -- 5.8% (NOTE 2)
--------------
BANK NOTES -- 0.2%
American Express Centurian Bank,
5.408%, 12/09/97.............................. P1 2,000 2,000,000
CoreStates Bank, N.A.,
5.626%, 12/19/97.............................. NR 1,000 1,000,000
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
First Bank N.A.,
5.585%, 10/15/97.............................. P3 $ 2,000 $ 2,000,000
Key Bank, N.A.,
5.608%, 08/21/97.............................. NR 2,000 1,999,941
--------------
6,999,941
--------------
CERTIFICATES OF DEPOSIT-EURODOLLAR
Berliner Handels (Germany),
5.72%, 07/21/97............................... P3 1,000 1,000,006
Royal Bank of Canada, (Canada),
5.50%, 08/06/97............................... P3 1,000 999,624
--------------
1,999,630
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 0.6%
Berliner Handels (Germany),
5.62%, 08/11/97............................... P3 1,000 1,000,011
Canadian Imperial Bank (Canada),
5.60%, 08/25/97............................... P3 8,000 8,000,000
5.68%, 08/19/97............................... P3 3,000 3,000,000
Credit Agricole Indosuez (France),
5.63%, 08/11/97............................... NR 3,000 3,000,084
Creditanstalt (Germany),
5.43%, 04/07/97............................... NR 5,000 5,000,013
Deutsche Bank (Germany),
5.69%, 10/28/97............................... P3 1,000 999,902
Landesbank Hessen-Thuringen (Germany),
6.13%, 04/01/98............................... NR 1,000 999,581
Royal Bank of Canada (Germany),
5.91%, 06/17/98............................... P3 3,000 2,998,345
Societe Generale (France),
5.75%, 12/22/97............................... P1 2,100 2,099,589
6.19%, 05/06/98............................... P1 4,000 3,997,993
--------------
31,095,518
--------------
COMMERCIAL PAPER -- 3.6%
Abbey National Treasury Services, PLC (United
Kingdom),
5.45%, 07/11/97............................... P1 4,400 4,393,339
Acquisition Holding Company,
5.60%, 07/16/97............................... NR 1,000 997,667
Aetna Services, Inc.,
5.57%, 07/15/97............................... NR 2,000 1,995,668
American General Financial Corp.,
5.55%, 07/07/97............................... P1 3,000 2,997,225
American Honda Finance Corp.,
5.60%, 07/30/97............................... P1 8,800 8,760,302
Aristar, Inc.,
5.70%, 07/24/97............................... P2 1,000 996,358
Asset Securitization Corp.,
5.56%, 08/18/97............................... NR 4,000 3,970,347
Associates Corp. of North America,
5.55%, 07/03/97............................... P1 1,000 999,692
6.625%, 11/15/97.............................. P1 600 602,097
Avco Financial Services Corp.,
5.46%, 11/17/97............................... P1 1,000 999,945
B. B. V. Finance Deleware, Inc.,
5.45%, 09/04/97............................... NR 2,000 1,980,319
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B21
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Banque Nationale De Paris (France),
5.74%, 08/20/97............................... NR $ 4,000 $ 4,000,000
Barton Capital Corp.,
5.59%, 07/31/97............................... NR 3,279 3,263,725
5.65%, 07/25/97............................... NR 1,905 1,897,824
Bear, Stearns & Co.,
5.57%, 07/07/97............................... P1 2,000 1,998,143
5.58%, 07/08/97............................... P1 1,000 998,915
Beneficial Corp.,
5.571%, 08/05/97.............................. P1 1,000 1,000,061
Ciesco Corp.,
5.60%, 08/14/97............................... P1 1,000 993,156
Coca Cola Enterprises, Inc.,
5.58%, 07/14/97............................... NR 1,000 997,985
5.70%, 08/18/97............................... NR 1,000 992,400
Commerzbank AG (Germany),
5.67%, 08/21/97............................... P3 2,000 1,983,935
Corporate Asset Funding Corp.,
5.62%, 08/07/97............................... P1 6,000 5,965,343
Corporate Receivables Corp.,
5.62%, 08/20/97............................... NR 2,000 1,984,375
Countrywide Home Loan, Inc.,
5.58%, 07/09/97............................... NR 5,335 5,328,385
CXC, Inc.,
5.65%, 08/05/97............................... NR 2,345 2,332,119
Dillard Investment Corp.,
5.55%, 07/23/97............................... P3 9,300 9,268,457
Falcon Asset Security Corp.,
5.57%, 07/07/97............................... P1 1,770 1,768,357
Finova Capital Corp.,
5.60%, 07/09/97............................... NR 1,000 998,756
5.71%, 07/15/97............................... NR 2,000 1,995,559
First Chicago Corp.,
5.56%, 08/19/97............................... P3 1,000 992,432
First Data Corp.,
5.68%, 08/19/97............................... NR 1,000 992,269
Ford Motor Credit,
5.55%, 07/09/97............................... P1 8,275 8,264,794
General Electric Capital Services, Inc.,
5.55%, 10/06/97............................... P3 1,000 985,046
5.70%, 11/05/97............................... P1 5,000 4,899,458
5.70%, 01/12/98............................... P1 5,000 4,845,625
General Motors Acceptance Corp.,
5.59%, 07/07/97............................... P1 3,000 2,997,205
5.82%, 11/07/97............................... P1 5,000 4,895,725
7.00%, 08/19/97............................... P1 1,000 1,001,286
General Signal Corp.,
5.58%, 07/18/97............................... NR 2,415 2,408,636
5.58%, 07/18/97............................... NR 2,000 1,994,730
GTE Corp.,
5.57%, 07/15/97............................... P2 405 404,123
5.61%, 07/22/97............................... P2 2,000 1,993,455
GTE Finance Corp.,
5.58%, 07/17/97............................... P3 1,563 1,559,124
5.60%, 07/24/97............................... P3 4,000 3,985,689
Household Finance Corp.,
5.709%, 08/11/97.............................. P2 475 475,092
Indosuez N. A., Inc (France)
5.66%, 07/07/97............................... NR 2,000 1,998,113
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
International Lease Finance Corp.,
5.35%, 07/30/97............................... A1 $ 2,662 $ 2,650,528
John Deere Capital Corp.,
5.54%, 07/09/97............................... P1 1,000 998,769
Johnson Controls Inc.,
5.60%, 07/07/97............................... P2 10,475 10,465,223
Johnson Controls, Inc.,
5.57%, 07/11/97............................... P2 1,000 998,453
Lehman Brothers Holdings, Inc.,
5.75%, 07/02/97............................... NR 3,000 2,999,521
MCI Communications Corp.,
5.45%, 07/07/97............................... NR 1,000 999,092
5.54%, 07/07/97............................... NR 1,000 999,077
Merrill Lynch & Co., Inc.,
5.468%, 10/16/97.............................. P3 1,000 1,000,090
Mitsubishi International Corp.,
5.75%, 07/08/97............................... P1 3,000 2,996,646
National Bank of Canada (Canada),
5.41%, 07/07/97............................... P3 1,000 999,098
Newell Co.,
5.60%, 08/20/97............................... NR 1,000 992,222
Norwest Corp.,
7.70%, 11/15/97............................... P1 500 503,639
NYNEX Corp.,
5.60%, 07/21/97............................... P3 927 924,116
Potomac Electric Power Co.,
5.52%, 07/28/97............................... P1 6,021 5,996,073
Prefco,
5.55%, 07/02/97............................... P1 1,000 999,846
Rank Xerox Capital PLC (United Kingdom),
5.56%, 08/20/97............................... NR 1,000 992,278
Rubbermaid, Inc.,
5.57%, 08/05/97............................... NR 1,000 994,585
6.30%, 07/01/97............................... NR 5,700 5,700,000
Shell Oil Co.,
6.15%, 07/01/97............................... NR 3,000 3,000,000
Short Term Repack Asset,
6.006%, 12/15/97.............................. NR 1,000 999,902
Smith Barney, Inc.,
5.55%, 07/07/97............................... NR 1,585 1,583,534
Sonoco Products,
6.30%, 07/01/97............................... P1 3,976 3,976,000
Svenska Handelsbanken (Sweden),
5.62%, 08/14/97............................... NR 11,000 10,924,442
Triple-A One Plus Funding,
5.70%, 07/07/97............................... NR 4,327 4,322,889
WCP Funding, Inc.,
5.65%, 08/04/97............................... NR 2,000 1,989,328
--------------
190,158,607
--------------
OTHER CORPORATE OBLIGATIONS
Capital Equipment Receivable Trust,
5.60%, 10/15/97............................... NR 378 377,758
Empersa La Moderna, SA (Mexico)
10.25%, 11/12/97.............................. NR 2,000 2,022,500
--------------
2,400,258
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B22
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 1.4%
Joint Repurchase Agreement Account,
5.88%, 07/01/97............................... $ 74,666 $ 74,666,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $307,299,369)...................................................... 307,319,954
--------------
TOTAL INVESTMENTS BEFORE SHORT SALE -- 100.0%
(cost $4,908,586,669; Note 6)............................................ 5,293,779,835
--------------
INVESTMENTS SOLD SHORT -- (0.7%)
United States Treasury Bonds,
6.25% 6/30/02............................................... 31,810 (31,809,920)
6.63% 5/15/07............................................... 5,041 (5,041,400)
--------------
TOTAL INVESTMENTS SOLD SHORT
(proceeds $36,863,906; Note 2).............................. (36,851,320)
--------------
TOTAL INVESTMENTS, NET OF SHORT SALES -- 99.3%.............................
5,256,928,515
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (D).............................
1,386,563
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7%..............................
(35,323,342)
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,293,638,420
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
AG Aktiegesellschaft (German Stock Company)
B.A. Bankers' Acceptances
C.D. Certificates of Deposit
M.T.N. Medium Term Note
NR Not Rated
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a variable rate security.
(c) Security segregated as collateral for future contracts.
(d) Open futures contracts as of June 30, 1997 are as follows:.
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Short
Position:
U.S.
2,465 T-Bond Sep 97 $268,153,594 $273,769,063 ($5,615,469)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B23
<PAGE>
HIGH YIELD BOND PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 95.6% MOODY'S INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS -- 90.1% RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 1.2%
Fairchild Corp.................................. CA 12.00% 10/15/01 $ 2,571 $ 2,622,420
Talley Manufacturing & Technology, Inc., Sr.
Notes......................................... B2 10.75% 10/15/03 3,000 3,150,000
--------------
5,772,420
--------------
AUTOMOTIVE PARTS -- 1.2%
Foamex, L.P..................................... B3 9.875% 06/15/07 1,450 1,500,750
JPS Automotive Products Corp., L.P., Sr.
Notes......................................... B2 11.125% 06/15/01 4,000 4,380,000
--------------
5,880,750
--------------
BROADCASTING & OTHER MEDIA -- 6.3%
Benedek Broadcasting Corp., Sr. Notes........... B2 11.875% 03/01/05 2,910 3,215,550
Capstar Broadcasting, Zero Coupon (until
2/1/02), 12.750%.............................. NR Zero 02/01/09 1,800 1,143,000
Capstar Broadcasting............................ NR 9.25% 07/01/07 2,000 1,935,000
Globo Communicacoes E Particip., Sr. Notes...... NR 10.50% 12/20/06 2,040 2,162,400
Hollinger Int'l., Inc........................... BA 8.625% 03/15/05 1,100 1,113,750
Hollinger Int'l., Inc........................... B1 9.25% 03/15/07 825 841,500
Multicanal Participacoes S.A.................... NR 10.50% 02/01/07 1,000 1,077,500
Outdoor Systems, Inc., Sr. Sub. Notes........... B1 9.375% 10/15/06 1,500 1,507,500
Paxson Communications Corp., Sr. Sub. Notes..... B3 11.625% 10/01/02 4,500 4,860,000
Plitt Theaters, Inc., Sr. Sub. Notes............ B3 10.875% 06/15/04 4,000 4,240,000
TV Azteca SA DE CV.............................. BA 10.125% 02/15/04 700 714,875
TV Azteca SA DE CV.............................. BA 10.50% 02/15/07 2,850 2,907,000
United Artists Theatre Circuit, Inc............. BA 11.50% 05/01/02 4,000 4,175,000
Von Hoffman Press, Inc.......................... B3 10.375% 05/15/07 500 522,500
--------------
30,415,575
--------------
BUILDING & RELATED INDUSTRIES -- 1.6%
Falcon Building Products, Inc., Zero Coupon
(until 6/15/02), 10.50%....................... B3 Zero 06/15/07 900 531,000
Falcon Building Products, Inc................... B3 9.50% 06/15/07 600 597,000
Nortek, Inc., Sr. Sub. Notes.................... CA 9.875% 03/01/04 3,750 3,843,750
Wickes Lumber Co................................ B3 11.625% 12/15/03 3,000 2,932,500
--------------
7,904,250
--------------
CABLE -- 8.2%
Adelphia Communications......................... NR 9.875% 03/01/07 2,000 1,930,000
Cablevision Systems Corp., Sr. Sub. Notes....... B3 9.875% 02/15/13 3,300 3,415,500
CCA Holdings, Sr. Sub. Notes.................... NR 13.00% 12/31/99 1,000 1,235,000
Comcast Corp., Sr. Sub. Notes................... B1 10.625% 07/15/12 4,000 4,720,000
Comcast UK Cable, Zero Coupon (until 11/15/00),
11.20% (a).................................... B2 Zero 11/15/07 1,225 918,750
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 12/15/00), 11.750%..................... B3 Zero 12/15/05 2,250 1,558,125
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 2/15/02), 10.750%...................... B3 Zero 02/15/07 700 414,750
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 9/30/99), 13.250%...................... B3 13.25% 09/30/04 2,000 1,670,000
Echostar Communications Corp., Sr. Disc. Notes,
Zero Coupon (until 6/1/99), 12.875%........... CA Zero 06/01/04 2,465 2,070,600
Echostar Satellite, Sr. Disc. Notes, Zero Coupon
(until 3/15/00), 13.125%...................... B- Zero 03/15/04 2,965 2,134,800
Falcon Holdings Group, L.P., Series B, Sr. Sub.
Notes, PIK.................................... NR 11.00% 09/15/03 4,020 4,039,954
Intermedia Capital Partners..................... B2 11.25% 08/01/06 3,380 3,641,950
International Cabletel, Inc., Zero Coupon (until
10/15/98), 10.875%............................ B3 Zero 10/15/03 1,500 1,275,000
International Cabletel, Inc., Sr. Disc. Notes,
Zero Coupon (until 4/15/00), 12.750%.......... B3 Zero 04/15/05 4,350 3,349,500
Kabelmedia Holdings, Sr. Disc. Note............. B3 Zero 08/01/06 2,000 1,200,000
Marcus Cable Operating Co., L.P., Sr. Sub. Disc.
Notes......................................... B3 Zero 08/01/04 2,250 1,957,500
Rogers Cablesystems, Inc., Sr. Sec'd. Deb.
(Canada)...................................... BA 10.00% 12/01/07 1,000 1,070,000
Rogers Cablesystems, Inc., Sr. Sec'd. Notes,
(Canada)...................................... BA 10.00% 03/15/05 1,750 1,890,000
Telewest Comm., PLC Zero Coupon (until 10/1/00),
11.00% (a).................................... B1 Zero 10/01/07 1,500 1,080,000
--------------
39,571,429
--------------
CASINOS -- 4.8%
Boomtown, Inc. First Mtge. Bonds................ B1 11.50% 11/01/03 3,000 3,232,500
Casino Magic Finance Corp., First Mtge. Bonds... B3 13.00% 08/15/03 1,000 855,000
Empress River Casino, Sr. Notes................. B1 10.75% 04/01/02 4,500 4,792,500
Grand Casinos, Inc.............................. BA 10.125% 12/01/03 4,250 4,420,000
Lady Luck Gaming, First Mtge. Notes............. B3 11.875% 03/01/01 2,000 2,025,000
Louisiana Casino Cruises, Inc................... NR 11.50% 12/01/98 1,500 1,533,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B24
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Trump Atlantic City Assoc., First Mtge. Notes... B1 11.25% 05/01/06 $ 3,500 $ 3,421,250
Trump Atlantic City Assoc., First Mtge. Notes... CA 11.75% 11/15/03 3,000 2,670,000
--------------
22,950,000
--------------
CHEMICALS -- 1.6%
Applied Extrusion Technology, Inc., Sr. Notes... B2 11.50% 04/01/02 1,700 1,785,000
Borden Chemicals & Plastics, L.P................ BA 9.50% 05/01/05 1,500 1,578,750
ISP Holdings, Inc............................... BA 9.00% 10/15/03 2,000 2,060,000
Sterling Chemical Holdings, Inc., Sr. Disc.
Notes......................................... CA Zero 08/15/08 1,560 1,029,600
Sterling Chemical Holdings, Inc., Sr. Sub.
Note.......................................... B3 11.75% 08/15/06 1,000 1,080,000
--------------
7,533,350
--------------
CONSUMER PRODUCTS -- 2.9%
Live Entertainment, Inc......................... NR 12.00% 03/23/99 1,500 1,503,750
Sealy Corp., Sr. Sub. Notes..................... B1 9.50% 05/01/98 750 787,500
Syratech Corp................................... B1 11.00% 04/15/07 475 504,688
Tultex Corp..................................... B3 9.625% 04/15/07 3,000 3,183,750
Twin Labs, Inc., Gtd. Notes..................... B3 10.25% 05/15/06 3,400 3,587,000
United Stationer Supply Co., Sr. Sub. Notes..... B3 12.75% 05/01/05 4,000 4,480,000
--------------
14,046,688
--------------
DRUGS & HEALTHCARE -- 4.4%
Fresenius Med Care Capital Trust................ BA 9.00% 12/01/06 1,600 1,624,000
Imed Corp., Sr. Sub. Notes...................... B3 9.75% 12/01/06 4,150 4,274,500
Owens & Minor, Inc., Sr. Sub. Notes............. B1 10.875% 06/01/06 3,450 3,846,750
Paracelsus Health, Sr. Sub. Notes............... B1 10.00% 08/15/06 2,750 2,805,000
Tenet Healthcare Corp., Sr. Sub. Notes.......... BA 8.625% 01/15/07 1,250 1,275,000
Tenet Healthcare Corp., Sr. Sub. Notes.......... BA 10.125% 03/01/05 6,500 7,101,250
--------------
20,926,500
--------------
ENERGY -- 6.9%
Calenergy, Inc., Sr. Notes...................... Ba2 9.50% 09/15/06 1,500 1,598,145
California Energy Co., Inc., Disc. Notes........ BA Zero 01/15/04 2,250 2,419,200
Falcon Drilling Co., Inc., L.P., Series B, Sr.
Sub. Notes.................................... B2 9.75% 01/15/01 500 520,000
Falcon Drilling Co., Inc., L.P., Series B, Sr.
Sub. Notes.................................... B3 12.50% 03/15/05 2,500 2,775,000
KCS Energy, Inc., Sr. Notes..................... B1 11.00% 01/15/03 4,000 4,340,000
Kelly Oil & Gas, Inc............................ B3 10.375% 10/15/06 3,500 3,605,000
Long Island Lighting Co., Deb................... BA 7.05% 03/15/03 1,500 1,475,775
Long Island Lighting Co., Deb................... BA 9.00% 11/01/22 1,500 1,642,530
Maxus Energy Corp., M.T.N....................... B1 10.83% 09/01/04 4,800 5,484,000
Maxus Energy Corp., Sr. Notes................... B1 9.375% 11/01/03 250 268,750
Parker Drilling Co., Gtd. Notes................. B1 9.75% 11/15/06 1,360 1,424,600
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 9.375% 02/01/06 3,000 2,865,000
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 12.25% 02/01/05 813 855,682
Snyder Oil Corp................................. B2 8.75% 06/15/07 900 895,500
Transamerican Energy Corp., Zero Coupon (until
6/15/99), 13.00%.............................. NR Zero 06/15/02 3,300 2,376,000
Transamerican Energy Corp....................... NR 11.50% 06/15/02 900 873,000
--------------
33,418,182
--------------
FINANCIAL SERVICES -- 4.2%
American Banknote Corp.......................... B2 11.625% 08/01/02 1,225 1,212,750
AmeriCredit Corp................................ B+ 9.25% 02/01/04 2,500 2,431,250
APP Int'l. Finance Co........................... BA 11.75% 10/01/05 3,750 4,134,375
Beaver Valley Funding, Inc...................... B1 8.625% 06/01/07 1,453 1,485,286
Coleman Escrow Corp............................. NR Zero 05/15/01 1,000 630,000
Coleman Holdings................................ B3 Zero 05/27/98 1,300 1,212,250
First Nationwide Holdings, Inc., Sr. Notes...... B2 12.50% 04/15/03 2,600 2,899,000
First Nationwide Holdings, Inc., Sr. Sub.
Notes......................................... Ba3 10.625% 10/01/03 1,600 1,752,000
Globalstar Capital Co........................... B3 11.375% 02/15/04 1,200 1,200,000
Polysindo Int'l. Finance Co., Sr. Notes......... BA 11.375% 06/15/06 1,750 1,927,188
PTC Int'l. Finance Co., Zero Coupon (until
7/1/02), 10.750%.............................. NR Zero 07/01/07 2,100 1,273,125
--------------
20,157,224
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B25
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
FOOD & BEVERAGE -- 3.9%
American Restaurant, Sr. Sec'd. Notes........... NR 13.00% 09/15/98 $ 700 $ 682,466
Curtis-Burns Foods, Inc......................... B3 12.25% 02/01/05 1,150 1,269,313
Envirodyne Industries, Sr. Disc. Notes.......... B1 12.00% 06/15/00 4,100 4,469,000
Fresh Del Monte Produce, N.V., Sr. Notes........ B3 10.00% 05/01/03 5,500 5,623,750
Pilgrim's Pride Corp............................ B3 10.875% 08/01/03 1,151 1,191,285
Premium Standard Farms, PIK, Sr. Sec'd. Notes... NR 11.00% 09/17/03 256 274,918
Specialty Foods Corp............................ CA 11.25% 08/15/03 1,500 1,290,000
Specialty Foods Corp., Sr. Notes................ B3 11.125% 10/01/02 4,000 3,960,000
--------------
18,760,732
--------------
GAMING -- 0.5%
Colorado Gaming & Entertainment, Sr. Notes,
PIK........................................... NR 12.00% 06/01/03 2,645 2,618,550
--------------
INDUSTRIAL -- 1.4%
Glasstech, Inc.................................. NR 12.75% 07/01/04 3,250 3,282,500
Interlake Corp.................................. B3 12.125% 03/01/02 3,000 3,150,000
Jordan Industries, Inc.......................... B3 10.375% 08/01/03 500 530,000
--------------
6,962,500
--------------
LEISURE & TOURISM -- 2.9%
Bally Total Fitness Holdings, Inc............... CA 13.00% 01/15/03 250 258,750
HMC Acquisition, Sr. Notes...................... BA 9.00% 12/15/07 3,000 3,048,750
HMH Properties, Inc., Sr. Notes................. B1 9.50% 05/15/05 5,550 5,772,000
Host Marriott Travel Plaza, Sr. Notes........... B1 9.50% 05/15/05 4,600 4,818,500
--------------
13,898,000
--------------
MISCELLANEOUS -- 3.9%
Coinstar, Inc., Sr. Sub. Notes.................. NR Zero 10/01/06 900 621,000
Consumers Int'l................................. Ba3 10.25% 04/01/05 2,700 2,895,750
Hedstrom Corp................................... NR Zero 06/01/09 400 238,000
Hedstrom Corp................................... NR 10.00% 06/01/07 900 931,500
Interact Systems Inc., Sr. Disc. Notes.......... NR Zero 08/01/03 4,400 1,980,000
K & F Industries, Inc., Sr. Notes............... B1 11.875% 12/01/03 1,050 1,111,687
KSL Recreation Group, Inc....................... B3 10.25% 05/01/07 400 416,000
Rayovac Corp.................................... B3 10.25% 11/01/06 3,200 3,360,000
Sassco, Inc..................................... NR Zero 05/01/04 3,325 3,541,125
TFM, SA DE...................................... B2 Zero 06/15/09 2,000 1,160,000
TFM, SA DE...................................... B2 10.25% 06/15/07 600 612,000
Viasystems, Inc................................. B3 9.75% 06/01/07 1,750 1,780,625
--------------
18,647,687
--------------
OIL & GAS -- 1.5%
DI Industries, Inc.............................. B1 8.875% 07/01/07 850 837,250
Empire Gas Corp., PIK........................... CA 12.875% 07/15/04 4,000 3,600,000
McDermott J Ray S.A., Sr. Sub. Notes............ BA 9.375% 07/15/06 2,750 2,791,250
--------------
7,228,500
--------------
PAPER & FOREST -- 2.9%
Gaylord Container Corp.......................... NR 9.75% 06/15/07 1,500 1,515,000
Gaylord Container Corp., Sr. Sub. Disc. Notes... CA Zero 05/15/05 4,365 4,779,675
Ivex Packaging Corp., Sr. Sub Notes............. B3 12.50% 12/15/02 740 802,900
Pacific Lumber Co., Sr. Notes................... B3 10.50% 03/01/03 2,750 2,832,500
Repap New Brunswick............................. B2 9.875% 07/15/00 1,247 1,259,470
Silgan Corp..................................... B3 11.75% 06/15/02 1,500 1,597,500
Stone Container................................. B3 12.25% 04/01/02 1,300 1,326,000
--------------
14,113,045
--------------
PUBLISHING -- .9%
Petersen Publishing, Sr. Sub. Notes............. B3 11.125% 11/15/06 2,050 2,270,375
Sullivan Graphics, Inc.......................... CA 12.75% 08/01/05 2,000 2,060,000
--------------
4,330,375
--------------
RESTAURANTS -- .6%
Flagstar Corp................................... B2 10.75% 09/15/01 3,000 3,045,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B26
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
RETAIL -- 5.4%
Barry's Jewelers, Inc........................... B3 11.00% 12/22/00 $ 750 $ 450,000
Cole National Group, Inc., Sr. Sub. Notes....... B2 9.875% 12/31/06 1,920 2,011,200
Jitney-Jungle Stores America, Inc............... B2 12.00% 03/01/06 4,000 4,440,000
Kmart Corp., Deb................................ BA 8.25% 01/01/22 3,250 2,973,750
Kmart Corp., Deb................................ BA 8.375% 07/01/22 2,500 2,275,000
Leslie's Poolmart............................... B2 10.375% 07/15/04 750 766,875
Merisel, Inc., Sub. Notes....................... NR 11.50% 01/31/98 996 1,003,514
Merisel, Inc., Sub. Notes....................... NR 11.78% 03/10/00 1,100 1,124,750
Phar-Mor, Inc., Sr. Notes....................... B3 11.72% 09/11/02 3,400 3,536,000
Silgan Holdings, Inc............................ NR 13.25% 07/15/06 3,149 3,558,370
Specialty Retailers, Inc........................ Ba3 8.50% 07/15/05 1,500 1,496,250
Specialty Retailers, Inc........................ B2 9.00% 07/15/07 400 398,000
Speedy Muffler King............................. B1 10.875% 10/01/06 2,200 2,200,000
--------------
26,233,709
--------------
STEEL & METAL -- 3.2%
Algoma Steel, Inc............................... B1 12.375% 07/15/05 2,250 2,486,250
CSN Iron, SA.................................... B1 9.125% 06/01/07 800 778,000
Earle M. Jorgensen Co........................... B2 10.75% 03/01/00 3,250 3,250,000
Ladish Company, Inc., PIK....................... NR 12.00% 12/22/00 491 495,581
Maxxam Group Holdings, Inc...................... NR 12.00% 08/01/03 4,000 4,150,000
WCI Steel, Inc. Sr. Notes....................... B2 10.00% 12/01/04 4,000 4,150,000
--------------
15,309,831
--------------
SUPERMARKETS -- 1.0%
Homeland Stores, Inc............................ NR 10.00% 08/01/03 720 696,600
Shoppers Food Warehouse Corp., Zero Coupon
(until 7/30/97) 10.50%........................ NR 9.75% 06/15/04 1,250 1,251,563
Shoppers Food Warehouse Corp.................... NR 10.00% 02/06/00 3,000 3,007,500
--------------
4,955,663
--------------
TECHNOLOGY -- .9%
Unisys Corp., Sr. Notes......................... B1 11.75% 10/15/04 4,000 4,370,000
--------------
TELECOMMUNICATIONS -- 14.6%
Brooks Fiber Properties, Inc., Sr. Disc. Notes,
Zero Coupon (until 3/01/01), 10.875%.......... NR Zero 03/01/06 2,250 1,530,000
Brooks Fiber Properties, Inc., Sr. Disc. Notes,
Zero Coupon (until 11/01/01), 11.875%......... NR Zero 11/01/06 2,000 1,300,000
Cellnet Data Systems, Zero Coupon (until
6/15/00), 13.00%(cost $2,286,598; purchased
06/06/95 & 11/17/95) (b)...................... NR Zero 06/15/05 4,250 2,911,250
Centennial Cellular Corp., Sr. Notes............ B 10.125% 05/15/05 4,500 4,680,000
Clearnet Communications, Inc., Sr. Disc.
