The
Prudential
Series Fund, Inc.
[PHOTO]
Annual Report to
Contract Owners
Pruco Life's Pruselect I(SM)
Pruco Life's Pruselect II(SM)
December 31, 1997
[LOGO] PRUDENTIAL
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
<PAGE>
================================================================================
The Prudential Series Fund, Inc.
<TABLE>
<CAPTION>
Average Annual Total Return as of December 31, 1997/1/
- --------------------------------------------------------------------------------------------------
Since
One Year Three Years Five Years Ten Years Inception
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Fixed Income Portfolios
- --------------------------------------------------------------------------------------------------
Money Market/2/ 5.41% 5.48% 4.68% 5.80% 6.46%
Diversified Bond 8.57 11.02 7.84 9.24 9.39
Government Income/3/ 9.67 10.23 7.41 N/A 8.85
Zero Coupon Bond 2000/4/ 7.17 9.77 7.36 10.19 10.30
Zero Coupon Bond 2005/4/ 11.18 13.21 9.85 N/A 10.81
- --------------------------------------------------------------------------------------------------
Balanced Portfolios
- --------------------------------------------------------------------------------------------------
Conservative Balanced 13.45% 14.43% 10.74% 11.15% 10.80%
Flexible Managed 17.96 18.49 13.25 13.41 12.18
- --------------------------------------------------------------------------------------------------
High Yield Bond Portfolio
- --------------------------------------------------------------------------------------------------
High Yield Bond 13.78% 14.21% 11.57% 10.68% 9.30%
- --------------------------------------------------------------------------------------------------
Diversified Stock Portfolios
- --------------------------------------------------------------------------------------------------
Stock Index 32.83% 30.67% 19.84% 17.47% 17.92%
Equity Income 36.61 26.49 20.22 N/A 16.82
Equity 24.66 24.71 19.43 17.53 15.55
Prudential Jennison 31.71 N/A N/A N/A 26.97
Small Capitalization Stock 25.17 N/A N/A N/A 24.50
Global 6.98 14.05 15.10 N/A 10.10
- --------------------------------------------------------------------------------------------------
Specialized Portfolio
- --------------------------------------------------------------------------------------------------
Natural Resources -11.59% 13.66% 11.96% N/A 11.26%
</TABLE>
/1/ "Average Annual Total Return" is an average rate of return based on growth
or decline in the amounts invested plus the reinvestment of all dividends
over the periods ended 12/31/97.
/2/ An investment in the Money Market Portfolio is neither issued nor guaranteed
by the U.S. government.
/3/ 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.
/4/ Not available in all contracts.
The rates of return quoted above and 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.
Variable life and variable annuity products are offered by Pruco Securities
Corp., a subsidiary of The Prudential Insurance Company of America. Both are
located at 751 Broad Street, Newark, NJ 07102-3777.
<PAGE>
The Prudential Series Fund, Inc.
Board of Directors
<TABLE>
<S> <C> <C>
MENDEL A. MELZER, CFA W. SCOTT MCDONALD, JR., Ph.D. E. MICHAEL CAULFIELD
Chairman, Principal, CEO,
The Prudential Series Fund, Inc. Kaludis Consulting Group Prudential Investments,
President, The Prudential Series Fund, Inc.
SAUL K. FENSTER, Ph.D. JOSEPH WEBER, Ph.D.
President, New Jersey Vice President,
Institute of Technology Interclass (international corporate learning)
</TABLE>
<PAGE>
================================================================================
Whether providing insurance protection for home, family and business, or
arranging to cover future education and retirement expenses, Prudential people
have always been able to deliver something more: personal service, quality,
attention to detail and the financial strength of The Rock(R). Since 1875,
Prudential has been helping individuals and families meet their financial needs.
[LOGO]
Pruselect AR 12/97 Printed in the U.S.A. PI-MV-0298-2456
on recycled paper. MRA-1998-A022962
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments (amortized cost
$654,059,056)............................ $ 654,059,056
Cash....................................... 13,970,702
Interest receivable........................ 4,191,789
--------------
Total Assets............................. 672,221,547
--------------
LIABILITIES
Payable for investments purchased.......... 13,969,161
Payable to investment adviser.............. 660,450
Accrued expenses........................... 129,796
--------------
Total Liabilities........................ 14,759,407
--------------
NET ASSETS................................... $ 657,462,140
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 657,462
Paid-in capital, in excess of par........ 656,804,678
--------------
Net assets, December 31, 1997.............. $ 657,462,140
--------------
--------------
Net asset value and redemption price per
share, 65,746,214 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 10.00
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 38,030,378
---------------
EXPENSES
Investment advisory fee.................... 2,667,947
Custodian expense.......................... 83,000
Accounting fees............................ 46,000
Shareholders' reports...................... 45,000
Audit fees................................. 12,000
Directors' fees............................ 2,800
Legal fees................................. 500
Miscellaneous expenses..................... 935
---------------
Total Expenses........................... 2,858,182
Less: Custodian fee credit................. (42,342)
---------------
Net Expenses............................. 2,815,840
---------------
NET INVESTMENT INCOME........................ 35,214,538
---------------
NET REALIZED GAIN ON INVESTMENTS............. 13,511
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 35,228,049
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 35,214,538 $ 31,843,235
Net realized gain on investments....................................................... 13,511 1,246
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 35,228,049 31,844,481
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (35,214,538) (31,843,235)
Distributions from net realized capital gains.......................................... (13,511) (1,246)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (35,228,049) (31,844,481)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [22,888,771 and 18,464,400 shares, respectively].................... 228,887,710 184,644,000
Capital stock issued in reinvestment of dividends and distributions [3,522,805 and
3,184,448 shares, respectively]....................................................... 35,228,049 31,844,481
Capital stock repurchased [(27,542,174) and (16,104,000) shares, respectively]......... (275,421,740) (161,040,000)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (11,305,981) 55,448,481
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (11,305,981) 55,448,481
NET ASSETS:
Beginning of year...................................................................... 668,768,121 613,319,640
------------------ -------------------
End of year............................................................................ $ 657,462,140 $ 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
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$790,639,568)............................ $ 803,286,169
Cash....................................... 880
Interest receivable........................ 14,128,219
Receivable for capital stock sold.......... 430,653
--------------
Total Assets............................. 817,845,921
--------------
LIABILITIES
Payable to investment adviser.............. 797,254
Due to broker -- variation margin.......... 214,531
Accrued expenses........................... 127,405
--------------
Total Liabilities........................ 1,139,190
--------------
NET ASSETS................................... $ 816,706,731
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 740,989
Paid-in capital, in excess of par........ 800,244,621
--------------
800,985,610
Undistributed net investment income........ 229,159
Accumulated net realized gain on
investments.............................. 3,308,830
Net unrealized appreciation on
investments.............................. 12,183,132
--------------
Net assets, December 31, 1997.............. $ 816,706,731
--------------
--------------
Net asset value and redemption price per
share, 74,098,859 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 11.02
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 56,691,387
---------------
EXPENSES
Investment advisory fee.................... 2,981,884
Accounting fees............................ 107,000
Custodian expense.......................... 79,500
Shareholders' reports...................... 20,000
Audit fees................................. 11,000
Directors' fees............................ 2,800
Legal fees................................. 1,000
Miscellaneous expenses..................... 1,222
---------------
Total Expenses........................... 3,204,406
Less: Custodian fee credit................. (44,514)
---------------
Net Expenses............................. 3,159,892
---------------
NET INVESTMENT INCOME........................ 53,531,495
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. 13,721,305
Futures contracts........................ (4,526,384)
---------------
9,194,921
---------------
Net change in unrealized appreciation on:
Investments.............................. (1,767,311)
Futures contracts........................ (463,469)
---------------
(2,230,780)
---------------
NET GAIN ON INVESTMENTS...................... 6,964,141
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 60,495,636
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 53,531,495 $ 46,726,825
Net realized gain on investments....................................................... 9,194,921 3,227,785
Net change in unrealized appreciation on investments................................... (2,230,780) (18,849,028)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 60,495,636 31,105,582
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (55,359,529) (44,766,756)
Distributions from net realized capital gains.......................................... (9,016,752) --
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (64,376,281) (44,766,756)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [11,468,488 and 7,068,417 shares, respectively]..................... 127,691,138 78,594,183
Capital stock issued in reinvestment of dividends and distributions [5,812,573 and
4,117,675 shares, respectively]....................................................... 64,376,281 44,766,756
Capital stock repurchased [(8,269,292) and (4,070,327) shares, respectively]........... (91,696,624) (45,319,610)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 100,370,795 78,041,329
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 96,490,150 64,380,155
NET ASSETS:
Beginning of year...................................................................... 720,216,581 655,836,426
------------------ -------------------
End of year............................................................................ $ 816,706,731 $ 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
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$411,381,627)............................ $ 424,649,985
Cash....................................... 1,091
Interest receivable........................ 5,592,164
--------------
Total Assets............................. 430,243,240
--------------
LIABILITIES
Payable to investment adviser.............. 456,426
Accrued expenses........................... 82,691
Due to broker -- variation margin.......... 38,438
Payable for capital stock repurchased...... 22,626
--------------
Total Liabilities........................ 600,181
--------------
NET ASSETS................................... $ 429,643,059
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 372,861
Paid-in capital, in excess of par........ 423,192,132
--------------
423,564,993
Undistributed net investment income........ 77,253
Accumulated net realized loss on
investments.............................. (7,194,513)
Net unrealized appreciation on investments
and futures contracts.................... 13,195,326
--------------
Net assets, December 31, 1997.............. $ 429,643,059
--------------
--------------
Net asset value and redemption price per
share, 37,286,113 outstanding shares of
common stock (authorized 90,000,000
shares).................................. $ 11.52
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 30,059,962
---------------
EXPENSES
Investment advisory fee.................... 1,758,870
Accounting fees............................ 106,000
Custodian expense.......................... 49,000
Shareholders' reports...................... 6,000
Audit fee.................................. 6,000
Directors' fees............................ 3,000
Legal fees................................. 300
Miscellaneous expenses..................... 1,825
---------------
Total Expenses........................... 1,930,995
Less: Custodian fee credit................. (13,345)
---------------
Net Expenses............................. 1,917,650
---------------
NET INVESTMENT INCOME........................ 28,142,312
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. 1,472,562
Futures contracts........................ (759,159)
Short sales.............................. 9,375
---------------
722,778
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 10,916,448
Futures contracts........................ (73,032)
---------------
10,843,416
---------------
NET GAIN ON INVESTMENTS...................... 11,566,194
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 39,708,506
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 28,142,312 $ 31,242,011
Net realized gain on investments....................................................... 722,778 14,328,542
Net change in unrealized appreciation (depreciation) on investments.................... 10,843,416 (35,068,717)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 39,708,506 10,501,836
------------------ -------------------
DIVIDENDS:
Dividends from net investment income................................................... (28,098,226) (30,988,878)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [550,602 and 778,426 shares, respectively].......................... 6,261,175 8,926,475
Capital stock issued in reinvestment of dividends and distributions [2,484,757 and
2,790,002 shares, respectively]....................................................... 28,098,226 30,988,878
Capital stock repurchased [(8,707,219) and (3,428,037) shares, respectively]........... (98,362,062) (39,168,176)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. (64,002,661) 747,177
------------------ -------------------
TOTAL DECREASE IN NET ASSETS............................................................. (52,392,381) (19,739,865)
NET ASSETS:
Beginning of year...................................................................... 482,035,440 501,775,305
------------------ -------------------
End of year............................................................................ $ 429,643,059 $ 482,035,440
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A3
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,491,825,742).......................... $4,696,024,117
Cash....................................... 2,749
Interest and dividends receivable.......... 60,006,370
--------------
Total Assets............................. 4,756,033,236
--------------
LIABILITIES
Payable to investment adviser.............. 6,725,610
Payable for investments purchased.......... 3,573,515
Due to broker -- variation margin.......... 653,438
Accrued expenses........................... 546,540
Payable for capital stock repurchased...... 302,094
--------------
Total Liabilities........................ 11,801,197
--------------
NET ASSETS................................... $4,744,232,039
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 3,169,112
Paid-in capital, in excess of par........ 4,500,747,938
--------------
4,503,917,050
Undistributed net investment income........ 949,046
Accumulated net realized gain on
investments.............................. 36,942,793
Net unrealized appreciation on
investments.............................. 202,423,150
--------------
Net assets, December 31, 1997.............. $4,744,232,039
--------------
--------------
Net asset value and redemption price per
share, 316,911,160 outstanding shares of
common stock (authorized 350,000,000
shares).................................. $ 14.97
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $187,480 foreign
withholding tax)......................... $ 19,377,627
Interest................................... 216,743,419
---------------
236,121,046
---------------
EXPENSES
Investment advisory fee.................... 25,757,735
Custodian expense.......................... 281,000
Shareholders' reports...................... 169,000
Accounting fees............................ 101,000
Audit fees................................. 67,000
Legal fees................................. 3,000
Directors' fees............................ 3,000
Miscellaneous expenses..................... 923
---------------
Total Expenses........................... 26,382,658
Less: Custodian fee credit................. (166,162)
---------------
Net Expenses............................. 26,216,496
---------------
NET INVESTMENT INCOME........................ 209,904,550
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. 546,046,706
Futures contracts........................ (20,841,176)
Short sales.............................. (30,344)
---------------
525,175,186
---------------
Net change in unrealized appreciation on:
Investments.............................. (145,915,485)
Futures contracts........................ (1,775,225)
Short sales.............................. (1,139,560)
---------------
(148,830,270)
---------------
NET GAIN ON INVESTMENTS...................... 376,344,916
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 586,249,466
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 209,904,550 $ 173,283,574
Net realized gain on investments....................................................... 525,175,186 270,107,246
Net change in unrealized appreciation on investments................................... (148,830,270) 61,403,321
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 586,249,466 504,794,141
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (209,004,256) (174,034,704)
Dividends in excess of net investment income........................................... -- (41,632)
Distributions from net realized capital gains.......................................... (518,358,296) (273,551,593)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (727,362,552) (447,627,929)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,585,160 and 10,561,256 shares, respectively]..................... 74,015,405 167,668,924
Capital stock issued in reinvestment of dividends and distributions [47,801,252 and
29,086,855 shares, respectively]...................................................... 727,362,552 447,627,929
Capital stock repurchased [(24,112,955) and (8,429,995) shares, respectively].......... (394,841,365) (134,428,797)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 406,536,592 480,868,056
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 265,423,506 538,034,268
NET ASSETS:
Beginning of year...................................................................... 4,478,808,533 3,940,774,265
------------------ -------------------
End of year............................................................................ $ 4,744,232,039 $ 4,478,808,533
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A4
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$5,050,966,053).......................... $5,471,387,547
Cash....................................... 15,631
Interest and dividends receivable.......... 40,850,547
Receivable for investments sold............ 294
--------------
Total Assets............................. 5,512,254,019
--------------
LIABILITIES
Payable for investments purchased.......... 12,760,562
Payable to investment adviser.............. 8,471,572
Accrued expenses........................... 654,878
Due to broker -- variation margin.......... 203,828
Payable for capital stock repurchased...... 21,085
--------------
Total Liabilities........................ 22,111,925
--------------
NET ASSETS................................... $5,490,142,094
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 3,177,111
Paid-in capital, in excess of par........ 4,984,889,353
--------------
4,988,066,464
Undistributed net investment income........ 768,864
Accumulated net realized gain on
investments.............................. 82,447,694
Net unrealized appreciation on
investments.............................. 418,859,072
--------------
Net assets, December 31, 1997.............. $5,490,142,094
--------------
--------------
Net asset value and redemption price per
share, 317,711,061 outstanding shares of
common stock (authorized 350,000,000
shares).................................. $ 17.28
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $810,090 foreign
withholding tax)......................... $ 35,833,891
Interest................................... 156,549,837
---------------
192,383,728
---------------
EXPENSES
Investment advisory fee.................... 31,740,440
Custodian expense.......................... 477,000
Shareholders' reports...................... 212,000
Accounting fees............................ 94,000
Audit fees................................. 72,000
Legal fees................................. 4,000
Directors' fees............................ 3,000
Miscellaneous expenses..................... 1,971
---------------
Total Expenses........................... 32,604,411
Less: Custodian fee credit................. (284,638)
---------------
Net Expenses............................. 32,319,773
---------------
NET INVESTMENT INCOME........................ 160,063,955
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. 867,141,418
Futures contracts........................ (499,159)
Short sales.............................. 1,049,655
---------------
867,691,914
---------------
Net change in unrealized appreciation on:
Investments.............................. (160,872,103)
Futures contracts........................ (1,562,422)
Short sales.............................. (1,168,571)
---------------
(163,603,096)
---------------
NET GAIN ON INVESTMENTS...................... 704,088,818
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 864,152,773
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 160,063,955 $ 139,211,865
Net realized gain on investments....................................................... 867,691,914 408,046,131
Net change in unrealized appreciation on investments................................... (163,603,096) 41,728,823
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 864,152,773 588,986,819
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (159,343,911) (142,089,785)
Distributions from net realized capital gains.......................................... (823,214,223) (458,909,559)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (982,558,134) (600,999,344)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,859,580 and 8,998,637 shares, respectively]...................... 92,765,042 166,455,957
Capital stock issued in reinvestment of dividends and distributions [56,453,647 and
34,012,173 shares, respectively]...................................................... 982,558,134 600,999,344
Capital stock repurchased [(18,791,325) and (6,420,074) shares, respectively].......... (363,698,408) (119,724,926)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 711,624,768 647,730,375
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 593,219,407 635,717,850
NET ASSETS:
Beginning of year...................................................................... 4,896,922,687 4,261,204,837
------------------ -------------------
End of year............................................................................ $ 5,490,142,094 $ 4,896,922,687
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A5
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$551,773,633)............................ $ 562,701,784
Cash....................................... 9,588,705
Interest and dividends receivable.......... 11,028,778
Receivable for investments sold............ 918,120
--------------
Total Assets............................. 584,237,387
--------------
LIABILITIES
Payable for investments purchased.......... 14,754,249
Payable to investment adviser.............. 738,097
Accrued expenses........................... 69,963
--------------
Total Liabilities........................ 15,562,309
--------------
NET ASSETS................................... $ 568,675,078
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 698,191
Paid-in capital, in excess of par........ 562,703,961
--------------
563,402,152
Undistributed net investment income........ 735,254
Accumulated net realized loss on
investments.............................. (6,390,479)
Net unrealized appreciation on
investments.............................. 10,928,151
--------------
Net assets, December 31, 1997.............. $ 568,675,078
--------------
--------------
Net asset value and redemption price per
share, 69,819,106 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 8.14
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest................................... $ 48,438,901
Dividends.................................. 2,026,846
---------------
50,465,747
---------------
EXPENSES
Investment advisory fee.................... 2,679,304
Custodian expense.......................... 79,000
Accounting fees............................ 68,000
Shareholders' reports...................... 18,000
Audit fee.................................. 6,000
Directors' fees............................ 3,000
Legal fees................................. 300
Miscellaneous expenses..................... 903
---------------
Total Expenses........................... 2,854,507
Less: Custodian fee credit................. (64,527)
---------------
Net Expenses............................. 2,789,980
---------------
NET INVESTMENT INCOME........................ 47,675,767
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 15,354,840
Net change in unrealized appreciation on
investments.............................. (144,633)
---------------
NET GAIN ON INVESTMENTS...................... 15,210,207
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 62,885,974
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 47,675,767 $ 39,424,947
Net realized gain (loss) on investments................................................ 15,354,840 (1,288,395)
Net change in unrealized appreciation on investments................................... (144,633) 4,580,936
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 62,885,974 42,717,488
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (47,277,841) (39,126,995)
Dividends in excess of net investment income........................................... -- (495,859)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (47,277,841) (39,622,854)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [18,324,520 and 5,685,336 shares, respectively]..................... 149,154,244 45,754,000
Capital stock issued in reinvestment of dividends and distributions [5,847,594 and
5,088,084 shares, respectively]....................................................... 47,277,841 39,622,854
Capital stock repurchased [(9,372,701) and (2,919,156) shares, respectively]........... (76,232,015) (23,514,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 120,200,070 61,862,854
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 135,808,203 64,957,488
NET ASSETS:
Beginning of year...................................................................... 432,866,875 367,909,387
------------------ -------------------
End of year............................................................................ $ 568,675,078 $ 432,866,875
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A6
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,467,986,080).......................... $2,452,933,864
Interest and dividends receivable.......... 3,244,896
Receivable for capital stock sold.......... 486,793
--------------
Total Assets............................. 2,456,665,553
--------------
LIABILITIES
Payable for investments purchased.......... 6,152,798
Payable to investment adviser.............. 2,079,794
Accrued expenses........................... 222,585
Due to broker -- variation margin.......... 19,150
--------------
Total Liabilities........................ 8,474,327
--------------
NET ASSETS................................... $2,448,191,226
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 810,134
Paid-in capital, in excess of par........ 1,455,746,577
--------------
1,456,556,711
Undistributed net investment income........ 304,262
Accumulated net realized gain on
investments.............................. 5,874,119
Net unrealized appreciation on
investments.............................. 985,456,134
--------------
Net assets, December 31, 1997.............. $2,448,191,226
--------------
--------------
Net asset value and redemption price per
share, 81,013,397 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 30.22
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $243,027 foreign
withholding tax)......................... $ 34,578,154
Interest................................... 4,314,396
---------------
38,892,550
---------------
EXPENSES
Investment advisory fee.................... 7,121,699
Shareholders' reports...................... 126,000
Accounting fees............................ 115,000
Custodian expense.......................... 47,000
Audit fees................................. 26,000
Directors' fees............................ 3,000
Legal fees................................. 1,000
Miscellaneous expenses..................... 1,448
---------------
Total Expenses........................... 7,441,147
Less: Custodian fee credit................. (8,173)
---------------
Net Expenses............................. 7,432,974
---------------
NET INVESTMENT INCOME........................ 31,459,576
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 57,018,822
Futures contracts........................ 17,002,563
---------------
74,021,385
---------------
Net change in unrealized appreciation on:
Investments.............................. 451,770,825
Futures contracts........................ (207,850)
---------------
451,562,975
---------------
NET GAIN ON INVESTMENTS...................... 525,584,360
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 557,043,936
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 31,459,576 $ 24,969,455
Net realized gain on investments....................................................... 74,021,385 12,465,185
Net change in unrealized appreciation on investments................................... 451,562,975 226,522,837
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 557,043,936 263,957,477
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (31,155,314) (25,100,782)
Distributions from net realized capital gains.......................................... (67,389,823) (17,273,757)
Distributions in excess of net realized capital gains.................................. -- (196,333)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (98,545,137) (42,570,872)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [17,248,797 and 14,156,009 shares, respectively].................... 484,303,403 310,087,550
Capital stock issued in reinvestment of dividends and distributions [3,309,920 and
1,875,670 shares, respectively]....................................................... 98,545,137 42,570,872
Capital stock repurchased [(6,144,732) and (1,109,676) shares, respectively]........... (174,536,420) (23,942,788)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 408,312,120 328,715,634
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 866,810,919 550,102,239
NET ASSETS:
Beginning of year...................................................................... 1,581,380,307 1,031,278,068
------------------ -------------------
End of year............................................................................ $ 2,448,191,226 $ 1,581,380,307
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A7
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$1,533,057,472).......................... $2,032,553,684
Cash....................................... 1,153
Interest and dividends receivable.......... 5,671,121
--------------
Total Assets............................. 2,038,225,958
--------------
LIABILITIES
Payable for investments purchased.......... 6,349,449
Payable to investment adviser.............. 1,968,342
Accrued expenses........................... 152,278
--------------
Total Liabilities........................ 8,470,069
--------------
NET ASSETS................................... $2,029,755,889
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 906,652
Paid-in capital, in excess of par........ 1,489,478,733
--------------
1,490,385,385
Undistributed net investment income........ 4,445,611
Accumulated net realized gain on
investments.............................. 35,428,681
Net unrealized appreciation on
investments.............................. 499,496,212
--------------
Net assets, December 31, 1997.............. $2,029,755,889
--------------
--------------
Net asset value and redemption price per
share, 90,665,193 outstanding shares of
common stock (authorized 150,000,000
shares).................................. $ 22.39
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $533,835 foreign
withholding tax)......................... $ 48,458,837
Interest................................... 6,190,866
---------------
54,649,703
---------------
EXPENSES
Investment advisory fee.................... 6,601,602
Accounting fees............................ 86,000
Shareholders' reports...................... 65,000
Custodian expense.......................... 50,000
Audit fees................................. 22,000
Directors' fee............................. 3,000
Legal fees................................. 1,000
Miscellaneous expenses..................... 918
---------------
Total Expenses........................... 6,829,520
Less: Custodian fee credit................. (30,193)
---------------
Net Expenses............................. 6,799,327
---------------
NET INVESTMENT INCOME........................ 47,850,376
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 209,283,667
Net change in unrealized appreciation on
investments.............................. 251,369,014
---------------
NET GAIN ON INVESTMENTS...................... 460,652,681
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 508,503,057
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 47,850,376 $ 40,888,718
Net realized gain on investments....................................................... 209,283,667 35,305,154
Net change in unrealized appreciation on investments................................... 251,369,014 167,448,548
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 508,503,057 243,642,420
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (43,537,704) (49,702,706)
Distributions from net realized capital gains.......................................... (179,961,221) (35,958,853)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (223,498,925) (85,661,559)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [11,266,195 and 3,768,657 shares, respectively]..................... 253,831,217 65,526,000
Capital stock issued in reinvestment of dividends and distributions [10,153,692 and
4,848,028 shares, respectively]....................................................... 223,498,925 85,661,559
Capital stock repurchased [(4,416,916) and (3,172,162) shares, respectively]........... (96,053,000) (55,657,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 381,277,142 95,530,559
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 666,281,274 253,511,420
NET ASSETS:
Beginning of year...................................................................... 1,363,474,615 1,109,963,195
------------------ -------------------
End of year............................................................................ $ 2,029,755,889 $ 1,363,474,615
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A8
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$4,198,636,403).......................... $6,025,444,474
Cash....................................... 77,594
Interest and dividends receivable.......... 14,912,488
Receivable for investments sold............ 2,093,331
Receivable for capital stock sold.......... 486,261
--------------
Total Assets............................. 6,043,014,148
--------------
LIABILITIES
Payable for investments purchased.......... 11,649,933
Payable to investment adviser.............. 6,897,764
Accrued expenses........................... 486,420
--------------
Total Liabilities........................ 19,034,117
--------------
NET ASSETS................................... $6,023,980,031
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,938,894
Paid-in capital, in excess of par........ 4,163,259,125
--------------
4,165,198,019
Undistributed net investment income........ 919,002
Accumulated net realized gain on
investments.............................. 31,068,956
Net unrealized appreciation on investments