Notes......................................... B3 Zero 12/15/05 7,940 5,260,250
Geotek Communication Inc., Sr. Disc. Notes, Zero
Coupon (until 7/15/05), 15.00%................ CA Zero 07/15/05 5,000 3,050,000
GST Telecommunications, Inc., Sr. Disc. Notes,
Zero Coupon (until 12/15/00), 13.875%
Series H, Conv................................ NR Zero 12/15/05 650 416,000
Series L (a).................................. NR Zero 12/15/05 7,200 4,338,000
Hyperion Telecom, Inc........................... NR Zero 04/15/03 1,000 502,500
ICG Holdings, Inc., Sr. Sub. Notes, Zero Coupon
(until 9/15/00), 13.50%....................... NR Zero 09/15/05 3,800 2,774,000
Impsat Corp., Sr. Notes......................... B2 12.125% 07/15/03 3,500 3,753,750
Int'l Wireless Group, Inc....................... NR Zero 08/15/01 2,600 1,280,500
Int'l Wireless Group, Inc....................... NR 11.75% 06/01/05 2,000 2,180,000
Intermedia Communications of Florida, Inc., Sr.
Notes......................................... B3 13.50% 06/01/05 3,000 3,667,500
Ionica PLC...................................... NR 13.50% 08/15/06 5,000 5,300,000
McCaw Int'l., Zero Coupon (until 4/15/02),
13.00%........................................ NR Zero 04/15/07 3,000 1,440,000
McLeodUSA, Inc., Zero Coupon (until 3/01/02),
10.50%........................................ B3 Zero 03/01/07 4,400 2,805,000
Metrocall, Inc., Sr. Sub. Notes................. B2 10.375% 10/01/07 1,250 1,150,000
Omnipoint Corp.................................. B2 11.625% 08/15/06 500 481,875
Omnipoint Corp.................................. B3 11.625% 08/15/06 2,875 2,716,875
Pagemart, Inc.,
Series H, Zero Coupon (until 11/01/98),
12.25%...................................... NR Zero 11/01/03 2,000 1,730,000
Sr. Disc. Notes, Zero Coupon (until 2/01/00),
15.00% (a).................................. NR Zero 02/01/05 6,500 4,842,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B27
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S INTEREST MATURITY AMOUNT VALUE
LONG-TERM INVESTMENTS (CONTINUED) RATING RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Tele-Communications, Inc.,...................... B2 9.80% 02/01/12 $ 3,000 $ 3,433,770
Telesystem Int'l. Wireless, Inc., Zero Coupon
(until 6/30/02), 13.25%....................... NR Zero 06/30/07 1,500 795,000
Unifi Communications, Inc....................... NR 14.00% 03/01/04 3,250 3,168,750
Winstar Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 10/15/00), 14.00%.......... NR Zero 10/15/05 2,025 1,245,375
Sr. Disc. Notes, Zero Coupon (until 10/15/00),
14.00%........................................ NR Zero 10/15/05 5,850 3,334,500
--------------
70,087,395
--------------
TRANSPORTATION/AIRLINES -- 1.3%
US Air, Inc., Series 89-A2...................... B1 9.82% 01/01/13 4,000 4,120,000
Valuejet, Inc., Sr. Notes....................... B3 10.25% 04/15/01 2,000 1,900,000
--------------
6,020,000
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.7%
Ameritruck Distribution Corp., Sr. Sub. Notes... B3 12.25% 11/15/05 3,090 3,229,050
--------------
WASTE MANAGEMENT -- 1.2%
Allied Waste North America, Inc., Sr. Sub.
Notes, CMO, Zero Coupon (until 6/01/02),
11.30% (a).................................... Caa Zero 06/01/07 3,750 2,343,750
Allied Waste North America, Inc., Sr. Sub.
Notes......................................... B3 10.25% 12/01/06 3,000 3,195,000
--------------
5,538,750
--------------
TOTAL CORPORATE BONDS
(cost $420,814,779)......................................................................... 433,925,155
--------------
CONVERTIBLE BONDS -- 0.4%
TELECOMMUNICATIONS -- 0.4%
Geotek Communications, Inc...................... Caa 12.00% 02/15/01 2,000 1,840,000
--------------
(cost $2,000,000)
VALUE
COMMON STOCKS (A) -- 0.2% SHARES (NOTE 2)
------------- --------------
Cellnet Data Systems, Inc....................... 34,000 422,875
Dr. Pepper Bottling Holdings, Inc., (Class 'B'
Stock)........................................ 5,807 98,719
Hedstrom Holding Co............................. 24,261 0
Loehmann's Holdings, Inc........................ 4,403 28,620
Pagemart Nationwide, Inc........................ 13,125 82,031
PM Holdings Corp................................ 1,103 363,990
--------------
TOTAL COMMON STOCKS
(cost $5,396).................................................. 996,235
--------------
PREFERRED STOCKS -- 4.5%
Alliance Gaming Corp.,.......................... 23,387 2,397,155
Cablevision Systems Corp.,
Series H...................................... 2,907 300,844
Series L, PIK................................. 316 3,173,850
California Federal Bancorp...................... 100,000 2,581,250
Chancellor Radio Broadcast...................... 35,000 3,972,500
ICG Communication, Inc.......................... 10,350 1,071,225
Intermedia Comm., PIK........................... 268,775 2,775,102
Petroleum Heat & Power Co....................... 80,000 1,920,000
SFX Broadcasting, PIK........................... 25,789 2,759,430
Von Hoffman Press, Inc.......................... 20,000 572,000
--------------
TOTAL PREFERRED STOCKS
(cost $20,741,933)............................................. 21,523,356
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B28
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
WARRANTS -- 0.4% UNITS (NOTE 2)
------------- --------------
<S> <C> <C>
American Telecasting, Inc., expiring 08/10/00... 6,500 $ 6,500
Cellular Communications Int'l., Inc., expiring
08/15/03...................................... 4,375 65,625
Clearnet Communications, Inc., expiring
09/15/05...................................... 26,202 131,010
Coinstar Inc., expiring 10/01/06................ 900 63,000
Foamex - JPS Automotive, expiring 07/01/99...... 2,000 50,000
Globalstar Capital Co., expiring 02/15/04....... 1,200 0
Hyperion Telecommunications Corp., expiring
04/15/01...................................... 1,000 30,000
ICG Communications, expiring 09/15/05........... 20,790 254,677
Interact Systems, Inc., expiring 08/01/03....... 4,400 550
Intercel, Inc., expiring 02/01/06............... 6,720 26,880
Intermedia Communications of Florida, Inc.,
expiring 06/01/00............................. 3,000 120,000
International Wireless Commerce, expiring
08/15/01...................................... 2,600 130,000
Ionica PLC, expiring 08/15/06................... 3,000 420,000
Nextel Communications
expiring 12/15/98............................. 1,543 15
expiring 04/05/99............................. 2,250 23
Pagemart, Inc., expiring 11/01/03............... 9,200 46,000
Premium Standard Farms, L.P., expiring
01/00/00...................................... 22,025 649,738
President Riverboat Casinos, expiring
09/30/99...................................... 22,075 1,104
Sterling Chemical Holdings, Inc., expiring
08/15/08...................................... 560 19,600
Unifi Communications, expiring 03/01/04......... 3,250 0
--------------
TOTAL WARRANTS
(cost $787,452)................................................ 2,014,722
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $444,349,560)............................................ 460,299,468
--------------
PRINCIPAL
INTEREST MATURITY AMOUNT
SHORT-TERM INVESTMENT -- 4.9% RATE DATE (000)
------ -------- ---------
REPURCHASE AGREEMENTS -- 4.9%
Joint Repurchase Agreement Account.............. 5.883% 07/01/97 $ 23,460 23,460,000
--------------
(cost $23,460,000)
TOTAL INVESTMENTS -- 100.5%
(cost $467,809,560; Note 6)................................................... 483,759,468
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5%)................................. (2,521,185)
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 481,238,283
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
CMO Collateralized Mortgage Obligations
LP Limited Partnership
MTN Medium Term Note
NR Not Rated by Moody's or Standard & Poor's
PIK Payment-In-Kind securities
(a) Non-income producing security.
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $2,286,598. The aggregate value, $2,911,250 is approximately
0.6% of net assets. (See Note 2)
SEE NOTES TO FINANCIAL STATEMENTS.
B29
<PAGE>
STOCK INDEX PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.0%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.0%
Aeroquip-Vickers, Inc........................... 8,200 $ 387,450
AlliedSignal, Inc............................... 84,300 7,081,200
Boeing Co....................................... 214,356 11,374,265
General Dynamics Corp........................... 18,600 1,395,000
Lockheed Martin Corp............................ 56,949 5,897,781
McDonnell Douglas Corp.......................... 62,600 4,288,100
Northrop Grumman Corp........................... 17,600 1,545,500
Parker-Hannifin Corp............................ 22,850 1,386,709
Raytheon Co..................................... 70,000 3,570,000
United Technologies Corp. (a)................... 70,200 5,826,600
--------------
42,752,605
--------------
AIRLINES -- 0.3%
AMR Corp. (a)................................... 26,900 2,488,250
Delta Air Lines, Inc............................ 22,000 1,804,000
Southwest Airlines Co........................... 43,700 1,130,737
USAir Group, Inc. (a)........................... 21,600 756,000
--------------
6,178,987
--------------
AUTOS - CARS & TRUCKS -- 2.0%
Chrysler Corp................................... 207,500 6,808,594
Cummins Engine Co., Inc......................... 12,600 889,087
Dana Corp....................................... 29,300 1,113,400
Echlin, Inc..................................... 19,300 694,800
Ford Motor Co................................... 354,300 13,374,825
General Motors Corp............................. 223,200 12,429,450
Genuine Parts Co................................ 55,125 1,867,359
Johnson Controls, Inc........................... 24,000 985,500
Navistar International Corp. (a)................ 20,500 353,625
PACCAR Inc...................................... 21,660 1,005,836
Safety Kleen Corp............................... 17,450 294,469
TRW, Inc........................................ 38,000 2,158,875
--------------
41,975,820
--------------
BANKS AND SAVINGS & LOANS -- 7.4%
Banc One Corp................................... 149,994 7,265,334
Bank of New York Co., Inc....................... 116,700 5,076,450
BankAmerica Corp................................ 212,096 13,693,448
BankBoston Corp................................. 45,200 3,257,225
Bankers Trust NY Corp........................... 23,900 2,079,300
Barnett Banks, Inc.............................. 60,700 3,186,750
Chase Manhattan Corp............................ 129,747 12,593,568
Citicorp........................................ 137,600 16,589,400
Comerica, Inc................................... 32,200 2,189,600
CoreStates Financial Corp....................... 66,700 3,585,125
First Bank System, Inc.......................... 39,800 3,397,925
First Chicago NBD Corp.......................... 94,315 5,706,057
First Union Corp.,.............................. 85,325 7,892,562
Fleet Financial Group, Inc...................... 76,800 4,857,600
Golden West Financial Corp...................... 16,200 1,134,000
Great Western Financial Corp.................... 39,600 2,128,500
H.F. Ahmanson & Co.............................. 31,600 1,358,800
KeyCorp......................................... 65,800 3,676,575
Mellon Bank Corp................................ 77,200 3,483,650
Morgan (J.P.) & Co., Inc........................ 54,950 5,735,406
National City Corp.............................. 66,600 3,496,500
NationsBank Corp................................ 216,426 13,959,477
Norwest Corp.................................... 111,100 6,249,375
PNC Bank Corp.,................................. 98,900 4,116,712
Providian Financial Corp........................ 27,300 877,012
Republic New York Corp.......................... 15,800 1,698,500
Suntrust Banks, Inc............................. 66,100 3,639,631
U.S. Bancorp.................................... 45,100 2,892,037
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Wachovia Corp................................... 49,100 $ 2,863,144
Wells Fargo & Co................................ 27,266 7,348,187
--------------
156,027,850
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc.................................... 43,000 1,599,062
--------------
CHEMICALS -- 2.2%
Air Products & Chemicals, Inc................... 33,400 2,713,750
Dow Chemical Co................................. 71,800 6,255,575
E.I. du Pont de Nemours & Co.................... 335,300 21,081,987
Eastman Chemical Co............................. 22,100 1,403,350
FMC Corp. (a)................................... 10,600 842,037
Hercules, Inc................................... 30,400 1,455,400
Monsanto Co..................................... 174,900 7,531,631
Nalco Chemical Co............................... 19,700 760,912
Rohm & Haas Co.................................. 19,000 1,711,187
Sigma-Aldrich Corp.............................. 29,200 1,023,825
Union Carbide Corp.............................. 37,800 1,778,962
--------------
46,558,616
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp.................................. 40,675 851,633
Great Lakes Chemical Corp....................... 17,400 911,325
Morton International, Inc....................... 40,500 1,222,594
Praxair, Inc.................................... 45,400 2,542,400
Raychem Corp.................................... 12,800 952,000
W.R. Grace & Co................................. 25,000 1,378,125
--------------
7,858,077
--------------
COMMERCIAL SERVICES -- 0.2%
CUC International, Inc. (a)..................... 121,025 3,123,958
Deluxe Corp..................................... 23,700 808,762
John H. Harland Co.............................. 8,200 187,062
Moore Corp., Ltd................................ 26,800 527,625
--------------
4,647,407
--------------
COMPUTER HARDWARE
Intergraph Corp. (a)............................ 11,300 96,050
--------------
COMPUTER SERVICES -- 5.0%
3Com Corp. (a).................................. 103,600 4,662,000
Adobe Systems, Inc.............................. 21,100 739,819
Autodesk, Inc................................... 13,900 532,544
Automatic Data Processing, Inc.................. 86,500 4,065,500
Bay Networks, Inc. (a).......................... 57,300 1,522,031
Cabletron Systems, Inc. (a)..................... 45,200 1,279,725
Ceridian Corp. (a).............................. 24,400 1,030,900
Cisco Systems, Inc. (a)......................... 197,100 13,230,337
Computer Associates International, Inc.......... 107,762 6,000,996
Computer Sciences Corp. (a)..................... 22,900 1,651,662
EMC Corp. (a)................................... 74,200 2,893,800
First Data Corp................................. 134,200 5,896,412
Microsoft Corp. (a)............................. 357,400 45,166,425
Novell, Inc. (a)................................ 102,500 711,094
Oracle Corp. (a)................................ 199,725 10,061,147
Parametric Technology Corp...................... 37,000 1,574,812
Seagate Technology, Inc. (a).................... 73,600 2,589,800
Silicon Graphics, Inc. (a)...................... 51,600 774,000
Tandem Computers, Inc. (a)...................... 32,900 666,225
--------------
105,049,229
--------------
COMPUTERS -- 3.1%
Amdahl Corp. (a)................................ 33,100 289,625
Apple Computer, Inc............................. 35,900 511,575
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B30
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Compaq Computer Corp., (a)...................... 81,500 $ 8,088,875
Dell Computer Corp., (a)........................ 51,600 6,059,775
Digital Equipment Corp. (a)..................... 47,000 1,665,562
Hewlett-Packard Co.,............................ 304,100 17,029,600
International Business Machines Corp.,.......... 298,300 26,902,931
Sun Microsystems, Inc. (a)...................... 109,800 4,086,619
--------------
64,634,562
--------------
CONSTRUCTION -- 0.1%
Fluor Corp...................................... 25,900 1,429,356
Foster Wheeler Corp............................. 12,500 506,250
Kaufman & Broad Home Corp....................... 8,366 146,928
Pulte Corp...................................... 5,900 203,919
--------------
2,286,453
--------------
CONSTRUCTION & HOUSING
Centex Corp..................................... 9,200 373,750
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 8,100 243,506
Bemis Co., Inc.................................. 16,300 704,975
Crown Cork & Seal Co., Inc...................... 37,800 2,019,937
Stone Container Corp............................ 28,566 408,851
--------------
3,377,269
--------------
COSMETICS & SOAPS -- 1.9%
Alberto Culver Co. (Class 'B' Stock)............ 16,400 459,200
Avon Products, Inc.............................. 38,900 2,744,881
Colgate Palmolive Co............................ 87,900 5,735,475
International Flavors & Fragrances, Inc......... 32,000 1,616,000
Procter & Gamble Co............................. 202,352 28,582,220
--------------
39,137,776
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.2%
Loews Corp...................................... 34,100 3,414,262
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
Avery Dennison Corp............................. 31,600 1,267,950
Pitney Bowes, Inc............................... 44,700 3,106,650
Unisys Corp. (a)................................ 50,100 382,012
Xerox Corp...................................... 96,546 7,615,066
--------------
12,371,678
--------------
DIVERSIFIED OPERATIONS -- 3.3%
Cognizant Corp.................................. 51,560 2,088,180
Fortune Brands, Inc............................. 49,900 1,861,894
General Electric Co............................. 978,000 63,936,750
Whitman Corp.................................... 30,300 766,969
--------------
68,653,793
--------------
DRUGS AND MEDICAL SUPPLIES -- 10.1%
Abbott Laboratories............................. 230,700 15,399,225
Allergan, Inc................................... 18,600 591,712
ALZA Corp. (a).................................. 25,500 739,500
American Home Products Corp..................... 191,200 14,626,800
Amgen, Inc. (a)................................. 79,000 4,591,875
Bausch & Lomb, Inc.............................. 15,600 735,150
Baxter International, Inc....................... 83,200 4,347,200
Becton, Dickinson & Co.......................... 36,700 1,857,937
Biomet, Inc..................................... 33,900 631,387
Boston Scientific Corp. (a)..................... 58,200 3,575,662
Bristol-Myers Squibb Co......................... 297,780 24,120,180
C.R. Bard, Inc.................................. 17,400 631,837
Cardinal Health, Inc............................ 32,700 1,872,075
Eli Lilly & Co.................................. 165,800 18,124,012
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Guidant Corp.................................... 22,500 $ 1,912,500
Johnson & Johnson............................... 397,200 25,569,750
Mallinckrodt, Inc............................... 23,100 877,800
Medtronic, Inc.................................. 71,300 5,775,300
Merck & Co., Inc................................ 360,350 37,296,225
Pfizer, Inc.,................................... 192,800 23,039,600
Pharmacia & Upjohn, Inc......................... 150,425 5,227,269
Schering-Plough Corp............................ 219,100 10,489,412
St. Jude Medical, Inc. (a)...................... 27,100 1,056,900
United States Surgical Corp..................... 21,700 808,325
Warner-Lambert Co............................... 81,000 10,064,250
--------------
213,961,883
--------------
ELECTRICAL EQUIPMENT -- 0.3%
W. W. Grainger, Inc............................. 15,700 1,227,544
Westinghouse Electric Corp...................... 189,200 4,375,250
--------------
5,602,794
--------------
ELECTRONICS -- 4.0%
Advanced Micro Devices, Inc. (a)................ 41,500 1,494,000
AMP, Inc........................................ 65,744 2,744,812
Applied Materials, Inc. (a)..................... 53,400 3,781,387
Data General Corp. (a).......................... 11,000 286,000
EG&G, Inc....................................... 13,800 310,500
Emerson Electric Co............................. 132,000 7,268,250
Harris Corp..................................... 11,900 999,600
Honeywell, Inc.................................. 37,100 2,814,962
Intel Corp...................................... 244,300 34,644,794
LSI Logic Corp. (a)............................. 41,900 1,340,800
Micron Technology, Inc.......................... 62,300 2,488,106
Motorola, Inc................................... 177,800 13,512,800
National Semiconductor Corp. (a)................ 42,200 1,292,375
Perkin-Elmer Corp............................... 12,500 994,531
Rockwell International Corp..................... 64,100 3,781,900
Tektronix, Inc.................................. 10,100 606,000
Texas Instruments, Inc.......................... 57,300 4,816,781
Thomas & Betts Corp............................. 16,300 856,769
--------------
84,034,367
--------------
ENERGY EQUIPMENT & SERVICES
NorAm Energy Corp............................... 39,700 605,425
--------------
ENVIRONMENTAL SERVICES -- 0.1%
Laidlaw, Inc. (Class 'B' Stock)................. 90,400 1,248,650
--------------
FINANCIAL SERVICES -- 3.1%
American Express Co............................. 140,300 10,452,350
Beneficial Corp................................. 15,500 1,101,469
Countrywide Credit Industries, Inc.............. 29,000 904,437
Federal Home Loan Mortgage Corp................. 211,400 7,266,875
Federal National Mortgage Association........... 322,900 14,086,512
Fifth Third Bancorp............................. 31,700 2,601,381
Green Tree Financial Corp....................... 41,500 1,478,437
H & R Block, Inc................................ 32,300 1,041,675
Household International, Inc.................... 31,600 3,711,025
MBNA Corp....................................... 98,375 3,602,984
Merrill Lynch & Co., Inc........................ 97,700 5,825,362
Morgan Stanley, Dean Witter, Discover & Co...... 170,205 7,329,453
Salomon, Inc.................................... 32,900 1,830,062
Schwab (Charles) Corp........................... 52,300 2,127,956
Transamerica Corp............................... 19,700 1,843,181
--------------
65,203,159
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B31
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 6.2%
Adolph Coors Co. (Class 'B' Stock).............. 11,500 $ 306,187
Anheuser-Busch Companies, Inc................... 147,900 6,202,556
Archer-Daniels-Midland Co....................... 160,998 3,783,453
Brown-Forman Corp. (Class 'B' Stock)............ 21,300 1,039,706
Campbell Soup Co................................ 139,400 6,970,000
Coca-Cola Co.................................... 739,700 49,929,750
ConAgra, Inc.................................... 71,300 4,572,112
CPC International, Inc.......................... 42,200 3,895,587
Fleming Companies, Inc.......................... 9,400 169,200
General Mills, Inc.............................. 47,300 3,080,412
Giant Food, Inc. (Class 'A' Stock).............. 16,500 538,312
H.J. Heinz & Co................................. 109,850 5,066,831
Hershey Foods Corp.............................. 45,700 2,527,781
Kellogg Co...................................... 62,800 5,377,250
PepsiCo, Inc.................................... 459,500 17,259,969
Pioneer Hi-Bred International, Inc.............. 23,700 1,896,000
Quaker Oats Co.................................. 39,300 1,763,587
Ralston-Ralston Purina Group.................... 31,440 2,583,975
Sara Lee Corp................................... 142,900 5,948,212
Seagram Co., Ltd................................ 109,200 4,395,300
Sysco Corp...................................... 53,100 1,938,150
W. M. Wrigley, Jr. Co........................... 34,000 2,278,000
--------------
131,522,330
--------------
FOREST PRODUCTS -- 0.9%
Boise Cascade Corp.............................. 13,986 493,881
Champion International Corp..................... 28,400 1,569,100
Georgia-Pacific Corp............................ 26,800 2,288,050
International Paper Co.......................... 89,234 4,333,426
James River Corp. of Virginia................... 25,500 943,500
Louisiana-Pacific Corp.......................... 31,800 671,775
Mead Corp....................................... 15,000 933,750
Potlatch Corp................................... 8,700 393,675
Temple-Inland Inc............................... 15,800 853,200
Union Camp Corp................................. 20,600 1,030,000
Westvaco Corp................................... 30,200 949,412
Weyerhaeuser Co................................. 59,500 3,094,000
Willamette Industries, Inc...................... 16,300 1,141,000
--------------
18,694,769
--------------
GAS PIPELINES -- 0.4%
Columbia Gas System, Inc........................ 16,000 1,044,000
Consolidated Natural Gas Co..................... 29,300 1,576,706
Enron Corp...................................... 75,300 3,073,181
Peoples Energy Corp............................. 9,700 363,144
Sonat, Inc...................................... 25,500 1,306,875
Williams Companies, Inc......................... 46,400 2,030,000
--------------
9,393,906
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.8%
Beverly Enterprises, Inc. (a)................... 28,200 458,250
Columbia/HCA Healthcare Corp.................... 198,598 7,807,384
Healthsouth Corp................................ 101,900 2,541,131
Humana, Inc. (a)................................ 48,500 1,121,563
Manor Care, Inc................................. 19,050 621,506
Service Corp. International..................... 71,500 2,350,563
Shared Medical Systems Corp..................... 7,100 383,400
Tenet Healthcare Corp. (a)...................... 87,800 2,595,588
--------------
17,879,385
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 1.2%
Clorox Co....................................... 15,300 $ 2,019,600
Gillette Co..................................... 166,500 15,775,875
Kimberly-Clark Corp............................. 167,688 8,342,478
--------------
26,137,953
--------------
HOUSING RELATED -- 0.4%
Armstrong World Industries, Inc................. 12,000 880,500
Fleetwood Enterprises, Inc...................... 9,500 283,219
Lowe's Companies, Inc........................... 52,400 1,945,350
Masco Corp...................................... 48,700 2,033,225
Maytag Corp..................................... 28,300 739,338
Owens Corning................................... 14,900 642,563
Stanley Works................................... 25,600 1,024,000
Tupperware Corp................................. 17,800 649,700
Whirlpool Corp.................................. 22,000 1,200,375
--------------
9,398,270
--------------
INSURANCE -- 4.3%
Aegon N.V., ARS................................. 11,859 830,871
Aetna, Inc...................................... 45,012 4,608,104
Allstate Corp................................... 131,194 9,577,162
American General Corp........................... 71,486 3,413,457
American International Group, Inc............... 140,237 20,947,902
Aon Corp........................................ 48,550 2,512,463
Chubb Corp...................................... 52,400 3,504,250
CIGNA Corp...................................... 22,000 3,905,000
Conseco, Inc.................................... 56,000 2,072,000
General Re Corp................................. 24,150 4,395,300
Hartford Financial Services Group, Inc.......... 34,600 2,863,150
Jefferson-Pilot Corp............................ 21,475 1,500,566
Lincoln National Corp........................... 30,600 1,969,875
Marsh & McLennan Companies, Inc................. 48,800 3,483,100
MBIA, Inc....................................... 12,500 1,410,156
MGIC Investment Corp............................ 34,800 1,668,225
SAFECO Corp..................................... 37,800 1,764,788
St. Paul Companies, Inc......................... 24,600 1,875,750
Torchmark Corp.................................. 21,500 1,531,875
Travelers Group Inc............................. 190,494 12,013,028
United Healthcare Corp.......................... 55,800 2,901,600
UNUM Corp....................................... 44,500 1,869,000
USF&G Corp...................................... 32,400 777,600
--------------
91,395,222
--------------
LEISURE -- 0.9%
Brunswick Corp.................................. 28,100 878,125
Harrah's Entertainment, Inc. (a)................ 30,650 559,363
Hilton Hotels Corp.............................. 74,700 1,984,219
King World Productions, Inc. (a)................ 10,550 369,250
Walt Disney Co.................................. 200,467 16,087,477
--------------
19,878,434
--------------
LODGING -- 0.3%
HFS, Inc. (a)................................... 47,300 2,743,400
ITT Corp. (a)................................... 34,100 2,082,231
Marriott International, Inc..................... 38,400 2,356,800
--------------
7,182,431
--------------
MACHINERY -- 1.1%
Briggs & Stratton Corp.......................... 6,300 315,000
Case Corp.,..................................... 21,500 1,480,813
Caterpillar, Inc................................ 56,300 6,045,213
Cincinnati Milacron, Inc........................ 11,000 285,313
Cooper Industries, Inc.......................... 34,200 1,701,450
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B32
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Deere & Co...................................... 76,600 $ 4,203,425
Dover Corp...................................... 34,100 2,097,150
Eaton Corp...................................... 22,500 1,964,531
Giddings & Lewis, Inc........................... 8,900 185,788
Harnischfeger Industries, Inc................... 14,700 610,050
Ingersoll-Rand Co............................... 33,300 2,056,275
Snap-On, Inc.................................... 17,500 689,063
Timken Co....................................... 18,200 647,238
--------------
22,281,309
--------------
MANUFACTURING -- 0.3%
Illinois Tool Works, Inc........................ 74,200 3,705,363
Tyco International, Ltd......................... 50,500 3,512,906
--------------
7,218,269
--------------
MEDIA -- 1.8%
Comcast Corp. (Special Class 'A' Stock)......... 95,900 2,049,863
Dow Jones & Co., Inc............................ 28,600 1,149,363
Dun & Bradstreet Corp........................... 49,460 1,298,325
Gannett Co., Inc................................ 42,000 4,147,500
Interpublic Group of Companies, Inc............. 25,200 1,545,075
Knight-Ridder, Inc.............................. 28,000 1,373,750
McGraw-Hill, Inc................................ 28,800 1,693,800
Meredith Corp................................... 15,800 458,200
New York Times Co. (Class 'A' Stock)............ 28,800 1,425,600
R. R. Donnelley & Sons Co....................... 46,200 1,692,075
Tele-Communications, Inc. (Series 'A'
Stock) (a).................................... 194,800 2,897,650
Time Warner, Inc................................ 168,040 8,107,930
Times Mirror Co. (Class 'A' Stock).............. 28,200 1,558,050
Tribune Co...................................... 35,900 1,725,444
US West Media Group (a)......................... 183,500 3,715,875
Viacom, Inc. (Class 'B' Stock) (a).............. 105,567 3,167,010
--------------
38,005,510
--------------
METALS-FERROUS -- 0.2%
Allegheny Teledyne, Inc......................... 51,380 1,387,260
Armco, Inc. (a)................................. 26,700 103,463
Bethlehem Steel Corp. (a)....................... 33,300 347,569
Inland Steel Industries, Inc.................... 14,000 365,750
Nucor Corp...................................... 25,700 1,452,050
USX-U.S. Steel Group............................ 25,740 902,509
Worthington Industries, Inc..................... 28,600 523,738
--------------
5,082,339
--------------
METALS-NON FERROUS -- 0.5%
Alcan Aluminum, Ltd............................. 66,450 2,304,984
Aluminum Company of America..................... 51,200 3,859,200
Cyprus Minerals Co.............................. 29,100 712,950
Inco Ltd........................................ 50,500 1,518,156
Reynolds Metals Co.............................. 21,900 1,560,375
--------------
9,955,665
--------------
MINERAL RESOURCES -- 0.2%
ASARCO, Inc..................................... 12,200 373,625
Burlington Resources, Inc....................... 36,300 1,601,738
Echo Bay Mines, Ltd............................. 37,200 213,900
Homestake Mining Co............................. 42,000 548,625
Phelps Dodge Corp............................... 19,500 1,661,156
--------------
4,399,044
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
Browning-Ferris Industries, Inc................. 64,700 $ 2,151,275
Crane Co........................................ 13,850 579,103
Ecolab, Inc..................................... 19,300 921,575
General Instrument Corp. (a).................... 40,900 1,022,500
General Signal Corp............................. 13,962 609,092
ITT Industries, Inc............................. 33,900 872,925
Millipore Corp.................................. 12,900 567,600
NACCO Industries, Inc. (Class 'A' Stock)........ 2,500 141,094
Pall Corp....................................... 36,500 848,625
PPG Industries Inc.............................. 54,800 3,185,250
Textron, Inc.................................... 49,200 3,265,650
Thermo Electron Corp. (a)....................... 45,600 1,550,400
--------------
15,715,089
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.8%
American Greetings Corp. (Class 'A' Stock)...... 23,300 865,013
Black & Decker Corp............................. 28,600 1,063,563
Corning, Inc.................................... 68,000 3,782,500
Eastman Kodak Co................................ 98,800 7,582,900
Jostens, Inc.................................... 10,900 291,575
Minnesota Mining & Manufacturing Co............. 123,700 12,617,400
Polaroid Corp................................... 13,500 749,250
Rubbermaid, Inc................................. 44,900 1,335,775
Unilever N.V., ADR, (United Kingdom)............ 47,600 10,376,800
--------------
38,664,776
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.1%
Tenneco, Inc.................................... 51,900 2,345,231
--------------
OIL & GAS -- 7.7%
Amerada Hess Corp............................... 28,300 1,572,419
Amoco Corp...................................... 146,630 12,747,646
Ashland, Inc.................................... 21,400 992,425
Atlantic Richfield Co........................... 95,570 6,737,685
Chevron Corp.................................... 194,400 14,373,450
Coastal Corp.................................... 31,400 1,670,088
Eastern Enterprises............................. 5,100 176,906
ENSERCH Corp.................................... 21,000 467,250
Exxon Corp...................................... 739,500 45,479,250
Kerr-McGee Corp................................. 14,600 925,275
Louisiana Land & Exploration Co................. 11,000 628,375
McDermott International, Inc.................... 16,700 487,431
Mobil Corp...................................... 234,600 16,392,675
NICOR, Inc...................................... 14,100 505,838
Occidental Petroleum Corp....................... 97,600 2,446,100
ONEOK, Inc...................................... 7,400 238,188
Pennzoil Co..................................... 14,200 1,089,850
Phillips Petroleum Co........................... 78,200 3,421,250
Royal Dutch Petroleum Co., ADR.................. 638,100 34,696,688
Santa Fe Energy Resources, Inc. (a)............. 27,970 410,809
Sun Co., Inc.................................... 22,000 682,000
Texaco, Inc..................................... 78,700 8,558,625
Union Pacific Resources Group, Inc.............. 72,656 1,807,318
Unocal Corp..................................... 73,600 2,856,600
USX-Marathon Group.............................. 86,500 2,497,688
--------------
161,861,829
--------------
OIL & GAS SERVICES -- 0.9%
Baker Hughes, Inc............................... 43,000 1,663,563
Dresser Industries, Inc......................... 53,200 1,981,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B33
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Halliburton Co.................................. 37,700 $ 2,987,725
Helmerich & Payne, Inc.......................... 7,600 437,950
Oryx Energy Co. (a)............................. 29,100 614,738
Rowan Companies, Inc. (a)....................... 25,400 715,963
Schlumberger Ltd................................ 73,100 9,137,500
Western Atlas, Inc. (a)......................... 15,500 1,135,375
--------------
18,674,514
--------------
PRECIOUS METALS -- 0.4%
Barrick Gold Corp............................... 107,900 2,373,800
Battle Mountain Gold Corp....................... 67,000 381,063
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 57,200 1,780,350
Newmont Mining Corp............................. 47,603 1,856,517
Placer Dome, Inc................................ 69,200 1,133,150
--------------
7,524,880
--------------
RAILROADS -- 0.8%
Burlington Northern, Inc........................ 46,342 4,164,987
CSX Corp........................................ 63,812 3,541,566
Norfolk Southern Corp........................... 37,400 3,768,050
Union Pacific Corp.............................. 72,900 5,139,450
--------------
16,614,053
--------------
REMARKET/LEASING OFFICE EQUIPMENT
IKON Office Solutions, Inc...................... 41,076 1,024,333
--------------
RESTAURANTS -- 0.5%
Darden Restaurants Inc.......................... 44,000 398,750
McDonald's Corp................................. 206,200 9,962,038
Wendy's International, Inc...................... 39,700 1,029,719
--------------
11,390,507
--------------
RETAIL -- 4.9%
Albertson's, Inc................................ 73,700 2,690,050
American Stores Co.............................. 44,000 2,172,500
AutoZone, Inc. (a).............................. 44,400 1,046,175
Charming Shoppes, Inc........................... 23,300 121,597
Circuit City Stores, Inc........................ 29,000 1,031,313
Costco Companies, Inc. (a)...................... 63,166 2,076,582
CVS Corp........................................ 49,500 2,536,875
Dayton-Hudson Corp.............................. 65,242 3,470,059
Dillards, Inc. (Class 'A' Stock)................ 33,850 1,172,056
Federated Department Stores, Inc. (a)........... 62,200 2,161,450
Great Atlantic & Pacific Tea Co., Inc........... 10,100 274,594
Harcourt General, Inc........................... 20,506 976,598
Home Depot, Inc................................. 144,449 9,957,953
J.C. Penney Co., Inc............................ 72,700 3,794,031
K mart Corp..................................... 142,900 1,750,525
Kroger Co. (a).................................. 75,200 2,180,800
Liz Claiborne, Inc.............................. 22,300 1,039,738
Longs Drug Stores, Inc.......................... 12,400 324,725
May Department Stores Co........................ 71,800 3,392,550
Mercantile Stores Co., Inc...................... 11,700 736,369
Newell Co....................................... 47,300 1,874,263
Nike, Inc. (Class 'B' Stock).................... 85,900 5,014,413
Nordstrom, Inc.................................. 23,200 1,138,250
Pep Boys-Manny, Moe & Jack...................... 18,100 616,531
Reebok International, Ltd....................... 16,300 762,025
Rite Aid Corp................................... 37,200 1,855,350
Sears, Roebuck & Co............................. 117,400 6,310,250
Sherwin-Williams Co............................. 49,800 1,537,575
Stride Rite Corp................................ 14,400 185,400
Supervalu, Inc.................................. 20,700 714,150
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Tandy Corp...................................... 16,665 $ 933,240
The Gap, Inc.................................... 82,300 3,199,413
The Limited, Inc................................ 79,448 1,608,822
TJX Companies, Inc.............................. 45,600 1,202,700
Toys 'R' Us, Inc. (a)........................... 84,850 2,969,750
Wal-Mart Stores, Inc............................ 680,000 22,992,500
Walgreen Co..................................... 73,500 3,941,438
Winn Dixie Stores, Inc.......................... 43,600 1,624,100
Woolworth Corp.................................. 38,900 933,600
--------------
102,320,310
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 15,800 684,338
Cooper Tire & Rubber Co......................... 23,200 510,400
Goodyear Tire & Rubber Co....................... 47,100 2,982,019
--------------
4,176,757
--------------
TELECOMMUNICATIONS -- 7.1%
Airtouch Communications, Inc. (a)............... 149,200 4,084,350
Alltel Corp..................................... 55,400 1,852,438
Ameritech Corp.................................. 163,900 11,134,956
Andrew Corp. (a)................................ 26,212 737,213
AT&T Corp....................................... 485,573 17,025,403
Bell Atlantic Corp.............................. 130,500 9,901,688
BellSouth Corp.................................. 295,800 13,717,725
DSC Communications Corp. (a).................... 34,000 756,500
Frontier Corp................................... 46,500 927,094
GTE Corp........................................ 285,120 12,509,640
Lucent Technologies, Inc........................ 191,460 13,797,086
MCI Communications Corp......................... 205,700 7,874,453
Northern Telecom, Ltd........................... 77,300 7,034,300
NYNEX Corp...................................... 130,300 7,508,538
SBC Communications, Inc......................... 271,793 16,817,192
Scientific-Atlanta, Inc......................... 21,500 470,313
Sprint Corp..................................... 128,200 6,746,525
Tellabs, Inc. (a)............................... 54,000 3,017,250
U S West Communications, Inc.................... 143,000 5,389,313
Worldcom Inc. (a)............................... 265,900 8,508,800
--------------
149,810,777
--------------
TEXTILES -- 0.2%
Fruit of the Loom, Inc. (Class 'A' Stock) (a)... 22,200 688,200
National Service Industries, Inc................ 12,500 608,594
Russell Corp.................................... 10,600 314,025
Springs Industries, Inc......................... 6,400 337,600
V.F. Corp....................................... 19,118 1,627,420
--------------
3,575,839
--------------
TOBACCO -- 1.6%
Gallaher Group, PLC, ADR........................ 25,900 477,531
Phillip Morris Co. Inc.,........................ 723,500 32,105,313
UST, Inc........................................ 55,300 1,534,575
--------------
34,117,419
--------------
TOYS -- 0.2%
Hasbro Inc...................................... 39,000 1,106,625
Mattel Inc...................................... 84,581 2,865,181
--------------
3,971,806
--------------
TRUCKING/SHIPPING -- 0.2%
Caliber System Inc.............................. 11,600 432,100
Federal Express Corp. (a)....................... 34,100 1,969,275
Ryder System, Inc............................... 24,300 801,900
--------------
3,203,275
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B34
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC -- 2.4%
American Electric Power Co. Inc................. 57,600 $ 2,419,200
Baltimore Gas & Electric Co..................... 44,150 1,178,253
Carolina Power & Light Co....................... 46,500 1,668,188
Central & South West Corp....................... 61,300 1,302,625
CINergy Corp.................................... 46,339 1,613,176
Consolidated Edison Co. of NY, Inc.............. 70,000 2,060,625
Dominion Resources, Inc......................... 53,950 1,975,919
DTE Energy Company.............................. 43,000 1,187,875
Duke Power Co................................... 106,831 5,121,211
Edison International............................ 127,200 3,164,100
Entergy Corp.................................... 69,500 1,902,563
FPL Group, Inc.................................. 55,000 2,533,438
GPU, Inc........................................ 36,600 1,313,025
Houston Industries, Inc......................... 71,500 1,532,781
Niagara Mohawk Power Corp....................... 39,700 339,931
Northern States Power Co........................ 20,000 1,035,000
Ohio Edison Co.................................. 44,200 964,113
P P & L Resources, Inc.......................... 47,800 953,013
Pacific Enterprises............................. 26,600 894,425
PacifiCorp...................................... 87,700 1,929,400
PECO Energy Co.................................. 64,800 1,360,800
PG&E, Corp...................................... 120,900 2,931,825
Public Service Enterprise Group, Inc............ 70,500 1,762,500
Southern Co..................................... 202,600 4,431,875
Texas Utilities Co.............................. 67,129 2,311,755
Unicom Corp..................................... 64,500 1,435,125
Union Electric Company.......................... 29,900 1,126,856
--------------
50,449,597
--------------
WASTE MANAGEMENT -- 0.2%
Waste Management, Inc........................... 137,200 4,407,550
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,180,886,147).......................................... 2,025,922,902
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 4.2% (000)
-------------
REPURCHASE AGREEMENTS -- 4.0%
Joint Repurchase Agreement Account,
5.88%, 7/1/97 Note 5.......................... $ 84,707 84,707,000
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (000) (NOTE 2)
------------- --------------
<S> <C> <C>
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bill,
4.935%, 09/18/97 (b).......................... $ 2,950 $ 2,916,960
5.05%, 09/18/97 (b)........................... 200 197,760
--------------
3,114,720
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $87,822,836)............................................. 87,821,720
--------------
TOTAL INVESTMENTS -- 100.2%
(cost $1,268,708,983; Note 6).................................. 2,113,744,622
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C)...................
(594,675)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%)..................