and foreign currencies................... 1,826,794,054
--------------
Net assets, December 31, 1997.............. $6,023,980,031
--------------
--------------
Net asset value and redemption price per
share, 193,889,401 outstanding shares of
common stock (authorized 250,000,000
shares).................................. $ 31.07
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $1,062,630 foreign
withholding tax)......................... $ 80,559,590
Interest................................... 70,049,162
---------------
150,608,752
---------------
EXPENSES
Investment advisory fee.................... 24,840,379
Shareholders' reports...................... 249,000
Custodian expense.......................... 122,000
Accounting fees............................ 83,000
Audit fees................................. 75,000
Legal fees................................. 4,000
Directors' fees............................ 2,800
Miscellaneous expenses..................... 1,561
---------------
Total Expenses........................... 25,377,740
Less: Custodian fee credit................. (95,183)
---------------
Net Expenses............................. 25,282,557
---------------
NET INVESTMENT INCOME........................ 125,326,195
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on:
Investments.............................. 320,710,878
Foreign currencies....................... 247,917
---------------
320,958,795
---------------
Net change in unrealized appreciation on:
Investments.............................. 744,802,907
Foreign currencies....................... (14,018)
---------------
744,788,889
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 1,065,747,684
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 1,191,073,879
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 125,326,195 $ 108,378,560
Net realized gain on investments and foreign currencies................................ 320,958,795 344,149,867
Net change in unrealized appreciation on investments and foreign currencies............ 744,788,889 282,410,872
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 1,191,073,879 734,939,299
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (127,895,464) (107,745,221)
Distributions from net realized capital gains.......................................... (322,171,256) (422,203,368)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (450,066,720) (529,948,589)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [12,471,611 and 13,547,538 shares, respectively].................... 381,942,219 368,210,773
Capital stock issued in reinvestment of dividends and distributions [14,665,432 and
20,011,095 shares, respectively]...................................................... 450,066,720 529,948,589
Capital stock repurchased [(11,774,942) and (3,776,507) shares, respectively].......... (363,005,143) (102,985,123)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 469,003,796 795,174,239
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 1,210,010,955 1,000,164,949
NET ASSETS:
Beginning of year...................................................................... 4,813,969,076 3,813,804,127
------------------ -------------------
End of year............................................................................ $ 6,023,980,031 $ 4,813,969,076
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A9
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
PRUDENTIAL JENNISON PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$426,967,254)............................ $ 506,859,751
Cash....................................... 117,479
Interest and dividends receivable.......... 300,382
Receivable for investments sold............ 84,864
--------------
Total Assets............................. 507,362,476
--------------
LIABILITIES
Payable for investments purchased.......... 10,696,174
Payable to investment adviser.............. 676,015
Accrued expenses........................... 53,168
--------------
Total Liabilities........................ 11,425,357
--------------
NET ASSETS................................... $ 495,937,119
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 279,684
Paid-in capital, in excess of par........ 412,804,227
--------------
413,083,911
Undistributed net investment income........ 101,780
Accumulated net realized gain on
investments.............................. 2,858,931
Net unrealized appreciation on
investments.............................. 79,892,497
--------------
Net assets, December 31, 1997.............. $ 495,937,119
--------------
--------------
Net asset value and redemption price per
share, 27,968,374 outstanding shares of
common stock (authorized 40,000,000
shares).................................. $ 17.73
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $58,571 foreign
withholding tax)......................... $ 2,459,372
Interest................................... 613,133
---------------
3,072,505
---------------
EXPENSES
Investment advisory fee.................... 2,063,572
Accounting fees............................ 87,000
Custodian expense.......................... 25,000
Shareholders' reports...................... 23,000
Audit fees................................. 3,500
Directors' fees............................ 3,000
Miscellaneous expenses..................... 2,838
---------------
Total Expenses........................... 2,207,910
Less: Custodian fee credit................. (7,281)
---------------
Net Expenses............................. 2,200,629
---------------
NET INVESTMENT INCOME........................ 871,876
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 33,000,406
Net change in unrealized appreciation on
investments.............................. 54,234,653
---------------
NET GAIN ON INVESTMENTS...................... 87,235,059
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 88,106,935
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 871,876 $ 270,664
Net realized gain (loss) on investments................................................ 33,000,406 (3,092,511)
Net change in unrealized appreciation on investments................................... 54,234,653 21,613,425
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 88,106,935 18,791,578
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (832,883) (373,490)
Distributions from net realized capital gains.......................................... (27,048,964) --
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (27,881,847) (373,490)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [12,593,772 and 11,292,685 shares, respectively].................... 218,245,522 151,529,000
Capital stock issued in reinvestment of dividends and distributions [1,607,079 and
27,287 shares, respectively].......................................................... 27,881,847 373,490
Capital stock repurchased [(1,044,246) and (531,868) shares, respectively]............. (17,547,320) (6,868,000)
Initial capitalization repurchased by The Prudential [(1,004,760) and -0- shares
respectively]......................................................................... (19,411,166) --
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 209,168,883 145,034,490
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 269,393,971 163,452,578
NET ASSETS:
Beginning of year...................................................................... 226,543,148 63,090,570
------------------ -------------------
End of year............................................................................ $ 495,937,119 $ 226,543,148
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A10
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C>
ASSETS
Investments, at value (cost:
$501,984,495)............................ $ 618,110,214
Cash....................................... 881
Foreign currency, at value (cost:
$18,305,955)............................. 18,046,890
Receivable for investments sold............ 6,732,972
Dividends and interest receivable.......... 825,037
Forward currency contracts -- amount
receivable from counterparties........... 553,788
Receivable for capital stock sold.......... 63,725
--------------
Total Assets............................. 644,333,507
--------------
LIABILITIES
Payable for investments purchased.......... 4,413,779
Payable to investment adviser.............. 1,247,805
Accrued expenses and other liabilities..... 190,075
Forward currency contracts -- amount
payable to counterparties................ 80,496
--------------
Total Liabilities........................ 5,932,155
--------------
NET ASSETS................................... $ 638,401,352
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 356,200
Paid-in capital, in excess of par........ 523,066,882
--------------
523,423,082
Undistributed net investment income........ 3,515,798
Accumulated net realized gain on
investments.............................. (4,868,770)
Net unrealized appreciation on investments
and foreign currencies................... 116,331,242
--------------
Net assets, December 31, 1997.............. $ 638,401,352
--------------
--------------
Net asset value and redemption price per
share, 35,619,965 outstanding shares of
common stock (authorized 100,000,000
shares).................................. $ 17.92
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $704,849 foreign
withholding tax)......................... $ 7,940,250
Interest................................... 622,794
---------------
8,563,044
---------------
EXPENSES
Investment advisory fee.................... 4,836,302
Custodian expense.......................... 368,000
Accounting fees............................ 223,000
Shareholders' reports...................... 55,000
Audit fees................................. 3,500
Directors' fees............................ 3,000
Miscellaneous expenses..................... 13,625
---------------
5,502,427
---------------
NET INVESTMENT INCOME........................ 3,060,617
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on:
Investments.............................. 29,811,023
Foreign currencies....................... 1,216,034
---------------
31,027,057
---------------
Net change in unrealized appreciation on:
Investments.............................. 5,516,053
Foreign currencies....................... (408,410)
---------------
5,107,643
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 36,134,700
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 39,195,317
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 3,060,617 $ 3,109,922
Net realized gain on investments and foreign currencies................................ 31,027,057 19,772,496
Net change in unrealized appreciation on investments and foreign currencies............ 5,107,643 65,301,446
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 39,195,317 88,183,864
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (4,377,947) (3,109,922)
Distributions in excess of net investment income....................................... (3,434,778) --
Distributions from net realized capital gains.......................................... (30,337,530) (19,019,488)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (38,150,255) (22,129,410)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,853,862 and 7,307,979 shares, respectively]...................... 111,692,563 123,508,873
Capital stock issued in reinvestment of dividends and distributions [2,115,902 and
1,310,966 shares, respectively]....................................................... 38,150,255 22,129,410
Capital stock repurchased [(4,869,453) and (1,820,909) shares, respectively]........... (93,116,567) (30,587,232)
Initial capitalization repurchased by The Prudential [-0- and (36,088) shares,
respectively]......................................................................... -- (575,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 56,726,251 114,476,051
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 57,771,313 180,530,505
NET ASSETS:
Beginning of year...................................................................... 580,630,039 400,099,534
------------------ -------------------
End of year............................................................................ $ 638,401,352 $ 580,630,039
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A11
<PAGE>
THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 11.5%
PNC Student Loan Trust I 1997-2 A1 (a).......... 5.91% 07/20/98 $ 4,501 $ 4,501,078
Restructured Asset Securities Enhanced
Return (a).................................... 5.96% 08/28/98 16,000 16,000,000
Short Term Card Trust 1996-1 (a)................ 6.00% 01/15/98 24,000 24,000,000
Short Term Repackaged Asset Trust 1997-A (a).... 6.00% 12/15/98 8,000 8,000,000
Strategic Money Market Trust 1997-A (a)......... 5.91% 12/16/98 23,000 23,000,000
--------------
75,501,078
--------------
BANK NOTES -- 5.8%
Comerica Bank of Detroit (a).................... 5.97% 02/05/98 2,000 1,999,883
Comerica Bank of Detroit (a).................... 5.90% 02/11/98 9,000 8,999,333
FCC National Bank (a)........................... 5.85% 07/02/98 12,000 11,995,370
US Bank, N.A. (a)............................... 5.88% 04/10/98 4,000 3,999,582
Nationsbank Corp. (a)........................... 5.87% 05/21/98 1,450 1,450,122
Wachovia Bank, N.A. (a)......................... 6.14% 06/01/98 10,000 10,000,000
--------------
38,444,290
--------------
CERTIFICATES OF DEPOSIT-DOMESTIC -- 0.1%
Corestates Bank N.A. (a)........................ 5.78% 01/23/98 1,000 1,000,000
--------------
CERTIFICATES OF DEPOSIT-EURODOLLAR -- 6.2%
Banco De Santander De Credito S.A............... 5.76% 04/20/98 4,000 4,000,233
Svenska Handelsbanken, Inc...................... 5.83% 03/12/98 2,000 1,999,710
Svenska Handelsbanken A.B....................... 5.72% 03/16/98 30,000 29,652,033
Westdeutsche Landesbank Girozentral............. 5.81% 03/04/98 5,000 4,999,982
--------------
40,651,958
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 13.4%
Bank of Montreal................................ 5.64% 01/29/98 4,000 4,000,000
Barclays Bank PLC............................... 5.84% 03/09/98 1,000 999,645
Commerzbank, AG................................. 6.08% 05/27/98 8,000 7,998,938
Commerzbank, AG................................. 5.97% 08/17/98 10,000 9,998,217
Credit Agricole Indosuez........................ 5.75% 02/10/98 3,000 3,000,000
Credit Agricole Indosuez........................ 5.95% 10/21/98 5,000 4,998,088
Landesbank Hessen-Thuringen Girozentrale........ 6.13% 04/01/98 10,000 9,997,185
Landesbank Hessen-Thuringen Girozentrale........ 5.94% 06/19/98 10,000 9,997,361
National Westminister Bank, PLC................. 5.86% 03/10/98 2,000 1,999,045
National Westminister Bank, PLC................. 6.06% 05/26/98 5,000 4,999,059
Royal Bank of Canada............................ 5.91% 06/17/98 5,000 4,998,696
Societe Generale................................ 5.85% 03/03/98 1,000 999,545
Societe Generale................................ 6.19% 05/06/98 2,000 1,999,597
Societe Generale................................ 6.01% 06/16/98 10,000 9,998,704
Swiss Bank Corp................................. 5.76% 02/12/98 6,000 5,999,611
Swiss Bank Corp................................. 5.98% 03/19/98 5,000 4,999,801
--------------
86,983,492
--------------
COMMERCIAL PAPER -- 42.9%
AC Acquisition Holding Co....................... 5.70% 02/18/98 3,000 2,977,675
American Express Credit Corp.................... 6.25% 01/13/98 2,300 2,295,608
Aon Corp........................................ 5.82% 02/05/98 6,126 6,092,327
Aristar, Inc.................................... 5.84% 01/29/98 1,000 995,620
Aristar, Inc.................................... 5.93% 02/10/98 2,000 1,987,152
Aristar, Inc.................................... 5.95% 02/12/98 1,000 993,224
Associates First Capital Corp................... 5.79% 02/04/98 3,000 2,984,077
Barnett Bank, Inc............................... 6.70% 01/02/98 4,053 4,053,000
Barton Capital Corp............................. 5.95% 02/09/98 4,000 3,974,878
Bell Atlantic Financial Services, Inc........... 6.10% 01/13/98 14,000 13,973,906
Bell Atlantic Financial Services, Inc........... 6.00% 01/29/98 5,255 5,231,352
BP America...................................... 6.90% 01/02/98 10,000 10,000,000
Carnival Corp................................... 5.83% 01/30/98 3,000 2,986,397
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
Caterpillar Financial Services Corp............. 5.95% 01/27/98 $ 1,000 $ 995,868
Centric Capital Corp............................ 5.92% 02/23/98 2,500 2,478,622
Centric Capital Corp............................ 5.80% 02/27/98 5,000 4,954,889
Chrysler Financial Corp......................... 5.79% 02/09/98 8,000 7,951,106
Coca Cola Enterprises, Inc...................... 5.87% 02/23/98 4,000 3,966,084
Coca Cola Enterprises, Inc...................... 5.85% 02/27/98 1,000 990,900
Corestates Capital Corp. (a).................... 5.93% 08/28/98 3,000 3,000,000
Corporate Receivables Corp...................... 6.00% 01/28/98 3,000 2,987,000
Duke Capital Corp............................... 5.90% 01/23/98 8,000 7,972,467
Enterprise Funding Corp......................... 5.90% 01/27/98 1,000 995,903
Enterprise Funding Corp......................... 5.86% 02/27/98 3,872 3,836,705
Falcon Asset Securitization Corp................ 5.90% 01/21/98 2,000 1,993,772
Falcon Asset Securitization Corp................ 6.07% 02/05/98 7,000 6,959,871
First Chicago Financial Corp.................... 5.83% 03/20/98 2,000 1,975,061
General Electric Capital Corp................... 5.88% 01/30/98 10,000 9,954,267
General Motors Acceptance Corp.................. 5.76% 02/09/98 12,000 11,927,040
ING America Insurance Holdings, Inc............. 5.74% 04/03/98 11,000 10,840,396
ING America Insurance Holdings, Inc............. 5.74% 04/28/98 8,000 7,852,036
Johnson Controls, Inc........................... 5.80% 02/13/98 3,000 2,979,700
Market Street Funding Corp...................... 5.80% 02/03/98 3,000 2,984,533
Martin Marietta Material........................ 5.88% 02/05/98 1,000 994,451
Mont Blanc Capital Corp......................... 5.90% 01/23/98 8,000 7,972,467
Mont Blanc Capital Corp......................... 6.00% 01/28/98 1,000 995,667
National Rural Utility.......................... 5.56% 01/27/98 7,465 7,436,177
Newell Co....................................... 6.80% 01/02/98 30,500 30,500,000
Old Line Funding Corp........................... 5.88% 01/20/98 5,000 4,985,312
Old Line Funding Corp........................... 5.90% 01/21/98 2,000 1,993,772
SAFECO Corp..................................... 5.70% 01/23/98 4,000 3,986,700
SAFECO Corp..................................... 5.83% 02/26/98 5,000 4,955,465
SAFECO Corp..................................... 5.76% 03/17/98 3,000 2,964,480
SAFECO Corp..................................... 5.79% 03/19/98 1,000 987,777
Smith Barney Holdings........................... 5.62% 01/28/98 6,088 6,063,289
Special Purpose Account Receivables Cooperative
Corp.......................................... 5.84% 02/20/98 2,000 1,984,102
Special Purpose Account Receivables Cooperative
Corp.......................................... 5.86% 02/20/98 2,000 1,984,048
Special Purpose Account Receivables Cooperative
Corp.......................................... 5.80% 03/26/98 1,000 986,628
Triple A-One Funding Corp....................... 6.15% 01/09/98 2,250 2,247,309
Triple A-One Funding Corp....................... 6.20% 01/23/98 1,561 1,555,354
TRW, Inc........................................ 6.00% 01/28/98 4,000 3,982,667
Variable Funding Capital Corp................... 5.89% 01/22/98 5,410 5,392,297
Variable Funding Capital Corp................... 5.88% 01/29/98 4,000 3,982,360
WCP Funding, Inc................................ 6.10% 01/27/98 9,000 8,961,875
Windmill Funding Corp........................... 5.89% 01/29/98 8,000 7,964,660
Wood Street Funding Corp........................ 6.25% 01/07/98 3,369 3,366,076
Xerox Overseas Holdings PLC..................... 5.79% 02/10/98 5,000 4,968,637
Xerox Capital (Europe) PLC...................... 5.79% 02/26/98 5,000 4,955,771
--------------
282,308,777
--------------
LOAN PARTICIPATIONS -- 3.5%
Bell Atlantic Financial Services................ 6.10% 01/21/98 6,000 6,000,000
Countrywide Home Loan, Inc...................... 6.25% 01/30/98 17,000 17,000,000
--------------
23,000,000
--------------
OTHER CORPORATE OBLIGATIONS -- 16.1%
American General Finance Corp................... 7.48% 03/02/98 2,700 2,705,005
CIT Group Holdings, Inc......................... 8.75% 04/15/98 2,000 2,014,097
First Union Corp................................ 6.75% 01/15/98 4,000 4,001,218
General Motors Acceptance Corp. (a)............. 5.73% 02/02/98 11,000 10,999,659
General Motors Acceptance Corp. (a)............. 5.79% 09/21/98 4,000 3,996,752
General Motors Acceptance Corp. (a)............. 6.00% 02/02/98 2,000 2,000,469
Goldman Sachs Group L.P. (a).................... 6.03% 12/17/98 30,000 30,000,000
Liquid Asset Backed Security Trust 1997-7 (a)... 6.03% 12/22/98 9,000 9,000,000
Merrill Lynch & Co., Inc. (a)................... 5.96% 10/08/98 16,000 15,998,804
Morgan Stanley Group, Inc. (a).................. 6.34% 03/09/98 4,000 4,002,425
Morgan Stanley Group, Inc. (a).................. 5.88% 10/26/98 4,000 4,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B2
<PAGE>
MONEY MARKET PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
------ -------- --------- --------------
<S> <C> <C> <C> <C>
Morgan Stanley Group, Inc. (a).................. 6.07% 11/16/98 $ 5,000 $ 7,000,000
SMM Trust Notes 1997-X (a)...................... 6.00% 12/14/98 9,000 9,000,000
Transamerica Finance Corp....................... 6.06% 06/15/98 1,450 1,451,032
--------------
106,169,461
--------------
TOTAL INVESTMENTS -- 99.5%
(amortized cost $654,059,056 (b))............................................. 654,059,056
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5%................................... 3,403,084
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 657,462,140
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (German Stock Company)
PLC Public Limited Company (British Corporation)
(a) Indicates a variable rate security. The maturity date presented for these
instruments is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at December 31, 1997.
(b) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
<TABLE>
<S> <C>
The industry classification of portfolio holdings and
other assets in excess of liabilities shown as a
percentage of net assets as of December 31, 1997 was as
follows:
Commercial Bank 33.9%
Asset Backed Securities 14.0%
Security Brokers & Dealers 10.2%
Fire & Marine Casualty Insurance 6.8%
Finance Lessors 5.8%
Miscellaneous Furniture 4.6%
Telephone & Communications 4.1%
Fire Insurance 2.8%
Mortgage Banker 2.6%
Bank Holding Company U.S. 2.2%
Short-Term Business Credit 2.0%
Petroleum Refining 1.5%
Photographic Equipment 1.5%
Personal Credit 1.5%
Electrical Services 1.2%
Accident/Health Insurance 0.9%
Beverages 0.8%
Construction 0.8%
Guided Missiles 0.6%
Pharmaceuticals 0.5%
Water Transport 0.5%
Regulating Controls 0.5%
Mining/Quarry 0.2%
------------
99.5%
Other assets in excess of liabilities 0.5%
------------
100.0%
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B3
<PAGE>
DIVERSIFIED BOND PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM INVESTMENTS -- 92.8%
<S> <C> <C> <C> <C> <C>
RATING INTEREST MATURITY AMOUNT VALUE
(UNAUDITED) RATE DATE (000) (NOTE 2)
LONG-TERM BONDS
<CAPTION>
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 1.1%
Agco Corp.,..................................... Ba1 8.50% 03/15/06 $ 600 $ 637,500
Archer Daniels Midland Co.,..................... Aa3 6.95% 12/15/2097 8,400 8,509,536
--------------
9,147,036
--------------
AIRLINES -- 4.7%
Boeing Co., (a)................................. Aa3 8.75% 08/15/21 6,250 7,831,500
Delta Air Lines, Inc., M.T.N.................... Baa3 7.79% 12/01/98 1,000 1,013,930
Delta Air Lines, Inc., M.T.N.................... Baa3 8.38% 06/12/98 2,000 2,018,960
Delta Air Lines, Inc.,.......................... Baa3 9.875% 05/15/00 6,000 6,464,520
United Airlines, Inc.,.......................... Baa3 9.75% 08/15/21 4,500 5,758,515
United Airlines, Inc.,.......................... Baa3 10.67% 05/01/04 7,000 8,390,060
United Airlines, Inc.,.......................... Baa3 11.21% 05/01/14 5,000 7,011,550
--------------
38,489,035
--------------
BANKS AND SAVINGS & LOANS -- 6.4%
Banco Ganadero, M.T.N. SA, (Colombia)........... Baa3 9.75% 08/26/99 4,100 4,212,750
Bangkok Bank, (Thailand) (b).................... Ba1 8.375% 01/15/27 12,000 7,032,120
Banque Cent De Tunisie, (Tunisia)............... Baa3 7.50% 09/19/07 3,000 2,805,000
Capital One Bank,............................... Baa3 7.08% 10/30/01 5,000 5,116,100
Chase Manhattan Corp., (a)...................... A1 8.00% 06/15/99 2,000 2,050,880
Chemical Bank, (a).............................. Aa3 6.625% 08/15/05 2,000 2,016,600
Compass Trust Bank,............................. A3 8.23% 01/15/27 4,500 4,882,500
International Bank for Reconstruction and
Development, (Supranational).................. Aaa 12.375% 10/15/02 750 946,125
Kansallis-Osake Pankki, (Finland)............... A3 8.65% 12/29/49 5,000 5,100,000
Kansallis-Osake Pankki, (Finland) (a)........... A3 10.00% 05/01/02 5,000 5,681,950
National Australia Bank, (Australia)............ A1 6.40% 12/10/07 3,700 3,700,000
Skandinaviska Enskilda Bank, (Sweden)........... Baa1 7.50% 03/29/49 5,000 5,093,750
Svenska Handelsbank, (Sweden)................... A1 7.125% 03/29/49 3,500 3,526,250
--------------
52,164,025
--------------
CABLE -- 1.5%
Rogers Cablesystems, Inc., (Canada)............. Ba3 10.00% 03/15/05 4,000 4,400,000
Videotron Holdings, PLC, Zero Coupon (until
7/1/99)....................................... Baa3 11.125% 07/01/04 8,000 7,619,840
--------------
12,019,840
--------------
CABLE & PAY TELEVISION SYSTEMS -- 0.4%
Grupo Televisa SA, (Mexico)..................... Ba3 11.875% 05/15/06 2,500 2,825,000
--------------
COMPUTER SERVICES -- 0.6%
Seagate Technology, Inc.,....................... Baa3 7.45% 03/01/37 5,000 5,135,100
--------------
COMPUTERS -- 1.4%
International Business Machines Corp., (a)...... A1 7.125% 12/01/2096 10,900 11,276,704
--------------
FINANCIAL SERVICES -- 20.5%
Advanta Corp., M.T.N............................ Ba3 7.25% 08/16/99 10,000 9,859,700
Advanta Mortgage Loan Trust, Series 1994-3
(a)........................................... Aaa 8.49% 01/25/26 8,500 8,925,000
American General Finance, Inc., (a)............. A1 8.125% 03/15/46 12,000 13,311,600
Aristar, Inc., (a).............................. A3 5.75% 07/15/98 2,000 1,999,820
Aristar, Inc.,.................................. Baa1 7.50% 07/01/99 2,000 2,037,120
Arkwright Corp.,................................ Baa3 9.625% 08/15/26 5,000 5,919,750
Chrysler Financial Corp., (a)................... A3 9.50% 12/15/99 5,000 5,309,800
Conseco, Inc.,.................................. Ba2 8.70% 11/15/26 1,600 1,788,880
Conseco, Inc., (b).............................. Ba2 8.796% 04/01/27 15,500 17,300,635
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa3 7.00% 06/15/00 9,000 9,179,640
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 7.875% 03/15/98 5,000 5,018,600
Enterprise Rent-A-Car USA Finance Co., M.T.N.... Baa2 8.75% 12/15/99 3,000 3,147,000
Felcor Suite Hotels, Inc.,...................... Ba1 7.625% 10/01/07 7,900 7,906,320
Ford Motor Credit Co., (a)...................... A1 5.75% 01/25/01 4,000 3,944,680
Ford Motor Credit Co., (a)...................... A1 6.25% 02/26/98 3,000 3,000,780
General Motors Acceptance Corp., (a)............ A3 8.40% 10/15/99 3,700 3,836,937
Green Tree Financial Corp.,..................... NR 7.90% 03/15/28 7,694 7,946,940
Industrial Financial Corp.,..................... Ba1 7.875% 08/04/02 4,000 3,800,000
Lumbermens Mutual Casualty Co.,................. Baa1 8.30% 12/01/37 12,850 13,621,000
Nationwide CSN Trust,........................... A1 9.875% 02/15/25 5,000 5,896,950
Polysindo Int'l. Finance Co., (Indonesia)....... Ba3 11.375% 06/15/06 3,000 2,430,000
Polysindo Int'l. Finance Co., (Indonesia)....... Ba3 13.00% 06/15/01 2,500 2,275,000
PT Alatief Freeport Financial Co.,
(Netherlands)................................. Ba1 9.75% 04/15/01 5,750 5,807,500
Reliastar Financial Corp., (a).................. A3 6.625% 09/15/03 5,000 5,007,500
Union Planters Corp.,........................... Baa1 8.20% 12/15/26 5,000 5,251,550
Vesta Insurance Group,.......................... Baa3 8.525% 01/15/27 12,000 13,231,200
--------------
167,753,902
--------------
FOOD & BEVERAGE -- 1.4%
RJR Nabisco, Inc.,.............................. Baa3 8.25% 07/01/04 11,000 11,563,750
--------------
FOREST PRODUCTS -- 0.8%
Westvaco Corp., (a)............................. A1 9.75% 06/15/20 5,000 6,673,550
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B4
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) 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 $ 2,962,500
--------------
INVESTMENT BANKERS -- 7.4%
Lehman Brothers Holdings, Inc., M.T.N........... Baa1 6.40% 08/30/00 23,250 23,220,938
Salomon Inc.,................................... Baa1 6.25% 10/01/99 8,000 8,009,280
Salomon Inc.,................................... A2 6.50% 03/01/00 10,000 10,052,400
Salomon Inc., M.T.N............................. A2 6.59% 02/21/01 10,000 10,083,200
Salomon Inc.,................................... A2 6.65% 07/15/01 7,000 7,059,080
Salomon Inc.,................................... A2 7.25% 05/01/01 2,250 2,309,220
--------------
60,734,118
--------------
LEISURE & TOURISM -- 2.7%
Royal Caribbean Cruises Ltd.,................... Baa3 7.00% 10/15/07 8,000 8,058,640
Royal Caribbean Cruises Ltd.,................... Baa3 7.25% 08/15/06 5,000 5,146,400
Royal Caribbean Cruises Ltd.,................... Baa3 7.50% 10/15/27 8,500 8,655,890
--------------
21,860,930
--------------
MEDIA -- 6.0%
News America Holdings, Inc., (a)................ Baa3 7.50% 03/01/00 6,000 6,134,760
Paramount Communications, Inc.,................. Ba2 7.50% 01/15/02 5,000 5,122,600
Time Warner, Inc.,.............................. Ba1 8.18% 08/15/07 2,500 2,721,150
Time Warner, Inc.,.............................. Ba1 7.75% 06/15/05 7,800 8,226,972
Time Warner, Inc.,.............................. Ba1 9.125% 01/15/13 6,000 7,144,620
Turner Broadcasting System, Inc.,............... Ba1 8.375% 07/01/13 2,000 2,244,040
Turner Broadcasting System, Inc.,............... Ba1 7.40% 02/01/04 13,500 14,023,125
Viacom, Inc.,................................... Ba2 7.75% 06/01/05 3,000 3,051,270
--------------
48,668,537
--------------
MISCELLANEOUS CONSUMER GROWTH -- 0.4%
Whitman Corp.,.................................. Baa2 7.50% 08/15/01 3,000 3,107,220
--------------
MORTGAGE PASS-THROUGHS -- 3.0%
02/15/08
-
Government National Mortgage Association,....... 7.50% 02/15/26 3,675 3,783,890
05/20/02
-
Government National Mortgage Association,....... 7.50% 01/15/26 20,159 20,745,779
Government National Mortgage Association,....... 7.50% 02/15/09 133 137,714
--------------
24,667,383
--------------
OIL & GAS -- 4.8%
Apache Corp.,................................... Baa1 7.95% 04/15/26 1,300 1,456,910
B.J. Services Co.,.............................. Baa2 7.00% 02/01/06 5,000 5,118,750
Gulf Canada Resources Ltd., (Canada)............ Ba1 8.25% 03/15/17 6,600 7,342,566
Occidental Petroleum Corp.,..................... Baa2 10.125% 11/15/01 5,000 5,641,200
Occidental Petroleum Corp.,..................... Baa2 11.125% 08/01/10 5,000 6,810,700
Parker & Parsley Petroleum Co.,................. Baa3 8.25% 08/15/07 4,000 4,405,760
Seagull Energy Corp.,........................... Ba1 7.50% 09/15/27 8,325 8,622,119
--------------
39,398,005
--------------
PAPER & FOREST -- 0.8%
UPM-Kymmene Oyj,................................ Baa1 7.45% 11/26/27 6,000 6,157,500
--------------
RAILROADS -- 1.8%
CSX Corp.,...................................... Baa2 7.95% 05/01/27 3,000 3,391,080
Norfolk Southern Corp., (a)..................... Baa1 7.80% 05/15/27 10,000 11,287,500
--------------
14,678,580
--------------
RESTAURANTS -- 1.2%
Darden Restaurants, Inc., (a)................... Baa1 7.125% 02/01/16 10,000 9,606,500
--------------
RETAIL -- 2.8%
Federated Department Stores, Inc.,.............. Baa2 8.50% 06/15/03 10,200 11,127,180
Federated Department Stores, Inc.,.............. Baa2 8.125% 10/15/02 5,250 5,612,250
Kmart Corp., M.T.N.............................. Ba3 9.80% 06/15/98 2,000 2,020,000
Rite Aid Corp., (a)............................. Baa1 6.70% 12/15/01 4,000 4,065,000
--------------
22,824,430
--------------
TELECOMMUNICATIONS -- 5.4%
Impast Corp.,................................... B2 12.125% 07/15/03 3,000 3,045,000
McLeod USA Inc.,................................ B3 9.25% 07/15/07 2,000 2,100,000
McLeod USA, Inc., Zero Coupon (until 3/1/02).... B3 10.50% 03/01/07 5,000 3,637,500
Tele-Communications, Inc.,...................... Ba1 7.875% 08/01/13 5,800 6,238,306
Tele-Communications, Inc.,...................... Ba1 6.875% 02/15/06 10,000 10,036,800
Tele-Communications, Inc.,...................... Ba1 10.125% 04/15/22 6,300 8,383,851
Total Access Communications Public Company Ltd.,
(Thailand).................................... Ba2 8.375% 11/04/06 15,000 7,200,000
WorldCom, Inc.,................................. Ba1 7.75% 04/01/07 3,500 3,758,615
--------------
44,400,072
--------------
UTILITIES -- 6.4%
Arkla, Inc., M.T.N.............................. Baa3 9.32% 12/18/00 2,000 2,140,300
Avon Energy Partners Holdings,.................. NR 7.05% 12/11/07 5,000 5,081,250
California Infrastructure PG&E, Series
1997-1,....................................... Aaa 6.32% 09/25/05 4,000 3,993,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B5
<PAGE>
DIVERSIFIED BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Cleveland Electric Illumination,................ Ba1 7.88% 11/01/17 $ 5,700 $ 6,017,490
Commonwealth Edison Co.,........................ Baa3 7.625% 01/15/07 7,525 7,941,735
El Paso Electric Company,....................... Ba3 9.40% 05/01/11 4,000 4,522,280
Hyder PLC,...................................... Baa1 7.25% 12/15/17 12,000 12,125,400
Niagara Mohawk Power,........................... Ba3 6.875% 04/01/03 4,000 3,988,440
Niagara Mohawk Power,........................... Ba3 8.00% 06/01/04 5,000 5,297,900
Pennsylvania Power & Light Co., (a)............. A3 9.375% 07/01/21 1,150 1,284,113
--------------
52,392,658
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 2.7%
Federal Farm Credit Bank,....................... 8.65% 10/01/99 150 156,891
Resolution Funding Corp.,....................... 8.125% 10/15/19 700 861,875
Resolution Funding Corp., (a)................... Zero 10/15/15 17,100 5,768,514
Resolution Funding Corp.,....................... 8.625% 01/15/21 200 258,812
United States Treasury Notes, (b)............... 7.875% 08/15/01 4,000 4,276,240
United States Treasury Notes,................... 5.875% 09/30/02 4,950 4,977,077
United States Treasury Notes,................... 6.00% 07/31/02 1,000 1,010,470
United States Treasury Notes,................... 6.125% 07/31/00 3,000 3,030,930
United States Treasury Notes,................... 6.25% 02/15/03 1,800 1,840,788
United States Treasury Notes,................... 6.625% 07/31/01 200 205,624
--------------
22,387,221
--------------
U.S. GOVERNMENT MORTGAGE BACKED SECURITIES -- 0.1%
Federal National Mortgage Association,.......... 9.00% 10/01/16 305 323,942
Federal National Mortgage Association,.......... 9.00% 05/01/17 211 225,908
Federal National Mortgage Association,.......... 9.00% 09/01/21 6 6,628
--------------
556,478
--------------
FOREIGN GOVERNMENT BONDS -- 8.1%
Banco de Commercio Exterior de Colombia, SA,
M.T.N., (Colombia)............................ Baa3 8.625% 06/02/00 2,000 2,045,000
City of Moscow, (Russia)........................ Ba2 9.50% 05/31/00 5,000 4,725,000
City of Moscow, (Russia)........................ Ba2 9.50% 05/31/00 2,000 1,890,000
City of St. Petersburg, (Russia)................ NR 9.50% 06/18/02 5,000 4,500,000
Republic of Colombia, (Colombia)................ Baa3 7.625% 02/15/07 12,500 11,672,125
Republic of Colombia, (Colombia)................ Baa3 8.00% 06/14/01 1,600 1,605,600
Republic of Colombia, (Colombia)................ Baa3 8.75% 10/06/99 3,500 3,604,370
Republic of Panama, (Panama).................... Ba1 7.875% 02/13/02 8,000 7,990,000
Republic of Philippines, (Philippines).......... Ba1 8.60% 06/15/27 1,000 820,000
Republic of South Africa, (South Africa)........ Baa3 8.50% 06/23/17 17,000 16,235,000
Rio De Janeiro, (Brazil)........................ B1 10.375% 07/12/99 5,000 4,956,250
Russian Ministry of Finance, (Russia)........... Ba2 10.00% 06/26/07 2,500 2,316,250
United Mexican States, (Mexico)................. Ba2 11.50% 05/15/26 3,500 4,147,500
--------------
66,507,095
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $745,310,568)......................................................................... 757,957,169
--------------
SHORT-TERM INVESTMENT -- 5.5%
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account
(cost $45,329,000; Note 5).................... 6.53% 01/02/98 45,329 45,329,000
--------------
TOTAL INVESTMENTS -- 98.3%
(cost $790,639,568; Note 6)................................................................. 803,286,169
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C) -- (0.0%)...................................... (214,531)
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES -- 1.7%........................................... 13,635,093
--------------
TOTAL NET ASSETS -- 100.0%.................................................................... $ 816,706,731
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Security segregated as collateral for futures contracts.