(2,992,395)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $2,110,157,552
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
ARS American Regulatory Shares
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Open futures contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Long
Positions:
S&P 500
183 Index Sep 97 $82,199,350 $81,457,875 ($741,475)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B35
<PAGE>
EQUITY INCOME PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.5%
VALUE
COMMON STOCKS -- 89.8% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE/DEFENSE -- 4.0%
Newport News Shipbuilding, Inc. (a)............. 50,260 $ 976,929
Northrop Grumman Corp........................... 388,600 34,123,937
Thiokol Corp.................................... 422,000 29,540,000
United Industrial Corp.......................... 31,700 283,319
--------------
64,924,185
--------------
AIRLINES -- 3.0%
AMR Corp. (a)................................... 534,200 49,413,500
--------------
AUTOS - CARS & TRUCKS -- 2.8%
Chrysler Corp................................... 1,248,034 40,951,116
Ford Motor Co................................... 130,000 4,907,500
--------------
45,858,616
--------------
CANADIAN OIL & GAS -- 0.2%
Crestar Energy, Inc. (a)........................ 200,000 3,635,442
--------------
CHEMICALS -- 3.0%
Dow Chemical Co................................. 378,800 33,002,950
Millennium Chemicals, Inc. (a).................. 724,998 16,493,704
--------------
49,496,654
--------------
COMMERCIAL SERVICES -- 0.2%
IMO Industries, Inc. (a)........................ 434,600 2,553,275
--------------
COMPUTER HARDWARE -- 1.7%
Intergraph Corp. (a)............................ 607,700 5,165,450
Digital Equipment Corp. (a)..................... 639,100 22,648,106
--------------
27,813,556
--------------
COMPUTER SYSTEMS -- 4.2%
International Business Machines Corp.,.......... 748,200 67,478,288
--------------
CONSTRUCTION -- 0.5%
Kaufman & Broad Home Corp....................... 462,700 8,126,169
--------------
CONSUMER SERVICES
Petroleum Heat and Power, Inc. (Class 'A'
Stock)........................................ 47,300 127,119
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 4.2%
Gibson Greetings Inc. (a)....................... 778,600 17,518,500
RJR Nabisco Holdings Corp....................... 1,548,880 51,113,040
--------------
68,631,540
--------------
DIVERSIFIED OPERATIONS -- 0.7%
Energy Group, PLC, ADR, (United Kingdom)........ 253,750 10,752,656
--------------
DRUGS AND MEDICAL SUPPLIES -- 0.5%
United States Surgical Corp..................... 198,509 7,394,460
--------------
ELECTRICAL EQUIPMENT -- 4.9%
Kuhlman Corp.................................... 560,000 18,060,000
Pacific Scientific Co........................... 185,700 2,460,525
Westinghouse Electric Corp...................... 2,558,945 59,175,603
--------------
79,696,128
--------------
ELECTRONICS -- 0.9%
Esterline Technologies Corp. (a)................ 275,700 9,701,194
Instron Corp.................................... 153,000 2,180,250
Newport Corp.................................... 306,900 3,452,625
--------------
15,334,069
--------------
FINANCIAL SERVICES -- 10.8%
A.G. Edwards, Inc............................... 211,000 9,020,250
Bear Stearns Companies, Inc..................... 928,251 31,734,581
Lehman Brothers Holdings, Inc.,................. 1,762,500 71,381,250
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Painewebber Group, Inc.......................... 904,000 $ 31,640,000
Salomon, Inc.................................... 560,000 31,150,000
--------------
174,926,081
--------------
FOREST PRODUCTS -- 0.7%
Fletcher Challenge Ltd., ADR, (Canada).......... 62,400 900,900
Louisiana-Pacific Corp.,........................ 71,700 1,514,662
Potlatch Corp................................... 81,500 3,687,875
Rayonier, Inc................................... 149,900 6,305,169
--------------
12,408,606
--------------
GAS DISTRIBUTION -- 1.9%
British Gas PLC, ADR, (United Kingdom).......... 610,600 22,515,875
TransCanada Pipelines, Ltd...................... 389,600 7,840,700
Yankee Energy System, Inc....................... 30,400 744,800
--------------
31,101,375
--------------
GAS PIPELINES -- 0.7%
Sonat, Inc...................................... 206,300 10,572,875
--------------
HOUSING RELATED -- 1.0%
Hanson, PLC, ADR, (United Kingdom).............. 253,750 6,343,750
Ryland Group, Inc............................... 750,000 10,593,750
--------------
16,937,500
--------------
INSURANCE -- 4.0%
Marsh & McLennan Companies, Inc................. 537,600 38,371,200
Ohio Casualty Corp.............................. 379,900 16,715,600
Selective Insurance Group, Inc.................. 198,800 9,629,375
--------------
64,716,175
--------------
LODGING -- 0.1%
Homestead Village, Inc.......................... 66,245 1,175,849
--------------
MEDIA -- 1.0%
Dun & Bradstreet Corp........................... 195,600 5,134,500
Gannett Co., Inc................................ 120,000 11,850,000
--------------
16,984,500
--------------
METALS-FERROUS -- 2.8%
LTV Corp........................................ 90,000 1,282,500
USX-U.S. Steel Group............................ 1,259,400 44,157,712
--------------
45,440,212
--------------
METALS-NON FERROUS -- 3.1%
Aluminum Company of America..................... 420,000 31,657,500
Reynolds Metals Co.............................. 271,586 19,350,502
--------------
51,008,002
--------------
MINERAL RESOURCES -- 0.3%
Coeur D'Alene Mines Corp........................ 194,678 2,518,647
Echo Bay Mines, Ltd............................. 298,499 1,716,369
--------------
4,235,016
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.6%
Tenneco, Inc.................................... 227,700 10,289,194
--------------
OIL & GAS -- 0.7%
Mesa, Inc., (a)................................. 800,000 4,600,000
Mobil Corp...................................... 1,200 83,850
USX-Marathon Group.............................. 230,600 6,658,575
--------------
11,342,425
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 2.9%
Elf Aquitaine SA, ADR, (France)................. 880,000 47,905,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B36
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS SERVICES -- 5.5%
KN Energy, Inc.................................. 261,900 $ 11,032,537
McDermott International, Inc.................... 1,861,300 54,326,694
Parker & Parsley Petroleum Co................... 662,400 23,432,400
--------------
88,791,631
--------------
REAL ESTATE DEVELOPMENT -- 16.3%
Alexander Haagen Properties, Inc................ 420,000 6,825,000
Amli Residential Properties Trust............... 208,300 4,895,050
Beacon Properties Corp.......................... 184,800 6,167,700
Boston Properties, Inc.......................... 250,000 6,875,000
Bradley Real Estate, Inc........................ 240,000 4,620,000
Crescent Operating, Inc......................... 152,150 1,825,800
Crescent Real Estate Equities, Inc.............. 1,521,500 48,307,625
Crown American Realty Trust..................... 1,139,500 10,540,375
Equity Residential Properties Trust............. 1,422,700 67,578,250
Gables Residential Trust........................ 435,800 11,003,950
Glimcher Realty Trust........................... 565,000 11,653,125
Irvine Apartment Communities, Inc............... 392,000 11,564,000
JDN Realty Corp................................. 293,200 9,162,500
JP Realty, Inc.................................. 84,000 2,278,500
Kimco Realty Corp............................... 56,250 1,785,937
Malan Realty Investors, Inc..................... 140,000 2,485,000
Manufactured Home Communities, Inc.............. 532,000 12,269,250
Pennsylvania Real Estate Investment Trust....... 50,100 1,124,119
Security Capital Pacific Trust.................. 527,034 12,055,903
Simon Debartolo Group, Inc...................... 214,300 6,857,600
Sunstone Hotel Investors, Inc................... 240,000 3,480,000
TriNet Corporate Realty Trust, Inc.............. 166,700 5,511,519
Vornado Realty Trust............................ 228,800 16,502,200
Walden Residential Properties, Inc.............. 5,000 128,125
--------------
265,496,528
--------------
RETAIL -- 2.6%
J.C. Penney Co., Inc............................ 669,800 34,955,187
Tandy Corp...................................... 140,000 7,840,000
--------------
42,795,187
--------------
TELECOMMUNICATIONS -- 0.6%
Telefonos de Mexico SA (Class 'L' Stock), ADR,
(Mexico)...................................... 198,000 9,454,500
--------------
TEXTILES -- 0.9%
Garan, Inc...................................... 2,900 58,362
Kellwood Co..................................... 518,900 14,399,475
Oxford Industries, Inc.......................... 34,500 978,938
--------------
15,436,775
--------------
TOBACCO -- 1.0%
Bat Industries, PLC, ADR, (United Kingdom)...... 606,500 11,106,531
UST, Inc........................................ 202,100 5,608,275
--------------
16,714,806
--------------
TRUCKING/SHIPPING -- 0.8%
Alexander & Baldwin, Inc........................ 287,750 7,517,469
Yellow Corp..................................... 259,700 5,810,788
--------------
13,328,257
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC -- 0.4%
Centerior Energy Corp........................... 46,600 $ 521,338
Central Louisiana Electric Co................... 6,100 171,563
Pacific Gas & Electric, Co...................... 240,000 5,820,000
--------------
6,512,901
--------------
TOTAL COMMON STOCKS
(cost $1,027,989,798).......................................... 1,458,809,052
--------------
PREFERRED STOCKS -- 3.7%
EXPLORATION & PRODUCTION -- 0.5%
Parker & Parsley Capital, LLC (Cum. Conv.)...... 118,800 7,603,200
--------------
INTEGRATED PRODUCERS -- 0.1%
Unocal Corp. (Conv.) Series 6.25%............... 34,372 1,946,315
--------------
METALS-FERROUS -- 1.3%
Bethlehem Steel Corp. (Cum. Conv.).............. 264,000 10,626,000
Rouge Steel..................................... 262,500 4,167,188
USX Capital Trust 6/7 (Cum. Conv.).............. 114,600 5,507,962
--------------
20,301,150
--------------
METALS-NON FERROUS -- 0.4%
Hecla Mining Co. (Cum. Conv.), Series B......... 60,000 2,801,250
Kaiser Aluminum Corp. (Cum. Conv.).............. 319,900 3,598,875
--------------
6,400,125
--------------
OIL SERVICES -- 0.3%
McDermott International, Inc. (Cum. Conv.),
Series C...................................... 88,000 4,334,000
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Security Capital Pacific Trust (Cum. Conv.),
Series A...................................... 54,500 1,662,250
--------------
RETAIL -- 0.8%
Kmart Corp. (Cum. Conv.)........................ 247,300 13,570,587
--------------
TEXTILES/APPAREL -- 0.2%
Fieldcrest Cannon, Inc. (Cum. Conv.), Series
A............................................. 85,000 3,910,000
--------------
TOTAL PREFERRED STOCKS
(cost $61,980,377)............................................. 59,727,627
--------------
WARRANTS UNITS
-------------
CONSTRUCTION
Morrison Knudsen Corp........................... 5,689 35,556
--------------
LODGING
Homestead Village, Inc.......................... 44,442 377,757
--------------
TOTAL WARRANTS
(cost $191,545)................................................ 413,313
--------------
PRINCIPAL
CONVERTIBLE AMOUNT
BONDS -- 1.2% (000)
-------------
EXPLORATION & PRODUCTION -- 0.1%
Oryx Energy Co.
7.50%, 05/15/14............................... $ 1,760 1,733,600
--------------
OIL & GAS SERVICES -- 0.3%
Baker Hughes, Inc.
0.00%, 05/05/08............................... 5,940 4,573,800
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B37
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
CONVERTIBLE AMOUNT VALUE
BONDS (CONTINUED) (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REAL ESTATE DEVELOPMENT -- 0.3%
Alexander Haagen Properties, Inc., Series A
7.50%, 01/15/01............................... $ 600 $ 582,000
7.50%, 01/15/01............................... 1,000 965,000
Malan Realty Investors, Inc.
9.50%, 07/15/04............................... 3,000 3,090,000
--------------
4,637,000
--------------
RETAIL -- 0.5%
Charming Shoppes, Inc.
7.50%, 07/15/06............................... 8,000 7,940,000
--------------
TOTAL CONVERTIBLE BONDS
(cost $17,976,268)............................................. 18,884,400
--------------
LONG-TERM BONDS -- 1.8%
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.8%
United States Treasury Note,
6.75%, 08/15/26............................... 30,000 29,690,700
--------------
(cost $29,016,419)
TOTAL LONG-TERM INVESTMENTS
(cost $1,137,154,407).......................................... 1,567,525,092
--------------
SHORT-TERM INVESTMENT -- 3.1%
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.88%, 07/01/97............................... 50,423 50,423,000
--------------
(cost $50,423,000; Note 5)
TOTAL INVESTMENTS -- 99.6%
(cost $1,187,577,407; Note 6).................................. 1,617,948,092
--------------
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.4%............................................ 7,204,426
--------------
TOTAL NET ASSETS -- 100.0%....................................... $1,625,152,518
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
LLC Limited Liability Company
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corportion) or Societe Anonyme (French
Corporation)
(a) Non-income producing Security.
SEE NOTES TO FINANCIAL STATEMENTS.
B38
<PAGE>
EQUITY PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 75.0%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AUTOS - CARS & TRUCKS -- 3.5%
Chrysler Corp................................... 2,862,120 $ 93,913,312
General Motors Corp............................. 700,000 38,981,250
Navistar International Corp. (a)................ 395,200 6,817,200
PACCAR Inc...................................... 279,400 12,974,637
TRW, Inc........................................ 694,400 39,450,600
--------------
192,136,999
--------------
BANKS & FINANCIAL SERVICES -- 6.0%
Bank of New York Co., Inc....................... 1,200,000 52,200,000
BankAmerica Corp................................ 1,100,000 71,018,750
Chase Manhattan Corp............................ 475,600 46,162,925
First America Bank Corp......................... 280,500 12,832,875
Great Western Financial Corp.................... 653,800 35,141,750
Mellon Bank Corp................................ 552,796 24,944,920
Mercantile Bankshares Corp...................... 279,600 11,184,000
NationsBank Corp................................ 800,000 51,600,000
Republic New York Corp.......................... 225,000 24,187,500
--------------
329,272,720
--------------
CHEMICALS -- 1.8%
BOC Group, PLC ADR (United Kingdom)............. 800,000 28,400,000
Eastman Chemical Co............................. 691,650 43,919,775
Wellman, Inc.................................... 798,200 13,868,725
Witco Corp...................................... 268,800 10,197,600
--------------
96,386,100
--------------
COMPUTERS -- 3.8%
Amdahl Corp. (a)................................ 4,000,000 35,000,000
Digital Equipment Corp. (a)..................... 3,050,000 108,084,375
Gerber Scientific, Inc.......................... 419,800 8,291,050
International Business Machines Corp............ 600,000 54,112,500
NCR Corp........................................ 100,000 2,975,000
--------------
208,462,925
--------------
CONSTRUCTION & HOUSING -- 1.3%
American Standard Co., Inc. (a)................. 1,050,000 46,987,500
Centex Corp..................................... 600,000 24,375,000
--------------
71,362,500
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 5.6%
Gibson Greeting Inc. (a)........................ 750,000 16,875,000
Kimberly-Clark Corp............................. 500,000 24,875,000
Loews Corp...................................... 1,600,000 160,200,000
RJR Nabisco Holdings Corp....................... 3,100,000 102,300,000
--------------
304,250,000
--------------
ELECTRICAL EQUIPMENT
Rexel, Inc. (a)................................. 107,199 1,983,181
--------------
ELECTRONICS -- 0.5%
Harris Corp..................................... 300,000 25,200,000
--------------
ENERGY EQUIPMENT & SERVICES -- 0.4%
NorAm Energy Corp............................... 1,300,000 19,825,000
--------------
FINANCIAL SERVICES -- 6.1%
American Express Co............................. 1,100,000 81,950,000
Lehman Brothers Holdings, Inc.,................. 900,000 36,450,000
Morgan (J.P.) & Co., Inc........................ 395,400 41,269,875
Morgan Stanley, Dean Witter, Discover & Co...... 3,200,000 137,800,000
Salomon, Inc.................................... 700,000 38,937,500
--------------
336,407,375
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 0.5%
Guiness PLC (United Kingdom).................... 3,000,000 $ 29,357,388
--------------
FOREST PRODUCTS -- 8.4%
Georgia-Pacific Corp............................ 900,000 76,837,500
International Paper Co.......................... 1,350,000 65,559,375
James River Corp. of Virginia................... 560,000 20,720,000
Mead Corp....................................... 900,000 56,025,000
Rayonier Inc.................................... 830,400 34,928,700
Temple-Inland Inc............................... 850,000 45,900,000
Weyerhaeuser Co................................. 1,450,000 75,400,000
Willamette Industries, Inc...................... 1,250,000 87,500,000
--------------
462,870,575
--------------
HEALTHCARE -- 3.8%
Foundation Health Corp. (a)..................... 1,859,910 56,378,522
Tenet Healthcare Corp. (a)...................... 3,237,832 95,718,408
Wellpoint Health Networks Inc................... 1,194,600 54,802,275
--------------
206,899,205
--------------
INSURANCE -- 11.9%
American Financial Group Inc.................... 552,700 23,455,206
American General Corp........................... 1,000,000 47,750,000
Chubb Corp...................................... 2,206,400 147,553,000
Citizens Corp................................... 700,000 19,337,500
Equitable Companies, Inc. (The)................. 1,800,000 59,850,000
Old Republic International Corp................. 1,950,885 59,136,202
SAFECO Corp..................................... 1,600,000 74,700,000
St. Paul Companies, Inc......................... 826,900 63,051,125
Travelers Group Inc............................. 1,800,000 113,512,500
Western National Corp........................... 1,624,300 43,551,544
--------------
651,897,077
--------------
METALS-FERROUS -- 0.6%
Bethlehem Steel Corp. (a)....................... 500,000 5,218,750
Birmingham Steel Corp........................... 1,527,400 23,674,700
Carpenter Technology Corp....................... 100,000 4,575,000
--------------
33,468,450
--------------
METALS-NON FERROUS -- 1.5%
Aluminum Company of America..................... 600,000 45,225,000
AMAX Gold Inc. (a).............................. 131,342 804,470
Cyprus Amax Minerals Co......................... 1,533,200 37,563,400
Nord Resources Corp. (a)........................ 130,500 407,813
--------------
84,000,683
--------------
OIL & GAS -- 2.0%
Amerada Hess Corp............................... 325,000 18,057,813
Atlantic Richfield Co........................... 800,000 56,400,000
Total SA, ADR (France).......................... 738,365 37,379,728
--------------
111,837,541
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 3.7%
Elf Aquitaine SA, ADR (France).................. 2,424,433 131,980,071
Occidental Petroleum Corp....................... 1,100,000 27,568,750
Oryx Energy Co. (a)............................. 1,600,000 33,800,000
Union Texas Petroleum Holdings, Inc............. 504,500 10,562,969
--------------
203,911,790
--------------
RESTAURANTS -- 1.3%
Darden Restaurants Inc.......................... 7,922,700 71,799,469
--------------
RETAIL -- 7.1%
Dayton-Hudson Corp.............................. 358,800 19,083,675
Dillards Department Stores, Inc. (a)............ 3,000,000 103,875,000
K-Mart Corp. (a)................................ 6,500,000 79,625,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B39
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Petrie Stores Corp. (a)......................... 540,000 $ 1,704,375
Tandy Corp...................................... 1,382,900 77,442,400
Toys 'R' Us, Inc. (a)........................... 1,800,000 63,000,000
Waban, Inc. (a)................................. 1,300,000 41,843,750
--------------
386,574,200
--------------
TELECOMMUNICATIONS -- 3.2%
360 Communication Co. (a)....................... 1,396,066 23,907,630
AT&T Corp....................................... 1,600,000 56,100,000
Loral Corp...................................... 1,800,000 27,000,000
Telefonica de Espana, SA, ADR (Spain)........... 800,000 69,000,000
--------------
176,007,630
--------------
TEXTILES
Worldtex, Inc. (a).............................. 107,199 857,592
--------------
TRANSPORTATION -- 0.4%
OMI Corp. (a)................................... 1,000,000 9,562,500
Overseas Shipholding Group, Inc................. 600,000 11,775,000
--------------
21,337,500
--------------
UTILITY - ELECTRIC -- 1.5%
American Electric Power Company, Inc............ 180,000 7,560,000
GPU, Inc........................................ 500,000 17,937,500
Long Island Lighting Co......................... 1,541,400 35,452,200
Unicom Corp..................................... 991,800 22,067,550
--------------
83,017,250
--------------
UTILITY - WATER -- 0.1%
American Water Works Co., Inc................... 270,000 5,771,250
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,658,631,715).......................................... 4,114,894,400
--------------
PRINCIPAL
MOODY'S AMOUNT
SHORT-TERM INVESTMENTS -- 24.8% RATING (000)
------------ ---------
CERTIFICATES OF DEPOSIT-YANKEE -- 6.1%
Bank of Montreal, (Canada),
6.375%, 07/01/97.............................. P1 $ 55,177 55,177,000
Berliner Handels, (Germany),
5.72%, 07/21/97............................... NR 13,000 13,000,072
Canadian Imperial Bank, (Canada),
5.60%, 08/25/97............................... P3 1,000 1,000,000
6.25%, 07/01/97............................... P3 47,104 47,104,000
Commerzbank, (Germany),
5.58%, 07/01/97............................... P1 12,000 12,000,000
Credit Agricole Indosuez, (France),
5.63%, 08/11/97............................... NR 25,000 25,000,699
Deutsche Bank, (Germany),
6.25%, 07/01/97............................... P1 55,177 55,177,000
Republic National Bank of NY, (Canada)
6.25%, 07/01/97............................... P1 55,177 55,177,000
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Societe Generale, (France),
6.375%, 07/01/97.............................. P1 $ 55,177 $ 55,177,000
Svenska Handelsbanken, (Sweden),
5.66%, 07/14/97............................... P1 13,000 13,000,089
--------------
331,812,860
--------------
COMMERCIAL PAPER -- 8.8%
American Honda Finance Corp.,
5.65%, 07/28/97............................... P2 9,000 8,961,862
Aristar, Inc.,
5.67%, 07/14/97............................... P3 3,000 2,993,857
5.70%, 07/24/97............................... P3 1,000 996,358
5.70%, 07/28/97............................... P3 960 955,896
Associates Corp. of North America,
5.55%, 07/03/97............................... P3 10,000 9,996,917
6.188%, 07/01/97.............................. P3 28,000 28,000,000
Bear, Stearns & Co.,
5.57%, 07/07/97............................... P2 7,000 6,993,502
Citicorp,
5.70%, 07/10/97............................... P3 45,000 44,935,875
Countrywide Home Loan, Inc.,
5.55%, 07/02/97............................... P3 12,000 11,998,150
5.60%, 08/07/97............................... P3 12,000 11,930,933
Creditanstalt Finance Inc.,
5.55%, 07/03/97............................... NR 4,000 3,998,767
Finova Capital Corp.,
5.60%, 07/07/97............................... NR 9,000 8,991,600
5.70%, 07/07/97............................... NR 1,450 1,448,622
5.71%, 07/15/97............................... NR 3,000 2,993,338
Ford Motor Credit Corp.,
5.55%, 07/09/97............................... P1 49,000 48,939,567
General Electric Capital Corp.,
6.30%, 07/01/97............................... P1 55,177 55,177,000
General Motors Acceptance Corp.,
5.59%, 07/07/97............................... P3 52,000 51,951,553
GTE Corp.,
5.60%, 07/23/97............................... P3 10,000 9,965,778
Hertz Corp.,
5.55%, 07/08/97............................... P3 3,500 3,496,223
John Deere Capital Corp.,
5.54%, 07/09/97............................... P2 3,000 2,996,307
Lehman Brothers Holdings, Inc.,
5.75%, 07/02/97............................... NR 18,000 17,997,125
6.40%, 07/01/97............................... NR 15,000 15,000,000
Merrill Lynch & Co. Inc.,
5.57%, 08/18/97............................... P3 6,000 5,955,440
Mitsubishi International Corp.,
5.65%, 07/09/97............................... NR 39,000 38,951,033
5.75%, 07/08/97............................... NR 16,220 16,201,865
NYNEX Corp.,
5.55%, 07/07/97............................... P2 2,900 2,897,317
5.60%, 08/05/97............................... P2 7,100 7,061,344
PHH Corp.,
5.67%, 07/07/97............................... NR 7,000 6,993,385
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B40
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Preferred Receivables Funding Corp.,
5.55%, 07/10/97............................... P1 $ 2,000 $ 1,997,225
Rank Xerox Capital, PLC, (Europe),
5.60%, 07/21/97............................... NR 4,105 4,092,229
Sears Roebuck Acceptance Corp.,
6.20%, 07/01/97............................... P2 13,000 13,000,000
Smith Barney, Inc.,
5.55%, 07/07/97............................... P2 10,000 9,990,750
Xerox Corp.,
5.60%, 07/11/97............................... P2 26,000 25,959,556
--------------
483,819,374
--------------
REPURCHASE AGREEMENTS -- 7.7%
First National Bank of Chicago,
6.25%, 07/01/97............................... 53,220 53,220,000
Joint Repurchase Agreement Account,
5.883%, 07/01/97 (Note 5)..................... 371,391 371,391,000
--------------
424,611,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 2.2%
Federal Home Loan Bank,
5.23%, 07/10/97............................... 21,200 21,170,956
Federal Home Loan Mortgage Corp.,
5.17%, 08/14/97............................... 9,360 9,297,101
5.53%, 08/07/97 (b)........................... 10,000 9,943,164
5.53%, 08/14/97............................... 5,000 4,966,206
Federal National Mortgage Association,
5.40%, 12/05/97............................... 10,000 9,989,100
5.53%, 10/29/97............................... 8,000 7,997,520
5.54%, 08/05/97............................... 900 895,122
5.89%, 05/21/98............................... 10,000 10,007,800
8.95%, 07/10/97............................... 4,300 4,302,666
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
United States Treasury Notes,
5.125%, 02/28/98.............................. $ 30,000 $ 29,887,500
5.75%, 09/30/97............................... 12,000 12,009,360
--------------
120,466,495
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,360,702,882).................................................... 1,360,709,729
--------------
TOTAL INVESTMENTS -- 99.8%
(cost $4,019,334,597; Note 6)............................................ 5,475,604,129
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%..............................
8,754,229
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,484,358,358
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a variable rate security.
SEE NOTES TO FINANCIAL STATEMENTS.
B41
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 97.1%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.5%
Boeing Co....................................... 171,500 $ 9,100,219
Gartner Group Inc.,............................. 67,700 2,432,969
--------------
11,533,188
--------------
BANKS AND SAVINGS & LOANS -- 1.9%
Chase Manhattan Corp............................ 63,100 6,124,644
--------------
BUSINESS SERVICES -- 4.8%
Eagle River Interactive, Inc. (a)............... 84,600 676,800
Manpower, Inc................................... 66,800 2,972,600
Omnicom Group, Inc.............................. 95,800 5,903,675
Reuters Holdings PLC, ADR (United Kingdom),..... 103,400 6,514,200
--------------
16,067,275
--------------
COMMERCIAL SERVICES -- 1.7%
CUC International, Inc. (a)..................... 212,100 5,474,831
--------------
COMPUTER SERVICES -- 5.9%
3Com Corp. (a).................................. 130,100 5,854,500
Cisco Systems, Inc. (a)......................... 139,800 9,384,075
SAP AG, ADR (Germany)........................... 60,800 4,210,400
--------------
19,448,975
--------------
COMPUTER SYSTEMS -- 8.6%
COMPAQ Computer Corp., (a)...................... 67,300 6,679,525
Dell Computer Corp., (a)........................ 51,800 6,083,263
Diebold, Inc.................................... 83,900 3,272,100
Hewlett-Packard Co.,............................ 150,700 8,439,200
International Business Machines Corp.,.......... 45,600 4,112,550
--------------
28,586,638
--------------
DRUGS AND MEDICAL SUPPLIES -- 12.4%
Boston Scientific Corp. (a)..................... 65,600 4,030,300
Bristol-Myers Squibb Co......................... 88,500 7,168,500
Eli Lilly & Co.................................. 76,500 8,362,406
Merck & Co., Inc................................ 40,300 4,171,050
Pfizer, Inc.,................................... 78,500 9,380,750
Smithkline Beecham, PLC, UTS, ADR (United
Kingdom)...................................... 90,000 8,246,250
--------------
41,359,256
--------------
ELECTRONICS -- 10.9%
Applied Materials, Inc. (a)..................... 64,500 4,567,406
Intel Corp...................................... 56,100 7,955,681
International Rectifier Corp. (a)............... 189,700 3,533,162
KLA Instruments Corp. (a)....................... 105,500 5,143,125
LSI Logic Corp. (a)............................. 157,700 5,046,400
Symbol Technologies, Inc. (a)................... 123,550 4,154,369
Texas Instruments, Inc.......................... 68,700 5,775,094
--------------
36,175,237
--------------
FINANCIAL SERVICES -- 5.5%
MBNA Corp....................................... 90,250 3,305,406
Morgan Stanley, Dean Witter, Discover & Co...... 129,520 5,577,455
Schwab (Charles) Corp.,......................... 93,100 3,788,006
Washington Mutual Inc........................... 92,400 5,520,900
--------------
18,191,767
--------------
FOOD & BEVERAGES -- 1.0%
PepsiCo, Inc.................................... 86,800 3,260,425
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOSPITAL MANAGEMENT -- 3.1%
Healthsouth Corp., (a).......................... 207,300 $ 5,169,544
PhyCor, Inc., (a)............................... 147,500 5,079,531
--------------
10,249,075
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 2.1%
Gillette Co..................................... 72,300 6,850,425
--------------
INSURANCE -- 7.7%
CIGNA Corp...................................... 29,800 5,289,500
MGIC Investment Corp............................ 133,100 6,380,481
Mutual Risk Management, Ltd..................... 99,866 4,581,353
Provident Companies, Inc........................ 75,400 4,033,900
UNUM Corp....................................... 128,800 5,409,600
--------------
25,694,834
--------------
LEISURE -- 2.5%
Walt Disney Co.................................. 103,800 8,329,950
--------------
LODGING -- 1.7%
Hilton Hotels Corp.............................. 214,600 5,700,312
--------------
MACHINERY -- 1.4%
Case Corp....................................... 66,800 4,600,850
--------------
MEDIA -- 1.9%
Clear Channel Communications, Inc. (a).......... 100,300 6,168,450
--------------
OIL & GAS -- 1.5%
Union Pacific Resources Group, Inc.............. 192,700 4,793,412
--------------
OIL & GAS SERVICES -- 2.4%
Schlumberger Ltd................................ 64,800 8,100,000
--------------
RESTAURANTS -- 0.7%
McDonald's Corp................................. 50,800 2,454,275
--------------
RETAIL -- 5.2%
Corporate Express, Inc. (a)..................... 241,750 3,490,266
Dollar General Corporation...................... 43,100 1,616,250
Kohl's Corp. (a)................................ 89,200 4,722,025
Sears, Roebuck & Co............................. 49,700 2,671,375
The Gap, Inc.................................... 125,800 4,890,475
--------------
17,390,391
--------------
TELECOMMUNICATIONS -- 7.0%
Ascend Communications, Inc. (a)................. 62,800 2,472,750
L.M. Ericsson Telephone Co. (Class 'B' Stock),
ADR (Sweden).................................. 132,300 5,209,313
Nokia AB Corp., ADR (Japan)..................... 89,100 6,571,125
Tellabs, Inc. (a)............................... 102,400 5,721,600
Vodafone Group PLC, ADR (United Kingdom)........ 68,700 3,327,656
--------------
23,302,444
--------------
TRUCKING/SHIPPING -- 1.2%
Federal Express Corp. (a)....................... 71,300 4,117,575
--------------
SOFTWARE -- 2.5%
Intuit, Inc. (a)................................ 120,000 2,752,500
Microsoft Corp., (a)............................ 44,300 5,598,413
--------------
8,350,913
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $259,025,944)............................................ 322,325,142
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B42
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT -- 3.4% (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account,
5.88%, 07/01/97 (Note 5)...................... $ 11,397 $ 11,397,000
--------------
(cost $11,397,000)
TOTAL INVESTMENTS -- 100.5%
(cost $270,422,944 ; Note 6)................................... 333,722,142
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5%)..................