(b) Portion of security segregated as collateral for future contracts. The
aggregate cost of the segregated securities is $26,272,861. The aggregated
value is $23,624,600.
(c) Open futures contracts as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31,
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
<S> <C> <C> <C> <C> <C>
Short Positions:
U.S.
Treasury
411 Notes Mar 98 $ 45,852,188 $46,096,219 $ (244,031)
U.S.
Treasury
145 Bond Mar 98 $ 17,248,531 $17,467,969 $ (219,438)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B6
<PAGE>
GOVERNMENT INCOME PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
LONG-TERM INVESTMENTS -- 95.7%
<S> <C> <C> <C> <C>
INTEREST MATURITY AMOUNT VALUE
RATE DATE (000) (NOTE 2)
LONG-TERM BONDS -- 95.7%
<CAPTION>
------ -------- --------- --------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 5.6%
Chase Manhattan Credit Card Master Trust, Series
1995-2 (a)(b)................................. 6.110% 08/15/01 $ 12,500 $ 12,503,875
Equicon Home Equity Loan Trust, Series 1994-2... 7.850% 03/18/14 1,029 1,034,799
Team Financing Corp., Series 1997-1 Class A..... 7.350% 05/15/03 10,000 10,368,700
--------------
23,907,374
--------------
COLLATERALIZED MORTGAGE OBLIGATION -- 2.3%
Main Place Funding (a).......................... 6.179% 07/17/98 10,000 10,018,750
--------------
CORPORATE -- 1.9%
Merck & Co...................................... 5.760% 05/03/37 8,000 8,232,880
--------------
MORTGAGE PASS-THROUGHS -- 36.0%
Federal Home Loan Mortgage Corp., ARM........... 7.932% 06/01/25 7,450 7,652,695
Federal National Mortgage Association........... 6.560% 08/27/04 25,000 25,218,750
05/01/10
-
Federal National Mortgage Association........... 7.500% 12/01/12 20,920 21,488,806
03/01/22
-
Federal National Mortgage Association........... 8.000% 05/01/26 1,913 1,985,086
05/01/24
-
Federal National Mortgage Association........... 8.500% 04/01/25 24,639 25,836,437
02/01/25
-
Federal National Mortgage Association........... 9.000% 04/01/25 10,179 10,851,475
04/08/07
-
Federal National Mortgage Association Strips.... Zero 10/08/09 43,480 22,792,572
12/15/25
-
Government National Mortgage Association........ 7.500% 02/15/26 18,260 18,719,986
09/15/23
-
Government National Mortgage Association........ 8.000% 10/15/25 19,511 20,249,250
--------------
154,795,057
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 49.9%
Israel AID...................................... Zero 03/15/06 18,272 11,233,991
Israel AID...................................... Zero 08/15/09 20,000 10,000,000
Resolution Funding Corp......................... 8.125% 10/15/19 4,200 5,171,250
Small Business Administration Participation
Certificate................................... 7.150% 01/01/17 19,125 19,966,691
Small Business Administration Participation
Certificate................................... 7.200% 10/01/16 19,338 20,178,133
Small Business Adminstration Participation
Certificate................................... 6.850% 07/01/17 5,000 5,166,050
United States Treasury Bond (b)................. 6.625% 02/15/27 25,000 27,140,500
United States Treasury Bond (b)................. 8.125% 08/15/19 28,000 35,035,000
United States Treasury Bond (b)................. 12.000% 08/15/13 24,100 35,509,904
United States Treasury Note..................... 6.000% 08/15/00 5,000 5,035,950
United States Treasury Note..................... 6.250% 10/31/01 3,500 3,559,605
United States Treasury Note (b)................. 7.750% 12/31/99 35,000 36,361,850
--------------
214,358,924
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $398,044,627)........................................................... 411,312,985
--------------
SHORT-TERM INVESTMENT -- 3.1%
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account
(cost $13,337,000; Note 5).................... 6.53% 01/02/98 13,337 13,337,000
--------------
TOTAL INVESTMENTS -- 98.8%
(cost $411,381,627; Note 6)................................................... 424,649,985
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- (C)............................... (38,438)
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES -- 1.2%............................. 5,031,512
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 429,643,059
--------------
--------------
</TABLE>
(a) The interest rate shown reflects the current rate of the variable rate
instrument.
(b) Pledged as initial margin on financial future contracts.
(c) Open futures contracts as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT
CONTRACTS TYPE DATE TRADE DATE DECEMBER 31, 1997 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Short Position:
123 U.S. Treasury Note Mar 98 $ 13,722,187 $ 13,795,219 ($ 73,032)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B7
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 91.8%
<S> <C> <C> <C>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) VALUE
LONG-TERM BONDS -- 58.6% (NOTE 2)
<CAPTION>
------------ --------- --------------
<S> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 0.1%
Agco Corp.,
8.50%, 03/15/06............................... Ba1 $ 2,875 $ 3,054,687
--------------
AIRLINES -- 4.2%
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 20,000 25,218,200
10.375%, 02/01/11 (a)......................... Ba1 56,905 73,306,108
United Airlines, Inc.,
6.126%, 03/02/04.............................. Aa2 8,000 7,988,000
9.75%, 08/15/21............................... Baa3 10,125 12,956,659
10.67%, 05/01/04.............................. Baa3 46,665 55,931,736
11.21%, 05/01/14.............................. Baa3 18,433 25,848,780
--------------
201,249,483
--------------
ASSET-BACKED SECURITIES -- 1.6%
California Infrastructure,
6.14%, 03/25/02............................... Aaa 5,500 5,511,000
6.17%, 03/25/03............................... Aaa 6,000 6,018,600
6.28%, 09/25/05............................... Aaa 7,000 7,042,000
6.38%, 09/25/08............................... Aaa 21,000 21,172,200
6.42%, 12/26/09............................... Aaa 10,000 10,110,000
6.48%, 11/26/09............................... Aaa 10,000 10,115,625
Standard Credit Card Master Trust,
5.95%, 10/07/04 (a)........................... Aaa 4,650 4,602,012
Team Financing Corp,
7.35%, 05/15/03............................... Aa2 11,000 11,405,570
--------------
75,977,007
--------------
BANKS AND SAVINGS & LOANS -- 5.9%
Banco Ganadero, M.T.N. SA (Colombia),
9.75%, 08/26/99............................... Baa3 7,300 7,500,750
Bangkok Bank, (Thailand),
7.25%, 09/15/05............................... Ba1 10,000 7,452,800
8.25%, 03/15/16............................... Ba1 7,500 5,250,000
8.375%, 01/15/27 Sr. Note..................... Ba1 40,000 23,440,400
Bank Nova Scotia,
6.50%, 07/15/07............................... A1 7,200 7,218,000
Bank of Boston N.A.,
5.973%, 01/25/99.............................. A2 2,500 2,507,600
Bankers Trust New York Corp.,
5.813%, 08/06/00.............................. A2 7,500 7,485,000
Banque Cent De Tunisie, (Tunisia),
7.50%, 09/19/07............................... Baa3 17,950 16,783,250
Capital One Bank,
6.97%, 02/04/02............................... Baa3 25,000 25,362,750
7.08%, 10/30/01............................... Baa3 35,100 35,915,022
7.35%, 06/20/00............................... Baa3 8,100 8,293,266
8.125%, 03/01/00.............................. Baa3 13,150 13,630,501
Chase, Inc.
6.075%, 02/28/00.............................. Aa3 4,000 4,006,160
Kansallis-Osake Pankki, (Finland),
8.65%, 12/29/49............................... A3 10,000 10,200,000
National Australia Bank, (Australia),
6.40%, 12/10/07............................... A1 14,000 14,000,000
Nationsbank Corp.,
6.076%, 06/19/02.............................. A1 5,000 5,005,850
North Fork Bancorporation, Inc.,
8.00%, 12/15/27............................... Baa3 4,000 4,068,800
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Okobank, (Finland),
7.20%, 10/29/49............................... A3 $ 9,000 $ 9,101,250
7.20%, 10/29/49............................... A3 3,500 3,539,375
7.312%, 09/27/49.............................. A3 18,750 19,031,250
Royal Bank of Canada, (Canada),
6.75%, 10/24/11 (a)........................... Aa3 17,400 17,513,448
Siam Commercila, (Thailand),
7.50%, 03/15/06............................... A3 14,500 9,425,000
Svenska Handelsbank, (Sweden),
7.125%, 03/29/49.............................. A1 10,000 10,075,000
Thai Farmers Bank, (Thailand),
8.25%, 08/21/16 (a)........................... Ba1 20,000 12,000,000
--------------
278,805,472
--------------
CABLE & PAY TELEVISION SYSTEMS -- 2.0%
Continental Cablevision, Inc.,
8.50%, 09/15/01............................... Baa3 5,545 5,889,455
Tele-Communications, Inc.,
6.875%, 02/15/06.............................. Ba1 10,000 10,036,800
7.375%, 02/15/00.............................. Ba1 27,000 27,521,100
7.875%, 08/01/13.............................. Ba1 19,350 20,812,279
8.25%, 01/15/03............................... Ba1 2,000 2,135,780
9.25%, 04/15/02............................... Ba1 9,500 10,427,865
9.875%, 06/15/22.............................. Ba1 12,900 16,811,667
--------------
93,634,946
--------------
CONSULTING -- 0.7%
Comdisco, Inc., M.T.N.,
6.11%, 08/04/99............................... Baa1 12,500 12,513,250
6.375%, 11/30/01.............................. Baa1 21,500 21,500,000
--------------
34,013,250
--------------
CONSUMER SERVICES -- 0.1%
Service Corp. International,
7.00%, 06/01/15............................... Baa1 2,500 2,557,875
--------------
ENERGY -- 0.1%
Baltimore Gas & Electric,
5.886%, 03/15/99.............................. A2 3,500 3,503,570
--------------
FINANCIAL SERVICES -- 15.4%
Advanta Corp.,
6.99%, 10/18/99............................... Ba3 15,000 14,400,000
7.25%, 08/16/99............................... Ba3 3,000 2,957,910
7.50%, 08/28/00............................... Ba3 35,000 34,053,250
American General Finance, Inc.,
7.57%, 12/01/45............................... A2 5,000 5,178,500
Arkwright Corp.,
9.625%, 08/15/26.............................. Baa3 8,000 9,471,600
Avco Financial Services,
5.915%, 11/17/99.............................. NR 3,500 3,498,950
Bear Stearns & Co.,
6.50%, 07/05/00............................... A2 20,000 20,120,800
Central Hispano Financial Services, (Portugal),
6.25%, 04/28/05............................... A3 10,000 10,000,000
Conseco, Inc.,
8.70%, 11/15/26 (a)........................... Ba2 32,313 36,126,991
8.796%, 04/01/27 (a).......................... Ba2 23,900 26,676,463
Donaldson Lufkin, & Jenrette Inc.,
5.625%, 02/15/16.............................. Baa1 5,480 5,395,827
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B8
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa2 $ 11,500 $ 11,554,050
6.95%, 03/01/04............................... Baa2 27,500 28,050,000
7.00%, 06/15/00............................... Baa2 30,000 30,598,800
7.50%, 06/15/03............................... Baa2 5,000 5,261,900
8.75%, 12/15/99............................... Baa2 5,000 5,245,000
First Chicago NBD Corp.,
5.819%, 09/23/02.............................. A1 8,000 7,976,000
First Union Corp.,
9.45%, 06/15/99............................... A2 4,000 4,177,920
Great Western Financial,
8.206%, 02/01/27 (a).......................... A3 19,300 20,469,966
Industrial Finance Corp.,
7.75%, 08/04/07............................... Ba1 5,000 4,750,000
7.875%, 08/04/02.............................. Ba1 6,000 5,700,000
Lehman Brothers Holdings, Inc.,
6.206%, 09/03/02.............................. Baa1 8,000 7,950,000
6.33%, 08/01/00............................... Baa1 30,000 30,039,600
6.40%, 08/30/00............................... Baa1 79,000 78,901,250
6.71%, 10/12/99............................... Baa1 6,000 6,056,640
6.89%, 10/10/00............................... Baa1 10,545 10,701,804
7.125%, 07/15/02.............................. Baa1 16,000 16,359,680
Lumbermens Mutual Casualty Co.,
8.30%, 12/01/37............................... Baa1 21,750 23,055,000
9.15%, 07/01/26............................... Baa1 7,500 8,728,125
Merita Bank, Ltd.,
7.50%, 12/29/49............................... A3 15,000 15,390,000
Merrill Lynch Pierce, Fenner & Smith,
5.935%, 11/14/00.............................. Aa3 10,000 9,966,250
Paine Webber Group, Inc.,
7.625%, 10/15/08 Sr. Note..................... Baa1 5,000 5,352,700
PT Alatief Freeport Financial Co., Sr. Notes,
(Netherlands),
9.75%, 04/15/01............................... Ba1 8,950 9,039,500
Salomon, Inc.,
6.25%, 10/01/99............................... A2 32,800 32,838,048
6.50%, 03/01/00 (a)........................... A2 38,500 38,701,740
6.59%, 02/21/01 (a)........................... A2 30,750 31,005,840
6.75%, 02/15/03............................... A2 5,000 5,057,850
7.25%, 05/01/01............................... A2 8,625 8,852,010
Sears Roebuck Acceptance Corp., M.T.N.,
6.38%, 02/16/99............................... A2 25,000 25,125,000
SunAmerica, Inc.,
6.20%, 10/31/99............................... Baa1 9,000 9,008,100
Textron Financial Corp.,
6.05%, 03/16/09............................... Aaa 46,440 46,354,771
Union Planters Corp., Gtd. Notes,
8.20%, 12/15/26............................... Baa1 20,750 21,793,932
--------------
731,941,767
--------------
FOOD & BEVERAGE -- 0.5%
Archer-Daniels-Midland Co.,
6.75%, 12/15/27............................... Aa3 5,000 5,008,650
6.95%, 12/15/2097............................. Aa3 18,800 19,045,152
--------------
24,053,802
--------------
INDUSTRIAL -- 0.8%
Compania Sud Americana de Vapores, SA (Chile),
7.375%, 12/08/03.............................. NR 7,600 7,505,000
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Reliance Industries Ltd.,
8.125%, 09/27/05.............................. Baa3 $ 15,000 $ 14,025,000
8.25%, 01/15/27............................... Baa3 19,000 17,005,000
--------------
38,535,000
--------------
LEISURE & TOURISM -- 0.1%
Royal Carribean Cruises Ltd.,
7.50%, 10/15/27............................... Baa3 5,750 5,855,455
--------------
MEDIA -- 5.7%
Paramount Communications, Inc., Sr. Notes,
7.50%, 01/15/02............................... Ba2 6,425 6,582,541
Time Warner, Inc.,
6.10%, 12/30/01............................... Ba1 27,650 27,016,815
8.11%, 08/15/06............................... Ba1 7,250 7,848,850
8.18%, 08/15/07............................... Ba1 24,915 27,118,981
9.125%, 01/15/13.............................. Ba1 41,270 49,143,078
Turner Broadcasting Co.,
8.375%, 07/01/13.............................. Ba1 17,325 19,438,997
Viacom, Inc.,
6.75%, 01/15/03............................... Ba2 71,325 70,082,518
7.75%, 06/01/05............................... Ba2 60,025 61,050,827
--------------
268,282,607
--------------
OIL & GAS -- 1.6%
Apache Corp.,
7.95%, 04/15/26............................... Baa1 2,900 3,250,030
B.J. Services Co.,
7.00%, 02/01/06............................... Baa2 4,000 4,095,000
Gulf Canada Resources, Ltd., (Canada),
8.25%, 03/15/17............................... Ba1 4,500 5,006,295
Parker & Parsley Petroleum Co.,
8.25%, 08/15/07............................... Baa3 3,000 3,304,320
Petroliam Nasional, (Malaysia),
6.625%, 10/18/01.............................. A2 12,000 11,662,680
Seagull Energy Corp.,
7.50%, 09/15/27............................... Ba1 17,000 17,606,730
Talisman Energy Inc.,
7.25%, 10/15/27............................... Baa1 30,000 30,829,800
--------------
75,754,855
--------------
PAPER & FOREST -- 0.5%
UPM-Kymmene Oyj,
7.45%, 11/26/27............................... Baa1 22,800 23,398,500
--------------
RAILROADS -- 0.5%
Norfolk Southern Corp.,
7.05%, 05/01/37............................... Baa1 25,000 26,218,750
--------------
REAL ESTATE INVESTMENT TRUST -- 0.2%
Falcor Suite Hotels, Inc.,
7.625%, 10/1/07............................... Ba1 8,000 8,006,400
--------------
RETAIL -- 2.8%
Federated Department Stores, Inc.,
8.125%, 10/15/02 Sr. Note (a)................. Baa2 41,030 43,861,070
8.50%, 06/15/03 (a)........................... Baa2 32,400 35,345,160
10.00%, 02/15/01 (a).......................... Baa2 46,115 50,791,061
Rite Aid Corp.,
6.70%, 12/15/01............................... Baa1 5,000 5,081,250
--------------
135,078,541
--------------
TELECOMMUNICATIONS -- 3.6%
McLeod USA Inc., Sr. Notes,
9.25%, 07/15/07............................... B3 3,000 3,150,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B9
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Total Access Communications Public Company Ltd.,
(Thailand),
8.375%, 11/04/06.............................. Ba2 $ 33,000 $ 15,840,000
WorldCom, Inc.,
7.55%, 04/01/04............................... Ba1 80,000 83,775,200
7.75%, 04/01/07............................... Ba1 25,000 26,847,250
7.75%, 04/01/27............................... Ba1 4,500 4,944,420
8.875%, 01/15/06.............................. Ba1 32,000 34,429,440
--------------
168,986,310
--------------
TOBACCO -- 3.0%
Philip Morris Co. Inc.,
6.375%, 02/01/06.............................. A2 17,675 17,359,501
7.20%, 02/01/07............................... A2 31,915 32,932,769
RJR Nabisco, Inc.,
7.625%, 09/15/03.............................. Baa3 10,500 10,732,260
8.25%, 07/01/04............................... Baa3 8,000 8,410,000
8.50%, 07/01/07............................... Baa3 11,000 11,726,550
8.75%, 04/15/04............................... Baa3 23,090 24,719,000
8.75%, 08/15/05............................... Baa3 19,000 20,499,670
9.25%, 08/15/13............................... Baa3 13,571 15,227,341
--------------
141,607,091
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.0%
Federal Express Corp., M.T.N.,
10.05%, 06/15/99.............................. Baa2 500 527,645
--------------
UTILITIES -- 1.9%
Commonwealth Edison Co.,
7.375%, 01/15/04.............................. Baa3 14,000 14,523,880
7.625%, 01/15/07.............................. Baa3 21,000 22,162,980
Hyder PLC, (United Kingdom),
6.75%, 12/15/04............................... Baa1 25,000 25,093,750
6.875%, 12/15/17.............................. Baa1 25,000 25,438,750
Hydro-Quebec, (Canada),
5.938%, 09/29/49.............................. A+ 5,000 4,415,625
--------------
91,634,985
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 3.1%
United States Treasury Bond,
6.125%, 08/15/07.............................. 7,500 7,707,450
United States Treasury Notes,
5.875%, 01/31/99 (a).......................... 20,000 20,046,800
5.875%, 09/30/02.............................. 28,550 28,706,169
5.875%, 02/15/04.............................. 16,750 16,896,563
6.25%, 10/31/01............................... 9,500 9,661,785
6.375%, 03/31/01 (a).......................... 4,600 4,686,250
6.375%, 08/15/27.............................. 57,325 60,460,104
--------------
148,165,121
--------------
FOREIGN GOVERNMENT BONDS -- 4.2%
Abbey National Treasury, (United Kingdom),
5.875%, 03/08/99.............................. Aa2 5,500 5,492,850
Banco de Commercio Exterior de Colombia, S.A.,
M.T.N. (Colombia),
8.625%, 06/02/00.............................. Baa3 5,500 5,623,750
City of Moscow, (Russia),
9.50%, 05/31/00............................... Ba2 16,500 15,592,500
City of St. Petersburg, (Russia),
9.50%, 06/18/02............................... NR 25,000 22,500,000
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Province of Quebec, (Canada),
6.238%, 06/15/99.............................. A2 $ 3,000 $ 3,007,969
Republic of Colombia, (Colombia),
7.625%, 02/15/07 (a).......................... Baa3 85,000 79,370,450
8.00%, 06/14/01............................... Baa3 2,250 2,257,875
8.75%, 10/06/99............................... Baa3 12,325 12,692,532
Republic of South Africa, (South Africa),
8.50%, 06/23/17............................... Baa3 37,950 36,242,250
Russian Ministry of Finance, (Russia),
10.00%, 06/26/07.............................. Ba2 7,800 7,226,700
United Mexican States, (Mexico),
11.50%, 05/15/26.............................. Ba2 6,900 8,176,500
--------------
198,183,376
--------------
TOTAL LONG-TERM BONDS
(cost $2,787,932,280).................................................... 2,779,026,495
--------------
COMMON STOCKS -- 32.5% SHARES
-------------
AEROSPACE -- 0.8%
AlliedSignal, Inc............................... 196,400 7,647,325
GenCorp, Inc.................................... 100,000 2,500,000
Litton Industries, Inc. (b)..................... 78,900 4,536,750
Lockheed Martin Corp............................ 193,000 19,010,500
Parker-Hannifin Corp. (b)....................... 43,925 2,015,059
Raytheon Co. (Class "A" Stock) (b).............. 7,295 359,749
--------------
36,069,383
--------------
AIRLINES -- 0.4%
AMR Corp. (b)................................... 84,700 10,883,950
US Airways Group, Inc. (b)...................... 114,900 7,181,250
--------------
18,065,200
--------------
APPAREL -- 0.0%
Phillips-Van Heusen Corp........................ 96,300 1,372,275
--------------
AUTOS - CARS & TRUCKS -- 0.4%
Chrysler Corp................................... 147,800 5,200,712
Ford Motor Co................................... 95,600 4,654,525
General Motors Corp............................. 111,000 6,729,375
Mascotech, Inc.................................. 96,000 1,764,000
Titan International, Inc........................ 102,950 2,065,434
--------------
20,414,046
--------------
BANKS AND SAVINGS & LOANS -- 1.4%
BankAmerica Corp................................ 172,000 12,556,000
Barnett Banks, Inc.............................. 179,600 12,908,750
Chase Manhattan Corp............................ 213,800 23,411,100
Citicorp........................................ 56,800 7,181,650
Fleet Financial Group, Inc...................... 166,100 12,447,119
--------------
68,504,619
--------------
CHEMICALS -- 0.2%
Ferro Corp...................................... 137,100 3,333,244
Millennium Chemicals, Inc....................... 148,927 3,509,092
OM Group, Inc................................... 64,400 2,358,650
--------------
9,200,986
--------------
COMMERCIAL SERVICES -- 0.3%
Cendant Corp. (b)............................... 373,700 12,845,937
--------------
COMPUTER SERVICES -- 1.5%
Autodesk, Inc................................... 671,600 24,849,200
BMC Software, Inc. (b).......................... 296,400 19,451,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B10
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Cadence Design Systems, Inc. (b)................ 693,800 $ 16,998,100
Microsoft Corp. (a)............................. 67,900 8,776,075
--------------
70,074,625
--------------
COMPUTERS -- 2.1%
3Com Corp. (b).................................. 519,600 18,153,525
Cisco Systems, Inc. (b)......................... 436,050 24,309,787
Compaq Computer Corp............................ 245,300 13,844,119
Digital Equipment Corp. (b)..................... 99,200 3,670,400
International Business Machines Corp............ 179,800 18,800,337
Sun Microsystems, Inc. (b)...................... 552,900 22,046,887
--------------
100,825,055
--------------
CONSTRUCTION -- 0.2%
Oakwood Homes Corp.............................. 141,600 4,699,350
Standard Pacific Corp........................... 156,600 2,466,450
Webb Corp....................................... 142,600 3,707,600
--------------
10,873,400
--------------
CONSUMER-APPLIANCES -- 0.3%
Sunbeam Corp.,.................................. 293,000 12,342,625
--------------
CONTAINERS -- 0.0%
Owens-Illinois, Inc. (b)........................ 58,300 2,211,756
--------------
COSMETICS & SOAPS -- 0.5%
Avon Products, Inc.............................. 425,600 26,121,200
--------------
DIVERSIFIED OPERATIONS -- 1.0%
Cognizant Corp.................................. 289,800 12,914,212
General Electric Co............................. 408,600 29,981,025
Whitman Corp.................................... 135,000 3,518,437
--------------
46,413,674
--------------
DRUGS AND MEDICAL SUPPLIES -- 3.8%
American Home Products Corp.,................... 315,500 24,135,750
Biogen, Inc. (b)................................ 532,500 19,369,687
Bristol-Myers Squibb Co......................... 308,700 29,210,737
Cardinal Health, Inc............................ 300,300 22,560,037
Guidant Corp.................................... 202,400 12,599,400
Medtronic, Inc.................................. 398,500 20,846,531
Novartis Corp., AG, ADR (Switzerland)........... 84,100 6,833,125
Pfizer, Inc..................................... 253,800 18,923,962
Warner-Lambert Co............................... 190,400 23,609,600
--------------
178,088,829
--------------
ELECTRICAL EQUIPMENT -- 0.0%
Belden, Inc..................................... 68,200 2,404,050
--------------
ELECTRONICS -- 0.5%
Intel Corp...................................... 79,600 5,591,900
National Semiconductor Corp. (b)................ 738,400 19,152,250
--------------
24,744,150
--------------
ENGINEERING & CONSTRUCTION -- 0.0%
Giant Cement Holdings, Inc. (b)................. 59,100 1,366,687
--------------
ENVIRONMENTAL SERVICES -- 0.5%
U.S.A. Waste Services, Inc. (b)................. 651,100 25,555,675
--------------
EXPLORATION & PRODUCTION -- 0.0%
Apex Silver Mines Ltd. (b)...................... 83,600 1,065,900
--------------
FINANCIAL SERVICES -- 1.6%
Fannie Mae...................................... 24,900 1,420,856
Lehman Brothers Holdings, Inc................... 254,000 12,954,000
Merrill Lynch & Co., Inc........................ 59,200 4,317,900
Morgan Stanley, Dean Witter, Discover & Co.,.... 334,090 19,753,071
Schwab (Charles) Corp........................... 417,600 17,513,100
Travelers Group, Inc............................ 357,967 19,285,472
--------------
75,244,399
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 1.3%
PepsiCo, Inc.................................... 740,500 $ 26,981,969
Quaker Oats Co.................................. 317,300 16,737,575
Ralston-Ralston Purina Group.................... 205,600 19,107,950
--------------
62,827,494
--------------
FOREST PRODUCTS -- 0.3%
Boise Cascade Corp.,............................ 145,600 4,404,400
Champion International Corp..................... 96,200 4,359,062
Louisiana-Pacific Corp.......................... 100,400 1,907,600
Mead Corp....................................... 96,500 2,702,000
Willamette Industries, Inc...................... 70,300 2,262,781
--------------
15,635,843
--------------
HEALTHCARE -- 0.1%
A.O. Smith Corp................................. 71,500 3,020,875
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.6%
Columbia/HCA Healthcare Corp.,.................. 203,800 6,037,575
Healthsouth Corp. (b)........................... 779,300 21,625,575
--------------
27,663,150
--------------
HOUSEHOLD PRODUCTS -- 0.0%
Leggett & Platt, Inc............................ 58,300 2,441,312
--------------
HOUSING RELATED -- 0.2%
Hanson, PLC, ADR (United Kingdom)............... 260,962 6,018,436
Owens Corning................................... 100,100 3,415,912
--------------
9,434,348
--------------
INSURANCE -- 1.2%
Allstate Corp................................... 150,000 13,631,250
Berkley (WR) Corp............................... 43,100 1,891,012
Financial Security Assurance Holdings Ltd.,..... 34,600 1,669,450
Loews Corp...................................... 29,500 3,130,687
PennCorp Financial Group, Inc................... 81,600 2,912,100
Provident Companies, Inc........................ 54,300 2,097,337
Reinsurance Group of America, Inc............... 117,450 4,998,966
TIG Holdings, Inc............................... 86,900 2,883,994
Trenwick Group, Inc............................. 65,950 2,481,369
United Healthcare Corp.......................... 377,000 18,732,187
Western National Corp........................... 134,500 3,984,562
--------------
58,412,914
--------------
INSTRUMENTS-CONTROLS -- 0.0%
Flowserve Corp.................................. 40,186 1,122,696
--------------
LEISURE -- 0.5%
Carnival Corp. (Class "A" Stock)................ 398,800 22,083,550
--------------
MACHINERY -- 0.2%
Case Corp....................................... 88,400 5,342,675
DT Industries, Inc.............................. 36,400 1,237,600
Global Industrial
Technologies, Inc. (b)........................ 62,400 1,056,900
Paxar Corp. (b)................................. 233,725 3,462,052
--------------
11,099,227
--------------
MANUFACTURING -- 1.0%
Illinois Tool Works, Inc. (b)................... 181,300 10,900,663
Tyco International, Ltd......................... 802,800 36,176,175
--------------
47,076,838
--------------
MEDIA -- 0.2%
Central Newspapers, Inc. (Class "A" Stock)...... 50,800 3,756,025
Houghton Mifflin Co............................. 59,700 2,290,988
Knight-Ridder, Inc.............................. 59,200 3,078,400
Lee Enterprises, Inc............................ 51,700 1,528,381
--------------
10,653,794
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B11
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MEDICAL INSTRUMENTS -- 0.3%
Arterial Vascular Engineering, Inc., (b)........ 198,200 $ 12,883,000
--------------
METALS-FERROUS -- 0.2%
Bethlehem Steel Corp. (b)....................... 225,200 1,942,350
LTV Corp........................................ 208,300 2,030,925
Material Sciences Corp. (b)..................... 98,500 1,200,469
National Steel Corp. (Class "B" Stock) (b)...... 42,900 496,031
USX-U.S. Steel Group............................ 61,800 1,931,250
--------------
7,601,025
--------------
METALS-NON FERROUS -- 0.2%
Aluminum Company of America..................... 147,600 10,387,350
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.3%
Coltec Industries, Inc. (b)..................... 44,400 1,029,525
Donaldson, Co................................... 55,500 2,500,969
IDEX Corp....................................... 61,100 2,130,863
Mark IV Industries, Inc......................... 87,942 1,923,731
Trinity Industries, Inc......................... 53,100 2,369,588
Wolverine Tube, Inc. (b)........................ 37,600 1,165,600
York International Corp......................... 27,400 1,084,013
--------------
12,204,289
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
Eastman Kodak Co................................ 29,200 1,775,725
Unilever N.V., ADR (United Kingdom)............. 237,000 14,797,688
--------------
16,573,413
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.2%
CBS Corp........................................ 207,400 6,105,338
Energy Group, PLC, ADR (United Kingdom)......... 49,862 2,225,092
--------------
8,330,430
--------------
OIL & GAS -- 1.3%
Basin Exploration, Inc. (b)..................... 17,700 314,175
Cabot Oil & Gas Corp. (Class "A" Stock)......... 90,100 1,751,319