(1,662,298)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 332,059,844
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
UTS Unit Trust Shares
(a) Non-income producing security
SEE NOTES TO FINANCIAL STATEMENTS.
B43
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 91.6%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.7%
BE Aerospace, Inc. (a).......................... 13,200 $ 417,450
Kaman Corp. (Class 'A' Stock)................... 11,300 173,737
Orbital Sciences Corp. (a)...................... 18,800 298,450
Trimble Navigation, Ltd. (a).................... 13,400 237,850
UNC, Inc. (a)................................... 11,200 163,800
Watkins-Johnson Co.............................. 5,100 156,825
--------------
1,448,112
--------------
AGRICULTURAL PRODUCTS & SERVICES -- 0.7%
Dekalb Genetics Corp............................ 10,400 829,400
Delta & Pine Land Co............................ 17,200 612,750
--------------
1,442,150
--------------
AIRLINES -- 0.4%
Comair Holdings, Inc............................ 27,125 751,023
Mesa Air Group, Inc. (a)........................ 17,200 92,450
SkyWest, Inc.................................... 6,200 96,875
--------------
940,348
--------------
AUTOS - CARS & TRUCKS -- 1.2%
Breed Technologies, Inc......................... 19,275 443,325
Custom Chrome, Inc. (a)......................... 2,700 43,537
Myers Industries, Inc........................... 10,320 174,150
Simpson Industries, Inc......................... 8,900 94,562
Smith (A.O.) Corp............................... 12,700 451,644
Spartan Motors, Inc............................. 7,600 58,900
Standard Motor Products, Inc.................... 7,900 108,625
Standard Products Co............................ 10,200 257,550
TBC Corp. (a)................................... 14,100 118,087
Titan International, Inc........................ 13,200 232,650
Wabash National Corp............................ 11,500 320,562
Wynn's International, Inc....................... 7,850 222,744
--------------
2,526,336
--------------
BANKS AND SAVINGS & LOANS -- 7.9%
Astoria Financial Corp. (a)..................... 13,200 627,000
Banc One Corp................................... 5,992 290,237
CCB Financial Corp.............................. 9,600 702,000
Centura Banks, Inc.............................. 15,600 715,650
Coast Savings Financial, Inc. (a)............... 11,350 515,716
Collective Bancorp, Inc......................... 12,400 556,450
Commercial Federal Corp. (a).................... 13,050 484,481
Cullen/Frost Bankers, Inc....................... 13,700 580,537
Deposit Guaranty Corp........................... 25,925 816,637
Downey Financial Corp........................... 16,019 378,449
First Commercial Corp........................... 20,436 840,430
First Financial Corp............................ 22,825 670,484
First Michigan Bank Corp........................ 16,827 509,017
FirstBank Puerto Rico (a)....................... 9,200 238,050
Firstmerit Corp................................. 19,600 940,800
JSB Financial, Inc.............................. 6,000 259,500
Keystone Financial, Inc......................... 33,300 1,040,625
Magna Group, Inc................................ 20,200 701,950
North American Mortgage Co...................... 8,525 201,936
ONBANcorp, Inc.................................. 7,500 382,500
Provident Bancorp, Inc. (a)..................... 25,125 1,074,094
RCSB Financial, Inc............................. 8,700 416,512
Riggs National Corp. (a)........................ 18,500 381,562
Roosevelt Financial Group, Inc.................. 25,600 563,200
Sovereign Bancorp, Inc.......................... 39,626 604,296
St. Paul Bancorp, Inc........................... 13,800 457,125
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Whitney Holding Corp............................ 11,600 $ 490,100
Zions Bancorp, Inc.............................. 36,000 1,354,500
--------------
16,793,838
--------------
BUSINESS SERVICES -- 0.1%
Franklin Covey Co. (a).......................... 12,000 303,750
--------------
CHEMICALS -- 1.6%
Cambrex Corp.................................... 7,100 282,225
Chemed Corp..................................... 6,000 224,625
Chemfirst Inc. (a).............................. 12,600 341,775
Hauser Chemical Research, Inc. (a).............. 6,500 34,937
Lilly Industries, Inc. (Class 'A' Stock)........ 13,800 277,725
McWhorter Technologies, Inc. (a)................ 6,300 150,412
Mississippi Chemical Corp. (a).................. 17,072 354,244
Mycogen Corp. (a)............................... 18,700 366,987
OM Group, Inc................................... 13,200 437,250
Penwest, Ltd.................................... 4,200 141,750
Quaker Chemical Corp............................ 5,100 88,612
Scotts Co. (Class 'A' Stock) (a)................ 11,300 327,700
WD-40 Co........................................ 4,400 264,000
--------------
3,292,242
--------------
COMMERCIAL SERVICES -- 3.5%
AAR Corp........................................ 11,000 355,437
ABM Industries, Inc............................. 12,100 233,681
ADVO, Inc....................................... 14,600 237,250
Bowne & Company, Inc............................ 10,900 380,137
BW/IP, Inc. (Class 'A' Stock)................... 14,900 302,656
CDI Corp. (a)................................... 12,100 504,419
Corrections Corp. of America (a)................ 45,800 1,820,550
IMO Industries, Inc. (a)........................ 10,400 61,100
Insurance Auto Auction, Inc. (a)................ 6,100 57,950
Interim Services, Inc. (a)...................... 12,000 534,000
LSB Industries, Inc............................. 7,900 32,587
Merrill Corp.................................... 4,800 174,600
NFO Research, Inc. (a).......................... 7,250 179,437
Norrell Corp.................................... 14,600 481,800
Pharmaceutical Marketing Services, Inc. (a)..... 8,000 87,000
Plenum Publishing Corp.......................... 2,400 92,400
Primark Corp. (a)............................... 16,500 439,312
Thomas Nelson, Inc.............................. 10,450 144,994
True North Communications, Inc.................. 14,500 358,875
Vantive Corp. (a)............................... 14,900 420,925
World Color Press, Inc. (a)..................... 20,500 486,875
--------------
7,385,985
--------------
COMPUTER SERVICES -- 6.3%
Acxiom Corp. (a)................................ 31,300 641,650
American Management Systems, Inc. (a)........... 24,850 664,737
Amtech Corp..................................... 8,900 41,719
Auspex Systems, Inc. (a)........................ 15,100 145,337
BancTec, Inc. (a)............................... 12,600 326,812
Banyan Systems, Inc. (a)........................ 9,300 20,925
BISYS Group, Inc. (a)........................... 15,400 642,950
Boole & Babbage, Inc. (a)....................... 10,400 221,000
Broderbund Software, Inc. (a)................... 12,700 313,531
Cerner Corp. (a)................................ 20,000 420,000
Chips & Technologies, Inc. (a).................. 13,300 137,987
Ciber, Inc. (a)................................. 11,400 389,737
Comverse Technology, Inc. (a)................... 15,100 785,200
Control Data Systems, Inc. (a).................. 8,300 123,462
Fair Issac & Company, Inc....................... 7,700 343,131
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B44
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FileNet Corp. (a)............................... 9,200 $ 133,400
Gerber Scientific, Inc.......................... 14,100 278,475
Henry (Jack) & Associates, Inc.................. 10,950 265,537
Hyperion Software Corp. (a)..................... 10,400 232,700
Keane, Inc. (a)................................. 20,500 1,066,000
Komag, Inc. (a)................................. 31,300 512,537
National Computer Systems, Inc.................. 9,300 247,612
National Data Corp.............................. 16,025 694,083
Network General Corp. (a)....................... 26,300 391,212
Platinum Software Corp. (a)..................... 11,400 118,275
PLATINUM Technology, Inc. (a)................... 37,700 499,525
Progress Software Corp. (a)..................... 7,700 123,200
Read-Rite Corp. (a)............................. 28,600 597,025
Standard Microsystems Corp. (a)................. 8,500 75,437
Sterling Software, Inc. (a)..................... 23,400 731,250
System Software Associates, Inc................. 25,900 197,487
Tech Data Corp. (a)............................. 26,300 826,806
Telxon Corp..................................... 9,800 176,400
Viewlogic Systems, Inc. (a)..................... 10,100 147,712
Wall Data, Inc. (a)............................. 5,600 147,700
Xircom, Inc. (a)................................ 12,300 152,981
Zebra Technologies Corp. (Class 'A'
Stock) (a).................................... 14,900 415,337
Zilog, Inc. (a)................................. 12,200 231,800
--------------
13,480,669
--------------
CONSTRUCTION -- 1.4%
BMC West Corp. (a).............................. 7,200 88,200
Halter Marine Group,............................ 11,200 268,800
Insituform Technologies, Inc. (Class 'A'
Stock) (a).................................... 16,400 100,450
Lone Star Industries, Inc....................... 6,500 294,531
M.D.C. Holdings, Inc............................ 10,300 93,344
Morrison Knudsen Corp. (a)...................... 32,700 445,537
Oakwood Homes Corp.............................. 28,000 672,000
Ply-Gem Industries, Inc......................... 8,500 153,531
Republic Group, Inc............................. 7,070 142,284
Southern Energy Homes, Inc. (a)................. 9,212 84,059
Standard Pacific Corp........................... 18,250 187,062
Stone & Webster, Inc............................ 7,800 332,962
--------------
2,862,760
--------------
CONTAINERS -- 0.4%
Aptargroup Inc.................................. 10,900 493,225
Shorewood Packaging Corp. (a)................... 11,200 254,800
--------------
748,025
--------------
COSMETICS & SOAPS -- 0.1%
Nature's Sunshine Products, Inc................. 11,600 210,250
USA Detergent, Inc. (a)......................... 8,400 86,100
--------------
296,350
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.1%
Nashua Corp..................................... 4,100 44,587
New England Business Service, Inc............... 8,000 210,500
--------------
255,087
--------------
DRUGS AND MEDICAL SUPPLIES -- 5.5%
ADAC Laboratories............................... 11,000 259,875
Advanced Tissue Sciences, Inc. (a).............. 22,800 293,550
Alliance Pharmaceutical Corp.................... 18,400 185,150
Alpharma Inc. (Class 'A' Stock)................. 13,200 210,375
Ballard Medical Products........................ 17,300 347,081
CellPro, Inc. (a)............................... 8,800 52,800
Cephalon, Inc. (a).............................. 14,900 171,350
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Circon Corp. (a)................................ 4,400 $ 62,700
Coherent Inc. (a)............................... 6,900 307,050
Collagen Corp................................... 4,700 82,250
COR Therapeutics, Inc. (a)...................... 12,300 130,687
Cygnus, Inc. (a)................................ 11,600 200,100
Enzo Biochem, Inc. (a).......................... 14,013 219,829
IDEXX Laboratories, Inc. (a).................... 23,400 291,037
ImmuLogic Pharmaceutical Corp. (a).............. 12,300 38,437
Invacare Corp................................... 18,100 423,087
Liposome Company, Inc. (a)...................... 22,300 199,306
Medimmune, Inc. (a)............................. 12,300 227,550
Mentor Corp..................................... 15,200 450,300
Molecular Biosystems, Inc. (a).................. 10,750 96,750
NBTY, Inc. (a).................................. 11,300 316,400
North American Vaccine, Inc. (a)................ 19,000 366,937
Noven Pharmaceuticals, Inc. (a)................. 12,100 86,212
Omnicare, Inc................................... 46,450 1,457,369
Owens & Minor, Inc.............................. 19,300 288,294
Patterson Dental Co. (a)........................ 13,000 446,062
Perseptive Biosystems, Inc. (a)................. 13,000 79,625
Pharmaceutical Resources, Inc. (a).............. 11,400 31,350
Protein Design Labs, Inc. (a)................... 10,900 310,650
Regeneron Pharmaceuticals, Inc. (a)............. 15,600 157,950
Resound Corp. (a)............................... 11,800 66,375
Respironics, Inc. (a)........................... 12,000 253,500
Roberts Pharmaceutical Corp. (a)................ 11,000 123,062
Safeskin Corp. (a).............................. 15,700 462,169
SciClone Pharmaceuticals, Inc. (a).............. 10,700 54,837
Sequus Pharmaceuticals, Inc. (a)................ 18,100 115,387
SpaceLabs Medical, Inc. (a)..................... 5,600 142,800
STERIS Corp. (a)................................ 20,832 778,596
Summit Technology, Inc. (a)..................... 18,800 124,550
Sunrise Medical, Inc. (a)....................... 11,700 176,962
Syncor International Corp. (a).................. 5,800 60,900
TECNOL Medical Products, Inc. (a)............... 12,100 269,225
The Immune Response Corp. (a)................... 13,700 104,462
TheraTech, Inc. (a)............................. 12,550 147,462
US Bioscience, Inc. (a)......................... 13,850 133,306
Vertex Pharmaceuticals, Inc. (a)................ 14,700 562,275
VISX, Inc. (a).................................. 9,400 223,250
Vital Signs, Inc................................ 7,900 138,744
Zoll Medical Corp. (a).......................... 3,800 28,500
--------------
11,756,475
--------------
ELECTRICAL EQUIPMENT -- 2.5%
Anixter International, Inc. (a)................. 29,200 501,875
Baldor Electric Co.............................. 15,950 471,522
Belden, Inc..................................... 15,900 541,594
Fluke Corp...................................... 5,300 314,025
KEMET Corp. (a)................................. 23,800 592,025
Kent Electronics Corp. (a)...................... 16,000 587,000
Kuhlman Corp.................................... 8,400 270,900
Microchip Technology, Inc. (a).................. 32,650 971,337
Pacific Scientific Co........................... 7,500 99,375
Rexel, Inc. (a)................................. 15,600 288,600
Valence Technology, Inc. (a).................... 13,200 113,850
Vicor Corp. (a)................................. 25,600 576,000
--------------
5,328,103
--------------
ELECTRONICS -- 5.6%
Bell Industries, Inc............................ 5,425 84,766
Benchmark Electronics, Inc. (a)................. 3,400 137,700
BMC Industries, Inc............................. 16,600 568,550
C-COR Electronics, Inc. (a)..................... 5,700 57,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B45
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Checkpoint Systems, Inc. (a).................... 21,000 $ 337,312
Core Industries, Inc............................ 6,500 160,875
Cyrix Corp. (a)................................. 11,900 254,362
Dallas Semiconductor Corp....................... 16,300 639,775
Dionex Corp. (a)................................ 7,300 374,125
Dynatech Corp. (a).............................. 10,450 373,587
Etec Systems, Inc. (a).......................... 13,000 557,375
Integrated Circuit Systems, Inc. (a)............ 7,000 158,812
Intermagnetics General Corp. (a)................ 7,500 80,625
International Rectifier Corp. (a)............... 31,100 579,237
Itron, Inc. (a)................................. 8,100 209,587
Lattice Semiconductor Corp. (a)................. 13,800 779,700
Logicon, Inc.................................... 8,600 455,800
Marshall Industries (a)......................... 10,200 379,950
Methode Electronics, Inc. (Class 'A' Stock)..... 20,900 415,387
Oak Industries, Inc. (a)........................ 11,100 319,125
Park Electrochemical Corp....................... 6,900 181,556
Photronics, Inc. (a)............................ 7,200 343,800
Picturetel Corp. (a)............................ 20,500 194,750
Pioneer Standard Electronics, Inc............... 12,600 170,100
Plexus Corp. (a)................................ 4,300 239,994
S3, Inc. (a).................................... 29,300 322,300
Sanmina Corp. (a)............................... 10,300 654,050
SCI Systems, Inc. (a)........................... 17,000 1,083,750
Three-Five Systems, Inc. (a).................... 4,775 71,028
Tseng Laboratories, Inc......................... 11,600 35,525
Ultratech Stepper, Inc. (a)..................... 12,300 281,362
VLSI Technology, Inc. (a)....................... 28,100 663,862
Wyle Electronics................................ 7,700 304,150
X-Rite, Inc..................................... 12,800 243,200
Zero Corp....................................... 7,400 194,250
--------------
11,907,327
--------------
ENVIRONMENTAL SERVICES -- 0.9%
Allwaste, Inc................................... 22,100 209,950
Dames & Moore, Inc.............................. 11,000 136,125
Ionics, Inc. (a)................................ 9,600 436,800
OHM Corp. (a)................................... 15,900 134,156
TETRA Technologies, Inc. (a).................... 7,800 193,050
United States Filter Corp. (a).................. 28,250 769,812
--------------
1,879,893
--------------
EXPLORATION & PRODUCTION -- 0.2%
Newfield Exploration Co. (a).................... 21,450 429,000
--------------
FINANCIAL SERVICES -- 3.9%
Alex Brown, Inc................................. 14,650 1,034,656
AMRESCO, Inc. (a)............................... 21,900 470,850
Charter One Financial, Inc...................... 28,017 1,509,416
Eaton Vance Corp................................ 11,550 321,234
Envoy Corporation (a)........................... 9,200 305,900
Interra Financial, Inc.......................... 7,500 314,531
Investors Financial Services Corp. (a).......... 69 3,277
Legg Mason, Inc................................. 11,100 597,319
National Auto Credit, Inc....................... 17,490 155,224
Pioneer Group, Inc.............................. 15,200 349,600
Piper Jaffray Companies, Inc.................... 11,450 234,725
Quick & Reilly Group, Inc....................... 23,025 535,331
Raymond James Financial, Inc.................... 19,212 525,928
SEI Corp........................................ 11,200 270,200
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
TCF Financial Corp.............................. 21,200 $ 1,046,750
United States Trust Corp........................ 11,900 560,787
--------------
8,235,728
--------------
FOOD & BEVERAGES -- 1.9%
Canandaigua Wine Co. (a)........................ 11,500 391,000
Chiquita Brands International, Inc.............. 33,975 467,156
Coca Cola Bottling Co........................... 4,700 227,950
Earthgrains Co.................................. 6,100 399,931
GoodMark Foods, Inc............................. 4,500 84,375
J & J Snack Foods Corp. (a)..................... 5,300 81,487
Nash-Finch Co................................... 6,100 134,962
Richfood Holdings, Inc.......................... 28,800 748,800
Rykoff-Sexton, Inc.............................. 17,000 396,313
Smith's Food & Drugs Centers, Inc............... 9,592 514,371
Smithfield Foods, Inc. (a)...................... 11,000 676,500
--------------
4,122,845
--------------
FOREST PRODUCTS -- 0.7%
Buckeye Cellulose Corp. (a)..................... 11,600 391,500
Caraustar Industries, Inc....................... 15,200 526,300
Mosinee Paper Corp.............................. 9,549 233,951
Pope & Talbot, Inc.............................. 8,125 133,555
Universal Forest Products, Inc.................. 10,400 152,100
--------------
1,437,406
--------------
FURNITURE -- 0.7%
Ethan Allen Interiors, Inc. (a)................. 8,800 501,600
Interface, Inc. (Class 'A' Stock)............... 13,800 305,325
Juno Lighting, Inc.............................. 10,800 175,500
La-Z-Boy Chair Co............................... 10,900 392,400
Thomas Industries, Inc.......................... 6,400 184,000
--------------
1,558,825
--------------
HEALTHCARE -- 1.9%
Bio-Technology General Corp. (a)................ 28,400 383,400
Coventry Corp. (a).............................. 20,300 307,038
GranCare, Inc. (a).............................. 14,400 155,700
OccuSystems, Inc. (a)........................... 13,800 400,200
Renal Treatment Centers, Inc. (a)............... 14,900 400,438
RoTech Medical Corp. (a)........................ 15,700 314,981
Sierra Health Services, Inc. (a)................ 10,850 339,063
Sola International, Inc. (a).................... 14,800 495,800
Sybron International Corp. (a).................. 28,700 1,144,413
--------------
3,941,033
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 2.7%
Express Scripts, Inc. (Class 'A' Stock) (a)..... 10,100 421,675
Genesis Health Ventures, Inc. (a)............... 21,300 718,875
Integrated Health Services, Inc................. 14,100 542,850
Lincare Holdings, Inc. (a)...................... 17,200 739,600
Living Centers of America, Inc. (a)............. 11,875 469,063
Magellan Health Services, Inc. (a).............. 17,500 516,250
Mariner Health Group, Inc. (a).................. 17,600 271,700
PhyCor, Inc. (a)................................ 37,675 1,297,433
Universal Health Services, Inc. (Class 'B'
Stock) (a).................................... 19,575 753,638
--------------
5,731,084
--------------
HOUSING RELATED -- 0.6%
Champion Enterprises, Inc. (a).................. 28,900 433,500
Continental Homes Holding Corp.................. 4,200 74,025
Fedders Corp.................................... 23,500 133,656
Ryland Group, Inc............................... 9,325 131,716
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B46
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Skyline Corp.................................... 6,100 $ 150,213
TJ International, Inc........................... 10,500 246,750