Cross Timbers Oil Co............................ 296,300 7,388,981
Elf Aquitaine SA, ADR (France).................. 126,900 7,439,513
Enron Oil & Gas Co.............................. 49,200 1,042,425
Murphy Oil Corp................................. 28,100 1,522,669
Noble Affiliates, Inc.,......................... 196,700 6,933,675
Pioneer Natural Resources Co.................... 325,044 9,405,961
Seagull Energy Corp. (b)........................ 63,700 1,313,813
Total SA (Class "B" Stock) (France)............. 126,800 7,037,400
Unocal Corp..................................... 389,700 15,125,231
Western Gas Resources, Inc.,.................... 104,700 2,316,488
--------------
61,591,650
--------------
OIL & GAS SERVICES -- 1.5%
Apache Corp..................................... 498,500 17,478,656
Halliburton Co.................................. 595,200 30,913,200
J. Ray McDermott, SA (b)........................ 166,500 7,159,500
McDermott International, Inc.................... 307,700 11,269,513
Oryx Energy Co. (b)............................. 125,500 3,200,250
--------------
70,021,119
--------------
REAL ESTATE DEVELOPMENT -- 0.2%
Crescent Operating, Inc. (b).................... 17,360 425,320
Crescent Real Estate Equities, Inc.............. 166,300 6,548,063
Equity Residential Properties Trust............. 14,600 738,213
--------------
7,711,596
--------------
RETAIL -- 4.2%
Bombay Company, Inc. (b)........................ 141,500 654,438
Borders Group, Inc. (b)......................... 656,000 20,541,000
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Charming Shoppes, Inc. (b)...................... 824,800 $ 3,866,250
Consolidated Stores Corp. (b)................... 466,900 20,514,419
Costco Companies, Inc. (b)...................... 373,200 16,654,050
CVS Corp........................................ 157,900 10,115,469
Designs, Inc. (b)............................... 52,800 158,400
Dillards, Inc. (Class "A" Stock)................ 32,200 1,135,050
Federated Department Stores, Inc. (b)........... 242,700 10,451,269
Home Depot, Inc................................. 276,050 16,252,444
Jan Bell Marketing, Inc. (b).................... 153,800 384,500
Kmart Corp. (b)................................. 619,600 7,164,125
Kroger Co. (b).................................. 407,400 15,048,338
Liz Claiborne, Inc.............................. 276,600 11,565,338
Rite Aid Corp................................... 241,700 14,184,769
Safeway, Inc. (b)............................... 407,800 25,793,350
Tandy Corp...................................... 47,500 1,831,719
The Limited, Inc................................ 215,300 5,490,150
The TJX Companies, Inc.......................... 449,600 15,455,000
Toys 'R' Us, Inc. (b)........................... 88,700 2,788,506
--------------
200,048,584
--------------
RUBBER -- 0.1%
Goodyear Tire & Rubber Co....................... 39,800 2,532,275
--------------
TELECOMMUNICATIONS -- 1.2%
Alcatel Alsthom, ADR (France)................... 127,000 3,214,688
Deutsche Telekom, ADR (Germany)................. 45,800 853,025
Nextel Communications, Inc. (Class "A" Stock)
(b)........................................... 871,500 22,659,000
Tellabs, Inc. (b)............................... 299,000 15,809,625
WorldCom, Inc................................... 410,800 12,426,700
--------------
54,963,038
--------------
TEXTILES -- 0.1%
Fruit of the Loom, Inc. (Class "A" Stock) (b)... 73,800 1,891,125
Pillowtex Corp.................................. 18,830 656,696
Tultex Corp. (b)................................ 89,800 364,813
--------------
2,912,634
--------------
TOBACCO -- 0.8%
Bat Industries, PLC, ADR (United Kingdom)....... 107,100 2,008,125
Phillip Morris Co. Inc.......................... 646,700 29,303,594
RJR Nabisco Holdings Corp....................... 125,800 4,717,500
--------------
36,029,219
--------------
TOYS -- 0.4%
Mattel, Inc..................................... 475,751 17,721,725
--------------
TRUCKING/SHIPPING -- 0.0%
Yellow Corp. (b)................................ 44,300 1,113,038
--------------
WASTE MANAGEMENT -- 0.1%
Waste Management, Inc........................... 208,000 5,720,000
--------------
TOTAL COMMON STOCKS
(cost $1,331,959,806).......................................... 1,543,620,897
--------------
PREFERRED STOCKS -- 0.7%
FINANCIAL SERVICES -- 0.7%
Central Hispano Capital Corp.,.................. 225,900 6,254,606
Central Hispano Corp.,.......................... 1,000,000 26,000,000
--------------
32,254,606
--------------
TOTAL PREFERRED STOCKS
(cost $31,236,594)............................................. 32,254,606
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,151,360,152).......................................... 4,354,901,998
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B12
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS -- 7.2% (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES -- 0.3%
Centric Capital Corp.,
5.92%, 02/23/98............................... P1 $ 1,000 $ 991,449
Corporate Asset Funding Co., Inc.,
5.78%, 02/24/98............................... P1 4,600 4,560,857
Falcon Asset Securitization Corp.,
5.90%, 01/21/98............................... P1 1,000 996,886
Restructured Asset Securities Enhanced Return,
5.95875%, 08/28/98............................ P1 4,000 4,000,000
Strategic Money Market Trust,
5.91%, 12/16/98............................... P1 2,000 2,000,000
Variable Funding Capital Corp.,
5.81%, 02/20/98............................... P1 2,000 1,984,184
Wood Street Funding Corp.,
5.83%, 02/13/98............................... P1 1,000 993,198
--------------
15,526,574
--------------
BANK NOTES -- 0.2%
American Express Centurion Bank,
5.929%, 09/22/98.............................. P1 5,000 5,000,000
NBD Bank--Michigan,
5.00%, 01/30/98............................... P1 2,000 1,998,356
US Bank, N.A.,
5.83094%, 10/21/98............................ P1 1,000 999,358
--------------
7,997,714
--------------
CERTIFICATES OF DEPOSIT-EURO -- 0.2%
Morgan Guaranty Trust Co.,
5.79%, 03/16/98............................... P1 4,000 4,000,209
Westdeutsche Landesbank Girozentral, (Germany),
5.83%, 08/03/98............................... P1 6,000 5,997,462
--------------
9,997,671
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 1.1%
Canadian Imperial Bank of Commerce, (Canada),
5.95%, 06/29/98............................... P1 900 899,706
Corestates Bank, NA,
5.7825%, 01/23/98............................. P1 1,000 1,000,000
Credit Agricole Indosuez,
5.75%, 02/10/98............................... P1 5,000 5,000,000
Dresdner Bank, AG, (Germany),
5.95%, 10/20/98............................... P1 7,000 6,998,241
Empresa Colombia de Petroleos, (Colombia),
7.25%, 07/08/98............................... BBB- 8,250 8,280,937
Kansallis-Osake Pankki, N.Y., (Finland),
6.125%, 05/15/98.............................. A3 6,160 6,160,000
9.75%, 12/15/98............................... Baa1 16,950 17,472,908
Republic of Colombia, (Colombia),
7.125%, 05/11/98.............................. Ba1 2,775 2,802,750
Royal Bank of Canada, (Canada),
5.91%, 06/17/98............................... P1 3,000 2,999,217
Swiss Bank Corp.,
5.77%, 01/30/98............................... P1 2,000 1,999,421
--------------
53,613,180
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 3.4%
Aon Corp.,
5.79%, 03/12/98............................... P2 $ 880 $ 870,234
Barton Capital Corp.,
5.95%, 02/09/98............................... P1 1,000 993,719
Bell Atlantic Financial Services, Inc.,
6.08%, 01/09/98............................... P1 6,000 5,992,907
BP America,
6.90%, 01/02/98............................... P1 6,500 6,500,000
Capital One Bank,
6.66%, 08/17/98............................... Baa3 10,050 10,088,291
Coca-Cola Enterprises,
5.65%, 03/12/98............................... P2 3,000 2,967,512
Comdisco, Inc., M.T.N.,
5.54%, 01/26/98............................... Baa1 12,500 12,498,000
6.09%, 11/09/98............................... Baa1 34,000 34,009,860
6.29%, 10/22/98............................... Baa1 5,000 5,009,900
6.689%, 05/22/98.............................. Baa1 9,000 9,024,300
Duke Capital Corp.,
5.90%, 01/23/98............................... P2 1,000 996,558
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
7.875%, 03/15/98 (b).......................... Baa2 9,925 9,961,921
Federal Express Corp., M.T.N.,
10.00%, 06/01/98.............................. Baa3 3,000 3,045,750
Finova Capital Corp.,
5.75%, 02/04/98............................... P2 3,400 3,382,079
First USA Bank,
8.20%, 02/15/98............................... Baa3 11,500 11,521,275
General Electric Capital Services, Inc.,
5.70%, 01/12/98............................... P1 5,000 4,992,083
Honeywell Inc.,
6.75%, 01/02/98............................... P1 4,250 4,250,000
ING America Insurance Holdings, Inc.,
5.74%, 04/03/98............................... P1 2,000 1,970,981
5.74%, 04/28/98............................... P1 1,600 1,570,407
Mont Blanc Capital Corp.,
5.82%, 02/13/98............................... P1 2,000 1,986,420
Newell Co.,
6.80%, 01/02/98............................... P1 6,500 6,500,000
Old Line Funding Corp.,
5.90%, 01/21/98............................... A1+ 1,000 996,886
PHH Corp.,
6.75%, 01/02/98............................... P1 6,500 6,500,000
Safeco Corp.,
5.76%, 03/17/98............................... P2 2,000 1,976,320
Special Purpose Account Receivables Cooperative
Corp.,
5.80%, 03/26/98............................... P1 1,000 986,628
Textron Financial Corp.,
6.125%, 02/23/98.............................. A3 1,000 1,000,220
Xerox Capital (Europe) PLC
5.75%, 02/05/98............................... P1 3,000 2,983,708
5.79%, 02/12/98............................... P1 875 869,230
6.85%, 01/02/98............................... P1 2,610 2,610,000
--------------
156,055,189
--------------
MEDIUM TERM NOTES -- 0.2%
Ford Motor Credit Corp.,
9.00%, 03/25/98............................... P1 1,200 1,208,318
General Motors Acceptance Corp.,
5.76825%, 09/21/98............................ P1 3,000 2,997,564
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B13
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
IBM Credit Corp.,
5.65%, 02/27/98............................... P1 $ 4,000 $ 3,998,626
Morgan Stanley Group, Inc.,
6.34%, 03/09/98............................... P1 1,000 1,000,606
Suntrust Banks, Inc.,
8.875%, 02/01/98.............................. P1 805 806,820
--------------
10,011,934
--------------
OTHER CORPORATE OBLIGATIONS -- 0.1%
Association Corp. of America,
6.125%, 02/01/98.............................. P1 2,040 2,039,976
Beneficial Corp.,
9.125%, 02/15/98.............................. P1 2,700 2,709,664
--------------
4,749,640
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.0%
United States Treasury Bills,
5.045%, 03/19/98 (a).......................... 700 692,545
5.165%, 01/22/98 (a).......................... 300 299,139
5.29%, 03/19/98 (a)........................... 400 395,533
--------------
1,387,217
--------------
REPURCHASE AGREEMENT -- 1.7%
Joint Repurchase Agreement Account,
6.53%, 01/02/98 (Note 5)...................... 81,783 81,783,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $340,697,062)...................................................... 341,122,119
--------------
TOTAL INVESTMENTS -- 99.0%
(cost $4,491,825,742; Note 6)............................................ 4,696,024,117
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (C) -- (0.0%)...................
(653,438)
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.0%..............................
48,861,360
--------------
TOTAL NET ASSETS -- 100.0%................................................. $4,744,232,039
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
AG Aktiengesellschaft (German Stock Company)
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Security segregated as collateral for futures contracts.
(b) Non-income producing security.
(c) Open futures contracts as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31, APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
61 S&P 500 Index Mar 98 15,095,625 14,931,275 (164,350)
U.S. Treasury 5
318 Yr. Mar 98 34,423,500 34,542,750 119,250
U.S. Treasury 5
166 Yr. Mar 98 19,931,438 19,997,813 66,375
Short Position:
U.S. Treasury 5
637 Yr. Mar 98 75,803,000 76,738,594 (935,594)
U.S. Treasury 5
365 Yr. Mar 98 39,488,438 39,648,125 (159,687)
U.S. Treasury
1181 10 Yr. Mar 98 131,755,312 132,456,531 (701,219)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B14
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 93.8%
VALUE
COMMON STOCKS -- 57.6% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.3%
AlliedSignal, Inc............................... 289,300 $ 11,264,619
GenCorp, Inc.................................... 428,200 10,705,000
Litton Industries, Inc. (a)..................... 324,400 18,653,000
Lockheed Martin Corp............................ 272,900 26,880,650
Raytheon Co. (Class "A" Stock).................. 30,252 1,491,826
--------------
68,995,095
--------------
AIRLINES -- 1.4%
AMR Corp. (a)................................... 346,000 44,461,000
USAir Group, Inc. (a)........................... 491,700 30,731,250
--------------
75,192,250
--------------
AUTOS - CARS & TRUCKS -- 1.5%
Chrysler Corp................................... 632,700 22,263,131
Ford Motor Co................................... 301,300 14,669,544
General Motors Corp............................. 474,400 28,760,500
Mascotech, Inc.................................. 411,300 7,557,637
Titan International, Inc........................ 440,700 8,841,544
--------------
82,092,356
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
BankAmerica Corp................................ 243,900 17,804,700
Barnett Banks, Inc.............................. 254,200 18,270,625
Chase Manhattan Corp............................ 302,100 33,079,950
Citicorp........................................ 80,500 10,178,219
Fleet Financial Group, Inc...................... 235,100 17,617,806
--------------
96,951,300
--------------
CHEMICALS -- 0.7%
Ferro Corp...................................... 586,950 14,270,222
Millennium Chemicals, Inc....................... 637,700 15,025,806
OM Group, Inc................................... 275,900 10,104,837
--------------
39,400,865
--------------
COMMERCIAL SERVICES -- 0.3%
Cendant Corp. (a)............................... 529,500 18,201,562
--------------
COMPUTERS -- 2.2%
3Com Corp. (a).................................. 737,000 25,748,937
Compaq Computer Corp............................ 346,700 19,566,881
Digital Equipment Corp. (a)..................... 424,700 15,713,900
International Business Machines Corp............ 254,400 26,600,700
Sun Microsystems, Inc. (a)...................... 781,100 31,146,362
--------------
118,776,780
--------------
COMPUTER SERVICES -- 2.4%
Autodesk, Inc................................... 951,300 35,198,100
BMC Software, Inc. (a).......................... 419,800 27,549,375
Cadence Design Systems, Inc. (a)................ 979,500 23,997,750
Cisco Systems, Inc. (a)......................... 617,100 34,403,325
Microsoft Corp.................................. 95,800 12,382,150
--------------
133,530,700
--------------
CONSTRUCTION -- 0.8%
Oakwood Homes Corp.............................. 606,400 20,124,900
Standard Pacific Corp........................... 670,400 10,558,800
Webb Corp....................................... 611,100 15,888,600
--------------
46,572,300
--------------
CONTAINERS -- 0.2%
Owens-Illinois, Inc. (a)........................ 250,000 9,484,375
--------------
COSMETICS & SOAPS -- 0.7%
Avon Products, Inc.............................. 595,600 36,554,950
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
DIVERSIFIED OPERATIONS -- 1.7%
Cognizant Corp.................................. 410,000 $ 18,270,625
General Electric Co............................. 577,200 42,352,050
Loews Corp...................................... 175,000 18,571,875
Whitman Corp.................................... 578,000 15,064,125
--------------
94,258,675
--------------
DRUGS AND MEDICAL SUPPLIES -- 4.6%
American Home Products Corp..................... 446,600 34,164,900
Biogen, Inc. (a)................................ 752,300 27,364,912
Bristol-Myers Squibb Co......................... 453,400 42,902,975
Cardinal Health, Inc............................ 425,100 31,935,637
Guidant Corp.................................... 284,900 17,735,025
Medtronic, Inc.................................. 564,000 29,504,250
Novartis Corp., AG, ADR (Switzerland)........... 114,200 9,278,750
Pfizer, Inc..................................... 359,600 26,812,675
Warner-Lambert Co............................... 269,000 33,356,000
--------------
253,055,124
--------------
ELECTRICAL EQUIPMENT -- 0.2%
Baldor Electric Co.............................. 1 29
Belden, Inc..................................... 292,200 10,300,050
--------------
10,300,079
--------------
ELECTRONICS -- 0.6%
Intel Corp...................................... 112,500 7,903,125
National Semiconductor Corp. (a)................ 1,029,600 26,705,250
--------------
34,608,375
--------------
ENERGY -- 0.2%
Energy Group, PLC, ADR (United Kingdom)......... 218,900 9,768,413
--------------
ENGINEERING & CONSTRUCTION -- 0.1%
Giant Cement Holdings, Inc. (a)................. 259,600 6,003,250
--------------
ENVIRONMENTAL SERVICES -- 1.1%
U.S.A. Waste Services, Inc. (a)................. 920,200 36,117,850
Waste Management, Inc........................... 872,300 23,988,250
--------------
60,106,100
--------------
FINANCIAL SERVICES -- 3.3%
Federal National Mortgage Association........... 35,100 2,002,894
Lehman Brothers Holdings, Inc................... 1,087,300 55,452,300
Merrill Lynch & Co., Inc........................ 253,100 18,460,481
Morgan Stanley, Dean Witter, Discover & Co...... 632,195 37,378,529
Schwab (Charles) Corp........................... 589,900 24,738,931
Travelers Group, Inc............................ 763,266 41,120,956
--------------
179,154,091
--------------
FOOD & BEVERAGES -- 2.0%
PepsiCo, Inc.................................... 1,047,900 38,182,856
Quaker Oats Co.................................. 448,500 23,658,375
Ralston-Ralston Purina Group.................... 291,000 27,044,812
RJR Nabisco Holdings Corp....................... 538,700 20,201,250
--------------
109,087,293
--------------
FOREST PRODUCTS -- 1.3%
Boise Cascade Corp.............................. 700,000 21,175,000
Champion International Corp..................... 412,200 18,677,812
Louisiana-Pacific Corp.......................... 412,200 7,831,800
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B15
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Mead Corp....................................... 413,200 $ 11,569,600
Willamette Industries, Inc...................... 301,600 9,707,750
--------------
68,961,962
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 1.0%
Columbia/HCA Healthcare Corp.................... 855,000 25,329,375
Healthsouth Corp. (a)........................... 1,101,400 30,563,850
--------------
55,893,225
--------------
HOUSEHOLD PRODUCTS -- 0.5%
Leggett & Platt, Inc............................ 249,500 10,447,812
Sunbeam Corp.................................... 415,000 17,481,875
--------------
27,929,687
--------------
HOUSING RELATED -- 0.7%
Hanson, PLC, ADR (United Kingdom)............... 1,046,700 24,139,519
Owens Corning................................... 429,000 14,639,625
--------------
38,779,144
--------------
INSTRUMENTS-CONTROLS -- 0.2%
Parker-Hannifin Corp............................ 187,500 8,601,563
--------------
INSURANCE -- 2.6%
Allstate Corp................................... 212,000 19,265,500
Berkley (WR) Corp............................... 186,450 8,180,494
Financial Security Assurance Holdings Ltd....... 148,500 7,165,125
PennCorp Financial Group, Inc................... 349,600 12,476,350
Provident Companies, Inc........................ 232,600 8,984,175
Reinsurance Group of America, Inc............... 503,100 21,413,194
TIG Holdings, Inc............................... 372,300 12,355,706
Trenwick Group, Inc............................. 289,700 10,899,962
United Healthcare Corp.......................... 532,700 26,468,531
Western National Corp........................... 575,900 17,061,037
--------------
144,270,074
--------------
LEISURE -- 0.5%
Carnival Corp. (Class "A" Stock)................ 563,300 31,192,737
--------------
MACHINERY -- 0.9%
Case Corp....................................... 378,500 22,875,594
DT Industries, Inc.............................. 155,600 5,290,400
Global Industrial Technologies, Inc. (a)........ 273,600 4,634,100
Paxar Corp. (a)................................. 1,011,875 14,988,398
--------------
47,788,492
--------------
MANUFACTURING -- 1.6%
A.O. Smith Corp................................. 306,300 12,941,175
Flowserve Corp.................................. 171,691 4,796,617
Illinois Tool Works, Inc........................ 256,100 15,398,012
Tyco International, Ltd......................... 1,134,202 51,109,978
--------------
84,245,782
--------------
MEDIA -- 0.8%
Central Newspapers, Inc. (Class "A" Stock)...... 217,600 16,088,800
Houghton Mifflin Co............................. 255,200 9,793,300
Knight-Ridder, Inc.............................. 253,000 13,156,000
Lee Enterprises, Inc............................ 221,400 6,545,137
--------------
45,583,237
--------------
MEDICAL INSTRUMENTS -- 0.3%
Arterial Vascular Engineering, Inc. (a)......... 280,000 18,200,000
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
METALS-FERROUS -- 0.6%
Bethlehem Steel Corp. (a)....................... 958,000 $ 8,262,750
LTV Corp........................................ 892,000 8,697,000
Material Sciences Corp. (a)..................... 421,800 5,140,687
National Steel Corp. (Class "B" Stock) (a)...... 183,200 2,118,250
USX-U.S. Steel Group............................ 265,100 8,284,375
--------------
32,503,062
--------------
METALS-NON FERROUS -- 0.8%
Aluminum Company of America..................... 632,400 44,505,150
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.9%
Coltec Industries, Inc. (a)..................... 190,000 4,405,625
Donaldson, Co................................... 237,800 10,715,862
IDEX Corp....................................... 261,500 9,119,813
Mark IV Industries, Inc......................... 376,900 8,244,688
Trinity Industries, Inc......................... 227,000 10,129,875
Wolverine Tube, Inc. (a)........................ 164,600 5,102,600
York International Corp......................... 117,200 4,636,725
--------------
52,355,188
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.5%
Eastman Kodak Co................................ 120,000 7,297,500
Unilever N.V., ADR (United Kingdom)............. 334,000 20,854,125
--------------
28,151,625
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.5%
CBS Corp........................................ 892,600 26,275,913
--------------
OIL & GAS -- 3.0%
Basin Exploration, Inc. (a)..................... 75,700 1,343,675
Cabot Oil & Gas Corp. (Class "A" Stock)......... 385,700 7,497,044
Cross Timbers Oil Co............................ 417,400 10,408,913
Elf Aquitaine SA, ADR (France).................. 544,200 31,903,725
Enron Oil & Gas Co.............................. 210,600 4,462,088
Murphy Oil Corp................................. 120,900 6,551,269
Noble Affiliates, Inc........................... 426,300 15,027,075
Pioneer Natural Resources Co.................... 1,426,731 41,286,028
Seagull Energy Corp. (a)........................ 260,200 5,366,625
Total SA (Class "B" Stock) (France)............. 179,200 9,945,600
Unocal Corp..................................... 550,500 21,366,281
Western Gas Resources, Inc...................... 448,500 9,923,063
--------------
165,081,386
--------------
OIL & GAS SERVICES -- 3.0%
Apache Corp..................................... 704,200 24,691,013
Halliburton Co.................................. 844,100 43,840,444
J. Ray McDermott, SA (a)........................ 713,300 30,671,900
McDermott International, Inc.................... 1,345,700 49,286,263
Oryx Energy Co. (a)............................. 537,500 13,706,250
--------------
162,195,870
--------------
PRECIOUS METALS -- 0.1%
Apex Silver Mines Ltd. (a)...................... 360,900 4,601,475
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Crescent Operating, Inc. (a).................... 71,240 1,745,380
Crescent Real Estate Equities, Inc.............. 712,400 28,050,750
Equity Residential Properties Trust............. 160,000 8,090,000
--------------
37,886,130
--------------
RETAIL -- 6.4%
Bombay Company, Inc. (a)........................ 605,900 2,802,288
Borders Group, Inc. (a)......................... 927,500 29,042,344
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Charming Shoppes, Inc. (a)...................... 3,532,600 $ 16,559,063
Consolidated Stores Corp. (a)................... 661,800 29,077,838
Costco Companies, Inc. (a)...................... 526,000 23,472,750
CVS Corp........................................ 223,000 14,285,938
Designs, Inc. (a)............................... 216,200 648,600
Dillards, Inc. (Class "A" Stock)................ 138,100 4,868,025
Federated Department Stores, Inc. (a)........... 342,800 14,761,825
Home Depot, Inc................................. 390,000 22,961,250
Jan Bell Marketing, Inc. (a).................... 658,700 1,646,750
K mart Corp. (a)................................ 2,646,900 30,604,781
Kroger Co. (a).................................. 575,200 21,246,450
Liz Claiborne, Inc.............................. 391,300 16,361,231
Phillips-Van Heusen Corp........................ 412,600 5,879,550
Rite Aid Corp................................... 341,400 20,035,913
Safeway, Inc. (a)............................... 576,300 36,450,975
Tandy Corp...................................... 203,800 7,859,038
The Limited, Inc................................ 837,400 21,353,700
The TJX Companies, Inc.......................... 637,200 21,903,750
Toys 'R' Us, Inc. (a)........................... 379,600 11,933,675
--------------
353,755,734
--------------
RUBBER -- 0.2%
Goodyear Tire & Rubber Co....................... 170,800 10,867,150
--------------
TELECOMMUNICATIONS -- 1.6%
Alcatel Alsthom, ADR (France)................... 543,800 13,764,938
Deutsche Telekom, ADR (Germany)................. 196,100 3,652,363
Nextel Communications, Inc. (Class "A"
Stock) (a).................................... 1,242,000 32,292,000
Tellabs, Inc. (a)............................... 422,500 22,339,688
WorldCom, Inc................................... 579,500 17,529,875
--------------
89,578,864
--------------
TEXTILES -- 0.2%
Fruit of the Loom, Inc. (Class "A" Stock) (a)... 316,400 8,107,750
Pillowtex Corp.................................. 78,333 2,731,856
Tultex Corp. (a)................................ 384,400 1,561,625
--------------
12,401,231
--------------
TOBACCO -- 1.0%
Bat Industries, PLC, ADR (United Kingdom)....... 458,600 8,598,750
Phillip Morris Co. Inc.......................... 1,034,900 46,893,906
--------------
55,492,656
--------------
TOYS -- 0.5%
Mattel, Inc..................................... 672,700 25,058,075
--------------
TRUCKING/SHIPPING -- 0.1%
Yellow Corp. (a)................................ 189,400 4,758,675
--------------
TOTAL COMMON STOCKS
(cost $2,741,915,742).......................................... 3,159,008,020
--------------
PREFERRED STOCKS -- 0.5%
FINANCIAL SERVICES -- 0.5%
Central Hispano Corp............................ 1,000,000 26,000,000
--------------
(cost $25,440,000)
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS -- 35.8% (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
AGRICULTURAL PRODUCTS & SERVICES -- 0.1%
Agco Corp.,
8.50%, 03/15/06............................... Ba1 $ 2,875 $ 3,054,687
--------------
AIRLINES -- 2.3%
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 19,335 24,379,695
10.375%, 02/01/11 (c)......................... Ba1 25,750 33,388,737
United Airlines, Inc.,
6.126%, 03/02/04.............................. Aa2 8,000 7,988,000
9.75%, 08/15/21............................... Baa3 10,125 12,956,659
10.67%, 05/01/04.............................. Baa3 19,500 23,372,310
11.21%, 05/01/14.............................. Baa3 17,500 24,540,425
--------------
126,625,826
--------------
APPAREL MANUFACTURING -- 0.4%
Nine West Group, Inc.,
8.375%, 08/15/05.............................. Ba2 25,000 23,937,500
--------------
ASSET-BACKED SECURITIES -- 0.4%
California Infrastructure,
6.17%, 03/25/03............................... Aaa 4,000 4,012,400
MBNA Master Credit Card Trust,
5.976%, 11/15/02.............................. Aaa 1,000 1,000,312
Standard Credit Card Master Trust,
5.95%, 10/07/04 (b)........................... Aaa 4,500 4,453,560
--------------
9,466,272
--------------
BANKS AND SAVINGS & LOANS -- 5.5%
Abbey National Treasury, (United Kingdom),
5.875%, 03/08/99.............................. Aa2 5,500 5,492,850
Banc One Corp.,
5.876%, 09/30/99.............................. Aa3 5,000 5,010,400
Banco Ganadero, SA, (Colombia),
9.75%, 08/26/99............................... Baa3 7,300 7,500,750
Bangkok Bank, (Thailand),
7.25%, 09/15/05 (b)........................... Ba1 10,000 7,452,800
8.25%, 03/15/16............................... Ba1 7,500 5,250,000
8.375%, 01/15/27 (b).......................... Ba1 43,000 25,198,430
Bank of Nova Scotia,
6.50%, 07/15/07............................... A1 5,400 5,413,500
Bank of Boston N.A.,
5.973%, 01/25/99.............................. A2 2,500 2,507,600
Bankers Trust New York Corp.,
5.813%, 08/06/00.............................. A2 2,500 2,495,000
BT Securities Corp.,
6.125%, 02/24/00.............................. A3 5,000 4,955,000
Capital One Bank,
6.844%, 06/13/00.............................. Baa3 23,900 24,225,757
Central Hispano Financial Services, (Portugal),
6.25%, 04/28/05............................... A3 5,000 5,000,000
Chemical Banking,
6.075%, 02/28/00.............................. Aa3 6,000 6,009,240
Citicorp, M.T.N.,
6.045%, 05/15/00.............................. Aa3 10,000 10,031,800
First Chicago NBD Corp.,
5.986%, 06/10/02.............................. A1 10,000 9,989,600
Great Western Financial,
8.206%, 02/01/27.............................. Baa2 14,200 15,060,804
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Kansallis-Osake Pankki, (Finland),
8.65%, 12/01/49 (b)........................... A3 $ 9,000 $ 9,180,000
Key Bank N.A.