U.S. Home Corp. (a)............................. 7,000 185,938
--------------
1,355,798
--------------
INSURANCE -- 4.3%
Allied Group, Inc............................... 12,450 473,100
American Bankers Insurance Group, Inc........... 12,500 790,625
Arthur J. Gallagher and Co...................... 9,900 373,725
Capital Re Corp................................. 9,700 518,950
CMAC Investment Corp............................ 13,700 654,175
Compdent Corp. (a).............................. 6,100 128,481
Conseco, Inc.................................... 1 31
Enhance Financial Services Group, Inc........... 11,000 482,625
Fidelity National Financial, Inc................ 8,404 141,818
First American Financial Corp................... 7,000 273,000
Fremont General Corp............................ 17,870 719,268
Frontier Insurance Group, Inc................... 8,960 580,160
Hilb, Rogal and Hamilton Co..................... 8,200 139,400
Integon Corp.................................... 9,600 240,000
Life Re Corp.................................... 8,225 383,491
Mutual Risk Management, Ltd..................... 11,400 522,975
Orion Capital Corp.............................. 8,400 619,500
Protective Life Corp............................ 18,800 944,700
Selective Insurance Group, Inc.................. 8,900 431,094
Trenwick Group, Inc............................. 7,350 275,625
Washington National Corp........................ 7,500 213,750
Zenith National Insurance Corp.................. 10,700 288,900
--------------
9,195,393
--------------
LEISURE -- 2.3%
Aztar Corp. (a)................................. 27,400 193,513
Bell Sports Corp. (a)........................... 8,400 68,250
Carmike Cinemas, Inc. (Class 'A' Stock) (a)..... 6,800 222,700
Cineplex Odeon Corp. (a)........................ 107,200 194,300
GC Companies, Inc. (a).......................... 4,700 215,025
Grand Casinos, Inc. (a)......................... 25,450 375,388
Hollywood Park, Inc. (a)........................ 9,000 131,625
Huffy Corp...................................... 8,100 118,463
K2, Inc. (a).................................... 10,100 320,044
Marcus Corp..................................... 11,950 291,806
Outboard Marine Corp............................ 12,300 218,325
Players International, Inc. (a)................. 19,000 57,000
Prime Hospitality Corp. (a)..................... 24,200 477,950
Regal Cinemas, Inc. (a)......................... 20,025 660,825
Showboat, Inc................................... 9,800 170,888
Sturm Ruger & Company, Inc...................... 16,400 321,850
Thor Industries, Inc............................ 9,400 233,825
WHG Resorts & Casinos, Inc. (a)................. 3,450 37,519
Winnebago Industries, Inc....................... 15,000 107,813
WMS Industries, Inc. (a)........................ 14,700 368,419
--------------
4,785,528
--------------
MACHINERY -- 2.0%
Cognex Corp. (a)................................ 24,800 657,200
Global Industrial Technologies, Inc. (a)........ 13,800 282,900
Lindsay Manufacturing Co. (a)................... 5,375 176,031
Manitowoc Company, Inc.......................... 7,050 329,588
Novellus Systems, Inc. (a)...................... 10,100 873,650
Paxar Corp...................................... 16,962 320,158
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Regal Beloit Corp............................... 12,600 $ 333,900
Roper Industries, Inc........................... 9,200 477,250
Royal Appliance Manufacturing Co. (a)........... 14,600 125,013
SPX Corp........................................ 7,120 461,465
Toro Co......................................... 7,500 284,063
--------------
4,321,218
--------------
MEDIA -- 0.7%
Catalina Marketing Corp. (a).................... 12,000 577,500
International Family Entertainment, Inc. (Class
'B' Stock) (a)................................ 27,300 938,438
NTN Communications, Inc. (a).................... 13,700 60,794
--------------
1,576,732
--------------
METALS-FERROUS -- 0.6%
Acme Metals, Inc. (a)........................... 7,100 121,588
Birmingham Steel Corp........................... 18,100 280,550
Commercial Metals Co............................ 9,200 296,700
Material Sciences Corp. (a)..................... 9,425 145,498
Northwestern Steel and Wire Co. (a)............. 14,900 40,975
Quanex Corp..................................... 8,325 255,473
Steel Technologies, Inc......................... 7,300 78,019
WHX Corp. (a)................................... 14,800 112,850
--------------
1,331,653
--------------
METALS-NON FERROUS -- 0.5%
Amcast Industrial Corp.......................... 5,300 132,500
AMCOL International Corp........................ 11,700 212,063
Castle (A.M.) & Co.............................. 8,500 187,531
Commonwealth Industries, Inc.................... 6,200 126,325
Handy & Harman.................................. 7,300 126,838
Hecla Mining Co. (a)............................ 32,100 172,538
IMCO Recycling, Inc. (a)........................ 7,600 143,450
--------------
1,101,245
--------------
MINERAL RESOURCES -- 0.1%
Dravo Corp...................................... 9,000 97,875
Kronos, Inc. (a)................................ 4,600 126,500
--------------
224,375
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 5.1%
Air & Water Technologies Corp. (Class 'A'
Stock) (a).................................... 19,500 58,500
Air Express International Corp.................. 13,800 548,550
Alliant Techsystems, Inc........................ 8,000 440,000
Apogee Enterprises, Inc......................... 16,700 359,050
Aquarion Co..................................... 4,250 114,750
Bassett Furniture Industries, Inc............... 8,000 226,500
Butler Manufacturing Co......................... 4,700 155,688
Clarcor, Inc.................................... 9,800 242,550
Consumers Water Co.............................. 5,300 94,075
Cross (A.T.) Co (Class 'A' Stock)............... 10,000 127,500
Cyrk International, Inc. (a).................... 6,600 77,550
Expeditors International of Washington, Inc..... 14,900 422,788
Fibreboard Corp. (a)............................ 5,200 286,000
Figgie International, Inc. (Class 'A'
Stock) (a).................................... 11,100 152,625
Fisher Scientific International, Inc............ 12,275 583,063
Flow International Corp. (a).................... 8,900 86,775
Gentex Corp. (a)................................ 21,400 422,650
Geon Co. (a).................................... 14,500 293,625
Greenfield Industries, Inc...................... 10,000 270,000
Griffon Corp. (a)............................... 17,800 243,638
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B47
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Harmon Industries, Inc.......................... 3,800 $ 81,700
Insteel Industries, Inc......................... 4,500 36,563
Intermet Corp. (a).............................. 15,300 245,756
Justin Industries, Inc.......................... 14,300 182,325
K-Swiss, Inc. (Class 'A' Stock)................. 3,700 58,275
Lydall, Inc. (a)................................ 10,400 219,700
Medusa Corp..................................... 10,300 395,263
Mohawk Industries, Inc. (a)..................... 21,000 477,750
Mueller Industries, Inc. (a).................... 10,650 465,938
O'Sullivan Corp................................. 9,600 80,400
Paragon Trade Brands, Inc. (a).................. 7,400 126,263
SPS Technologies, Inc. (a)...................... 3,700 261,775
Standex International Corp...................... 8,100 243,000
Texas Industries, Inc........................... 13,300 353,281
The Rival Co.................................... 5,900 87,025
Timberland Co. (Class 'A' Stock) (a)............ 6,900 448,500
Tredegar Industries, Inc........................ 7,550 419,025
Valmont Industries, Inc......................... 16,600 315,400
Walbro Corp..................................... 5,300 107,325
Whittaker Corp. (a)............................. 6,800 75,650
Wolverine Tube, Inc. (a)........................ 8,400 234,150
Wolverine World Wide, Inc....................... 25,512 774,927
--------------
10,895,868
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.4%
DeVRY, Inc. (a)................................. 20,275 547,425
Hughes Supply, Inc.............................. 6,400 256,000
Mail Boxes, Etc. (a)............................ 6,900 192,338
Philadelphia Suburban Corp...................... 11,550 220,894
Premark International, Inc...................... 38,125 1,019,844
Southern California Water Co.................... 5,500 134,750
Valassis Communications, Inc. (a)............... 25,700 616,800
--------------
2,988,051
--------------
OIL & GAS -- 1.6%
Benton Oil & Gas Co. (a)........................ 16,500 247,500
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 13,900 244,988
Cascade Natural Gas Corp........................ 6,622 108,435
Cross Timbers Oil Co............................ 16,350 314,738
Mesa, Inc. (a).................................. 39,100 224,825
Northwest Natural Gas Co........................ 12,100 316,869
Piedmont Natural Gas Company, Inc............... 18,100 464,944
Snyder Oil Corp................................. 18,900 347,288
Southwest Gas Corp.............................. 16,200 321,975
United Cities Gas Co............................ 5,400 126,900
Vintage Petroleum, Inc.......................... 15,600 479,700
Wiser Oil Co.................................... 5,400 99,563
--------------
3,297,725
--------------
OIL & GAS SERVICES -- 4.9%
Atmos Energy Corp............................... 9,800 235,200
Barrett Resources Corp. (a)..................... 19,110 572,106
Box Energy Corp. (Class 'B' Stock) (a).......... 12,700 92,075
Camco International, Inc........................ 22,860 1,251,585
Connecticut Energy Corp......................... 5,500 133,375
Daniel Industries............................... 10,400 160,550
Devon Energy Corp............................... 19,500 716,625
Energen Corp.................................... 8,000 269,500
HS Resources, Inc. (a).......................... 10,300 145,488
Input/Output, Inc. (a).......................... 26,300 476,688
KCS Energy, Inc................................. 17,800 362,675
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
KN Energy, Inc.................................. 18,450 $ 777,206
New Jersey Resources Corp....................... 11,000 345,125
Oceaneering International, Inc. (a)............. 14,500 268,250
Offshore Logistics, Inc. (a).................... 12,800 241,600
Pennsylvania Enterprises, Inc................... 5,800 148,263
Plains Resources, Inc. (a)...................... 10,000 147,500
Pogo Producing Co............................... 20,300 785,356
Pool Energy Services Co. (a).................... 11,500 208,438
Pride Petroleum Services, Inc. (a).............. 28,100 674,400
Public Service Company of North Carolina,
Inc........................................... 11,875 227,852
Seitel, Inc. (a)................................ 6,097 231,686
Southwestern Energy Co.......................... 15,000 195,000
St. Mary Land & Exploration Co.................. 6,600 231,825
Tuboscope Vetco International, Inc. (a)......... 26,800 532,650
United Meridian Corp. (a)....................... 21,000 630,000
WICOR, Inc...................................... 11,200 436,100
--------------
10,497,118
--------------
PAPER AND RELATED PRODUCTS
Schweitzer-Mauduit International, Inc........... 1,000 37,500
--------------
PRECIOUS METALS -- 0.5%
Coeur D'Alene Mines Corp........................ 13,300 172,069
Getchell Gold Co. (a)........................... 15,700 553,425
Glamis Gold, Ltd................................ 18,900 137,025
Stillwater Mining Co. (a)....................... 12,300 264,450
--------------
1,126,969
--------------
RAILROADS -- 0.1%
RailTex, Inc. (a)............................... 5,500 99,000
--------------
REAL ESTATE DEVELOPMENT -- 0.2%
Toll Brothers, Inc. (a)......................... 20,700 380,363
--------------
RESTAURANTS -- 2.0%
Applebee's International, Inc................... 19,100 510,925
Au Bon Pain, Inc. (Class 'A' Stock) (a)......... 7,100 47,925
Bertucci's, Inc. (a)............................ 5,300 36,106
Cheesecake Factory (a).......................... 6,700 140,700
CKE Restaurants, Inc............................ 20,250 640,406
Foodmaker, Inc. (a)............................. 23,700 388,088
IHOP Corp. (a).................................. 5,800 179,800
Landry's Seafood Restaurants, Inc. (a).......... 15,400 354,200
Luby's Cafeterias, Inc.......................... 14,200 283,113
Ruby Tuesday Inc................................ 10,100 226,619
Ryan's Family Steak Houses, Inc. (a)............ 29,100 249,169
Shoney's, Inc. (a).............................. 29,500 175,156
Showbiz Pizza Time, Inc. (a).................... 11,150 294,081
Sonic Corp. (a)................................. 8,250 181,500
Taco Cabana (Class 'A' Stock) (a)............... 800 3,200
TCBY Enterprises, Inc........................... 14,900 94,056
Triarc Companies, Inc. (Class 'A' Stock) (a).... 18,200 370,825
--------------
4,175,869
--------------
RETAIL -- 5.8%
Arbor Drugs, Inc................................ 23,825 479,478
Arctic Cat, Inc................................. 17,800 184,675
Bombay Company, Inc. (a)........................ 23,100 115,500
Books-A-Million, Inc. (a)....................... 10,600 50,350
Brown Group, Inc................................ 10,950 204,628
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B48
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Carson Pirie Scott & Co. (a).................... 9,700 $ 307,975
Casey's General Stores, Inc..................... 16,000 344,500
Cash America International, Inc................. 14,643 153,752
Cato Corp. (Class 'A' Stock).................... 17,300 94,069
CompUSA, Inc. (a)............................... 55,700 1,197,550
Damark International, Inc. (a).................. 5,000 77,500
Designs, Inc. (a)............................... 9,500 46,313
Discount Auto Parts, Inc. (a)................... 10,100 196,950
Dress Barn, Inc. (a)............................ 13,800 269,100
Eagle Hardware & Garden, Inc. (a)............... 17,600 402,600
Fabri-Centers of America (Class 'A' Stock)...... 10,900 297,025
Filene's Basement Corp. (a)..................... 12,600 83,475
Galoob Toys, Inc. (a)........................... 11,000 207,625
Gottschalks, Inc. (a)........................... 6,400 52,800
Gymboree Corp. (a).............................. 15,400 369,600
Hechinger Co. (Class 'A' Stock)................. 25,700 54,613
J. Baker, Inc................................... 8,500 66,938
Jan Bell Marketing, Inc. (a).................... 15,800 38,513
Jumbosports, Inc. (a)........................... 12,200 46,513
Just For Feet, Inc. (a)......................... 17,300 301,669
Lechters, Inc. (a).............................. 900 3,938
Levitz Furniture, Inc. (a)...................... 18,300 26,306
Lillian Vernon Corp............................. 5,800 97,875
Michaels Stores, Inc. (a)....................... 14,300 302,981
MicroAge, Inc. (a).............................. 9,400 172,725
O'Reilly Automotive, Inc. (a)................... 6,400 246,400
Oshkosh B' Gosh, Inc. (Class 'A' Stock)......... 7,500 163,125
Payless Cashways, Inc. (a)...................... 24,300 21,263
Pier 1 Imports, Inc............................. 27,400 726,100
Proffitt's, Inc. (a)............................ 16,800 737,100
RDM Sports Group, Inc. (a)...................... 29,200 32,850
Regis Corp...................................... 13,900 328,388
Ross Stores, Inc................................ 30,400 993,700
Russ Berrie & Company, Inc...................... 13,300 291,769
Shopko Stores, Inc.............................. 19,700 502,350
Sports Authority, Inc........................... 19,150 372,228
Stein Mart, Inc. (a)............................ 13,900 417,000
Strawbridge & Clothier (Class 'A' Stock)........ 3,700 60,125
Swiss Army Brand (a)............................ 4,200 50,925
Whole Foods Market, Inc. (a).................... 11,700 387,563
Williams-Sonoma, Inc. (a)....................... 15,700 671,175
--------------
12,249,597
--------------
TELECOMMUNICATIONS -- 2.4%
ACC Corp. (a)................................... 10,300 318,013
Allen Telecom, Inc. (a)......................... 16,300 338,225
Aspect Telecommunications Corp. (a)............. 29,600 658,600
Boston Technology, Inc. (a)..................... 15,400 455,263
BroadBand Technologies, Inc. (a)................ 8,100 65,813
California Microwave, Inc. (a).................. 9,900 138,600
Centigram Communications Corp. (a).............. 4,300 55,631
CommNet Cellular, Inc. (a)...................... 8,400 291,900
Dialogic Corp. (a).............................. 9,600 255,600
Digi International, Inc. (a).................... 8,100 82,013
Digital Microwave Corp. (a)..................... 11,200 336,000
Geotek Communications, Inc...................... 36,300 197,381
InterVoice, Inc. (a)............................ 9,900 90,956
Network Equipment Technologies, Inc. (a)........ 12,700 228,600
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Symmetricom, Inc. (a)........................... 9,600 $ 138,000
TCSI Corp. (a).................................. 12,900 67,725
Tel-Save Holdings, Inc. (a)..................... 39,400 600,850
Vitesse Semicondutor Corp. (a).................. 21,450 701,147
--------------
5,020,317
--------------
TEXTILES -- 1.9%
Angelica Corp................................... 5,600 98,000
Ashworth, Inc. (a).............................. 7,400 74,463
Authentic Fitness Corp.......................... 13,600 171,700
Cone Mills Corp. (a)............................ 16,400 131,200
Delta Woodside Industries, Inc.................. 14,900 100,575
Dixie Group, Inc. (a)........................... 6,100 62,525
Fieldcrest Cannon, Inc. (a)..................... 5,500 104,500
G & K Services, Inc. (Class 'A' Stock).......... 12,400 461,900
Galey & Lord, Inc. (a).......................... 7,100 133,125
Guilford Mills, Inc............................. 13,237 275,495
Haggar Corp..................................... 4,200 53,550
Hartmarx Corp. (a).............................. 20,200 166,650
Johnston Industries, Inc........................ 6,300 40,163
Kellwood Co..................................... 12,875 357,281
Nautica Enterprises, Inc. (a)................... 24,400 645,075
Oxford Industries, Inc.......................... 5,300 150,388
Phillips-Van Heusen Corp........................ 16,500 247,500
Pillowtex Corp. (a)............................. 5,900 129,431
St. John Knits, Inc............................. 10,150 548,100
Tultex Corp. (a)................................ 17,900 109,638
--------------
4,061,259
--------------
TOBACCO -- 0.3%
Dimon, Inc...................................... 25,775 683,038
--------------
TRUCKING/SHIPPING -- 1.8%
American Freightways, Inc....................... 19,000 296,875
Arkansas Best Corp.............................. 11,900 108,588
Fritz Companies Inc. (a)........................ 21,400 207,313
Frozen Food Express Industries, Inc............. 10,100 87,113
Heartland Express, Inc. (a)..................... 14,949 351,302
Kirby Corp. (a)................................. 15,100 275,575
Landstar Systems, Inc. (a)...................... 7,800 219,375
M.S. Carriers, Inc. (a)......................... 7,300 183,413
Pittston Burling................................ 12,675 356,484
Rollins Truck Leasing Corp...................... 25,800 383,775
US freightways Co............................... 15,400 398,475
Werner Enterprises, Inc......................... 23,150 448,531
Yellow Corp. (b)................................ 17,300 387,088
--------------
3,703,907
--------------
UTILITY - ELECTRIC -- 1.6%
Bangor Hydro-Electric Co........................ 4,475 25,731
Central Hudson Gas & Electric Corp.............. 10,700 368,481
Central Vermont Public Service Corp............. 7,000 77,438
Cilcorp Inc..................................... 8,300 341,856
Commonwealth Energy System...................... 13,075 312,983
Eastern Utilities Associates.................... 12,400 226,300
Green Mountain Power Corp....................... 3,000 71,063
Interstate Power Co............................. 6,000 171,750
Orange & Rockland Utilities, Inc................ 8,300 279,088
Sierra Pacific Resources........................ 18,800 601,600
TNP Enterprises, Inc............................ 7,800 180,863
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B49
<PAGE>
SMALL CAPITALIZATION STOCK PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
United Illuminating Co.......................... 8,625 $ 266,297
United Water Resources, Inc..................... 20,800 403,000
--------------
3,326,450
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $164,174,787)............................................ 194,538,344
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 8.5% (000)
-------------
REPURCHASE AGREEMENT -- 8.2%
Joint Repurchase Agreement Account,
5.88%, 07/01/97 (Note 5)...................... $ 17,347 17,347,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.3%
United States Treasury Bill,
4.935%, 09/18/97 (b).......................... 600 593,280
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $17,940,502)............................................. 17,940,280
--------------
TOTAL INVESTMENTS -- 100.1%
(cost $182,115,289; Note 6).................................... 212,478,624
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C)...................
(67,425)
OTHER LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)............
(108,535)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 212,302,664
--------------
--------------
</TABLE>
(a) Non-income producing security
(b) Security segregated as collateral for futures contracts.
(c) Open futures contracts as of June 30, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT JUNE 30, UNREALIZED
CONTRACTS TYPE DATE TRADE DATE 1997 APPRECIATION
Long
Positions:
MIDCAP 400
114 Index Jun 97 $16,317,400 $16,507,200 $189,800
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B50
<PAGE>
GLOBAL PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 98.3%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
ARGENTINA -- 0.8%
Banco Frances Del Rio De La Plata (Banks and
Savings & Loans).............................. 485,395 $ 5,257,590
--------------
AUSTRALIA -- 3.5%
Brambles Industries, Ltd. (Miscellaneous - Basic
Industry)..................................... 585,900 11,578,801
Broken Hill Proprietary Co., Ltd. (Metals -
Diversified).................................. 500,731 7,361,195
Publishing and Broadcasting, Ltd. (Media)....... 224,600 1,293,071
Woolworth Ltd. (Retail)......................... 1,005,600 3,300,673
--------------
23,533,740
--------------
BRAZIL -- 0.8%
Basil De Distrub., ADR (Retail) (a)(b).......... 235,000 5,346,250
--------------
FEDERAL REPUBLIC OF GERMANY -- 4.5%
Hoechst, AG (Chemicals) (a)..................... 96,000 4,072,294
Linde, AG (Machinery) (a)....................... 12,040 9,216,399
SAP, AG (Computer Services) (a)................. 43,300 8,689,794
Volkswagen, AG (Autos -- Cars & Trucks)......... 11,100 8,509,576
--------------
30,488,063
--------------
FINLAND -- 1.9%
Nokia Corp. (Class 'A' Stock)
(Telecommunications).......................... 168,900 12,756,638
--------------
FRANCE -- 7.2%
Carrefour Supermarche, SA (Retail).............. 19,300 14,015,943
Imetal (Steel).................................. 27,136 3,596,863
Legrand, SA (Electrical Equipment).............. 40,500 7,132,405
SGS Thomson Microelectronics, N.V.,
(Electronics) (a)............................. 114,240 9,133,494
Total SA (Class 'B' Stock) (Petroleum).......... 66,100 6,680,801
Valeo, SA (Autos - Cars & Trucks)............... 137,785 8,557,274
--------------
49,116,780
--------------
HONG KONG -- 3.9%
CDL Hotels International, Ltd. (Real Estate
Development).................................. 7,294,145 2,965,674
Guoco Group, Ltd. (Financial Services).......... 1,944,000 10,237,522
Hutchison Whampoa, Ltd. (Miscellaneous - Basic
Industry)..................................... 786,000 6,822,652
New World Development Co., Ltd. (Real Estate
Development).................................. 1,123,000 6,740,174
--------------
26,766,022
--------------
ITALY -- 4.0%
Credito Italiano (Financial Services) (a)....... 3,150,000 5,768,094
Gucci Group, ADR (Textiles)..................... 124,700 8,027,562
Telecom Italia Mobile SpA
(Telecommunications).......................... 4,060,000 13,147,711
--------------
26,943,367
--------------
JAPAN -- 18.5%
Aoki International, Co., Ltd. (Retail) (a)...... 419,000 7,463,849
Aoyama Trading, Co., Ltd. (Retail).............. 254,000 8,162,068
Daibiru Corp. (Real Estate Development)......... 1,070,000 12,893,818
Daito Trust Construction Co. (Construction)..... 661,000 7,792,089
Daiwa Securities Co., Ltd. (Financial
Services) (a)................................. 836,000 6,599,232
Makita Corp. (Machinery)........................ 426,000 6,249,389
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Mikuni Coca Cola Bottling (Containers &
Packaging).................................... 254,000 $ 3,770,520
Mitsui Fudosan (Real Estate Development)........ 449,000 6,194,726
Mycal Corp. (Retail) (a)........................ 265,000 3,818,110
Namco, Ltd. (Leisure)........................... 154,500 5,963,063
Nichiei Co., Ltd. (Financial Services).......... 84,400 9,801,956
Nippon Shokubai Co. (Chemicals)................. 539,000 4,283,007
Nomura Securities Co., Ltd. (Financial
Services) (a)................................. 513,000 7,077,716
Seino Transportation (Trucking/ Shipping)....... 325,000 3,519,036
Sekisui Housing, Ltd. (Real Estate) (a)......... 682,000 6,908,138
Senshukai (Retail).............................. 411,000 4,199,005
Shiseido Co., Ltd. (Cosmetics & Soaps).......... 504,000 8,317,848
Sumitomo Marine & Fire Insurance (Insurance).... 553,000 4,539,120
Tokio Marine & Fire Insurance (Insurance)....... 320,000 4,191,408
Yodogawa Steel Works (Steel).................... 553,000 3,380,196
--------------
125,124,294
--------------
MEXICO -- 3.7%
Apasco, SA de CV (Steel)........................ 706,100 5,073,453
Cifra, SA de CV (Class 'B' Stock)
(Retail) (a).................................. 4,291,507 7,999,266
Fomento Economico Mexicano, SA de CV (Class 'B'
Stock) (Food & Beverages) (a)................. 1,314,100 7,835,236
Kimberly Clark (Series A) (Paper Products)...... 1,097,500 4,427,077
--------------
25,335,032
--------------
NETHERLANDS -- 2.9%
Heineken, N.V. (Food & Beverages)............... 22,725 3,877,834
Nutricia Verenigde Bedrijven (Healthcare)....... 40,000 6,316,292
Royal Dutch Petroleum (Petroleum) (a)........... 177,200 9,215,734
--------------
19,409,860
--------------
NEW ZEALAND -- 0.1%
Fletcher Challenge Forestry Division (Forest
Products)..................................... 293,204 427,016
--------------
THE PHILIPPINES -- 1.3%
Philippine Long Distance Telephone, ADR
(Telecommunications).......................... 131,600 8,455,300
--------------
SINGAPORE -- 2.2%
Overseas Chinese Banking Corp., Ltd. (Banks and
Savings & Loans) (a).......................... 594,400 6,153,123
Overseas Union Bank, Ltd. (Banks and Savings &
Loans) (a).................................... 1,010,800 6,292,313
Sembawang Maritime, Ltd. (Trucking/Shipping).... 883,500 2,768,469
--------------
15,213,905
--------------
SPAIN -- 3.0%
Banco Central Hispanoamericano, ADR (Banks &
Financial Services)........................... 225,806 8,260,344
Centros Commerciales Pryca, SA (Retail)......... 207,362 4,489,456
Telefonica De Espana (Telecommunications)....... 271,700 7,855,487
--------------
20,605,287
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B51
<PAGE>
GLOBAL PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS(CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
SWEDEN -- 6.3%
Allgon Corp. (Miscellaneous - Basic Industry)... 344,400 $ 5,465,026
Astra AB (Series 'B' Free) (Drugs and Hospital
Supplies)..................................... 462,213 8,172,743
Hennes & Mauritz (Series 'B' Free) (Retail)..... 460,900 16,239,349
Mo Och Domsjo, AB (Series'B' Free) (Forest
Products)..................................... 168,100 5,530,883
Skandinaviska Enskilda Bank (Series A) (Banks
and Savings & Loans).......................... 701,700 7,589,811
--------------
42,997,812
--------------
UNITED KINGDOM -- 12.1%
Bank Of Ireland (Banks and Savings & Loans)..... 1,052,500 11,560,713
Barclays, PLC (Banks and Savings & Loans)....... 336,400 6,673,456
British Sky Broadcasting Group, PLC (Media)..... 1,058,100 7,748,149
Dixons Group, PLC (Retail)...................... 844,000 6,559,608
Guest Kean & Nettlefolds, PLC (Autos - Cars &
Trucks) (a)(b)................................ 479,040 8,247,472
Hays, PLC (Commercial Services)................. 556,600 5,280,033
Reed International PLC (Miscellaneous - Basic
Industry)..................................... 638,400 6,162,252
Siebe, PLC (Machinery).......................... 459,240 7,780,474
Standard Chartered, PLC (Banks and Savings &
Loans)........................................ 621,300 9,471,426
Vodafone Group, PLC (Telecommunications)........ 2,564,400 12,504,662
--------------
81,988,245
--------------
UNITED STATES -- 21.6%
Adaptec, Inc. (Computer Services) (b)........... 189,000 6,567,750
Baker Hughes, Inc. (Oil Services)............... 175,500 6,789,656
Circus Circus Enterprises, Inc. (Leisure)....... 309,300 7,616,512
Cisco Systems, Inc. (Computer Services) (a)..... 165,800 11,129,325
Electronic Arts, Inc. (Computer Services)....... 207,400 6,973,825
Mattel Inc. (Toys).............................. 359,258 12,169,865
Mcafee Associates Inc (Software) (a)............ 111,300 7,025,812
Microsoft Corp. (Computer Services) (a)......... 118,500 14,975,438
Mirage Resorts, Inc. (Leisure) (a).............. 226,500 5,719,125
Mobil Corp. (Oil & Gas)......................... 174,000 12,158,250
Motorola, Inc. (Electronics).................... 72,200 5,487,200
Oracle Corp. (Computer Services) (a)............ 270,600 13,631,475
Texas Instruments, Inc. (Electronics)........... 75,600 6,355,125
Tiffany & Co. (Retail).......................... 141,900 6,554,006
Time Warner, Inc. (Media)....................... 185,700 8,960,025
Transocean Offshore, Inc. (Petroleum
Services)..................................... 85,500 6,209,438
Walt Disney Co. (Leisure)....................... 99,000 7,944,750
--------------
146,267,577
--------------
TOTAL COMMON STOCKS
(cost $502,457,643)............................................ 666,032,778
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
WARRANTS UNITS (NOTE 2)
------------- --------------
<S> <C> <C>
MALAYSIA
Renong Berhad, Expire 11/21/00, (Miscellaneous -
Basic Industry)............................... 185,625 $ 97,813
--------------
(cost $49,861)
TOTAL LONG-TERM INVESTMENTS
(cost $502,507,504)............................................ 666,130,591
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS -- 0.7% (000)
-------------
COMMERCIAL PAPER -- 0.6%
UNITED STATES
Federal Farm Credit
5.44%, 07/01/97............................... $ 4,064 4,063,325
--------------
(cost $4,063,325)
PURCHASED CALL OPTIONS -- 0.1% CONTRACTS
-------------
JAPAN
Tokyo Option Index, Expiring 11/21/97 @ 1,480... 941 871,323
--------------
(cost $600,165; Note 2)
TOTAL SHORT-TERM INVESTMENTS
(cost $4,663,490).............................................. 4,934,648
--------------
TOTAL INVESTMENTS -- 99.0%
(cost $507,170,994 ; Note 6)................................... 671,065,239
--------------
FORWARD CURRENCY CONTRACTS -- AMOUNT
RECEIVABLE FROM COUNTERPARTIES -- 0.2% (C)....................... 1,203,237
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.8%.................... 5,357,033
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 677,625,509
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
AB Akiteboing (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $9,139,669. The aggregate value, $13,593,722, is
approximately 2% of net assets. (See Note 2)
(c) Outstanding forward currency contracts at June 30, 1997 were as follows:
<TABLE>
<S> <C> <C> <C>
FOREIGN VALUE AT
CURRENCY SETTLEMENT CURRENT
CONTRACTS DATE VALUE APPRECIATION
Purchase:
Japanese Yen,
expiring
07/17/97 $14,900,000 $15,676,273 $776,273
Sale:
Japanese Yen,
expiring
07/17/97 $87,496,764 $87,069,800 $426,964
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B52
<PAGE>
NATURAL RESOURCES PORTFOLIO
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 98.9%
VALUE
COMMON STOCKS -- 94.0% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
ALUMINUM -- 3.9%
Aluminum Company of America..................... 182,100 $ 13,725,787
Comalco Ltd., ADR (Australia)................... 134,900 3,612,878
--------------
17,338,665
--------------
CHEMICALS
Agrium, Inc..................................... 503 5,755
--------------
EXPLORATION & PRODUCTION -- 6.5%
Abacan Resource Corp. (a)....................... 676,500 2,156,344
Arakis Energy Corp.............................. 1,010,000 3,819,062
Atna Resources Ltd. (a)......................... 200,000 506,934
Brigham Exploration Company..................... 123,000 1,030,125
Fx Energy, Inc.................................. 197,800 1,607,125
Harcor Energy, Inc.............................. 428,500 2,571,000
Newfield Exploration Co. (a).................... 473,900 9,478,000
PetroCorp, Inc. (a)............................. 206,600 1,807,750
Tom Brown, Inc. (a)............................. 291,000 6,183,750
--------------
29,160,090
--------------
FOREST PRODUCTS -- 13.8%
Champion International Corp.,................... 355,100 19,619,275
Fletcher Challenge Ltd., ADR (New Zealand)...... 418,300 6,039,206
Louisiana-Pacific Corp.......................... 324,700 6,859,287
Macmillan Bloedel Ltd........................... 932,000 12,790,238
Pacific Forest Products Ltd. (a)................ 485,000 8,868,632
Rayonier, Inc................................... 182,600 7,680,612
--------------
61,857,250
--------------
METALS-NON FERROUS -- 11.0%
Cameco Corp..................................... 241,300 9,043,179
Freeport-McMoRan Copper & Gold, Inc. (Class 'A'
Stock)........................................ 242,800 7,101,900
Potash Corp. of Saskatchewan, Inc. (Canada)..... 145,900 10,951,619
Reynolds Metals Co.............................. 100,000 7,125,000
Rio Tinto Ltd., ADR (Australia) (a)............. 70,627 4,809,699
Westaim Corp.................................... 219,390 857,954
Westmin Resources Ltd........................... 1,082,000 5,171,597
WMC Ltd., ADR (South Africa) (a)................ 172,800 4,428,000
--------------
49,488,948
--------------
OIL & GAS -- 19.8%
3-D Geophysical Inc. (a)........................ 232,800 1,193,100
Alberta Energy Co., Ltd......................... 271,600 6,826,861
Barrington Petroleum Ltd., (Canada) (a)......... 604,700 2,408,553
Beau Canada Exploration Ltd. (Class 'A' Stock)
(Canada) (a).................................. 980,000 2,201,441
Blue Range Resource Corp., (Canada)............. 636,000 3,961,038
Crestar Energy, Inc., (Canada) (a).............. 570,000 10,361,008
Cross Timbers Oil Co............................ 320,400 6,167,700
Elan Energy, Inc., (Canada)..................... 1,083,500 7,807,383
HCO Energy Ltd., (Canada)....................... 899,592 1,368,100
Mesa, Inc. (a).................................. 1,333,700 7,668,775
Noble Affiliates, Inc........................... 309,300 11,966,044
Northstar Energy Corp., (Canada) (a)............ 648,300 5,516,547
Rigel Energy Corp., (Canada) (a)................ 309,000 3,302,438
Rio Alto Exploration Ltd., (Canada) (a)......... 332,900 2,784,513
Western Gas Resources, Inc...................... 782,900 15,266,550
--------------
88,800,051
--------------
</TABLE>
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS SERVICES -- 9.3%
Bouyges Offshore SA, ADR (France) (a)........... 224,100 $ 2,801,250
Coflexip, ADR (France).......................... 280,799 8,459,070
J. Ray McDermott, SA (Country).................. 254,200 6,863,400
NGC Corp........................................ 533,545 8,236,601
Parker & Parsley Petroleum Co................... 133,700 4,729,638
Tejas Gas Corp. (a)............................. 1 39
Weatherford Enterra, Inc. (a)................... 274,874 10,582,649
--------------
41,672,647
--------------
OIL SERVICES -- 4.6%
Dailey Petroleum Services Corp. (a)............. 79,100 533,925
Dawson Production Services, Inc. (a)............ 273,700 3,831,800
Precision Drilling Corp......................... 78,700 3,807,113
Stolt Comex Seaway, SA (Country) (a)............ 341,800 8,673,175
Tesco Corp. (a)................................. 285,000 3,715,103
--------------
20,561,116
--------------
GOLD -- 16.3%
Agnico-Eagle Mines Ltd.......................... 450,600 4,337,025
Ashanti Goldfields Co., Ltd..................... 199,800 2,335,163
Barrick Gold Corp............................... 320,053 7,041,166
Battle Mountain Gold Corp....................... 154,200 877,013
Bema Gold Corp.................................. 679,000 4,074,000
Cambior, Inc.................................... 710,500 8,008,603
Coeur D'Alene Mines Corp........................ 87,825 1,136,236
Durban Roodeport Deep, ADR (South Africa)....... 150,000 609,375
Getchell Gold Co. (a)........................... 174,211 6,140,938
Golden Star Resources........................... 328,000 2,665,000
Greenstone Resources Ltd........................ 252,200 2,209,958
Harmony Gold Mining, ADR (South Africa)......... 468,000 2,164,500
International Pursuit Corp...................... 343,100 566,512
Kloof Gold Mining Co., Ltd., ADR (South
Africa)....................................... 257,900 1,531,281
Meridian Gold, Inc.............................. 714,900 3,222,836
Newmont Mining Corp............................. 301,307 11,750,973
Placer Dome, Inc................................ 184,000 3,013,000
Rea Gold Corp. (a).............................. 1,467,000 839,287
Samax Gold, Inc................................. 336,900 1,402,886
TVX Gold, Inc. (a).............................. 552,900 2,937,281
Vaal Reefs Exploration & Mining Co., Ltd., ADR
(South Africa)................................ 350,000 1,684,375
Western Areas Gold Mining Co., Ltd., ADR (South
Africa) (a)................................... 194,000 1,321,625
Western Deep Levels Ltd., ADR (South Africa).... 147,000 3,509,625
--------------
73,378,658
--------------
PLATINUM -- 8.8%
Impala Platinum Holdings Ltd.................... 807,600 8,984,550
Rustenburg Platinum Holdings Ltd................ 731,369 13,438,905
Stillwater Mining Co. (a)....................... 799,600 17,191,400
--------------
39,614,855
--------------
TOTAL COMMON STOCKS
(cost $366,333,316)............................................ 421,878,035
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B53
<PAGE>
NATURAL RESOURCES PORTFOLIO (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCKS -- 4.1% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
NON-FERROUS METALS -- 0.3%
Freeport - McMoRan Copper & Gold, Inc........... 55,300 $ 1,009,225
--------------
GOLD -- 1.4%
Amax Gold, Inc. (Conv.), Series B............... 47,300 2,518,725
Hecla Mining Co. (Cum. Conv.), Series B......... 82,400 3,847,050
--------------
6,365,775
--------------
OIL & GAS -- 2.4%
Mesa, Inc....................................... 1,620,825 10,839,267
--------------
TOTAL PREFERRED STOCKS
(cost $12,290,873)............................................. 18,214,267
--------------
PRINCIPAL
CONVERTIBLE AMOUNT
BOND -- 0.8% (000)
-------------
GOLD
Coeur d'Alene Mines Corp.
6.375%, 1/31/04............................... $ 3,979 3,660,680
--------------
(cost $3,827,116)
TOTAL LONG-TERM INVESTMENTS
(cost $382,451,305)............................................ 443,752,987
--------------
SHORT-TERM INVESTMENT -- 0.9%
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account,
5.88%, 7/1/97................................. 4,128 4,128,000
--------------
(cost $4,128,000)
TOTAL INVESTMENTS -- 99.8%
(cost $386,579,305 ; Note 6)................................... 447,880,987
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%....................
781,645
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 448,662,632
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B54
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
(UNAUDITED)
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of fifteen Portfolios ("Portfolio" or "Portfolios"),
each with a separate series of capital stock: Money Market Portfolio,
Diversified Bond Portfolio, Government Income Portfolio, Zero Coupon Bond 2000
Portfolio, Zero Coupon Bond 2005 Portfolio, Conservative Balanced Portfolio,
Flexible Managed Portfolio, High Yield Bond Portfolio, Stock Index Portfolio,
Equity Income Portfolio, Equity Portfolio, Prudential Jennison Portfolio, Small
Capitalization Stock Portfolio, Global 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 ("contracts") issued by
the Companies. The accounts invest in shares of the Series Fund through
subaccounts that correspond to the portfolios. The accounts will redeem shares
of the Series Fund to the extent necessary to provide benefits under the
contracts or for such other purposes as may be consistent with the contracts.
NOTE 2: ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Series Fund in preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
SECURITIES VALUATION: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Convertible debt securities are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. High yield
bonds are valued either by quotes received from principal market makers or by an
independent pricing service which determine prices by analysis of quality,
coupon, maturity and other factors. Any security for which a reliable market
quotation is unavailable is valued at fair value as determined in good faith by
or under the direction of the Series Fund's Board of Directors.
The Money Market, Conservative Balanced and Flexible Managed Portfolios use
amortized cost to value short-term securities. Short-term securities that are
held in the other Portfolios which mature in more than 60 days are valued at
current market quotations and those short-term securities which mature in 60
days or less are valued at amortized cost.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Series Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction
including accrued interest. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Series Fund may
by delayed or limited. (See Note 5).
FOREIGN CURRENCY TRANSLATION: The books and records of the Series Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investments securities, other assets and liabilities - at
the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses - at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market
C1
<PAGE>
prices of securities held at the end of the period. Similarly, the Series Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the period. Accordingly, these realized foreign currency
gains (losses) are included in the reported net realized gains (losses) on
investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at period end exchange rates are reflected as a component of net
unrealized appreciation (depreciation) on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
SHORT SALES: Certain portfolios of the Series Fund may sell a security it does
not own in anticipation of a decline in the market value of that security (short
sale). When the Portfolio makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short sale
as collateral for its obligation to deliver the security upon conclusion of the
sale. The Portfolio may have to pay a fee to borrow the particular security and
may be obligated to remit any interest or dividends received on such borrowed
securities. A gain, limited to the price at which the Portfolio sold the
security short, or a loss, unlimited in magnitude, will be recognized upon the
termination of a short sale if the market price at termination is less than or
greater than, respectively, the proceeds originally received.
OPTIONS: The Series Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value with respect to
securities which the Series Fund currently owns or intends to purchase. The
Series Fund's principal reason for writing options is to realize, through
receipts of premiums, a greater current return than would be realized on the
underlying security alone. When the Series Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Series Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or
paid is an adjustment to the proceeds from the sales or the cost of the purchase
in determining whether the Series Fund has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.
The Series Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series Fund bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
FINANCIAL FUTURES CONTRACTS: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the "initial margin". Subsequent payment, known as "variation
margin", are made or received by the Series Fund each day, depending on the
daily fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.
The Series Fund invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series Fund intends to purchase,
against fluctuations in value. Under a variety of circumstances, the Series Fund
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts and the
underlying assets.
C2
<PAGE>
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of three elements: stated
coupon, original issue discount and market discount, is recorded on the accrual
basis. Certain portfolios own shares of real estate investment trusts ("REITs")
which report information on the source of their distributions annually. A
portion of distributions received from REITs during the year is estimated to be
a return of capital and is recorded as a reduction of their costs. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management. The Series Fund expenses are allocated to the respective portfolios
on the basis of relative net assets.
CUSTODY FEE CREDITS: The Series Fund, exclusive of the Global Portfolio, has an
arrangement with its custodian bank, whereby uninvested monies earn credits
which reduce the fees charged by the custodian. Such custody fee credits are
presented as a reduction of gross expenses in the accompanying Statement of
Operations.
TAXES: For federal income tax purposes, each portfolio in the Series Fund is
treated as a separate taxpaying entity. It is the intent of the Series Fund to
continue to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net income to
shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends, interest and capital gains have been
provided for in accordance with the Series Fund's understanding of the
applicable country's tax rules and regulations.
DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions of each Portfolio are
declared in cash and automatically reinvested in additional shares of the Fund.
The Money Market Portfolio will declare and reinvest dividends from net
investment income and net realized capital gain (loss) daily. Each other
Portfolio will declare and distribute dividends from net investment income, if
any, quarterly and net capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
RECLASSIFICATION OF CAPITAL ACCOUNTS: The Series Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gains, and
Return of Capital Distributions by Investment Companies. As a result of this
statement, the Series Fund changed the classification of distributions to
shareholders to disclose the amounts of undistributed net investment income and
accumulated net realized gain (loss) on investments available for distributions
determined in accordance with income tax regulations. For the six months ended
June 30, 1997, the application of this statement increased (decreased) net
unrealized appreciation on investments (APP), paid-in capital in excess of par
(PC), undistributed net investment income ("UNI") and accumulated net realized
gains (losses) on investments ("GL") by the following amounts:
<TABLE>
<CAPTION>
APP PC UNI G/L
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
High Yield Bond Portfolio.............. $ (227,243) -- $ 337,328 $ (110,085)
Equity Portfolio....................... -- -- 81,727 (82,787)
Global Portfolio....................... -- (903,000) 869,655 33,345
Natural Resources Portfolio............ -- -- (1,916) 1,916
</TABLE>
Net investment income, net realized gains and net assets were not affected by
these reclassifications.
NOTE 3: AGREEMENTS
The Series Fund has an investment advisory agreement with The Prudential.
Pursuant to this agreement The Prudential has responsibility for all investment
advisory services and supervises the subadvisers' performance of such services.
The Prudential has entered into a service agreement with The Prudential
Investment Corporation ("PIC"), which provides that PIC will furnish to The
Prudential such services as The Prudential may require in connection with the
performance of its obligations under the investment advisory agreement with the
Series Fund. In addition, The Prudential has entered into a subadvisory
agreement with Jennison Capital Corp. ("Jennison"), under which Jennison
furnishes investment advisory services in connection with the management of the
Prudential Jennison Portfolio. The Prudential compensates Jennison
C3
<PAGE>
for its services as follows: 0.75% on the first $10 million of that Portfolio's
average daily net assets, 0.50% on the next $30 million, 0.35% on the next $25
million, 0.25% on the next $335 million, 0.22% on the next $600 million and
0.20% thereafter. The Prudential pays for the cost of PIC's services,
compensation of officers of the Series Fund, occupancy and certain clerical and
administrative expenses of the Series Fund. The Series Fund bears all other
costs and expenses.
The investment advisory fee paid The Prudential is computed daily and payable
quarterly, at the annual rates specified below of the value of each of the
Portfolio's average daily net assets.
<TABLE>
<CAPTION>
Fund Investment Advisory Fee
- --------------------------------------- ------------------------
<S> <C>
Money Market Portfolio................. 0.40%
Diversified Bond Portfolio............. 0.40
Government Income Portfolio............ 0.40
Zero Coupon Bond 2000 Portfolio........ 0.40
Zero Coupon Bond 2005 Portfolio........ 0.40
Conservative Balanced Portfolio........ 0.55
Flexible Managed Portfolio............. 0.60
High Yield Bond Portfolio.............. 0.55
Stock Index Portfolio.................. 0.35
Equity Income Portfolio................ 0.40
Equity Portfolio....................... 0.45
Prudential Jennison Portfolio.......... 0.60
Small Capitalization Stock Portfolio... 0.40
Global Portfolio....................... 0.75
Natural Resources Portfolio............ 0.45
</TABLE>
The Prudential has agreed to refund to a Portfolio (other than the Global
Portfolio), the portion of the investment advisory fee for that Portfolio equal
to the amount that the aggregate annual ordinary operating expenses (excluding
interest, taxes and brokerage commissions) exceeds 0.75% of the Portfolio's
average daily net assets. No refund was required for the six months ended June
30, 1997.
PIC and Jennison are indirect, wholly-owned subsidiaries of The Prudential.
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended June 30, 1997, Prudential Securities Incorporated, an
indirect, wholly-owned subsidiary of The Prudential, earned $507,278 in
brokerage commissions from transactions executed on behalf of the Series Fund as
follows:
<TABLE>
<CAPTION>
Fund Commission
- --------------------------------------- -----------
<S> <C>
Conservative Balanced Portfolio........ $ 81,663
Flexible Managed Portfolio............. 142,020
Equity Income Portfolio................ 115,394
Equity Portfolio....................... 131,211
Global Portfolio....................... 3,953
Natural Resources Portfolio............ 132
-----------
$ 507,278
</TABLE>
As of June 30, 1997, The Prudential had investments of $16,801,047 in the
Prudential Jennison Portfolio and $16,021,702 in the Small Capitalization Stock
Portfolio.
NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT
The portfolios of the Series Fund (excluding Global Portfolio) may transfer
uninvested cash balances into a single joint repurchase agreement account, the
daily aggregate balance of which is invested in one or more repurchase
agreements collateralized by U.S. Government obligations. The Series Fund's
undivided interest
C4
<PAGE>
in the joint repurchase agreement account represented $695,194,000 as of June
30, 1997. The Portfolios of the Series Fund with cash invested in the joint
accounts had the following principal amounts and percentage participation in the
account:
<TABLE>
<CAPTION>
Principal Percentage
Amount Interest
------------- ----------
<S> <C> <C>
Diversified Bond Portfolio............. $ 7,491,000 1.08%
Government Income Portfolio............ 8,841,000 1.27
Zero Coupon Bond 2000 Portfolio........ 1,018,000 0.15
Conservative Balanced Portfolio........ 40,325,000 5.80
Flexible Managed Portfolio............. 74,666,000 10.74
High Yield Bond Portfolio.............. 23,460,000 3.37
Stock Index Portfolio.................. 84,707,000 12.19
Equity Income Portfolio................ 50,423,000 7.25
Equity Portfolio....................... 371,391,000 1.64
Prudential Jennison Portfolio.......... 11,397,000 2.50
Small Capitalization Stock Portfolio... 17,347,000 53.42
Natural Resources Portfolio............ 4,128,000 .59
------------- ----------
$ 695,194,000 100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
Chase Securities, Inc., 5.80%, in the principal amount of $230,000,000,
repurchase price $230,037,056, due 7/1/97. The value of the collateral including
accrued interest was $234,039,088.
J. P. Morgan Securities, Inc., 5.95%, in the principal amount of $230,000,000,
repurchase price $230,038,014, due 7/1/97. The value of the collateral including
accrued interest was $236,789,590.
SBC Warburg, Ltd., 5.85%, in the principal amount of $5,194,000, repurchase
price $5,194,844, due 7/1/97. The value of the collateral including accrued
interest was $5,308,986.
UBS Securities Corp., 5.90%, in the principal amount of $230,000,000, repurchase
price $230,037,694, due 7/1/97. The value of the collateral including accrued
interest was $234,671,875.
The weighted average interest rate of these repurchase agreements was 5.88%.