5.875%, 08/29/00.............................. Aa3 7,000 6,950,020
MBNA America Bank N.A.,
5.973%, 07/18/01.............................. Baa1 5,000 4,965,500
MBNA Corp.,
6.288%, 09/08/00.............................. Baa2 3,000 2,991,000
Merita Bank, Ltd.,
7.50%, 12/29/49 (b)........................... NR 12,000 12,312,000
National Australia Bank, (Australia),
6.40%, 12/10/07............................... A1 8,700 8,700,000
6.60%, 12/10/07............................... A1 5,000 5,000,000
Nationsbank Corp.,
6.076%, 06/19/02.............................. A1 5,000 5,005,850
North Fork Bancorporation, Inc.,
8.00%, 12/15/27............................... Baa3 4,000 4,068,800
Norwest Corp.,
5.863%, 11/13/01.............................. Aa3 6,450 6,446,130
Okobank, (Finland),
7.20%, 10/29/49 (c)........................... A3 12,500 12,640,625
7.312%, 09/27/49 (b).......................... A3 18,750 19,031,250
Royal Bank of Canada, (Canada),
6.75%, 10/24/11 (b)........................... Aa3 5,000 5,032,600
Siam Commercila, (Thailand),
7.50%, 03/15/06 (b)........................... Ba1 14,500 9,425,000
Suntrust Bank, Inc.,
5.889%, 04/22/02.............................. A1 10,000 9,979,000
Svenska Handelsbank, (Sweden),
7.125%, 03/29/49 (b).......................... A1 5,000 5,037,500
Thai Farmers Bank, (Thailand),
8.25%, 08/21/16 (b)........................... Ba1 20,000 12,000,000
Union Planters Corp.,
8.20%, 12/15/26............................... Baa1 20,750 21,793,932
--------------
302,152,738
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.6%
Roger Cablesystems, Inc., (Canada)
10.00%, 03/15/05.............................. Ba3 2,000 2,200,000
Tele-Communications, Inc.,
6.656%, 12/20/00.............................. Ba1 5,000 5,012,500
7.375%, 02/15/00.............................. Ba1 6,000 6,115,800
7.875%, 08/01/13.............................. Ba1 43,750 47,056,187
8.25%, 01/15/03............................... Ba1 8,000 8,543,120
9.875%, 06/15/22.............................. Ba1 12,878 16,782,996
--------------
85,710,603
--------------
CHEMICALS -- 0.2%
Reliance Industries Ltd., (India),
9.375%, 06/24/26.............................. Baa3 12,000 12,045,000
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CONSULTING -- 0.3%
Comdisco, Inc., M.T.N.,
6.11%, 08/04/99............................... Baa1 $ 12,500 $ 12,513,250
6.375%, 11/30/01.............................. Baa1 2,700 2,700,000
--------------
15,213,250
--------------
CONSUMER SERVICES
Service Corp. International,
7.00%, 06/01/15............................... Baa1 2,500 2,557,875
--------------
ENERGY -- 0.1%
Baltimore Gas & Electric,
5.886%, 03/15/99.............................. A2 4,000 4,004,080
--------------
FINANCIAL SERVICES -- 5.3%
Advanta Corp.,
6.99%, 10/18/99............................... Ba3 10,000 9,600,000
American General Finance, Inc.,
7.57%, 12/01/45............................... A2 5,000 5,178,500
Avco Financial Services,
5.915%, 11/17/99.............................. NR 3,500 3,498,950
Caterpillar Financial Services,
5.829%, 04/10/00.............................. A2 5,000 5,011,850
Conseco, Inc.,
8.70%, 11/15/26 (c)........................... Baa3 32,538 36,378,552
8.796%, 04/01/27.............................. Ba2 29,000 32,368,930
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa3 20,700 20,797,290
6.95%, 03/01/04............................... Baa2 7,500 7,650,000
7.00%, 06/15/00............................... Baa3 13,500 13,769,460
Ford Credit Europe PLC,
6.086%, 12/20/99.............................. A1 10,000 10,010,000
General Motors Acceptance Corp., M.T.N.,
5.813%, 10/30/00.............................. A3 10,000 9,941,250
Lehman Brothers Holdings, Inc.,
6.206%, 09/03/02.............................. Baa1 10,000 9,937,500
6.40%, 08/30/00 (c)........................... Baa1 93,250 93,133,437
Lumbermens Mutual Casualty Co.,
8.30%, 12/01/37............................... Baa1 23,100 24,486,000
9.15%, 07/01/26............................... Baa1 7,500 8,728,125
--------------
290,489,844
--------------
FOOD & BEVERAGE -- 0.5%
Archer Daniels,
6.95%, 12/15/2097............................. Aa3 19,700 19,956,888
Archer-Daniels-Midland Co.,
6.75%, 12/15/27............................... Aa3 5,000 5,008,650
--------------
24,965,538
--------------
FOREST PRODUCTS -- 0.4%
UPM-Kymmene Corp.,
7.45%, 11/26/27............................... Baa1 23,400 24,014,250
--------------
INVESTMENT BANKING -- 1.9%
Merrill Lynch Pierce, Fenner & Smith, Inc.,
5.935%, 11/14/00.............................. A3 10,000 9,966,250
Morgan Stanley Group, Inc.,
5.869%, 12/19/01.............................. A1 5,000 4,987,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
PaineWebber Group, Inc.,
6.206%, 06/03/99.............................. Baa1 $ 5,000 $ 5,004,000
Salomon, Inc.,
6.25%, 10/01/99............................... Baa1 26,400 26,430,624
6.50%, 03/01/00............................... A2 19,000 19,099,560
6.59%, 02/21/01............................... A2 23,250 23,443,440
6.75%, 08/15/03............................... Baa1 5,000 5,059,400
7.25%, 05/01/01............................... A2 8,625 8,852,010
--------------
102,842,784
--------------
LEISURE & TOURISM -- 0.1%
Royal Carribean Cruises Ltd.,
7.50%, 10/15/27............................... Baa3 5,815 5,921,647
--------------
MEDIA -- 3.4%
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 9,100 9,323,132
Time Warner, Inc.,
8.11%, 08/15/06............................... Ba1 9,250 10,014,050
8.18%, 08/15/07............................... Ba1 8,000 8,707,680
9.125%, 01/15/13.............................. Ba1 39,690 47,261,661
Turner Broadcasting Co.,
8.375%, 07/01/13.............................. Ba1 18,275 20,504,916
Viacom, Inc.,
6.75%, 01/15/03............................... Ba2 23,350 22,943,243
7.75%, 06/01/05............................... Ba2 68,800 69,975,792
--------------
188,730,474
--------------
METALS & MINING -- 0.1%
PT Alatief Freeport Financial Co.,
(Netherlands),
9.75%, 04/15/01............................... Ba1 7,600 7,676,000
--------------
OIL & GAS -- 1.2%
Apache Corp.,
7.95%, 04/15/26............................... Baa1 3,000 3,362,100
B.J. Services Co.,
7.00%, 02/01/06............................... Ba1 4,000 4,095,000
Gulf Canada Resources, Ltd., (Canada),
8.25%, 03/15/17............................... Ba1 20,990 23,351,585
Parker & Parsley Petroleum Co.,
8.25%, 08/15/07............................... Baa3 3,000 3,304,320
Talisman Energy Inc.,
7.25%, 10/15/27............................... Baa1 33,250 34,169,695
--------------
68,282,700
--------------
REAL ESTATE INVESTMENT TRUST -- 0.5%
Felcor Suites, L.P.,
7.375%, 10/01/04.............................. Ba1 25,000 24,937,500
--------------
RETAIL -- 1.3%
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Ba1 3,600 3,848,400
8.50%, 06/15/03 (b)........................... Baa2 54,890 59,879,501
10.00%, 02/15/01.............................. Ba1 8,000 8,811,200
--------------
72,539,101
--------------
SHIPPING -- 0.1%
Compania Sud Americana de Vapores, SA (Chile),
7.375%, 12/08/03.............................. Baa1 5,650 5,579,375
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
TELECOMMUNICATIONS -- 1.9%
Total Access Communications Public Company Ltd.,
(Thailand),
8.375%, 11/04/06.............................. Ba2 $ 4,000 $ 1,920,000
WorldCom, Inc.,
7.55%, 04/01/04............................... Ba1 57,000 59,689,830
7.75%, 04/01/07............................... Ba1 20,000 21,477,800
7.75%, 04/01/27............................... Ba1 6,000 6,592,560
8.875%, 01/15/06.............................. Ba1 16,000 17,214,720
--------------
106,894,910
--------------
TOBACCO -- 2.4%
Philip Morris Co. Inc.,
7.20%, 02/01/07............................... A2 10,000 10,318,900
7.50%, 04/01/04............................... A2 50,000 52,363,500
RJR Nabisco, Inc.,
8.50%, 07/01/07............................... Baa3 12,750 13,592,138
8.75%, 04/15/04............................... Baa3 5,000 5,352,750
8.75%, 08/15/05............................... Baa3 12,500 13,486,625
8.75%, 07/15/07............................... Baa3 25,000 27,110,750
9.25%, 08/15/13............................... Baa3 7,000 7,854,350
--------------
130,079,013
--------------
UTILITIES -- 1.4%
Cleveland Electric Illumination,
7.88%, 11/01/17............................... Ba1 27,000 28,503,900
Consolidated Edison,
5.998%, 06/15/02.............................. A1 7,000 7,014,420
Hyder PLC, (United Kingdom),
6.75%, 12/15/17............................... Baa1 5,000 5,018,750
6.875%, 12/15/07.............................. Baa1 25,000 25,438,750
Hydro-Quebec, (Canada),
5.938%, 09/29/49.............................. A+ 6,250 5,519,531
Southern California Edison Co.,
6.38%, 09/25/08............................... Aaa 7,000 7,057,400
--------------
78,552,751
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.2%
Federal National Mortgage Association,
Zero Coupon, 10/09/19 (b)..................... 11,800 3,071,658
United States Treasury Bonds,
6.125%, 08/15/07.............................. 10,450 10,739,047
United States Treasury Notes,
5.875%, 09/30/02 (c).......................... 7,650 7,691,846
6.00%, 08/15/00............................... 2,750 2,769,773
6.375%, 08/15/27.............................. 37,910 39,983,298
--------------
64,255,622
--------------
FOREIGN GOVERNMENT BONDS -- 3.4%
Banco de Commercio Exterior de Colombia, S.A.,
M.T.N. (Colombia),
8.625%, 06/02/00.............................. Baa3 5,500 5,623,750
Banque Cent De Tunisie, (Tunisia),
7.50%, 09/19/07............................... Baa3 13,600 12,716,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
City of Moscow, (Russia),
9.50%, 05/31/00............................... Ba2 $ 12,500 $ 11,812,500
City of St. Petersburg, (Russia),
9.50%, 06/18/02............................... NR 35,000 31,500,000
Province of Quebec, (Canada),
6.238%, 06/15/99.............................. A2 2,000 2,005,313
Republic of Argentina, (Argentina),
6.687%, 03/31/05.............................. B1 1,949 1,744,176
Republic of Colombia, (Colombia),
7.625%, 02/15/07 (b).......................... Baa3 25,000 23,344,250
8.00%, 06/14/01............................... Baa3 2,150 2,157,525
8.75%, 10/06/99............................... Baa3 12,300 12,666,786
Republic of Philippines, (The Philippines),
8.60%, 06/15/27 (b)........................... Ba1 8,000 6,560,000
Republic of South Africa, (South Africa),
8.50%, 06/23/17............................... Baa3 25,600 24,448,000
Russian Ministry of Finance, (Russia),
9.25%, 11/27/01............................... Ba2 35,000 33,337,500
10.00%, 06/26/07.............................. Ba2 5,600 5,188,400
United Mexican States, (Mexico),
11.50%, 05/15/26.............................. Ba2 11,200 13,272,000
--------------
186,376,200
--------------
TOTAL LONG-TERM BONDS
(cost $1,964,292,103).................................................... 1,966,905,540
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,731,647,845).................................................... 5,151,913,560
--------------
SHORT-TERM INVESTMENTS -- 5.8%
ASSET-BACKED SECURITIES -- 0.4%
Barton Capital Corp.,
5.95%, 02/09/98............................... P1 1,100 1,093,091
Centric Capital Corp.,
5.92%, 02/23/98............................... P1 1,000 991,449
Corporate Asset Funding Co., Inc.,
5.78%, 02/24/98............................... P1 5,400 5,354,049
Mont Blanc Capital Corp.,
5.82%, 02/13/98............................... P1 2,000 1,986,420
Restructured Asset Securities Enhanced Return,
5.958%, 08/28/98.............................. P1 4,000 4,000,000
Special Purpose Account Receivables Cooperative
Corp.,
5.80%, 03/26/98............................... P1 1,000 986,628
Strategic Money Market Trust,
5.91%, 12/16/98............................... P1 5,000 5,000,000
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Variable Funding Capital Corp.,
5.81%, 02/20/98............................... P1 $ 2,135 $ 2,118,116
5.88%, 01/29/98............................... P1 1,000 995,590
5.98%, 01/21/98............................... P1 1,225 1,221,134
--------------
23,746,477
--------------
BANK ACCEPTANCE -- 0.1%
Bank of Montreal, (Canada),
5.68%, 02/17/98............................... P1 4,000 3,970,969
--------------
BANK NOTES -- 0.2%
American Express Centurion Bank,
5.929%, 09/22/98.............................. P1 5,000 5,000,000
NBD Bank Michigan,
5.00%, 01/30/98............................... P1 3,000 2,997,534
US Bank, N.A.,
5.830%, 10/21/98.............................. P1 3,000 2,998,073
--------------
10,995,607
--------------
CERTIFICATES OF DEPOSIT-DOMESTIC -- 0.1%
Taubman Realty Group,
6.519%, 07/27/98.............................. P1 5,500 5,517,710
--------------
CERTIFICATES OF DEPOSIT-EURODOLLAR -- 0.1%
Morgan Guaranty Trust Co.,
5.79%, 03/16/98............................... P1 3,000 3,000,157
Westdeutsche Landesbank Girozentral, (Germany),
5.82%, 08/03/98............................... P1 2,000 1,999,096
5.83%, 08/03/98............................... P1 3,000 2,998,731
--------------
7,997,984
--------------
CERTIFICATES OF DEPOSIT-YANKEE -- 0.4%
Canadian Imperial Bank of Commerce, (Canada),
5.80%, 03/02/98............................... P1 1,000 999,485
5.95%, 06/29/98............................... P1 3,500 3,498,858
Credit Agricole Indosuez, (France),
5.75%, 02/10/98............................... P1 5,000 5,000,000
Dresdner Bank, AG, (Germany),
5.95%, 10/20/98............................... P1 5,000 4,998,743
Royal Bank of Canada, (Canada),
5.91%, 06/17/98............................... P1 3,000 2,999,217
Societe Generale, (France),
6.19%, 05/06/98............................... P1 4,000 3,999,194
--------------
21,495,497
--------------
COMMERCIAL PAPER -- 1.4%
American General Finance Corp.,
5.72%, 03/13/98............................... P1 2,000 1,977,756
Aon Corp.,
5.79%, 03/13/98............................... P2 1,000 988,742
5.79%, 03/18/98............................... P2 1,048 1,035,358
Associates First Capital Corp.,
5.79%, 02/04/98............................... P1 1,000 994,692
Bank of New York,
5.75%, 02/06/98............................... P1 2,285 2,272,226
Barnett Bank, Inc.,
6.00%, 01/28/98............................... P1 3,000 2,987,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B20
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
BBL North America,
6.73%, 01/02/98............................... P1 $ 2,393 $ 2,393,000
Bell Atlantic Financial Services, Inc.,
6.08%, 01/09/98............................... P1 8,000 7,990,542
BP America, Inc.,
6.90%, 01/02/98............................... P1 8,000 8,000,000
Carnival Corp.,
5.83%, 01/30/98............................... P1 1,000 995,466
Duke Capital Corp.,
5.90%, 01/21/98............................... P2 1,900 1,894,084
First Chicago Financial Corp.,
5.73%, 02/26/98............................... P1 2,000 1,982,492
General Electric Capital Services, Inc.,
5.70%, 01/12/98............................... P1 5,000 4,992,083
General Motors Acceptance Corp.,
5.76%, 02/09/98............................... P1 4,000 3,975,680
ING America Insurance Holdings, Inc.,
5.74%, 04/03/98............................... P1 3,000 2,956,472
5.74%, 04/28/98............................... P1 2,000 1,963,009
Newell Co.,
6.80%, 01/02/98............................... P1 8,000 8,000,000
PHH Corp.,
6.75%, 01/02/98............................... P2 8,000 8,000,000
Safeco Corp.,
5.76%, 03/17/98............................... P2 3,000 2,964,480
Xerox Capital PLC,
5.75%, 02/05/98............................... P1 3,221 3,203,508
6.85%, 01/02/98............................... P1 3,804 3,804,000
Xerox Overseas Holdings PLC,
5.79%, 02/10/98............................... P1 996 989,753
--------------
74,360,343
--------------
FOREIGN GOVERNMENT OBLIGATIONS
Republic of Colombia, (Colombia),
7.125%, 05/11/98.............................. Ba1 2,700 2,727,000
--------------
OTHER CORPORATE OBLIGATIONS -- 0.5%
Beneficial Corp.,
9.125%, 02/15/98.............................. P1 2,715 2,724,705
Empresa Colombia de Petroleos, (Colombia),
7.25%, 07/08/98............................... BBB- 8,250 8,280,937
General Electric Capital Corp.,
13.50%, 01/20/98.............................. P1 3,000 3,010,899
General Motors Acceptance Corp.,
6.00%, 07/13/98............................... P1 1,000 1,000,400
5.786%, 09/21/98.............................. P1 3,500 3,497,158
IBM Credit Corp.,
5.65%, 02/27/98............................... P1 3,500 3,498,798
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
Morgan Stanley, Dean Witter, Discover & Co.,
6.34%, 03/09/98............................... P1 $ 1,000 $ 1,000,606
Textron Financial Corp.,
6.125%, 02/23/98.............................. A3 1,000 1,000,220
--------------
24,013,723
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Bills,
4.95%, 01/15/98 (b)........................... 1,140 1,137,962
5.135%, 01/22/98 (b).......................... 3,000 2,991,442
5.19%, 01/22/98 (b)........................... 1,500 1,495,675
5.195%, 03/19/98 (c).......................... 370 365,942
5.275%, 01/22/98 (b).......................... 800 797,656
--------------
6,788,677
--------------
REPURCHASE AGREEMENT -- 2.5%
Joint Repurchase Agreement Account,
6.53%, 01/02/98
(Note 5).................................... 137,860 137,860,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $319,318,208)...................................................... 319,473,987
--------------
TOTAL INVESTMENTS -- 99.7%
(cost $5,050,966,053; Note 6)............................................ 5,471,387,547
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (D).............................
(203,828)
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES -- 0.3%........................
18,958,375
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,490,142,094
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
AG Aktiengesellschaft (German Stock Company)
L.P. Limited Partnership
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Portion of security segregated as collateral for futures contracts.
Aggregate value of segregated securities -- $100,311,229.
(d) Open futures contracts as of December 31, 1997 are as follows:
<TABLE>
<C> <S> <C> <C> <C> <C>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31, APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE 1997 DEPRECIATION
Long positions:
U.S. 5 yr
627 T-Note Mar 98 $67,867,922 $68,107,875 $239,953
865 U.S. T-Bond Mar 98 $103,945,625 $104,205,469 $259,844
Short Position:
1,779 U.S. T-Bond Mar 98 $205,927,125 $207,989,344 $(2,062,219)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B21
<PAGE>
HIGH YIELD BOND PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM INVESTMENTS -- 96.2%
<S> <C> <C> <C> <C> <C>
RATING INTEREST MATURITY AMOUNT VALUE
(UNAUDITED) RATE DATE (000) (NOTE 2)
CORPORATE BONDS -- 88.7%
<CAPTION>
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
AEROSPACE -- 1.4%
Fairchild Corp., Sub. Deb....................... Caa 12.00% 10/15/01 $ 2,571 $ 2,583,855
Sequa Corp., Sr. Sub. Notes..................... B3 9.375% 12/15/03 2,000 2,080,000
Talley Manufacturing & Technology, Inc., Sr.
Notes......................................... B2 10.75% 10/15/03 3,000 3,195,000
--------------
7,858,855
--------------
AUTOMOTIVE PARTS -- 2.1%
JPS Automotive Products Corp., L.P., Sr.
Notes......................................... B2 11.125% 06/15/01 4,000 4,460,000
Stanadyne Automotive, Sr. Sub. Notes............ Caa 10.25% 12/15/07 3,000 3,000,000
Venture Holdings Trust, Sr. Notes............... B2 9.50% 07/01/05 3,700 3,755,500
Walbro Corp., Sr. Notes......................... B2 10.125% 12/15/07 1,000 1,025,000
--------------
12,240,500
--------------
BROADCASTING & OTHER MEDIA -- 4.4%
American Lawyer Media Holdings, Inc., Sr. Disc.
Notes,
Zero Coupon (until 12/15/02).................. B3 12.25% 12/15/08 1,000 565,000
American Lawyer Media Holdings, Inc., Sr.
Notes......................................... B1 9.75% 12/15/07 1,300 1,319,500
Benedek Broadcasting Corp., Sr. Notes........... B2 11.875% 03/01/05 2,910 3,266,475
Capstar Broadcasting, Sr. Sub. Notes............ B2 9.25% 07/01/07 2,000 2,010,000
Globo Communicacoes E Particip., Sr. Notes...... NR 10.50% 12/20/06 2,040 1,963,500
Paxson Communications Corp., Sr. Sub. Notes..... B3 11.625% 10/01/02 2,500 2,700,000
Plitt Theaters, Inc., Sr. Sub. Notes............ B3 10.875% 06/15/04 4,000 4,325,000
Transwestern Publishing, Sr. Disc. Notes, Zero
Coupon (until 11/15/02)....................... B3 11.875% 11/15/08 3,650 2,190,000
TV Azteca SA DE CV, Sr. Notes................... NR 10.50% 02/15/07 2,850 2,935,500
United Artists Theatre Circuit, Inc., Sr.
Notes......................................... Ba3 11.50% 05/01/02 3,000 3,127,500
Von Hoffman Press, Inc., Sr. Sub. Notes......... B3 10.375% 05/15/07 500 533,750
--------------
24,936,225
--------------
BUILDING & RELATED INDUSTRIES -- 1.8%
EMCOR Group, Inc., Notes........................ NR 11.00% 12/15/01 2,654 2,763,501
Falcon Building Products, Inc., Sr. Sub. Disc.
Notes,
Zero Coupon (until 6/15/02)................... NR 10.50% 06/15/07 1,900 1,254,000
Koppers Industry, Inc., Sr. Sub. Notes.......... B2 9.875% 12/01/07 1,050 1,081,500
Nortek, Inc., Sr. Notes......................... B1 9.125% 09/01/07 2,500 2,518,750
Wickes Lumber Co., Sr. Notes.................... B3 11.625% 12/15/03 3,000 2,865,000
--------------
10,482,751
--------------
CABLE -- 5.2%
CD Radio, Inc., Sr. Disc. Notes, Zero Coupon
(until 12/01/02).............................. NR 12.25% 12/01/07 7,245 3,260,250
Comcast Corp., Sr. Sub. Notes................... B1 10.625% 07/15/12 1,500 1,857,855
Diamond Cable Co., Sr. Disc. Notes, Zero Coupon
(until 9/30/99)............................... B3 13.25% 09/30/04 2,000 1,800,000
Echostar Communications Corp., Sr. Disc. Notes,
Zero Coupon (until 6/01/99)................... Caa 12.25% 06/01/04 3,165 2,895,975
Echostar Satellite, Sr. Disc. Notes, Zero Coupon
(until 3/15/00)............................... B2 13.125% 03/15/04 1,500 1,245,000
Falcon Holdings Group, L.P., Series B, Sr. Sub.
Notes, PIK.................................... B3 11.00% 09/15/03 4,241 4,569,611
Intermedia Capital Partners, Sr. Notes.......... B2 11.25% 08/01/06 3,380 3,751,800
International Cabletel, Inc., Zero Coupon (until
10/15/98)..................................... B3 10.875% 10/15/03 1,500 1,436,250
International Cabletel, Inc., Sr. Disc. Notes,
Zero Coupon (until 4/30/01)................... B3 12.75% 04/15/05 4,350 3,654,000
Rogers Cablesystems Inc., Sr. Sec'd. Deb.
(Canada)...................................... Ba3 10.00% 12/01/07 1,000 1,095,000
Rogers Cablesystems, Inc., Sr. Sec'd. Notes
(Canada)...................................... Ba3 10.00% 03/15/05 1,750 1,925,000
Star Choice Communications, Inc., Sr. Notes
(Canada) (b) (cost $1,750,000; purchased
12/18/97)..................................... B3 13.00% 12/15/05 1,750 1,811,250
--------------
29,301,991
--------------
CHEMICALS -- 1.3%
Applied Extrusion Technology, Inc., Sr. Notes... B2 11.50% 04/01/02 1,500 1,597,500
Borden Chemicals & Plastics, L.P., Sr. Notes.... Ba2 9.50% 05/01/05 1,500 1,593,750
Sterling Chemical Holdings, Inc., Sr. Disc.
Notes, Zero Coupon (until 8/15/01)............ Caa 13.50% 08/15/08 5,060 3,036,000
Sterling Chemical Holdings, Inc., Sr. Sub.
Notes......................................... B3 11.75% 08/15/06 1,000 1,020,000
--------------
7,247,250
--------------
CONSUMER PRODUCTS -- 3.9%
Coleman Escrow Corp., Sr. Disc. Notes........... B3 Zero 05/15/01 2,250 1,496,250
Coleman Holdings, Sr. Disc. Notes............... Caa Zero 05/15/01 1,500 903,750
French Fragrances, Inc., Sr. Notes.............. NR 10.375% 05/15/07 1,350 1,417,500
Hedstrom Corp., Sr. Disc. Notes, Zero Coupon
(until 6/01/02)............................... Caa 12.00% 06/01/09 400 240,000
Hedstrom Corp., Sr. Sub. Notes.................. B3 10.00% 06/01/07 900 906,750
IHF Holdings, Inc., Sr. Disc. Notes, Zero Coupon
(until 11/15/99).............................. Caa 15.00% 11/15/04 2,000 1,740,000
Packaging Resources Group, Sr. Notes............ NR 13.00% 06/30/03 1,864 1,742,606
Radnor Holdings, Sr. Notes...................... B2 10.00% 12/01/03 1,500 1,557,500
Rayovac Corp., Sr. Sub. Notes................... B3 10.25% 11/01/06 2,080 2,267,200
Remington Products Co., Sr. Sub. Notes.......... B3 11.00% 05/15/06 2,500 2,112,500
Sealy Corp., Sr. Disc. Notes, Zero Coupon (until
12/15/02)..................................... B3 10.875% 12/15/07 2,500 1,512,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B22
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS (CONTINUED) (UNAUDITED) RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Syratech Corp., Sr. Notes....................... B1 11.00% 04/15/07 $ 2,550 $ 2,371,500
Twin Labs, Inc., Gtd. Notes..................... B3 10.25% 05/15/06 3,400 3,672,000
--------------
21,940,056
--------------
DEFENSE -- 0.2%
Stellex Industries, Inc., Sr. Sub. Notes........ B3 9.50% 11/01/07 1,000 1,007,500
--------------
DRUGS & HEALTHCARE -- 4.5%
Alliance Imaging, Sr. Sub. Notes................ B3 9.625% 12/15/05 1,500 1,530,000
Community Distributors, Sr. Notes............... B2 10.25% 10/15/04 900 922,500
Dade International, Inc., Sr. Sub. Notes........ B3 11.125% 05/01/06 6,000 6,675,000
Graham-Field Health Products, Inc., Sr. Sub.
Notes......................................... B3 9.75% 08/15/07 2,630 2,741,775
Integrated Health Services, Inc., Sr. Sub.
Notes......................................... B2 9.25% 01/15/08 4,000 4,080,000
Owens & Minor, Inc., Sr. Sub. Notes............. B1 10.875% 06/01/06 3,450 3,829,500
Paracelsus Health, Sr. Sub. Notes............... B1 10.00% 08/15/06 2,750 2,805,000
Paragon Health Networks, Sr. Sub. Notes, Zero
Coupon (until 11/01/02)....................... B3 10.50% 11/01/07 3,000 1,860,000
Tenet Healthcare Corp., Sr. Sub. Notes.......... Ba3 8.625% 01/15/07 1,250 1,290,625
--------------
25,734,400
--------------
ENERGY -- 3.0%
Anker Coal Group, Inc., Sr. Notes............... B3 9.75% 10/01/07 2,900 2,885,500
Clark USA, Inc., Sr. Notes...................... B3 10.875% 12/01/05 1,250 1,360,937
Falcon Drilling Co., Inc., L.P., Series B, Sr.
Sub. Notes.................................... B3 12.50% 03/15/05 2,500 2,856,250
KCS Energy, Inc., Sr. Notes..................... B1 11.00% 01/15/03 4,000 4,380,000
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 9.375% 02/01/06 3,000 2,700,000
Petroleum Heat & Power, Inc., Sub. Deb.......... B2 12.25% 02/01/05 813 827,227
Transamerican Energy Corp., Sr. Disc. Notes,
Zero Coupon (until 6/15/99)................... B3 13.00% 06/15/02 1,300 1,049,750
Transamerican Energy Corp., Sr. Disc. Notes..... B3 11.50% 06/15/02 900 904,500
--------------
16,964,164
--------------
FINANCIAL SERVICES -- 2.4%
AmeriCredit Corp., Sr. Notes.................... B+ 9.25% 02/01/04 2,500 2,500,000
Beaver Valley Funding, Inc., Deb................ B1 8.625% 06/01/07 1,453 1,546,675
Delta Financial Corp., Sr. Notes................ B1 9.50% 08/01/04 1,125 1,116,562
First Nationwide Holdings, Inc., Sr. Notes...... B2 12.50% 04/15/03 2,600 2,951,000
First Nationwide Holdings, Inc., Sr. Sub.
Notes......................................... NR 10.625% 10/01/03 1,600 1,788,000
Korea Development Bank (Korea) Bonds............ A1 6.50% 11/15/02 1,000 801,940
Korea Development Bank (Korea) Bonds............ Ba1 7.00% 07/15/99 900 819,720
Korea Development Bank (Korea) Bonds............ Ba1 7.375% 09/17/04 2,000 1,600,420
Polysindo Int'l. Finance Co., Gtd. Notes,
(Indonesia)................................... Ba3 11.375% 06/15/06 800 648,000
--------------
13,772,317
--------------
FOOD & BEVERAGE -- 2.0%
Curtis-Burns Foods, Inc., Sr. Sub. Notes........ B3 12.25% 02/01/05 2,870 3,142,650
NBTY Inc., Sr. Sub. Notes....................... B1 8.625% 09/15/07 2,000 2,000,000
Pilgrim's Pride Corp., Sr. Sub. Notes........... B3 10.875% 08/01/03 1,951 2,038,795
PSF Holdings, LLC, Notes (b) (cost $255,739;
purchased 9/17/96 and
3/03/97)...................................... NR 11.00% 09/17/03 256 274,919
Specialty Foods Acquisition Corp., Sr. Notes.... B2 10.25% 08/15/01 2,765 2,723,525
Specialty Foods Corp., Sr. Sub. Notes........... Caa 11.25% 08/15/03 1,000 930,000
--------------
11,109,889
--------------
GAMING -- 6.0%
Aztar Corp., Sr. Sub. Notes..................... B2 13.75% 10/01/04 2,000 2,290,000
Blue Chip Casino, Sr. Sub. Notes................ NR 9.50% 09/15/02 2,749 2,061,750
Casino Magic Finance Corp., First Mtge. Bonds... B3 13.00% 08/15/03 4,500 4,275,000
Colorado Gaming & Entertainment, Sr. Notes,
PIK........................................... NR 12.00% 06/01/03 4,026 4,347,799
Fitzgerald Gaming, Sr. Notes.................... B3 12.25% 12/15/04 1,750 1,763,125
Grand Casinos, Inc., Sr. Notes.................. B2 9.00% 10/15/04 1,000 1,005,000
Grand Casinos, Inc., Sr. Notes.................. Ba3 10.125% 12/01/03 3,950 4,266,000
Isle of Capri Black Hawk, LLC, First Mtg.
Notes......................................... B3 13.00% 08/31/04 3,000 3,030,000
Lady Luck Gaming, First Mtge. Notes............. B2 11.875% 03/01/01 3,000 3,045,000
Louisiana Casino Cruises, Inc., Sr. Notes....... NR 11.50% 12/01/98 2,680 2,683,100
Majestic Star Casino, Sr. Notes................. B2 12.75% 05/15/03 2,175 2,332,688
Trump Atlantic City Assoc., First Mtge. Notes... Caa 11.75% 11/15/03 3,000 2,760,000
--------------
33,859,462
--------------
INDUSTRIAL -- 4.5%
Allied Waste North America, Inc., Sr. Sub.
Notes......................................... B2 10.25% 12/01/06 3,000 3,292,500
Clean Harbors, Inc., Sr. Notes.................. B2 12.50% 05/15/01 50 50,000
Continental Global Group, Sr. Notes............. B2 11.00% 04/01/07 1,170 1,246,050
Glasstech, Inc., Sr. Notes...................... NR 12.75% 07/01/04 1,500 1,552,500
ICF Kaiser International, Inc., Sr. Sub.
Notes......................................... B3 12.00% 12/31/03 500 520,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B23
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS (CONTINUED) (UNAUDITED) RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Interlake Corp., Sr. Sub. Notes................. B3 12.125% 03/01/02 $ 4,500 $ 4,725,000
Jordan Telecommunication Products, Inc., Sr.
Notes......................................... B3 9.875% 08/01/07 2,900 2,965,250
Kaiser Aluminum & Chemical Corp., Sr. Sub.
Notes......................................... B2 12.75% 02/01/03 3,000 3,191,250
Motors & Gears, Inc., Sr. Notes................. B3 10.75% 11/15/06 3,500 3,718,750
RBX Corp., Sr. Notes............................ B2 12.00% 01/15/03 2,300 2,357,500
Viasystems, Inc., Sr. Sub. Notes................ B3 9.75% 06/01/07 1,750 1,806,875
--------------
25,426,300
--------------
LEISURE & TOURISM -- 1.2%
Bally Total Fitness Holdings, Inc., Sr. Sub.
Notes......................................... B3 9.875% 10/15/07 1,350 1,370,250
Discovery Zone, Inc., Sr. Notes................. NR 13.50% 08/01/02 2,000 2,080,000
Icon Health & Fitness, Sr. Sub. Notes........... B3 13.00% 07/15/02 3,000 3,345,000
--------------
6,795,250
--------------
LODGING -- 0.5%
HMC Acquisition, Sr. Notes...................... Ba3 9.00% 12/15/07 3,000 3,135,000
--------------
MISCELLANEOUS -- 1.3%
Coinstar, Inc., Sr. Sub. Notes.................. NR 13.00% 10/01/06 2,275 1,797,250
Electronic Retailing Systems, Sr. Disc. Notes,
Zero Coupon (until 2/01/00)................... NR 13.25% 02/01/04 2,000 1,330,000
Interact Systems Inc., Sr. Disc. Notes, Zero
Coupon (until 8/1/99)......................... NR 14.00% 08/01/03 4,400 1,628,000
Kindercare Learning Center, Sr. Sub. Notes...... B3 9.50% 02/15/09 2,500 2,487,500
--------------
7,242,750
--------------
OIL & GAS -- 0.8%
Empire Gas Corp., Sr. Notes..................... Caa 7.00% 07/15/04 5,300 4,743,500
--------------
PAPER/PACKAGING -- 7.1%
APP Int'l. Finance Co., Sr. Notes (b) (cost
$4,093,123; purchased 2/11/97 and 2/20/97).... Ba3 11.75% 10/01/05 3,750 3,468,750
Consumers Int'l., Sr. Notes..................... Ba3 10.25% 04/01/05 2,700 2,943,000
Envirodyne Industries, Sr. Disc. Notes.......... B1 12.00% 06/15/00 4,600 4,922,000
Gaylord Container Corp., Sr. Notes.............. B 9.75% 06/15/07 2,100 2,026,500
Gaylord Container Corp., Sr. Sub. Disc. Notes... Caa 12.75% 05/15/05 4,365 4,670,550
Maxxam Group Holdings, Inc., Sr. Notes.......... NR 12.00% 08/01/03 4,000 4,320,000
Pacific Lumber Co., Sr. Notes................... B3 10.50% 03/01/03 4,875 5,045,625
SD Warren Co., Sr. Sub. Notes................... B1 12.00% 12/15/04 2,500 2,793,750
Silgan Holdings, Inc., Sub. Deb................. NR 13.25% 07/15/06 3,149 3,597,733
Stone Container, Sr. Sub. Notes................. B3 12.25% 04/01/02 1,300 1,316,250
U.S. Timberlands Klamath Fall, LLC, Sr. Notes... B1 9.625% 11/15/07 2,250 2,328,750
United Stationer Supply Co., Sr. Sub. Notes..... B3 12.75% 05/01/05 2,667 3,033,713
--------------
40,466,621
--------------
PUBLISHING -- 1.5%
American Banknote Corp., Sr. Sub. Notes......... B3 11.25% 12/01/07 4,000 4,010,000
Sullivan Graphics, Inc., Sr. Sub. Notes......... Caa 12.75% 08/01/05 4,500 4,545,000
--------------
8,555,000
--------------
RESTAURANTS -- 1.1%
American Restaurant, Sr. Notes.................. NR 13.00% 09/15/98 694 672,893
Flagstar Corp., Sr. Notes....................... B2 10.75% 09/15/01 3,000 3,337,500
FRI-MRD Corp., Sr. Disc. Notes, Zero Coupon
(until 8/1/99)................................ NR 15.00% 01/24/02 3,000 2,497,500
--------------
6,507,893
--------------
RETAIL -- 7.8%
Barry's Jewelers, Inc., Sr. Notes (b) (cost
$603,980; purchased 2/13/97).................. B3 11.00% 12/22/00 750 450,000
County Seat Stores, Inc., Sr. Notes (b) (cost
$2,750,000; purchased 10/23/97)............... NR 12.75% 11/01/04 2,750 2,832,500
Duane Reade Corp., Sub. Notes, Zero Coupon
(until 9/15/99)............................... Caa 15.00% 09/15/04 7,840 6,546,400
Edison Brothers, Inc., Sr. Notes................ NR 11.00% 01/01/07 3,000 2,700,000
Hechinger Co., Sr. Notes........................ B2 6.95% 10/15/03 4,125 2,928,750
Jitney-Jungle Stores America, Inc., Sr. Notes... B2 12.00% 03/01/06 2,000 2,270,000
Kmart Corp., Deb................................ Ba3 8.25% 01/01/22 3,250 3,152,500
Kmart Corp., Deb................................ Ba3 8.375% 07/01/22 2,500 2,437,500
Leslie's Poolmart, Sr. Notes.................... NR 10.375% 07/15/04 2,500 2,600,000
Merisel, Inc., Sr. Notes........................ Ca 12.50% 12/31/04 3,250 3,640,000
New Sassco, Inc., Sr. Notes..................... NR 12.75% 05/01/04 7,171 7,592,296
Pamida, Inc., Sr. Notes......................... B3 11.75% 03/15/03 2,500 2,562,500
Phar-Mor, Inc., Sr. Notes....................... B3 11.72% 09/11/02 4,564 4,792,200
--------------
44,504,646
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B24
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS (CONTINUED) (UNAUDITED) RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
STEEL & METAL -- 3.3%
Earle M. Jorgensen Co., Sr. Notes............... B3 10.75% 03/01/00 $ 3,250 $ 3,347,500
Ladish Company, Inc., Sr. Sub. Notes............ NR 12.00% 12/22/00 517 521,841
Northwestern Steel & Wire, Sr. Notes............ B3 9.50% 06/15/01 1,000 970,000
Pohang Iron & Steel, Sr. Notes.................. Ba1 6.625% 07/01/03 2,000 1,544,040
Sheffield Steel Corp., First Mtg. Notes......... Caa 11.50% 12/01/05 3,500 3,640,000
WCI Steel, Inc. Sr. Notes....................... B2 10.00% 12/01/04 4,000 4,090,000
Wheeling-Pittsburgh Corp., Sr. Notes............ B2 9.25% 11/15/07 4,625 4,463,125
--------------
18,576,506
--------------
SUPERMARKETS -- 1.7%
Homeland Stores, Inc., Notes.................... NR 10.00% 08/01/03 4,181 3,762,900
Pantry, Inc., Sr. Sub. Notes.................... B3 10.25% 10/15/07 2,800 2,870,000
Shoppers Food Warehouse Corp., Sr. Notes........ NR 9.75% 06/15/04 2,500 2,550,000
Southland Corp., Sr. Notes...................... B3 12.00% 06/15/09 500 500,000
--------------
9,682,900
--------------
TECHNOLOGY -- 1.2%
Details Holdings Corp., Sr. Disc. Notes, Zero
Coupon (until 11/15/02)....................... Caa 11.875% 11/15/07 1,300 760,500
Details, Inc., Sr. Sub. Notes................... B3 10.00% 11/15/05 1,000 1,027,500
DII Group, Sr. Sub. Notes....................... B1 8.50% 09/15/07 2,000 1,965,000
Unisys Corp., Sr. Notes......................... B1 11.75% 10/15/04 2,500 2,862,500
--------------
6,615,500
--------------
TELECOMMUNICATIONS -- 15.0%
Cellnet Data Systems, Inc., Sr. Disc. Notes (b),
Zero Coupon (until 10/01/02), (cost
$3,686,306; purchased on various dates:
6/06/95 through 9/24/97)...................... NR 14.00% 10/01/07 7,010 3,119,450
Centennial Cellular Corp., Sr. Notes............ B1 10.125% 05/15/05 2,000 2,170,000
Concentric Network Corp., Sr. Notes............. NR 12.75% 12/15/07 2,500 2,562,500
Crown Castle Int'l Corp., Sr. Disc. Notes, Zero
Coupon (until 11/15/02)....................... B3 11.875% 11/15/07 1,400 875,000
Geotek Communication, Inc., Sr. Disc. Notes,
Zero Coupon (until 7/15/00)................... Caa 15.00% 07/15/05 5,000 2,600,000
GST Telecommunications, Inc., Sr. Disc. Notes,
Series L,
Zero Coupon (until 12/15/00).................. NR 13.875% 12/15/05 5,200 3,978,000
Highway Master Communications, Inc., Sr.
Notes......................................... Caa 13.75% 09/15/05 2,000 2,030,000
Hyperion Telecom, Inc., Sr. Disc. Notes, Zero
Coupon (until 4/01/01)........................ NR 13.00% 04/15/03 1,250 906,250
ICG Holdings Inc., Sr. Sub. Notes, Zero Coupon
(until 9/15/00)............................... NR 13.50% 09/15/05 3,800 3,120,750
Impsat Corp., Gtd. Sr. Notes.................... B2 12.125% 07/15/03 3,500 3,552,500
International Wireless Group, Inc., Sr. Sub.
Notes......................................... NR 11.75% 06/01/05 3,000 3,292,500
Ionica PLC, Sr. Notes........................... NR 13.50% 08/15/06 5,000 4,237,500
McCaw Int'l. Ltd., Sr. Disc. Notes, Zero Coupon
(until 4/15/02)............................... NR 13.00% 04/15/07 2,000 1,165,000
McLeod USA, Inc., Sr. Disc. Notes, Zero Coupon
(until 3/01/02)............................... B3 10.50% 03/01/07 4,400 3,201,000
Metrocall, Inc., Sr. Sub. Notes................. B2 10.375% 10/01/07 1,250 1,265,625
MGC Communications, Inc., Sr. Notes............. Caa 13.00% 10/01/04 2,950 3,023,750
Microcell Telecommunications, Sr. Disc. Notes,
Zero Coupon (until 6/01/06)................... NR 14.00% 06/01/06 2,000 1,350,000
Netia Holdings, Sr. Disc. Notes, Zero Coupon
(until 11/01/01).............................. NR 11.25% 11/01/07 3,250 1,852,500
Netia Holdings, Sr. Notes....................... NR 10.25% 11/01/07 1,000 960,000
Nextel Communications, Inc., Sr. Disc. Notes,
Zero Coupon (until 10/31/02).................. B3 9.75% 10/31/07 1,500 920,625
Omnipoint Corp., Sr. Notes...................... B3 11.625% 08/15/06 500 531,875
Omnipoint Corp., Sr. Notes...................... B3 11.625% 08/15/06 3,875 4,097,813
PTC Int'l. Finance Co., Zero Coupon (until
7/01/02)...................................... NR 10.75% 07/01/07 2,100 1,344,000
Pagemart Nationwide, Inc., Sr. Disc. Notes,
Series H,
Zero Coupon (until 2/1/00).................... NR 15.00% 02/01/05 6,500 5,557,500
Price Communications Cellular Holdings, Sr.
Disc. Notes, Zero Coupon (until 11/01/02)..... NR 13.50% 08/01/07 2,000 1,280,000
Price Communications Wireless, Inc., Sr. Sub.
Notes......................................... NR 11.75% 07/15/07 2,500 2,712,500
Primus Telecom Group, Sr. Notes................. B3 11.75% 08/01/04 1,500 1,605,000
RCN Corp., Sr. Disc. Notes, Zero Coupon (until
10/15/02)..................................... NR 11.125% 10/15/07 2,200 1,380,500
RCN Corp., Sr. Notes............................ NR 10.00% 10/15/07 1,100 1,141,250
Rogers Cantel, Inc., Sr. Sub. Notes, Zero Coupon
(until 11/30/02).............................. B2 8.80% 10/01/07 4,800 4,776,000
Telegroup, Inc., Sr. Disc. Notes, Zero Coupon
(until 5/1/00)................................ NR 10.50% 11/01/04 4,000 3,095,000
Telesystem Int'l. Wireless, Inc., Sr. Disc.
Notes......................................... Caa 10.50% 11/01/07 1,150 638,250
Telesystem Int'l. Wireless, Inc., Sr. Disc.
Notes, Zero Coupon (until 6/30/02)............ NR 13.25% 06/30/07 1,000 632,500
UNIFI Communications, Inc., Sr. Notes........... NR 14.00% 03/01/04 3,750 3,375,000
Unisite, Inc., Sub. Accrual Note................ NR 13.00% 12/15/04 4,000 4,000,000
USN Communications, Inc., Sr. Disc. Notes, Zero
Coupon (until 8/15/00)........................ Caa 14.625% 08/15/04 1,059 804,840
Vialog Corp., Sr. Notes......................... NR 12.75% 11/15/01 2,000 2,090,000
--------------
85,244,978
--------------
TEXTILES -- 1.6%
Congoleum Corp., Sr. Notes...................... B1 9.00% 02/01/01 945 968,625
Foamex, L.P., Sr. Sub. Notes.................... B3 9.875% 06/15/07 3,700 3,792,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B25
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT VALUE
CORPORATE BONDS (CONTINUED) (UNAUDITED) RATE DATE (000) (NOTE 2)
------------ ------ -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Tultex Corp., Sr. Notes......................... Ba3 9.625% 04/15/07 $ 3,000 $ 2,992,500
Worldtex, Inc., Sr. Notes....................... B1 9.625% 12/15/07 1,450 1,486,250
--------------
9,239,875
--------------
TRANSPORTATION -- 1.9%
Ameritruck Distribution Corp., Sr. Sub. Notes
(b) (cost $3,099,070; purchased on various
dates: 1/16/96 through 6/05/97)............... B3 12.25% 11/15/05 3,090 3,090,000
Kitty Hawk, Inc., Sr. Notes..................... B1 9.95% 11/15/04 1,400 1,435,000
Trans World Airlines, Sr. Notes................. NR 11.50% 12/15/04 1,750 1,758,750
Airtran Holdings, Inc., Sr. Notes............... B3 10.25% 04/15/01 2,000 1,850,000
Airtran Holdings, Inc., Sr. Notes............... B2 10.50% 04/15/01 3,000 2,955,000
--------------
11,088,750
--------------
TOTAL CORPORATE BONDS
(cost $496,878,727)......................................................................... 504,280,829
--------------
CONVERTIBLE BONDS -- 0.9%
TELECOMMUNICATIONS
GST Telecommunications, Inc., Sr. Disc. Notes,
Series H,
Zero Coupon (until 12/15/00).................. NR 13.875% 12/15/05 650 624,000
Geotek Communications, Inc...................... Caa 12.00% 02/15/01 2,000 1,500,000
Winstar Communications, Inc., Conv. Notes....... NR 14.00% 10/15/05 2,875 2,961,250
--------------
(cost $4,766,282)......................................................................... 5,085,250
--------------
COMMON STOCKS (A) -- 0.2% SHARES
-------------
Cellnet Data Systems, Inc. (b) (cost $170;
purchased 6/23/97)............................ 34,000 263,500
Coinstar, Inc................................... 6,300 57,488
Dr. Pepper Bottling Holdings, Inc., (Class "B"
Stock)........................................ 5,807 119,044
Hedstrom Holding Co............................. 24,261 30,326
Intermedia Communications, PIK.................. 1,132 68,769
Loehmann's Holdings, Inc........................ 4,403 25,317
Pagemart Nationwide, Inc........................ 13,125 118,125
PM Holdings Corp................................ 1,103 579,075
PSF Holdings, LLC (b)/(c) (cost $757,452;
purchased 9/17/96)............................ 22,025 726,825
--------------
TOTAL COMMON STOCKS
(cost $804,909)................................................ 1,988,469
--------------
PREFERRED STOCKS -- 5.9%
Adelphia Communications, Inc.................... 52,500 6,221,250
American Communication Services, Inc............ 4,643 467,827
AmeriKing, Inc.................................. 19,990 539,730
BioSafe International, Inc...................... 7,219 1,925,091
Cablevision Systems Corp., Series L, PIK........ 1 9,240
California Federal Bancorp, Inc................. 100,000 2,625,000
Chancellor Media Corp........................... 17,058 2,046,960
Clark USA, Inc.................................. 4,750 503,500
EchoStar Communications, Inc.................... 35,534 3,660,018
Fitzgerald Gaming, Inc.......................... 50,000 1,561,500
Geneva Steel, Inc............................... 18,000 1,350,000
Hyperion Telecommunications..................... 5,659 570,178
ICG Communications, Inc......................... 11,085 1,274,758
Intermedia Comm., PIK........................... 76,084 932,029
Intermedia Communications....................... 90,000 2,542,500
Pantry Pride, Inc. (Ex. Pfd.; Class "B"
Stock)........................................ 25,000 2,525,000
Paxson Communications, Inc...................... 20,000 2,010,000
Petroleum Heat & Power, Inc..................... 80,000 1,600,000
Viasystems, Inc................................. 40,800 835,003
Von Hoffman Press, Inc.......................... 20,000 625,000
--------------
TOTAL PREFERRED STOCKS
(cost $33,395,215)............................................. 33,824,584
--------------
WARRANTS (A) -- 0.5% UNITS
-------------
American Banknote Corp., expiring 12/01/02...... 4,000 0
American Telecasting, Inc., expiring 08/10/00... 6,500 65
Cellnet Data Systems, Inc., expiring 01/01/49
(b) (cost $0; purchased 9/24/97 and
9/29/97)...................................... 7,010 140,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B26
<PAGE>
HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
WARRANTS (A) (CONTINUED) UNITS (NOTE 2)
------------- --------------
<S> <C> <C>
Cellular Communications Int'l., Inc., expiring
08/15/03...................................... 4,375 $ 87,500
Clearnet Communications, Inc., expiring
09/15/05...................................... 26,202 235,818
Cocentric Network Corp., expiring 01/01/49...... 2,500 0
County Seat Stores, Inc., expiring 01/01/49 (b)
(cost $0; purchased 10/23/97)................. 2,750 0
Discovery Zone, Inc., expiring 01/01/49......... 2,000 0
Electronic Retailing Systems, expiring
01/01/49...................................... 2,000 40,000
Fitzgerald Gaming, Inc., expiring 12/19/98...... 62,701 0
Foamex - JPS Automotive, expiring 07/01/99...... 2,000 40,000
Glasstech, Inc., expiring 06/30/04.............. 1,500 1,500
Globalstar Capital Co., expiring 02/15/04....... 1,200 122,400
Highwaymaster Communications, Inc., expiring
01/01/49...................................... 2,000 24,000
Hyperion Telecommunications Corp., expiring
04/15/01...................................... 4,250 255,000
ICF Kaiser International, Inc., expiring
12/31/98...................................... 500 0
ICG Communications, Inc., expiring 09/15/05..... 20,790 301,455
Interact Systems, Inc., expiring 08/01/03....... 4,400 550
Intermedia Communications of Florida, Inc.,
expiring 06/01/00 (b) (cost $0; purchased
5/25/95)...................................... 3,000 330,000
McCaw Int'l. Ltd., expiring 01/01/49............ 2,000 5,000
MGC Communications, Inc., expiring 01/01/49..... 2,950 0
Nextel Communications
expiring 12/15/98 (b) (cost $0; purchased
12/16/93).................................... 1,543 417
expiring 04/05/99 (b) (cost $0; purchased
4/15/94)..................................... 2,250 6,750
Pagemart, Inc., expiring 11/01/03............... 9,200 69,000
Powertel, Inc., expiring 02/01/06............... 6,720 63,840
President Riverboat Casinos, expiring
09/30/99...................................... 22,075 883
Price Communications Cellular Holdings, expiring
08/01/07...................................... 6,880 69
Primus Telecom Group, expiring 08/01/07......... 1,500 15,000
Star Choice Communications, Inc., expiring
12/15/05 (b) (cost $0; purchased 12/18/97).... 40,530 405
Sterling Chemical Holdings, Inc., expiring
08/15/08...................................... 560 16,800
Unifi Communications, expiring 03/01/04......... 3,750 75,000
Unisite, Inc., expiring 12/15/04................ 1,943 0
USN Communications, Inc., expiring 01/01/49..... 10,590 0
Vialog Corp., expiring 01/01/49................. 2,000 0
--------------
TOTAL WARRANTS
(cost $237,500)................................................ 1,831,652
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $536,082,633)............................................ 547,010,784
--------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
SHORT-TERM INVESTMENT -- 2.8% RATE DATE (000)
------ -------- ---------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account.............. 6.53% 01/02/98 $ 15,691 15,691,000
--------------
(cost $15,691,000; Note 5)
TOTAL INVESTMENTS -- 98.9%
(cost $551,773,633; Note 6)................................................... 562,701,784
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.1%................................... 5,973,294
--------------
TOTAL NET ASSETS -- 100.0%...................................................... $ 568,675,078
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
LLC Limited Liability Company
LP Limited Partnership
NR Not Rated by Moody's or Standard & Poors
PIK Payment in Kind Securities
(a) Non-income producing security
(b) Indicates a restricted security; the aggregate cost of the restricted
securities is $16,995,840. The aggregate value, $13,424,966 is
approximately 2.4% of net assets.
(c) Indicates a fair valued security.
SEE NOTES TO FINANCIAL STATEMENTS.