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the six months ended June 30, 1997 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
ZERO ZERO
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE
BOND INCOME 2000 2005 BALANCED MANAGED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ $964,547,717 $159,249,804 0 $ 11,044,231 $6,547,909,550 $4,370,837,860
Equity Securities...................... 0 0 0 0 $1,633,768,724 $1,566,032,657
<CAPTION>
HIGH
YIELD
BOND
------------
<S> <C>
Debt Securities........................ $244,098,573
Equity Securities...................... $ 16,471,900
</TABLE>
<TABLE>
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION
INDEX INCOME EQUITY JENNISON STOCK GLOBAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ 0 0 0 0 0 $ 3,332,500
Equity Securities...................... $187,746,264 $236,876,578 $242,397,488 $145,713,888 $ 54,561,673 $211,915,651
<CAPTION>
NATURAL
RESOURCES
------------
<S> <C>
Debt Securities........................ $ 0
Equity Securities...................... $ 80,408,148
</TABLE>
C5
<PAGE>
Proceeds from Sales:
<TABLE>
<CAPTION>
ZERO ZERO
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE
BOND INCOME 2000 2005 BALANCED MANAGED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ $965,614,445 $202,059,069 $ 13,124,879 $ 4,782,015 $6,250,287,364 $4,156,009,378
Equity Securities...................... 0 0 0 0 $1,955,092,923 $1,599,802,199
<CAPTION>
HIGH
YIELD
BOND
------------
<S> <C>
Debt Securities........................ $195,605,394
Equity Securities...................... $ 6,957,399
</TABLE>
<TABLE>
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION
INDEX INCOME EQUITY JENNISON STOCK GLOBAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities........................ 0 $ 1,300,898 0 0 0 $ 3,334,000
Equity Securities...................... $ 7,435,517 $201,483,922 $357,163,217 $ 80,769,502 $ 13,826,286 $159,846,263
<CAPTION>
NATURAL
RESOURCES
------------
<S> <C>
Debt Securities........................ 0
Equity Securities...................... $ 58,204,782
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of June 30, 1997 were as follows:
<TABLE>
<CAPTION>
ZERO ZERO
DIVERSIFIED GOVERNMENT COUPON COUPON CONSERVATIVE FLEXIBLE
BOND INCOME 2000 2005 BALANCED MANAGED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation.......... $ 14,879,194 $ 4,933,268 $ 1,000.343 $ 1,852,990 $184,952,186 $421,745,655
Gross Unrealized Depreciation.......... 3,455,447 4,756,079 -- 109,299 35,438,318 39,569,961
Total Net Unrealized................... 11,423,747 177,189 1,000,343 1,743,691 149,513,868 382,175,694
Tax Basis.............................. 725,851,274 422,392,473 32,206,973 31,279,274 4,508,986,738 4,911,604,141
<CAPTION>
HIGH
YIELD
BOND
------------
<S> <C>
Gross Unrealized Appreciation.......... $ 20,323,257
Gross Unrealized Depreciation.......... 4,174,767
Total Net Unrealized................... 16,148,490
Tax Basis.............................. 467,809,560
</TABLE>
<TABLE>
<CAPTION>
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION
INDEX INCOME EQUITY JENNISON STOCK GLOBAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation.......... $858,497,827 $443,841,941 $1,525,443,014 $ 68,348,804 $ 39,789,944 $166,808,443
Gross Unrealized Depreciation.......... 13,503,432 13,471,256 69,173,483 5,609,074 9,435,401 2,914,198
Total Net Unrealized................... 844,994,395 430,370,685 1,456,269,531 62,739,730 30,354,543 163,894,245
Tax Basis.............................. 1,268,750,226 1,187,577,407 4,019,334,597 259,585,412 182,124,081 507,170,994
<CAPTION>
NATURAL
RESOURCES
------------
<S> <C>
Gross Unrealized Appreciation.......... $ 37,932,294
Gross Unrealized Depreciation.......... 23,369,388
Total Net Unrealized................... 14,562,906
Tax Basis.............................. 422,392,473
</TABLE>
For federal income tax purposes, the following Portfolios had post-October
losses deferred and capital loss carryforwards as of December 31, 1996.
Accordingly no capital gain distributions are expected to be paid to
shareholders until net gains have been realized in excess of such amounts:
<TABLE>
<CAPTION>
CAPITAL LOSSES
POST OCTOBER CARRYFORWARDS
LOSSES DEFERRED AVAILABLE EXPIRATION DATE
---------------- -------------- ----------------
<S> <C> <C> <C>
Government Income Portfolio............ -- $ 7,917,291 12/31/2003
High Yield Bond Portfolio.............. $ 2,303,758 972,998 12/31/1999
3,273,984 12/31/2002
15,084,494 12/31/2003
--------------
19,331,476
Prudential Jennison Portfolio.......... -- 2,160,575 12/31/2004
Natural Resources Portfolio............ 31,622 -- --
</TABLE>
C6
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income and realized and
unrealized gains..................... 0.26 0.51 0.56 0.40 0.29 0.37
Dividends and distributions............ (0.26) (0.51) (0.56) (0.40) (0.29) (0.37)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RATE OF RETURN(b)..... 2.61% 5.22% 5.80% 4.05% 2.95% 3.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $672.2 $668.8 $613.3 $583.3 $474.7 $528.7
Ratios to average net assets:
Expenses............................. 0.43%(c) 0.44% 0.44% 0.47% 0.45% 0.47%
Net investment income................ 5.17%(c) 5.10% 5.64% 4.02% 2.90% 3.72%
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED BOND
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 11.07 $ 11.31 $ 10.04 $ 11.10 $ 10.83 $ 11.00
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.40 0.76 0.76 0.68 0.68 0.76
Net realized and unrealized gains
(losses) on investments.............. 0.03 (0.27) 1.29 (1.04) 0.40 0.01
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.43 0.49 2.05 (0.36) 1.08 0.77
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.23) (0.73) (0.75) (0.68) (0.66) (0.72)
Distributions from net realized
gains................................ (0.05) -- (0.03) (0.02) (0.15) (0.22)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.28) (0.73) (0.78) (0.70) (0.81) (0.94)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 11.22 $ 11.07 $ 11.31 $ 10.04 $ 11.10 $ 10.83
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 4.11% 4.40% 20.73% (3.23)% 10.13% 7.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $739.9 $720.2 $655.8 $541.6 $576.2 $428.8
Ratios to average net assets:
Expenses............................. 0.44%(c) 0.45% 0.44% 0.45% 0.46% 0.47%
Net investment income................ 7.29%(c) 6.89% 7.00% 6.41% 6.05% 6.89%
Portfolio turnover rate................ 13% 210% 199% 32% 41% 61%
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
D1
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
GOVERNMENT INCOME
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 11.22 $ 11.72 $ 10.46 $ 11.78 $ 11.09 $ 11.13
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.38 0.75 0.74 0.70 0.70 0.73
Net realized and unrealized gains
(losses) on investments.............. (0.09) (0.51) 1.28 (1.31) 0.68 (0.09)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.29 0.24 2.02 (0.61) 1.38 0.64
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.19) (0.74) (0.76) (0.71) (0.64) (0.59)
Distributions from net realized
gains................................ -- -- -- -- (0.05) (0.09)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.19) (0.74) (0.76) (0.71) (0.69) (0.68)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 11.32 $ 11.22 $ 11.72 $ 10.46 $ 11.78 $ 11.09
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 2.63% 2.22% 19.48% (5.16)% 12.56% 5.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $428.7 $482.0 $501.8 $487.6 $540.1 $315.5
Ratios to average net assets:
Expenses............................. 0.45%(c) 0.46% 0.45% 0.45% 0.46% 0.53%
Net investment income................ 6.52%(c) 6.38% 6.55% 6.30% 5.91% 6.58%
Portfolio turnover rate................ 37% 95% 195% 34% 19% 81%
</TABLE>
<TABLE>
<CAPTION>
ZERO COUPON BOND 2000
-------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ----------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 12.92 $ 13.27 $ 11.86 $ 13.72 $ 12.55 $ 12.40
------------ ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.38 0.55 0.59 0.92 0.85 0.89
Net realized and unrealized gains
(losses) on investments.............. (0.11) (0.36) 1.95 (1.91) 1.16 0.14
------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations... 0.27 0.19 2.54 (0.99) 2.01 1.03
------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.20) (0.54) (0.60) (0.85) (0.84) (0.88)
Distributions from net realized
gains................................ (0.13) -- (0.53) (0.02) (0.01) --
------------ ---------- ---------- ---------- ---------- ----------
Total distributions................ (0.33) (0.54) (1.13) (0.87) (0.85) (0.88)
------------ ---------- ---------- ---------- ---------- ----------
Net Asset Value, end of period......... $ 12.86 $ 12.92 $ 13.27 $ 11.86 $ 13.71 $ 12.55
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN(b)............. 2.11% 1.53% 21.56% (7.18)% 16.15% 8.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $33.2 $44.7 $25.3 $20.6 $22.2 $16.7
Ratios to average net assets:
Expenses............................. 0.56%(c) 0.52% 0.48% 0.51% 0.62% 0.66%
Net investment income................ 5.00%(c) 4.88% 4.53% 6.69% 6.21% 7.24%
Portfolio turnover rate................ -- 13% 71% 9% 1% --
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized
SEE NOTES TO FINANCIAL STATEMENTS.
D2
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
ZERO COUPON BOND 2005
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 12.25 $ 13.19 $ 10.74 $ 12.68 $ 11.03 $ 10.87
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.31 0.66 0.66 0.75 0.77 0.80
Net realized and unrealized gains
(losses) on investments.............. (0.07) (0.82) 2.73 (1.97) 1.62 0.21
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.24 (0.16) 3.39 (1.22) 2.39 1.01
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.15) (0.64) (0.65) (0.72) (0.74) (0.79)
Distributions from net realized
gains................................ -- (0.14) (0.29) -- -- (0.06)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.15) (0.78) (0.94) (0.72) (0.74) (0.85)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 12.34 $ 12.25 $ 13.19 $ 10.74 $ 12.68 $ 11.03
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 1.97% (1.01)% 31.85% (9.61)% 21.94% 9.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $33.1 $25.8 $23.6 $16.5 $14.5 $9.8
Ratios to average net assets:
Expenses............................. 0.60%(c) 0.53% 0.49% 0.60% 0.66% 0.75%
Net investment income................ 5.89%(c) 5.42% 5.32% 6.53% 6.17% 7.46%
Portfolio turnover rate................ 15% 10% 69% 6% 4% 11%
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
--------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, -----------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 15.52 $ 15.31 $ 14.10 $ 14.91 $ 14.24 $ 14.32
------------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.36 0.66 0.63 0.53 0.49 0.56
Net realized and unrealized gains
(losses) on investments.............. 0.81 1.24 1.78 (0.68) 1.23 0.41
------------- --------- --------- --------- --------- ---------
Total from investment operations... 1.17 1.90 2.41 (0.15) 1.72 0.97
------------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.17) (0.66) (0.64) (0.51) (0.47) (0.54)
Distributions from net realized
gains................................ (0.12) (1.03) (0.56) (0.15) (0.58) (0.51)
------------- --------- --------- --------- --------- ---------
Total distributions................ (0.29) (1.69) (1.20) (0.66) (1.05) (1.05)
------------- --------- --------- --------- --------- ---------
Net Asset Value, end of period......... $ 16.40 $ 15.52 $ 15.31 $ 14.10 $ 14.91 $ 14.24
------------- --------- --------- --------- --------- ---------
------------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN(b)............. 7.80% 12.63% 17.27% (0.97)% 12.20% 6.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $4,707.2 $4,478.8 $3,940.8 $3,501.1 $3,103.2 $2,114.0
Ratios to average net assets:
Expenses............................. 0.57%(c) 0.59% 0.58% 0.61% 0.60% 0.62%
Net investment income................ 4.58%(c) 4.13% 4.19% 3.61% 3.22% 3.88%
Portfolio turnover rate................ 192% 295% 201% 125% 79% 62%
Average commission rate paid per
share................................ $0.0497 $0.0554 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
D3
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 17.79 $ 17.86 $ 15.50 $ 16.96 $ 16.01 $ 16.29
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.28 0.57 0.56 0.47 0.57 0.58
Net realized and unrealized gains
(losses) on investments.............. 1.49 1.79 3.15 (1.02) 1.88 0.61
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 1.77 2.36 3.71 (0.55) 2.45 1.19
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.13) (0.58) (0.56) (0.45) (0.57) (0.56)
Distributions from net realized
gains................................ (0.16) (1.85) (0.79) (0.46) (0.93) (0.91)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.29) (2.43) (1.35) (0.91) (1.50) (1.47)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 19.27 $ 17.79 $ 17.86 $ 15.50 $ 16.96 $ 16.01
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 10.13% 13.64% 24.13% (3.16)% 15.58% 7.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $5,293.6 $4,896.9 $4,261.2 $3,481.5 $3,292.2 $2,435.6
Ratios to average net assets:
Expenses............................. 0.62%(c) 0.64% 0.63% 0.66% 0.66% 0.67%
Net investment income................ 3.09%(c) 3.07% 3.30% 2.90% 3.30% 3.63%
Portfolio turnover rate................ 120% 233% 173% 124% 63% 59%
Average commission rate paid per
share................................ $0.0571 $0.0563 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 7.87 $ 7.80 $ 7.37 $ 8.41 $ 7.72 $ 7.21
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.40 0.80 0.81 0.87 0.82 0.82
Net realized and unrealized gains
(losses) on investments.............. 0.06 0.06 0.46 (1.10) 0.63 0.42
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.46 0.86 1.27 (0.23) 1.45 1.24
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.20) (0.78) (0.84) (0.81) (0.76) (0.73)
Distributions from net realized
gains................................ -- (0.01) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.20) (0.79) (0.84) (0.81) (0.76) (0.73)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 8.13 $ 7.87 $ 7.80 $ 7.37 $ 8.41 $ 7.72
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 5.88% 11.39% 17.56% (2.72)% 19.27% 17.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $481.2 $432.9 $367.9 $306.2 $282.9 $153.7
Ratios to average net assets:
Expenses............................. 0.60%(c) 0.63% 0.61% 0.65% 0.65% 0.70%
Net investment income................ 9.84%(c) 9.89% 10.34% 9.88% 9.91% 10.67%
Portfolio turnover rate................ 47% 88% 139% 69% 96% 75%
Average commission rate paid per
share................................ N/A N/A N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
D4
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK INDEX
---------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, -------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 23.74 $ 19.96 $ 14.96 $ 15.20 $ 14.22 $ 13.61
----------- ----------- ----------- ----------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.20 0.40 0.40 0.38 0.36 0.35
Net realized and unrealized gains
(losses) on investments.............. 4.62 4.06 5.13 (0.23) 1.00 0.60
----------- ----------- ----------- ----------- ---------- ----------
Total from investment operations... 4.82 4.46 5.53 0.15 1.36 0.95
----------- ----------- ----------- ----------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.10) (0.40) (0.38) (0.37) (0.35) (0.33)
Distributions from net realized
gains................................ -- (0.28) (0.15) (0.02) (0.03) (0.01)
----------- ----------- ----------- ----------- ---------- ----------
Total distributions................ (0.10) (0.68) (0.53) (0.39) (0.38) (0.34)
----------- ----------- ----------- ----------- ---------- ----------
Net Asset Value, end of period......... $ 28.46 $ 23.74 $ 19.96 $ 14.96 $ 15.20 $ 14.22
----------- ----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ----------- ---------- ----------
TOTAL INVESTMENT RETURN(b)............. 20.32% 22.57% 37.06% 1.01% 9.66% 7.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $2,110.2 $1,581.4 $1,031.3 $664.5 $615.1 $433.5
Ratios to average net assets:
Expenses............................. 0.37%(c) 0.40% 0.38% 0.42% 0.42% 0.46%
Net investment income................ 1.62%(c) 1.95% 2.27% 2.50% 2.43% 2.56%
Portfolio turnover rate................ 1% 1% 1% 2% 1% 1%
Average commission rate paid per
share................................ $0.0250 $0.0250 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME
--------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 18.51 $ 16.27 $ 14.48 $ 15.66 $ 13.67 $ 13.21
----------- ----------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.33 0.58 0.64 0.67 0.55 0.58
Net realized and unrealized gains
(losses) on investments.............. 2.87 2.88 2.50 (0.45) 2.46 0.72
----------- ----------- ----------- ---------- ---------- ----------
Total from investment operations... 3.20 3.46 3.14 0.22 3.01 1.30
----------- ----------- ----------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.14) (0.71) (0.62) (0.56) (0.50) (0.52)
Distributions from net realized
gains................................ (0.08) (0.51) (0.73) (0.82) (0.52) (0.32)
----------- ----------- ----------- ---------- ---------- ----------
Total distributions................ (0.22) (1.22) (1.35) (1.38) (1.02) (0.84)
----------- ----------- ----------- ---------- ---------- ----------
Net Asset Value, end of period......... $ 21.49 $ 18.51 $ 16.27 $ 14.50 $ 15.66 $ 13.67
----------- ----------- ----------- ---------- ---------- ----------
----------- ----------- ----------- ---------- ---------- ----------
TOTAL INVESTMENT RETURN(b)............. 17.47% 21.74% 21.70% 1.44% 22.28% 10.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $1,625.2 $1,363.5 $1,110.0 $859.7 $602.8 $234.4
Ratios to average net assets:
Expenses............................. 0.45%(c) 0.45% 0.43% 0.52% 0.54% 0.57%
Net investment income................ 3.14%(c) 3.36% 4.00% 3.92% 3.56% 4.32%
Portfolio turnover rate................ 15% 21% 64% 63% 41% 40%
Average commission rate paid per
share................................ $0.0554 $0.0553 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
D5
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY
----------------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, --------------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 26.96 $ 25.64 $ 20.66 $ 21.49 $ 18.90 $ 17.91
----------- ------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.35 0.71 0.55 0.51 0.42 0.44
Net realized and unrealized gains on
investments.......................... 3.20 3.88 5.89 0.05 3.67 2.05
----------- ------------ ------------ ------------ ------------ ------------
Total from investment operations... 3.55 4.59 6.44 0.56 4.09 2.49
----------- ------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.17) (0.67) (0.52) (0.49) (0.40) (0.44)
Distributions from net realized
gains................................ (0.18) (2.60) (0.94) (0.90) (1.10) (1.06)
----------- ------------ ------------ ------------ ------------ ------------
Total distributions................ (0.35) (3.27) (1.46) (1.39) (1.50) (1.50)
----------- ------------ ------------ ------------ ------------ ------------
Net Asset Value, end of period......... $ 30.16 $ 26.96 $ 25.64 $ 20.66 $ 21.49 $ 18.90
----------- ------------ ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN(b)............. 13.26% 18.52% 31.29% 2.78% 21.87% 14.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $5,484.4 $4,814.0 $3,813.8 $2,617.8 $2,186.5 $1,416.6
Ratios to average net assets:
Expenses............................. 0.47%(c) 0.50% 0.48% 0.55% 0.53% 0.53%
Net investment income................ 2.50%(c) 2.54% 2.28% 2.39% 1.99% 2.33%
Portfolio turnover rate................ 6% 20% 18% 7% 13% 16%
Average commission rate paid per
share................................ $0.0506 $0.0524 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Prudential Jennison
----------------------------------------------------------
SIX MONTHS YEAR APRIL 25, 1995(d)
ENDED ENDED to
JUNE 30, 1997 DECEMBER 31, 1996 December 31, 1995(a)
-------------- ----------------- ---------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 14.32 $ 12.55 $ 10.00
-------------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.03 0.02 0.02
Net realized and unrealized gains on
investments.......................... 2.41 1.78 2.54
-------------- -------- --------
Total from investment operations... 2.44 1.80 2.56
-------------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.02) (0.03) (0.01)
Distributions from net realized
gains................................ -- -- --
-------------- -------- --------
Total distributions................ (0.02) (0.03) (0.01)
-------------- -------- --------
Net Asset Value, end of period......... $ 16.74 $ 14.32 $ 12.55
-------------- -------- --------
-------------- -------- --------
TOTAL INVESTMENT RETURN(b)............. 16.98% 14.41% 24.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $332.1 $226.5 $63.1
Ratios to average net assets:
Expenses............................. 0.63%(c) 0.66% 0.79%
Net investment income................ 0.36%(c) 0.20% 0.15%
Portfolio turnover rate................ 33% 46% 37%
Average commission rate paid per
share................................ $0.0592 $0.0603 N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized
(d) Commencement of Operations
SEE NOTES TO FINANCIAL STATEMENTS.
D6
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
Small Capitalization Stock
-----------------------------------------------------
SIX MONTHS YEAR APRIL 25, 1995(d)
ENDED ENDED to
JUNE 30, 1997 DECEMBER 31, 1996 December 31, 1995
------------- ----------------- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 13.79 $ 11.83 $ 10.00
------------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.05 0.09 0.08
Net realized and unrealized gains on
investments.......................... 1.54 2.23 1.91
------------- -------- --------
Total from investment operations... 1.59 2.32 1.99
------------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.03) (0.09) (0.04)
Distributions from net realized
gains................................ (0.05) (0.27) (0.12)
------------- -------- --------
Total distributions................ (0.08) (0.36) (0.16)
------------- -------- --------
Net Asset Value, end of period......... $ 15.30 $ 13.79 $ 11.83
------------- -------- --------
------------- -------- --------
TOTAL INVESTMENT RETURN(b)............. 11.51% 19.77% 19.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $212.3 $147.9 $47.5
Ratios to average net assets:
Expenses............................. 0.50%(c) 0.56% 0.60%(c)
Net investment income................ 0.81%(c) 0.87% 0.68%(c)
Portfolio turnover rate................ 9% 13% 32%
Average commission rate paid per
share................................ $0.0301 $0.0307 N/A
</TABLE>
<TABLE>
<CAPTION>
GLOBAL
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 17.85 $ 15.53 $ 13.88 $ 14.64 $ 10.37 $ 10.79
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.08 0.11 0.06 0.02 0.02 0.05
Net realized and unrealized gains
(losses) on investments.............. 2.09 2.94 2.14 (0.74) 4.44 (0.42)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 2.17 3.05 2.20 (0.72) 4.46 (0.37)
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.04) (0.11) (0.24) (0.02) (0.08) (0.05)
Distributions from net realized
gains................................ (0.03) (0.62) (0.31) (0.02) (0.11) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.07) (0.73) (0.55) (0.04) (0.19) (0.05)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 19.95 $ 17.85 $ 15.53 $ 13.88 $ 14.64 $ 10.37
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. 12.48% 19.97% 15.88% (4.89)% 43.14% (3.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $677.6 $580.6 $400.1 $345.7 $129.1 $34.0
Ratios to average net assets:
Expenses............................. 0.88%(c) 0.92% 1.06% 1.23% 1.44% 1.87%
Net investment income................ 0.87%(c) 0.64% 0.44% 0.20% 0.18% 0.49%
Portfolio turnover rate................ 27% 41% 59% 37% 55% 78%
Average commission rate paid per
share................................ $0.0243 $0.0358 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
(d) Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
D7
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
NATURAL RESOURCES
-----------------------------------------------------------------------------
SIX MONTHS Year ended
ENDED December 31,
JUNE 30, ---------------------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a) 1992(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 19.77 $ 17.27 $ 14.44 $ 15.56 $ 12.95 $ 12.45
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.06 0.15 0.21 0.18 0.23 0.32
Net realized and unrealized gains
(losses) on investments.............. (0.39) 5.11 3.66 (0.85) 3.00 0.59
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... (0.33) 5.26 3.87 (0.67) 3.23 0.91
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income... (0.04) (0.14) (0.21) (0.15) (0.21) (0.31)
Distributions from net realized
gains................................ (0.51) (2.62) (0.83) (0.30) (0.41) (1.00)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.55) (2.76) (1.04) (0.45) (0.62) (1.31)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 18.89 $ 19.77 $ 17.27 $ 14.44 $ 15.56 $ 12.05
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN(b)............. (1.48)% 30.88% 26.92% (4.30)% 25.15% 7.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $448.7 $438.4 $293.2 $227.3 $158.8 $77.5
Ratios to average net assets:
Expenses............................. 0.49%(c) 0.52% 0.50% 0.61% 0.60% 0.72%
Net investment income................ 0.62%(c) 0.75% 1.25% 1.09% 1.50% 2.44%
Portfolio turnover rate................ 13% 36% 46% 18% 20% 29%
Average commission rate paid per
share................................ $0.0465 $0.0454 N/A N/A N/A N/A
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total investment returns for
less than a full year are not annualized.
(c) Annualized.
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, PhD. CEO,
THE PRUDENTIAL SERIES VICE PRESIDENT, PRUDENTIAL INVESTMENTS
FUND, INC. KALUDIS CONSULTING PRESIDENT, THE
GROUP PRUDENTIAL SERIES FUND,
INC.
SAUL K. FENSTER, PhD. JOSEPH WEBER, PhD.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
SEE NOTES TO FINANCIAL STATEMENTS.
D8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The toll-free numbers shown below can be used to make transfers and
reallocations, review how your premiums are being allocated, receive current
investment option values in your contract. Unit values for each investment
option are available to all Contract Owners from the toll-free numbers. The
phone lines are open each business day during the hours shown. Please be sure to
have your contract number available when you call.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you own a Prudential variable life insurance contract, please use the
telephone numbers shown below:
[GRAPHIC]
1-800-634-7879
8 am - 4 pm Central Time
1-800-356-4050
8 am - 4 pm Eastern Time
1-800-635-9587
8 am - 4 pm Eastern Time
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If you own a Prudential variable annuity contract, please call the following
telephone number:
1-888-778-2888
8 am - 9 pm Eastern Time
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Whether providing insurance protection for home, family and business or
arranging to cover future education and retirement expenses, Prudential people
have always been able to deliver something more: personal service, quality,
attention to detail and the financial strength of The Rock-Registered
Trademark-. Since 1875, Prudential has been helping individuals and families
meet their financial needs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO OBTAIN ADDITIONAL COPIES OF THIS CONTRACT OWNER REPORT:
In the past, Contract Owners who held several variable contracts at the same
address received multiple copies of Annual and Semiannual Reports. In an effort
to lessen waste and reduce your fund's expenses of postage and printing, we will
now mail only one copy of all your related contracts at the same address. No
action on your part is necessary. Upon request, we will furnish you with
additional reports. The toll-free numbers listed on the inside back cover of
this report should be used to request any additional copies of The Prudential
Series Fund, Inc., Semiannual Report. Proxy material and tax information will
continue to be sent to each account of record.
-------------------
P.O. Box 197 Bulk Rate
Minneapolis, MN 55440-0197 U.S. Postage
Address Service Requested PAID
Prudential
-------------------
[LOGO]
PSF SAR 6/97 Printed in the U.S.A. PI-MV-0897-1221
Cat.#64M852B on recycled paper. MRA-1997-A017206