B27
<PAGE>
STOCK INDEX PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.0%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.8%
Aeroquip-Vickers, Inc........................... 8,300 $ 407,219
AlliedSignal, Inc............................... 175,600 6,837,425
Boeing Co....................................... 311,336 15,236,005
General Dynamics Corp........................... 19,400 1,676,887
Lockheed Martin Corp............................ 60,149 5,924,676
Northrop Grumman Corp........................... 20,600 2,369,000
Parker-Hannifin Corp............................ 35,225 1,615,947
Raytheon Co. (Class "A" Stock).................. 14,418 711,007
Raytheon Co. (Class "B" Stock).................. 72,900 3,681,450
United Technologies Corp........................ 73,000 5,315,312
--------------
43,774,928
--------------
AIRLINES -- 0.4%
AMR Corp. (a)................................... 28,500 3,662,250
Delta Air Lines, Inc............................ 23,000 2,737,000
Southwest Airlines Co........................... 68,100 1,676,962
USAir Group, Inc. (a)........................... 29,000 1,812,500
--------------
9,888,712
--------------
AUTOS - CARS & TRUCKS -- 2.0%
Chrysler Corp................................... 208,500 7,336,594
Cummins Engine Co., Inc......................... 12,200 720,562
Dana Corp....................................... 33,400 1,586,500
Echlin, Inc..................................... 18,700 676,706
Ford Motor Co................................... 372,700 18,145,831
General Motors Corp............................. 226,100 13,707,312
Genuine Parts Co................................ 54,425 1,847,048
Johnson Controls, Inc........................... 26,400 1,260,600
Navistar International Corp. (a)................ 23,400 580,612
PACCAR, Inc..................................... 23,960 1,257,900
Safety Kleen Corp............................... 17,350 476,041
TRW, Inc........................................ 38,600 2,060,275
--------------
49,655,981
--------------
BANKS AND SAVINGS & LOANS -- 8.1%
Banc One Corp................................... 180,694 9,813,943
Bank of New York Co., Inc....................... 117,300 6,781,406
BankAmerica Corp................................ 216,096 15,775,008
BankBoston Corp................................. 44,800 4,208,400
Bankers Trust NY Corp........................... 30,900 3,474,319
Barnett Banks, Inc.............................. 61,600 4,427,500
BB&T Corp....................................... 41,900 2,684,219
Chase Manhattan Corp............................ 131,247 14,371,546
Citicorp........................................ 142,100 17,966,769
Comerica, Inc................................... 32,900 2,969,225
CoreStates Financial Corp....................... 65,000 5,204,062
First Chicago NBD Corp.......................... 92,015 7,683,252
First Union Corp................................ 194,550 9,970,687
Fleet Financial Group, Inc...................... 77,600 5,815,150
Golden West Financial Corp...................... 17,600 1,721,500
H.F. Ahmanson & Co.............................. 30,700 2,054,981
Huntington Bancshares, Inc...................... 58,600 2,109,600
KeyCorp......................................... 67,400 4,772,762
Mellon Bank Corp................................ 78,200 4,740,875
Morgan (J.P.) & Co., Inc........................ 55,450 6,258,919
National City Corp.............................. 66,600 4,378,950
NationsBank Corp................................ 220,526 13,410,737
Norwest Corp.................................... 233,600 9,022,800
PNC Bank Corp................................... 95,500 5,449,469
Providian Financial Corp........................ 29,300 1,323,994
Republic New York Corp.......................... 17,100 1,952,606
Suntrust Banks, Inc............................. 65,800 4,696,475
Synovus Financial Corp.......................... 53,700 1,758,675
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
U.S. Bancorp.................................... 75,642 $ 8,467,176
Wachovia Corp................................... 63,400 5,143,325
Wells Fargo & Co................................ 27,166 9,221,159
--------------
197,629,489
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc.................................... 45,900 1,626,581
Omnicom Group, Inc.............................. 30,000 1,271,250
--------------
2,897,831
--------------
CHEMICALS -- 2.0%
Air Products & Chemicals, Inc................... 33,700 2,771,825
Dow Chemical Co................................. 70,300 7,135,450
E.I. du Pont de Nemours & Co.................... 352,100 21,148,006
Eastman Chemical Co............................. 23,600 1,405,675
FMC Corp. (a)................................... 11,200 753,900
Hercules, Inc................................... 30,400 1,521,900
Monsanto Co..................................... 183,700 7,715,400
Nalco Chemical Co............................... 20,900 826,856
Rohm & Haas Co.................................. 18,700 1,790,525
Sigma-Aldrich Corp.............................. 31,400 1,248,150
Union Carbide Corp.............................. 38,200 1,640,212
--------------
47,957,899
--------------
CHEMICALS - SPECIALTY -- 0.3%
Engelhard Corp.................................. 46,975 816,191
Great Lakes Chemical Corp....................... 17,700 794,287
Morton International, Inc....................... 42,400 1,457,500
Praxair, Inc.................................... 48,500 2,182,500
Raychem Corp.................................... 26,800 1,154,075
W.R. Grace & Co................................. 24,300 1,954,631
--------------
8,359,184
--------------
COMMERCIAL SERVICES -- 0.4%
Cendant Corp. (a)............................... 245,719 8,446,582
Deluxe Corp..................................... 24,800 855,600
John H. Harland Co.............................. 7,400 155,400
Moore Corp., Ltd................................ 25,900 391,737
--------------
9,849,319
--------------
COMPUTER SERVICES -- 4.5%
3Com Corp. (a).................................. 110,000 3,843,125
Adobe Systems, Inc.............................. 21,700 895,125
Autodesk, Inc................................... 14,300 529,100
Automatic Data Processing, Inc.................. 91,100 5,591,262
Bay Networks, Inc. (a).......................... 63,900 1,633,444
Cabletron Systems, Inc. (a)..................... 47,900 718,500
Ceridian Corp. (a).............................. 24,800 1,136,150
Cisco Systems, Inc. (a)......................... 313,100 17,455,325
Computer Associates International, Inc.......... 169,643 8,969,874
Computer Sciences Corp. (a)..................... 24,200 2,020,700
EMC Corp. (a)................................... 154,000 4,225,375
First Data Corp................................. 138,300 4,045,275
Microsoft Corp.................................. 375,200 48,494,600
Novell, Inc. (a)................................ 104,900 786,750
Oracle Corp. (a)................................ 303,587 6,773,785
Parametric Technology Corp. (a)................. 39,700 1,880,787
Siebel Systems, Inc. (a)........................ 72 3,010
Silicon Graphics, Inc. (a)...................... 53,600 666,650
--------------
109,668,837
--------------
COMPUTERS -- 3.4%
Apple Computer, Inc. (a)........................ 37,700 494,812
Compaq Computer Corp............................ 235,285 13,278,897
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B28
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Dell Computer Corp. (a)......................... 102,700 $ 8,626,800
Digital Equipment Corp. (a)..................... 47,900 1,772,300
Hewlett-Packard Co.............................. 323,800 20,237,500
International Business Machines Corp............ 304,400 31,828,825
Seagate Technology, Inc. (a).................... 76,000 1,463,000
Sun Microsystems, Inc. (a)...................... 115,000 4,585,625
--------------
82,287,759
--------------
CONSTRUCTION -- 0.1%
Fluor Corp...................................... 26,600 994,175
Foster Wheeler Corp............................. 12,000 324,750
Kaufman & Broad Home Corp....................... 11,866 266,243
Pulte Corp...................................... 6,400 267,600
--------------
1,852,768
--------------
CONSTRUCTION & HOUSING -- 0.0%
Centex Corp..................................... 8,800 553,850
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 9,100 321,344
Bemis Co., Inc.................................. 17,200 757,875
Crown Cork & Seal Co., Inc...................... 39,600 1,984,950
Owens-Illinois, Inc. (a)........................ 44,100 1,673,044
Stone Container Corp. (a)....................... 31,266 326,339
--------------
5,063,552
--------------
COSMETICS & SOAPS -- 1.8%
Alberto Culver Co. (Class "B" Stock)............ 17,400 557,887
Avon Products, Inc.............................. 41,300 2,534,787
Colgate Palmolive Co............................ 92,000 6,762,000
International Flavors & Fragrances, Inc......... 33,200 1,709,800
Procter & Gamble Co............................. 418,404 33,393,869
--------------
44,958,343
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
Avery Dennison Corp............................. 31,700 1,418,575
Pitney Bowes, Inc............................... 44,700 4,020,206
Unisys Corp. (a)................................ 53,500 742,312
Xerox Corp...................................... 100,646 7,428,933
--------------
13,610,026
--------------
DIVERSIFIED OPERATIONS -- 3.3%
Cognizant Corp.................................. 51,160 2,279,817
Fortune Brands, Inc............................. 53,600 1,986,550
General Electric Co............................. 1,018,000 74,695,750
Whitman Corp.................................... 29,500 768,844
--------------
79,730,961
--------------
DRUGS AND MEDICAL SUPPLIES -- 10.0%
Abbott Laboratories............................. 238,600 15,643,212
Allergan, Inc................................... 19,900 667,894
ALZA Corp. (a).................................. 26,400 839,850
American Home Products Corp..................... 202,200 15,468,300
Amgen, Inc. (a)................................. 82,000 4,438,250
Bausch & Lomb, Inc.............................. 17,400 689,475
Baxter International, Inc....................... 86,800 4,377,975
Becton, Dickinson & Co.......................... 38,500 1,925,000
Biomet, Inc..................................... 33,600 861,000
Boston Scientific Corp. (a)..................... 60,600 2,780,025
Bristol-Myers Squibb Co......................... 309,280 29,265,620
C.R. Bard, Inc.................................. 18,600 582,412
Cardinal Health, Inc............................ 33,700 2,531,712
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Eli Lilly & Co.................................. 344,600 $ 23,992,775
Guidant Corp.................................... 45,900 2,857,275
Johnson & Johnson............................... 418,000 27,535,750
Mallinckrodt, Inc............................... 22,300 847,400
Medtronic, Inc.................................. 145,900 7,632,394
Merck & Co., Inc................................ 374,550 39,795,937
Pfizer, Inc..................................... 402,000 29,974,125
Pharmacia & Upjohn, Inc......................... 158,025 5,787,666
PharMerica, Inc. (a)............................ 15,063 156,279
Schering-Plough Corp............................ 227,700 14,145,862
St. Jude Medical, Inc. (a)...................... 27,800 847,900
United States Surgical Corp..................... 22,600 662,462
Warner-Lambert Co............................... 84,400 10,465,600
--------------
244,772,150
--------------
ELECTRICAL EQUIPMENT -- 0.1%
W.W. Grainger, Inc.............................. 15,800 1,535,562
--------------
ELECTRONICS -- 3.3%
Advanced Micro Devices, Inc. (a)................ 43,200 774,900
AMP, Inc........................................ 69,044 2,899,848
Applied Materials, Inc. (a)..................... 113,400 3,416,175
Data General Corp. (a).......................... 15,500 270,281
EG&G, Inc....................................... 12,900 268,481
Emerson Electric Co............................. 138,100 7,794,019
Harris Corp..................................... 24,800 1,137,700
Honeywell, Inc.................................. 39,000 2,671,500
Intel Corp...................................... 508,800 35,743,200
KLA-Tencor Corp. (a)............................ 26,900 1,039,012
LSI Logic Corp. (a)............................. 43,300 855,175
Micron Technology, Inc. (a)..................... 65,900 1,713,400
Motorola, Inc................................... 186,000 10,613,625
National Semiconductor Corp. (a)................ 50,300 1,304,656
Perkin-Elmer Corp............................... 14,000 994,875
Rockwell International Corp..................... 64,500 3,370,125
Tektronix, Inc.................................. 15,600 619,125
Texas Instruments, Inc.......................... 121,200 5,454,000
Thomas & Betts Corp............................. 17,600 831,600
--------------
81,771,697
--------------
FINANCIAL SERVICES -- 3.8%
American Express Co............................. 144,900 12,932,325
Beneficial Corp................................. 16,100 1,338,312
Countrywide Credit Industries, Inc.............. 33,100 1,419,162
Federal Home Loan Mortgage Corp................. 215,700 9,045,919
Federal National Mortgage Association........... 330,200 18,842,037
Fifth Third Bancorp............................. 47,600 3,891,300
Green Tree Financial Corp....................... 42,100 1,102,494
H & R Block, Inc................................ 32,300 1,447,444
Household International, Inc.................... 33,200 4,235,075
MBNA Corp....................................... 155,212 4,239,228
Merrill Lynch & Co., Inc........................ 103,700 7,563,619
Morgan Stanley, Dean Witter, Discover & Co...... 184,005 10,879,296
Schwab (Charles) Corp........................... 81,400 3,413,712
State Street Corp............................... 49,300 2,868,644
Sunamerica, Inc................................. 60,700 2,594,925
Transamerica Corp............................... 19,800 2,108,700
Washington Mutual Inc........................... 79,920 5,099,895
--------------
93,022,087
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B29
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOOD & BEVERAGES -- 5.8%
Adolph Coors Co. (Class "B" Stock).............. 11,600 $ 385,700
Anheuser-Busch Companies, Inc................... 153,400 6,749,600
Archer-Daniels-Midland Co....................... 173,537 3,763,584
Brown-Forman Corp. (Class "B" Stock)............ 21,300 1,176,825
Campbell Soup Co................................ 142,000 8,253,750
Coca-Cola Co.................................... 769,100 51,241,287
ConAgra, Inc.................................... 145,800 4,784,062
Corn Products International, Inc................ 11,075 330,173
CPC International, Inc.......................... 44,300 4,773,325
General Mills, Inc.............................. 49,200 3,523,950
Giant Food, Inc. (Class "A" Stock).............. 18,000 606,375
H.J. Heinz & Co................................. 113,450 5,764,678
Hershey Foods Corp.............................. 43,700 2,706,669
Kellogg Co...................................... 127,600 6,332,150
PepsiCo, Inc.................................... 474,400 17,285,950
Pioneer Hi-Bred International, Inc.............. 23,700 2,541,825
Quaker Oats Co.................................. 42,200 2,226,050
Ralston-Ralston Purina Group.................... 33,040 3,070,655
Sara Lee Corp................................... 148,200 8,345,512
Seagram Co., Ltd................................ 115,300 3,725,631
Sysco Corp...................................... 53,600 2,442,150
W. M. Wrigley, Jr. Co........................... 35,900 2,856,294
--------------
142,886,195
--------------
FOREST PRODUCTS -- 0.8%
Boise Cascade Corp.............................. 17,286 522,901
Champion International Corp..................... 29,300 1,327,656
Fort James Corp................................. 65,200 2,493,900
Georgia-Pacific Corp............................ 28,500 1,731,375
Georgia-Pacific Corp. (Timber Group) (a)........ 28,500 646,594
International Paper Co.......................... 93,734 4,042,279
Louisiana-Pacific Corp.......................... 34,200 649,800
Mead Corp....................................... 31,800 890,400
Potlatch Corp................................... 9,000 387,000
Temple-Inland Inc............................... 17,600 920,700
Union Camp Corp................................. 21,700 1,165,019
Westvaco Corp................................... 32,700 1,028,006
Weyerhaeuser Co................................. 61,800 3,032,062
Willamette Industries, Inc...................... 33,800 1,087,937
--------------
19,925,629
--------------
GAS PIPELINES -- 0.5%
Columbia Gas System, Inc........................ 17,300 1,359,131
Consolidated Natural Gas Co..................... 29,100 1,760,550
Enron Corp...................................... 98,700 4,102,219
Peoples Energy Corp............................. 10,200 401,625
Sonat, Inc...................................... 26,600 1,216,950
Williams Companies, Inc......................... 99,600 2,826,150
--------------
11,666,625
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.7%
Columbia/HCA Healthcare Corp.................... 202,798 6,007,891
Healthsouth Corp. (a)........................... 122,400 3,396,600
Humana, Inc. (a)................................ 51,700 1,072,775
Manor Care, Inc................................. 19,050 666,750
Service Corp. International..................... 77,900 2,877,431
Shared Medical Systems Corp..................... 7,400 488,400
Tenet Healthcare Corp. (a)...................... 94,800 3,140,250
--------------
17,650,097
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 1.2%
Clorox Co....................................... 32,100 $ 2,537,906
Gillette Co..................................... 173,800 17,456,037
Kimberly-Clark Corp............................. 173,188 8,540,333
--------------
28,534,276
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc................. 13,100 979,225
Fleetwood Enterprises, Inc...................... 10,900 462,569
Lowe's Companies, Inc........................... 54,400 2,594,200
Masco Corp...................................... 51,300 2,609,887
Maytag Corp..................................... 30,700 1,145,494
Owens Corning................................... 16,900 576,712
Stanley Works................................... 27,800 1,311,812
Tupperware Corp................................. 18,900 526,837
Whirlpool Corp.................................. 23,100 1,270,500
--------------
11,477,236
--------------
INSURANCE -- 4.8%
Aetna, Inc...................................... 46,512 3,282,003
Allstate Corp................................... 134,794 12,249,405
American General Corp........................... 76,986 4,162,056
American International Group, Inc............... 217,855 23,691,731
Aon Corp........................................ 51,350 3,010,394
Chubb Corp...................................... 53,400 4,038,375
CIGNA Corp...................................... 23,000 3,980,437
Cincinnati Financial Corp....................... 17,000 2,392,750
Conseco, Inc.................................... 57,500 2,612,656
General Re Corp................................. 24,550 5,204,600
Hartford Financial Services Group, Inc.......... 36,600 3,424,387
Jefferson-Pilot Corp............................ 21,975 1,711,303
Lincoln National Corp........................... 31,600 2,468,750
Loews Corp...................................... 35,700 3,788,662
Marsh & McLennan Companies, Inc................. 52,400 3,907,075
MBIA, Inc....................................... 27,400 1,830,662
MGIC Investment Corp............................ 35,500 2,360,750
Progressive Corp................................ 22,300 2,673,212
SAFECO Corp..................................... 43,500 2,120,625
St. Paul Companies, Inc......................... 26,300 2,158,244
Torchmark Corp.................................. 42,700 1,796,069
Travelers Group, Inc............................ 356,409 19,201,535
United Healthcare Corp.......................... 57,700 2,866,969
UNUM Corp....................................... 43,200 2,349,000
USF&G Corp...................................... 33,200 732,475
--------------
118,014,125
--------------
LEISURE -- 1.1%
Brunswick Corp.................................. 30,800 933,625
Harrah's Entertainment, Inc. (a)................ 31,150 587,956
Hilton Hotels Corp.............................. 77,100 2,293,725
King World Productions, Inc..................... 11,050 638,137
Mirage Resorts, Inc. (a)........................ 56,200 1,278,550
Walt Disney Co.................................. 210,067 20,809,762
--------------
26,541,755
--------------
LODGING -- 0.2%
ITT Corp. (a)................................... 36,400 3,016,650
Marriott International, Inc..................... 39,700 2,749,225
--------------
5,765,875
--------------
MACHINERY -- 0.9%
Briggs & Stratton Corp.......................... 7,600 369,075
Case Corp....................................... 23,800 1,438,412
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B30
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Caterpillar, Inc................................ 116,600 $ 5,662,387
Cincinnati Milacron, Inc........................ 12,300 319,031
Cooper Industries, Inc.......................... 37,800 1,852,200
Deere & Co...................................... 78,400 4,571,700
Dover Corp...................................... 68,800 2,485,400
Eaton Corp...................................... 23,700 2,115,225
Harnischfeger Industries, Inc................... 15,000 529,688
Ingersoll-Rand Co............................... 51,850 2,099,925
Snap-On, Inc.................................... 18,700 815,788
Timken Co....................................... 19,200 660,000
--------------
22,918,831
--------------
MANUFACTURING -- 0.5%
Illinois Tool Works, Inc........................ 77,600 4,665,700
Tyco International, Ltd......................... 165,600 7,462,350
--------------
12,128,050
--------------
MEDIA -- 2.6%
CBS Corp........................................ 218,300 6,426,206
Clear Channel Communications, Inc. (a).......... 30,100 2,391,069
Comcast Corp. (Special Class "A" Stock)......... 107,100 3,380,344
Dow Jones & Co., Inc............................ 29,700 1,594,519
Dun & Bradstreet Corp........................... 53,460 1,653,919
Gannett Co., Inc................................ 87,500 5,408,594
HBO & Co........................................ 61,600 2,956,800
Interpublic Group of Companies, Inc............. 38,400 1,912,800
Knight-Ridder, Inc.............................. 27,100 1,409,200
McGraw-Hill, Inc................................ 30,700 2,271,800
Meredith Corp................................... 16,600 592,413
New York Times Co. (Class "A" Stock)............ 29,600 1,957,300
R. R. Donnelley & Sons Co....................... 44,500 1,657,625
Tele-Communications, Inc. (Series "A"
Stock) (a).................................... 162,900 4,551,019
Time Warner, Inc................................ 173,940 10,784,280
Times Mirror Co. (Class "A" Stock).............. 29,100 1,789,650
Tribune Co...................................... 38,400 2,390,400
US West Media Group (a)......................... 188,600 5,445,825
Viacom, Inc. (Class "B" Stock) (a).............. 109,567 4,540,183
--------------
63,113,946
--------------
METALS - FERROUS -- 0.2%
Allegheny Teledyne, Inc......................... 55,580 1,438,133
Armco, Inc. (a)................................. 26,700 131,831
Bethlehem Steel Corp. (a)....................... 33,500 288,938
Inland Steel Industries, Inc.................... 15,300 262,013
Nucor Corp...................................... 27,600 1,333,425
USX-U.S. Steel Group............................ 27,340 854,375
Worthington Industries, Inc..................... 29,400 485,100
--------------
4,793,815
--------------
METALS - NON FERROUS -- 0.3%
Alcan Aluminum, Ltd............................. 70,250 1,940,656
Aluminum Company of America..................... 53,900 3,793,213
Cyprus Minerals Co.............................. 28,100 432,038
Inco Ltd........................................ 51,100 868,700
Reynolds Metals Co.............................. 23,400 1,404,000
--------------
8,438,607
--------------
MINERAL RESOURCES -- 0.2%
ASARCO, Inc..................................... 12,500 280,469
Burlington Resources, Inc....................... 54,617 2,447,524
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Echo Bay Mines, Ltd............................. 39,900 $ 97,256
Homestake Mining Co............................. 45,300 402,038
Phelps Dodge Corp............................... 18,900 1,176,525
--------------
4,403,812
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
Browning-Ferris Industries, Inc................. 65,000 2,405,000
Crane Co........................................ 14,150 613,756
Ecolab, Inc..................................... 19,700 1,092,119
General Signal Corp............................. 15,362 648,084
ITT Industries, Inc............................. 36,400 1,142,050
Laidlaw, Inc.................................... 101,500 1,382,938
Millipore Corp.................................. 13,200 447,975
NACCO Industries, Inc. (Class "A" Stock)........ 2,500 267,969
Pall Corp....................................... 39,200 810,950
PPG Industries Inc.............................. 55,500 3,170,438
Textron, Inc.................................... 51,300 3,206,250
Thermo Electron Corp. (a)....................... 46,700 2,078,150
--------------
17,265,679
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.5%
American Greetings Corp. (Class "A" Stock)...... 24,300 950,738
Black & Decker Corp............................. 29,900 1,167,969
Corning, Inc.................................... 71,800 2,665,575
Eastman Kodak Co................................ 101,100 6,148,144
Jostens, Inc.................................... 12,200 281,363
Minnesota Mining & Manufacturing Co............. 128,600 10,553,238
Polaroid Corp................................... 15,100 735,181
Rubbermaid, Inc................................. 46,000 1,150,000
Unilever N.V.................................... 198,800 12,412,575
--------------
36,064,783
--------------
MISCELLANEOUS - INDUSTRIAL -- 0.1%
Tenneco, Inc.................................... 53,600 2,117,200
--------------
OIL & GAS -- 7.0%
Amerada Hess Corp............................... 28,100 1,541,988
Amoco Corp...................................... 152,230 12,958,579
Anadarko Petroleum Corp......................... 18,400 1,116,650
Ashland, Inc.................................... 23,500 1,261,656
Atlantic Richfield Co........................... 99,470 7,970,034
Chevron Corp.................................... 204,000 15,708,000
Coastal Corp.................................... 32,600 2,019,163
Eastern Enterprises............................. 6,400 288,000
Exxon Corp...................................... 767,200 46,943,050
Kerr-McGee Corp................................. 14,800 937,025
Mobil Corp...................................... 243,500 17,577,656
NICOR, Inc...................................... 14,400 607,500
Occidental Petroleum Corp....................... 105,400 3,089,538
Pennzoil Co..................................... 15,000 1,002,188
Phillips Petroleum Co........................... 82,500 4,011,563
Royal Dutch Petroleum Co........................ 666,500 36,115,969
Sun Co., Inc.................................... 22,500 946,406
Texaco, Inc..................................... 174,382 9,482,021
Union Pacific Resources Group, Inc.............. 79,256 1,921,958
Unocal Corp..................................... 77,000 2,988,563
USX-Marathon Group.............................. 89,600 3,024,000
--------------
171,511,507
--------------
OIL & GAS SERVICES -- 1.1%
Apache Corporation.............................. 28,600 1,002,788
Baker Hughes, Inc............................... 51,900 2,264,138
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B31
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Dresser Industries, Inc......................... 55,000 $ 2,306,563
Halliburton Co.................................. 81,300 4,222,519
Helmerich & Payne, Inc.......................... 7,900 536,213
McDermott International, Inc.................... 16,900 618,963
ONEOK, Inc...................................... 9,800 395,675
Oryx Energy Co. (a)............................. 32,700 833,850
Rowan Companies, Inc. (a)....................... 26,200 799,100
Schlumberger, Ltd............................... 154,100 12,405,050
Western Atlas, Inc. (a)......................... 17,100 1,265,400
--------------
26,650,259
--------------
PRECIOUS METALS -- 0.2%
Barrick Gold Corp............................... 115,100 2,143,738
Battle Mountain Gold Corp....................... 71,500 420,063
Freeport-McMoRan Copper & Gold, Inc. (Class "B"
Stock)........................................ 63,000 992,250
Newmont Mining Corp............................. 48,103 1,413,026
Placer Dome, Inc................................ 75,600 959,175
--------------
5,928,252
--------------
RAILROADS -- 0.7%
Burlington Northern, Inc........................ 48,442 4,502,078
CSX Corp........................................ 68,112 3,678,048
Norfolk Southern Corp........................... 116,800 3,598,900
Union Pacific Corp.............................. 76,900 4,801,444
--------------
16,580,470
--------------
REMARKET/LEASING OFFICE EQUIPMENT -- 0.0%
IKON Office Solutions, Inc...................... 41,376 1,163,700
--------------
RESTAURANTS -- 0.5%
Darden Restaurants, Inc......................... 45,900 573,750
McDonald's Corp................................. 213,900 10,213,725
Tricon Global Restaurants, Inc. (a)............. 47,750 1,387,734
Wendy's International, Inc...................... 40,600 976,938
--------------
13,152,147
--------------
RETAIL -- 4.9%
Albertson's, Inc................................ 75,900 3,595,763
American Stores Co.............................. 84,000 1,727,250
AutoZone, Inc. (a).............................. 48,000 1,392,000
Charming Shoppes, Inc. (a)...................... 23,300 109,219
Circuit City Stores, Inc........................ 30,100 1,070,431
Costco Companies, Inc. (a)...................... 66,366 2,961,583
CVS Corp........................................ 54,000 3,459,375
Dayton-Hudson Corp.............................. 68,242 4,606,335
Dillards, Inc. (Class "A" Stock)................ 35,450 1,249,613
Federated Department Stores, Inc. (a)........... 64,900 2,794,756
Great Atlantic & Pacific Tea Co., Inc........... 11,200 332,500
Harcourt General, Inc........................... 21,906 1,199,354
Home Depot, Inc................................. 228,123 13,430,742
J.C. Penney Co., Inc............................ 77,800 4,692,313
Kmart Corp. (a)................................. 150,300 1,737,844
Kroger Co. (a).................................. 78,700 2,906,981
Limited, Inc.................................... 84,248 2,148,324
Liz Claiborne, Inc.............................. 21,600 903,150
Longs Drug Stores, Inc.......................... 11,700 375,863
May Department Stores Co........................ 72,000 3,793,500
Mercantile Stores Co., Inc...................... 11,200 681,800
Newell Co....................................... 49,600 2,108,000
Nike, Inc. (Class "B" Stock).................... 89,900 3,528,575
Nordstrom, Inc.................................. 24,100 1,455,038
Pep Boys-Manny, Moe & Jack...................... 19,300 460,788
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Reebok International, Ltd. (a).................. 17,300 $ 498,456
Rite Aid Corp................................... 39,300 2,306,419
Sears, Roebuck & Co............................. 121,900 5,515,975
Sherwin-Williams Co............................. 53,600 1,487,400
Supervalu, Inc.................................. 20,000 837,500
Tandy Corp...................................... 32,330 1,246,726
The Gap, Inc.................................... 124,650 4,417,284
TJX Companies, Inc.............................. 50,000 1,718,750
Toys 'R' Us, Inc. (a)........................... 89,550 2,815,228
Wal-Mart Stores, Inc............................ 701,900 27,681,181
Walgreen Co..................................... 153,200 4,806,650
Winn Dixie Stores, Inc.......................... 45,900 2,005,256
Woolworth Corp. (a)............................. 42,400 863,900
--------------
118,921,822
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 22,300 924,056
Cooper Tire & Rubber Co......................... 24,600 599,625
Goodyear Tire & Rubber Co....................... 49,300 3,136,713
--------------
4,660,394
--------------
TELECOMMUNICATIONS -- 7.8%
Airtouch Communications, Inc. (a)............... 157,200 6,533,625
Alltel Corp..................................... 57,700 2,369,306
Ameritech Corp.................................. 170,400 13,717,200
Andrew Corp. (a)................................ 27,312 655,488
AT&T Corp....................................... 505,273 30,947,971
Bell Atlantic Corp.............................. 241,895 22,012,445
BellSouth Corp.................................. 308,100 17,349,881
DSC Communications Corp. (a).................... 36,100 866,400
Frontier Corp................................... 51,100 1,229,594
GTE Corp........................................ 297,820 15,561,095
Lucent Technologies, Inc........................ 200,060 15,979,793
MCI Communications Corp......................... 216,600 9,273,188
NextLevel Systems, Inc. (a)..................... 44,500 795,438
Northern Telecom, Ltd........................... 81,600 7,262,400
SBC Communications, Inc......................... 284,893 20,868,412
Scientific-Atlanta, Inc......................... 24,800 415,400
Sprint Corp..................................... 133,800 7,844,025
Tellabs, Inc. (a)............................... 56,100 2,966,288
US West Communications, Inc..................... 150,700 6,800,338
WorldCom, Inc................................... 280,800 8,494,200
--------------
191,942,487
--------------
TEXTILES -- 0.1%
Fruit of the Loom, Inc. (Class "A" Stock) (a)... 24,700 632,938
National Service Industries, Inc................ 13,500 669,094
Russell Corp.................................... 11,500 305,469
Springs Industries, Inc......................... 6,100 317,200
V.F. Corp....................................... 38,836 1,784,029
--------------
3,708,730
--------------
TOBACCO -- 1.5%
Phillip Morris Co., Inc......................... 753,800 34,156,563
UST, Inc........................................ 56,800 2,098,050
--------------
36,254,613
--------------
TOYS -- 0.2%
Hasbro, Inc..................................... 39,500 1,244,250
Mattel, Inc..................................... 91,281 3,400,217
--------------
4,644,467
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B32
<PAGE>
STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
TRUCKING/SHIPPING -- 0.1%
Caliber System, Inc............................. 11,900 $ 579,381
Federal Express Corp. (a)....................... 35,900 2,192,144
Ryder System, Inc............................... 25,300 828,575
--------------
3,600,100
--------------
UTILITY - ELECTRIC -- 2.7%
American Electric Power Co., Inc................ 58,900 3,040,713
Baltimore Gas & Electric Co..................... 46,350 1,578,797
Carolina Power & Light Co....................... 46,200 1,960,613
Central & South West Corp....................... 66,500 1,799,656
CINergy Corp.................................... 48,239 1,848,157
Consolidated Edison Co. of NY, Inc.............. 72,300 2,964,300
Dominion Resources, Inc......................... 57,750 2,457,984
DTE Energy Company.............................. 44,800 1,554,000
Duke Power Co................................... 112,231 6,214,792
Edison International............................ 123,100 3,346,781
Entergy Corp.................................... 75,000 2,245,313
First Energy Corp. (a).......................... 70,800 2,053,200
FPL Group, Inc.................................. 56,600 3,350,013
GPU, Inc........................................ 37,900 1,596,538
Houston Industries, Inc......................... 97,510 2,602,298
Niagara Mohawk Power Corp. (a).................. 43,300 454,650
Northern States Power Co........................ 23,300 1,357,225
P P & L Resources, Inc.......................... 51,100 1,223,206
Pacific Enterprises............................. 25,900 974,488
Pacific Gas & Electric, Co...................... 136,200 4,145,588
PacifiCorp...................................... 92,600 2,529,138
PECO Energy Co.................................. 68,000 1,649,000
Public Service Enterprise Group, Inc............ 71,100 2,252,981
Southern Co..................................... 213,200 5,516,550
Texas Utilities Co.............................. 76,306 3,171,468
Unicom Corp..................................... 66,900 2,057,175
Union Electric Company.......................... 31,000 1,340,750
--------------
65,285,374
--------------
WASTE MANAGEMENT -- 0.2%
Waste Management, Inc........................... 140,000 3,850,000
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,365,454,009).......................................... 2,350,401,793
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENTS -- 4.2% (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.0%
Joint Repurchase Agreement Account,
6.53%, 01/02/98 (Note 5)...................... $ 98,176 $ 98,176,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bills,
5.065%, 03/19/98 (b).......................... 4,000 3,957,229
5.21%, 01/22/98 (b)........................... 400 398,842
--------------
4,356,071
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $102,532,071)............................................ 102,532,071
--------------
TOTAL INVESTMENTS -- 100.2%
(cost $1,467,986,080; Note 6).................................. 2,452,933,864
--------------
VARIATION MARGIN ON OPEN
FUTURES CONTRACTS -- (0.0%).................................... (19,150)
OTHER LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.2%)......................................... (4,723,488)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $2,448,191,226
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
(c) Open futures contracts as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT
CONTRACTS TYPE DATE TRADE DATE DECEMBER 31, 1997 APPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
383 S&P 500 Index Mar 98 $ 93,240,475 $ 93,748,825 $ 508,350
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B33
<PAGE>
EQUITY INCOME PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 95.3%
VALUE
COMMON STOCKS -- 90.9% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.1%
Raytheon Co. (Class "A" Stock).................. 28,696 $ 1,415,096
United Industrial Corp.......................... 31,700 344,737
--------------
1,759,833
--------------
AIRLINES -- 2.9%
AMR Corp. (a)................................... 464,200 59,649,700
--------------
AUTOS - CARS & TRUCKS -- 5.3%
Chrysler Corp................................... 1,398,034 49,193,321
Ford Motor Co................................... 630,000 30,673,125
General Motors Corp............................. 450,000 27,281,250
--------------
107,147,696
--------------
CHEMICALS -- 4.3%
Dow Chemical Co................................. 667,600 67,761,400
Millennium Chemicals, Inc....................... 824,998 19,439,015
--------------
87,200,415
--------------
COMPUTERS -- 1.5%
Digital Equipment Corp. (a)..................... 673,100 24,904,700
Intergraph Corp. (a)............................ 607,700 6,077,000
--------------
30,981,700
--------------
CONSUMER SERVICES
Petroleum Heat and Power, Inc. (Class "A"
Stock)........................................ 47,300 109,381
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 4.4%
Eastman Kodak Co................................ 174,900 10,636,106
Gibson Greetings Inc. (a)....................... 724,000 15,837,500
RJR Nabisco Holdings Corp....................... 1,698,880 63,708,000
--------------
90,181,606
--------------
ELECTRICAL EQUIPMENT -- 1.3%
Kuhlman Corp.................................... 560,000 21,910,000
Pacific Scientific Co........................... 185,700 4,456,800
--------------
26,366,800
--------------
ELECTRONICS -- 0.9%
Esterline Technologies Corp. (a)................ 275,700 9,925,200
Instron Corp.................................... 154,800 2,921,850
Newport Corp.................................... 306,900 4,315,781
--------------
17,162,831
--------------
FINANCIAL SERVICES -- 10.8%
A.G. Edwards, Inc............................... 316,500 12,580,875
Bear Stearns Companies, Inc..................... 928,251 44,091,922
Lehman Brothers Holdings, Inc................... 1,760,900 89,805,900
PaineWebber Group, Inc.......................... 1,269,300 43,870,181
Travelers Group, Inc............................ 539,200 29,049,400
--------------
219,398,278
--------------
FOREST PRODUCTS -- 1.8%
Fletcher Challenge Ltd., ADR, (Canada).......... 62,400 522,600
Louisiana-Pacific Corp.......................... 771,500 14,658,500
Potlatch Corp................................... 125,300 5,387,900
Rayonier, Inc................................... 396,700 16,884,544
--------------
37,453,544
--------------
GAS DISTRIBUTION -- 1.6%
British Gas PLC, ADR, (United Kingdom).......... 1,077,525 24,446,348
TransCanada Pipelines, Ltd...................... 389,600 8,717,300
--------------
33,163,648
--------------
GAS PIPELINES -- 0.5%
Sonat, Inc...................................... 206,300 9,438,225
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOUSING RELATED -- 3.2%
Hanson, PLC, ADR, (United Kingdom).............. 1,574,150 $ 36,303,834
Kaufman & Broad Home Corp....................... 462,700 10,381,831
Ryland Group, Inc............................... 750,000 17,718,750
--------------
64,404,415
--------------
INSURANCE -- 3.3%
Marsh & McLennan Companies, Inc................. 537,600 40,084,800
Ohio Casualty Corp.............................. 379,900 16,953,037
Selective Insurance Group, Inc.................. 397,600 10,735,200
--------------
67,773,037
--------------
MEDIA -- 2.4%
CBS Corp........................................ 1,488,945 43,830,818
Dun & Bradstreet Corp........................... 195,600 6,051,375
--------------
49,882,193
--------------
METALS-FERROUS -- 2.3%
USX-U.S. Steel Group............................ 1,509,400 47,168,750
--------------
METALS-NON FERROUS -- 3.2%
Aluminum Company of America..................... 525,000 36,946,875
Kaiser Aluminum Corp. (a)....................... 266,572 2,349,166
Reynolds Metals Co.............................. 431,586 25,895,160
--------------
65,191,201
--------------
MISCELLANEOUS - INDUSTRIAL -- 2.2%
Energy Group, PLC, (United Kingdom)............. 253,750 11,323,594
Nova Corp....................................... 2,449,400 23,422,387
Tenneco, Inc.................................... 227,700 8,994,150
--------------
43,740,131
--------------
OIL & GAS -- 6.0%
Crestar Energy, Inc., ADR, (Canada) (a)......... 200,000 3,078,969
Elf Aquitaine SA, ADR, (France)................. 680,000 39,865,000
Occidental Petroleum Corp....................... 1,000,000 29,312,500
Pioneer Natural Resources Co.................... 1,416,487 40,989,593
USX-Marathon Group.............................. 230,600 7,782,750
--------------
121,028,812
--------------
OIL & GAS SERVICES -- 4.1%
McDermott International, Inc.................... 1,861,300 68,170,113
Quaker State Corp............................... 1,000,000 14,250,000
--------------
82,420,113
--------------
PRECIOUS METALS -- 0.3%
Ashanti Goldfields Co., Ltd..................... 500,000 3,750,000
Coeur D'Alene Mines Corp........................ 194,678 1,752,102
Echo Bay Mines, Ltd............................. 298,499 727,591
--------------
6,229,693
--------------
REAL ESTATE DEVELOPMENT -- 17.6%
Alexander Haagen Properties, Inc................ 420,000 7,323,750
Amli Residential Properties Trust............... 208,300 4,634,675
Bradley Real Estate, Inc........................ 204,200 4,288,200
CCA Prison Realty Trust......................... 787,100 35,124,338
Crescent Operating, Inc. (a).................... 152,150 3,727,675
Crescent Real Estate Equities, Inc.............. 1,591,500 62,665,313
Crown American Realty Trust..................... 1,127,800 10,502,638
Equity Inns, Inc................................ 200,000 2,950,000
Equity Office Properties Trust.................. 544,378 17,181,954
Equity Residential Properties Trust............. 1,572,700 79,519,644
Gables Residential Trust........................ 435,800 12,038,975
Glimcher Realty Trust........................... 515,400 11,628,713
Irvine Apartment Communities, Inc............... 392,000 12,470,500
JDN Realty Corp................................. 235,500 7,624,313
JP Realty, Inc.................................. 84,000 2,178,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B34
<PAGE>
EQUITY INCOME PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Kimco Realty Corp............................... 56,250 $ 1,982,813
Malan Realty Investors, Inc..................... 140,000 2,537,500
Manufactured Home Communities, Inc.............. 632,000 17,064,000
Pennsylvania Real Estate
Investment Trust.............................. 50,100 1,230,581
Security Capital Pacific Trust.................. 587,034 14,235,575
Simon Debartolo Group, Inc...................... 214,300 7,004,931
Sunstone Hotel Investors, Inc................... 240,000 4,140,000
TriNet Corporate Realty Trust, Inc.............. 166,700 6,449,206
Vornado Realty Trust............................ 400,000 18,775,000
Walden Residential Properties, Inc.............. 355,000 9,052,500
--------------
356,331,544
--------------
RETAIL -- 5.1%
Blair Corporation............................... 80,400 1,386,900
Heilig-Meyers, Co............................... 589,900 7,078,800
J.C. Penney Co., Inc............................ 769,800 46,428,563
Tandy Corp...................................... 280,000 10,797,500
The Limited, Inc................................ 1,504,600 38,367,300
--------------
104,059,063
--------------
TELECOMMUNICATIONS -- 1.3%
Telefonos de Mexico SA (Class "L" Stock), ADR
(Mexico)...................................... 460,500 25,816,781
--------------
TEXTILES -- 0.8%
Garan, Inc...................................... 2,900 74,675
Kellwood Co..................................... 518,900 15,567,000
Oxford Industries, Inc.......................... 34,500 1,121,250
--------------
16,762,925
--------------
TOBACCO -- 0.6%
BAT Industries, PLC, ADR, (United Kingdom)...... 606,500 11,371,875
--------------
TRUCKING/SHIPPING -- 0.6%
Alexander & Baldwin, Inc........................ 287,750 7,859,172
Yellow Corp..................................... 157,800 3,964,725
--------------
11,823,897
--------------
UTILITY - ELECTRIC -- 0.4%
Central Louisiana Electric Co................... 6,100 197,488
First Energy Corp. (a).......................... 24,465 709,485
Pacific Gas & Electric, Co...................... 240,000 7,305,000
--------------
8,211,973
--------------
WASTE MANAGEMENT -- 2.1%
Waste Management, Inc........................... 1,546,900 42,539,750
--------------
TOTAL COMMON STOCKS
(cost $1,337,420,791).......................................... 1,844,769,810
--------------
PREFERRED STOCKS -- 3.5%
INTEGRATED PRODUCERS -- 0.1%
Unocal Corp. (Conv.) Series 6.25%............... 34,372 1,944,166
--------------
METALS-FERROUS -- 1.0%
Bethlehem Steel Corp. (Cum. Conv.).............. 264,000 10,692,000
Rouge Steel..................................... 262,500 3,346,875
USX Capital Trust 6/7 (Cum. Conv.).............. 114,600 5,271,600
--------------
19,310,475
--------------
METALS-NON FERROUS -- 0.1%
Hecla Mining Co. (Cum. Conv.), Series B......... 60,000 2,805,000
--------------
OIL SERVICES -- 0.2%
McDermott International, Inc. (Cum. Conv.),
Series C...................................... 88,000 4,829,000
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
PREFERRED STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
REAL ESTATE DEVELOPMENT -- 0.1%
Security Capital Pacific Trust (Cum. Conv.),
Series A...................................... 54,500 $ 1,784,875
--------------
RETAIL -- 2.0%
Kmart Corp. (Cum. Conv.)........................ 763,600 39,420,850
--------------
TOTAL PREFERRED STOCKS
(cost $78,873,899)............................................. 70,094,366
--------------
WARRANTS UNITS
-------------
CONSTRUCTION
Morrison Knudsen Corp., 03/11/03................ 5,689 16,356
--------------
REAL ESTATE DEVELOPMENT
Security Capital Pacific Trust,
09/18/98...................................... 31,610 165,952
--------------
TOTAL WARRANTS
(cost $248,929)................................................ 182,308
--------------
PRINCIPAL
AMOUNT
CONVERTIBLE BONDS -- 0.9% (000)
-------------
EXPLORATION & PRODUCTION -- 0.1%
Oryx Energy Co.,
7.50%, 05/15/14............................... $ 1,760 1,777,600
--------------
OIL & GAS SERVICES -- 0.2%
Baker Hughes, Inc., Zero Coupon, 05/05/08....... 5,940 4,989,600
--------------
REAL ESTATE DEVELOPMENT -- 0.2%
Alexander Haagen Properties, Inc., Series A
7.50%, 01/15/01............................... 1,600 1,585,000
Malan Realty Investors, Inc. 9.50%, 07/15/04.... 3,000 3,180,000
--------------
4,765,000
--------------
RETAIL -- 0.4%
Charming Shoppes, Inc.,
7.50%, 07/15/06............................... 8,000 7,540,000
--------------
TOTAL CONVERTIBLE BONDS
(cost $18,078,853)............................................. 19,072,200
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,434,622,472).......................................... 1,934,118,684
--------------
SHORT-TERM INVESTMENT -- 4.8%
REPURCHASE AGREEMENT
Joint Repurchase Agreement Account, 6.53%,
01/02/98
(cost $98,435,000; Note 5).................... 98,435 98,435,000
--------------
TOTAL INVESTMENTS -- 100.1%
(cost $1,533,057,472; Note 6).................................. 2,032,553,684
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.1%)......................................... (2,797,795)
--------------
NET ASSETS -- 100.0%............................................. $2,029,755,889
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B35
<PAGE>
EQUITY PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 83.3%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.0%
Raytheon Co..................................... 44,639 $ 2,201,261
--------------
AUTOS - CARS & TRUCKS -- 4.3%
Chrysler Corp................................... 2,627,820 92,466,416
General Motors Corp............................. 700,000 42,437,500
LucasVarity PLC (United Kingdom)................ 19,000,000 67,472,027
Navistar International Corp. (a)................ 395,200 9,805,900
PACCAR, Inc..................................... 279,400 14,668,500
TRW, Inc........................................ 634,600 33,871,775
--------------
260,722,118
--------------
BANKS AND SAVINGS & LOANS -- 6.2%
Bank of New York Co., Inc....................... 1,200,000 69,375,000
BankAmerica Corp................................ 750,000 54,750,000
Chase Manhattan Corp............................ 475,600 52,078,200
First America Bank Corp......................... 280,500 21,633,562
Mellon Bank Corp................................ 270,100 16,374,812
Mercantile Bankshares Corp...................... 419,400 16,409,025
Morgan (J.P.) & Co., Inc........................ 395,400 44,630,775
NationsBank Corp................................ 800,000 48,650,000
Republic New York Corp.......................... 225,000 25,692,187
Washington Mutual, Inc.......................... 429,060 27,379,391
--------------
376,972,952
--------------
CHEMICALS -- 3.3%
BOC Group, PLC ADR (United Kingdom)............. 800,000 26,350,000
Dow Chemical Co................................. 556,300 56,464,450
Eastman Chemical Co............................. 941,550 56,081,072
Potash Corp. of Saskatchewan, Inc............... 380,000 31,540,000
Wellman, Inc.................................... 798,200 15,564,900
Witco Corp...................................... 268,800 10,970,400
--------------
196,970,822
--------------
COMPUTERS -- 3.3%
Digital Equipment Corp. (a)..................... 3,050,000 112,850,000
International Business Machines Corp............ 600,000 62,737,500
NCR Corp........................................ 100,000 2,781,250
Seagate Technology, Inc. (a).................... 950,000 18,287,500
--------------
196,656,250
--------------
CONSTRUCTION & HOUSING -- 1.3%
American Standard Co., Inc. (a)................. 1,050,000 40,228,125
Centex Corp..................................... 600,000 37,762,500
--------------
77,990,625
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 5.3%
Gibson Greeting Inc. (a)........................ 750,000 16,406,250
Loews Corp...................................... 1,775,000 188,371,875
RJR Nabisco Holdings Corp....................... 3,100,000 116,250,000
--------------
321,028,125
--------------
ELECTRONICS -- 0.6%
Harris Corp..................................... 600,000 27,525,000
Gerber Scientific, Inc.......................... 419,800 8,343,525
--------------
35,868,525
--------------
FINANCIAL SERVICES -- 7.7%
American Express Co............................. 700,000 62,475,000
Lehman Brothers Holdings, Inc................... 900,000 45,900,000
Morgan Stanley, Dean Witter, Discover & Co...... 3,200,000 189,200,000
Travelers Group, Inc............................ 3,061,500 164,938,312
--------------
462,513,312
--------------
FOOD & BEVERAGES -- 0.5%
Diageo PLC (United Kingdom)..................... 3,000,000 27,599,940
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 7.9%
Fort James Corp................................. 560,000 $ 21,420,000
Georgia-Pacific Corp............................ 1,158,000 70,348,500
Georgia-Pacific Corp. (a)....................... 1,158,000 26,272,125
International Paper Co.......................... 1,638,000 70,638,750
Mead Corp....................................... 1,800,000 50,400,000
Rayonier Inc.................................... 830,400 35,343,900
Temple-Inland Inc............................... 892,500 46,688,906
Weyerhaeuser Co................................. 1,522,500 74,697,656
Willamette Industries, Inc...................... 2,500,000 80,468,750
--------------
476,278,587
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 5.0%
Columbia/HCA Healthcare Corp.................... 2,383,500 70,611,187
Foundation Health Corp. (a)..................... 2,044,210 45,739,199
PacifiCare Health Systems, Inc. (a)............. 291,500 15,267,312
Tenet Healthcare Corp. (a)...................... 3,237,832 107,253,185
Wellpoint Health Networks Inc................... 1,508,300 63,725,675
--------------
302,596,558
--------------
INSURANCE -- 10.9%
American Financial Group, Inc................... 552,700 22,280,719
American General Corp........................... 1,000,000 54,062,500
Chubb Corp...................................... 2,206,400 166,859,000
Citizens Corp................................... 700,000 20,125,000
Equitable Companies, Inc........................ 1,800,000 89,550,000
Old Republic International Corp................. 1,950,885 72,548,536
SAFECO Corp..................................... 2,327,000 113,441,250
St. Paul Companies, Inc......................... 826,900 67,857,481
Western National Corp........................... 1,624,300 48,119,888
--------------
654,844,374
--------------
METALS-FERROUS -- 0.6%
Bethlehem Steel Corp. (a)....................... 500,000 4,312,500
Birmingham Steel Corp........................... 1,527,400 24,056,550
Carpenter Technology Corp....................... 100,000 4,806,250
--------------
33,175,300
--------------
METALS-NON FERROUS -- 1.1%
Aluminum Company of America..................... 600,000 42,225,000
Cyprus Amax Minerals Co......................... 1,533,200 23,572,950
Nord Resources Corp. (a)........................ 130,500 236,531
--------------
66,034,481
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.5%
Eastman Kodak Co................................ 475,000 28,885,938
--------------
OIL & GAS -- 2.4%
Amerada Hess Corp............................... 325,000 17,834,375
Atlantic Richfield Co........................... 1,081,700 86,671,213
Total SA, ADR (France).......................... 738,365 40,979,258
--------------
145,484,846
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 3.7%
Elf Aquitaine SA, ADR (France).................. 2,424,433 142,132,385
Occidental Petroleum Corp....................... 1,100,000 32,243,750
Oryx Energy Co. (a)............................. 1,600,000 40,800,000
Union Texas Petroleum Holdings, Inc............. 504,500 10,499,906
--------------
225,676,041
--------------
PRECIOUS METALS -- 0.4%
AMAX Gold Inc. (a).............................. 131,342 303,728
Newmont Mining Corp............................. 883,900 25,964,563
--------------
26,268,291
--------------
RESTAURANTS -- 1.6%
Darden Restaurants, Inc......................... 7,922,700 99,033,750
--------------
RETAIL -- 8.0%
BJ'S Wholesale Club, Inc. (a)................... 1,300,000 40,787,500
Dayton-Hudson Corp.............................. 358,800 24,219,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B36
<PAGE>
EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Dillard's, Inc.................................. 3,300,000 $ 116,325,000
Homebase, Inc. (a).............................. 1,300,000 10,237,500
Kmart Corp. (a)................................. 6,500,000 75,156,250
Nine West Group, Inc. (a)....................... 715,800 18,566,063
Petrie Stores Corp. (a)......................... 540,000 1,651,050
Sears, Roebuck and Co........................... 690,000 31,222,500
Tandy Corp...................................... 2,765,800 106,656,163
Toys 'R' Us, Inc. (a)........................... 1,800,000 56,587,500
--------------
481,408,526
--------------
TELECOMMUNICATIONS -- 5.4%
360 Communication Co. (a)....................... 1,696,066 34,239,332
AT&T Corp....................................... 1,950,000 119,437,500
Loral Corp...................................... 1,800,000 38,587,500
Portugal Telecom SA, ADR (Portugal)............. 1,262,500 59,337,500
Telefonica de Espana, SA, ADR (Spain)........... 800,000 72,850,000
--------------
324,451,832
--------------
TEXTILES -- 0.0%
Worldtex, Inc. (a).............................. 107,199 850,892
--------------
TRANSPORTATION -- 0.4%
OMI Corp. (a)................................... 1,000,000 9,187,500
Overseas Shipholding Group, Inc................. 600,000 13,087,500
--------------
22,275,000
--------------
UTILITY - ELECTRIC -- 2.3%
American Electric Power, Inc.................... 180,000 9,292,500
GPU, Inc........................................ 500,000 21,062,500
Houston Industries, Inc......................... 974,519 26,007,476
Long Island Lighting Co......................... 1,541,400 46,434,675
Unicom Corp..................................... 1,112,900 34,221,675
--------------
137,018,826
--------------
UTILITY - WATER -- 0.1%
American Water Works Co., Inc................... 270,000 7,374,375
--------------
WASTE MANAGEMENT -- 0.5%
Waste Management, Inc........................... 1,100,000 30,250,000
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $3,193,641,271).......................................... 5,020,431,547
--------------
PRINCIPAL
MOODY'S AMOUNT
SHORT-TERM INVESTMENTS -- 16.7% RATING (000)
------------ ---------
CERTIFICATES OF DEPOSIT-YANKEE -- 2.3%
Bank of Montreal, (Canada),
5.90%, 01/16/98............................... P1 $ 27,000 27,000,000
Barclays Bank PLC, (United Kingdom)
5.64%, 01/20/98............................... P1 21,000 20,997,178
Bayerische LandesBank, (Federal Republic of
Germany)
5.69%, 01/28/98............................... P1 20,000 19,997,165
Bayerische VereinBank, (Federal Republic of
Germany)
5.69%, 01/23/98............................... P1 13,000 12,998,349
Canadian Imperial Bank, (Canada)
5.80%, 02/13/98............................... P1 59,000 59,000,000
--------------
139,992,692
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.6%
Associates Corp. of North America,
5.70%, 01/15/98............................... P1 $ 17,000 $ 16,965,008
5.70%, 01/16/98............................... P1 24,000 23,946,800
Associates First Capital Corp.,
5.75%, 01/30/98............................... P1 19,000 18,915,028
Bell Atlantic Financial,
5.80%, 01/14/98............................... P1 9,000 8,982,600
Beneficial Corp.,
5.74%, 02/12/98............................... P1 59,000 58,614,304
General Electric Capital Corp.,
5.71%, 01/23/98............................... P1 27,000 26,910,067
5.80%, 01/14/98............................... P1 34,000 33,934,267
Morgan (J.P.) & Co., Inc.,
5.77%, 02/10/98............................... P1 8,030 7,979,806
Norwest Financial, Inc.,
5.70%, 01/16/98............................... P1 48,384 48,276,749
Smith Barney, Inc.,
5.82%, 01/15/98............................... P1 10,000 9,978,983
Xerox Corp.,
5.75%, 02/10/98............................... P1 20,000 19,875,417
--------------
274,379,029
--------------
REPURCHASE AGREEMENT -- 8.1%
Joint Repurchase Agreement Account,
6.53%, 01/02/98
(Note 5).................................... 490,528 490,528,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 1.7%
Federal Home Loan Mortgage Corp.,
5.61%, 03/10/98............................... 7,000 6,929,020
Federal National Mortgage Association,
5.40%, 02/05/98............................... 10,000 9,946,200
5.63%, 08/14/98............................... 8,000 7,991,760
5.71%, 09/09/98............................... 15,000 14,983,650
5.89%, 05/21/98............................... 12,200 12,209,516
United States Treasury Notes,
5.125%, 02/28/98.............................. 20,000 19,984,400
5.875%, 04/30/98.............................. 10,000 10,012,500
6.125%, 08/31/98.............................. 18,000 18,056,160
--------------
100,113,206
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,004,995,132).................................................... 1,005,012,927
--------------
TOTAL INVESTMENTS -- 100.0%
(cost $4,198,636,403; Note 6)............................................ 6,025,444,474
--------------
LIABILITIES IN EXCESS OF
OTHER ASSETS -- (0.0%)................................................... (1,464,443)
--------------
TOTAL NET ASSETS -- 100.0%................................................. $6,023,980,031
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
The following abbreviations are used in portfolio descriptions:
-- American Depository Receipt.
ADR
-- Public Limited Company (British Corporation).
PLC
SA -- Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation).
</TABLE>
(a) Non-Income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B37
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 96.6%
VALUE
COMMON STOCKS SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.6%
Boeing Co....................................... 147,700 $ 7,228,069
Gartner Group Inc. (a).......................... 153,400 5,714,150
--------------
12,942,219
--------------
BANKS AND SAVINGS & LOANS -- 4.5%
Chase Manhattan Corp............................ 106,400 11,650,800
Citicorp........................................ 42,600 5,386,237
Fleet Financial Group, Inc...................... 73,200 5,485,425
--------------
22,522,462
--------------
BUSINESS SERVICES -- 3.6%
Manpower, Inc................................... 67,400 2,375,850
Mastering Inc. (a).............................. 84,600 771,975
Omnicom Group, Inc.............................. 196,600 8,330,925
Reuters Holdings PLC, (United Kingdom), ADR..... 95,500 6,326,875
--------------
17,805,625
--------------
CHEMICALS -- 2.0%
Monsanto Co..................................... 233,000 9,786,000
--------------
COMMERCIAL SERVICES -- 1.8%
Cendant Corp. (a)............................... 258,100 8,872,187
--------------
COMPUTER SERVICES -- 3.1%
Microsoft Corp.................................. 68,900 8,905,325
SAP AG, (Germany), ADR.......................... 58,100 6,256,644
--------------
15,161,969
--------------
COMPUTER SYSTEMS -- 1.6%
Diebold, Inc.................................... 158,500 8,024,062
--------------
COMPUTERS -- 10.0%
3Com Corp. (a).................................. 112,000 3,913,000
Cisco Systems, Inc. (a)......................... 179,350 9,998,762
Compaq Computer Corp............................ 198,650 11,211,309
Dell Computer Corp. (a)......................... 93,200 7,828,800
Hewlett-Packard Co.............................. 171,500 10,718,750
International Business Machines Corp............ 55,600 5,813,675
--------------
49,484,296
--------------
DIVERSIFIED OPERATIONS -- 2.4%
General Electric Co............................. 165,700 12,158,237
--------------
DRUGS AND MEDICAL SUPPLIES -- 10.7%
Boston Scientific Corp. (a)..................... 80,000 3,670,000
Bristol-Myers Squibb Co......................... 90,600 8,573,025
Eli Lilly & Co.................................. 104,400 7,268,850
Pfizer, Inc..................................... 242,600 18,088,863
Smithkline Beecham, PLC, ADR (United Kingdom)... 186,700 9,603,381
Warner-Lambert Co............................... 46,700 5,790,800
--------------
52,994,919
--------------
ELECTRONICS -- 9.1%
Applied Materials, Inc. (United States) (a)..... 190,800 5,747,850
Intel Corp. (United States)..................... 96,600 6,786,150
International Rectifier Corp. (a)............... 181,300 2,141,606
KLA-Tencor Corp. (a)............................ 132,000 5,098,500
Motorola, Inc. (United States).................. 129,400 7,383,888
Symbol Technologies, Inc. (a)................... 186,950 7,057,363
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Texas Instruments, Inc. (United States)......... 164,800 $ 7,416,000
Xilinx Inc. (a)................................. 106,400 3,730,650
--------------
45,362,007
--------------
FINANCIAL SERVICES -- 6.8%
MBNA Corp....................................... 276,225 7,544,395
Morgan Stanley, Dean Witter, Discover & Co.,.... 170,520 10,081,995
Schwab (Charles) Corp. (a)...................... 156,300 6,554,831
Washington Mutual, Inc.......................... 151,300 9,654,831
--------------
33,836,052
--------------
HOSPITAL MANAGEMENT -- 1.2%
PhyCor, Inc. (a)................................ 220,000 5,940,000
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 1.4%
Healthsouth Corp. (a)........................... 245,200 6,804,300
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 1.5%
Gillette Co..................................... 72,300 7,261,631
--------------
INSURANCE -- 6.4%
MGIC Investment Corp............................ 106,200 7,062,300
Mutual Risk Management, Ltd..................... 255,332 7,644,002
Provident Companies, Inc........................ 192,400 7,431,450
UNUM Corp....................................... 173,900 9,455,813
--------------
31,593,565
--------------
LEISURE -- 5.4%
Hilton Hotels Corp.............................. 287,400 8,550,150
Promus Hotel Corp. (a).......................... 156,000 6,552,000
Walt Disney Co.................................. 116,800 11,570,500
--------------
26,672,650
--------------
MACHINERY -- 1.4%
Case Corp....................................... 119,100 7,198,106
--------------
MEDIA -- 1.5%
Clear Channel Communications, Inc. (a).......... 93,700 7,443,294
--------------
OIL & GAS SERVICES -- 1.8%
Schlumberger Ltd................................ 108,400 8,726,200
--------------
RETAIL -- 8.3%
AutoZone, Inc. (a).............................. 181,200 5,254,800
Dollar General Corporation...................... 183,775 6,661,844
Home Depot, Inc................................. 130,200 7,665,525
Kohl's Corp. (a)................................ 93,200 6,349,250
Sears, Roebuck & Co............................. 168,600 7,629,150
The Gap, Inc.................................... 210,000 7,441,875
--------------
41,002,444
--------------
SOFTWARE -- 1.1%
Intuit, Inc. (a)................................ 138,200 5,700,750
--------------
TELECOMMUNICATIONS -- 6.5%
Airtouch Communications, Inc. (a)............... 182,200 7,572,688
Ciena Corp. (a)................................. 77,800 4,755,525
Nokia AB Corp., (Japan), ADR.................... 79,500 5,565,000
Tellabs, Inc. (a)............................... 136,400 7,212,150
Vodafone Group, (United Kingdom) ADR, PLC....... 95,100 6,894,750
--------------
32,000,113
--------------
TRUCKING/SHIPPING -- 1.9%
Federal Express Corp. (a)....................... 157,800 9,635,663
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $399,036,254)............................................ 478,928,751
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B38
<PAGE>
PRUDENTIAL JENNISON PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM INVESTMENT -- 5.6% (000) (NOTE 2)
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENT --
Joint Repurchase Agreement Account,
6.53%, 01/02/98 (cost $27,931,000; Note 5).... $ 27,931 $ 27,931,000
--------------
27,931,000
--------------
TOTAL INVESTMENTS -- 102.2%
(cost $426,967,254; Note 6).................................... 506,859,751
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.2%).................. (10,922,632)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 495,937,119
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
(a) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
B39
<PAGE>
GLOBAL PORTFOLIO
DECEMBER 31, 1997
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 93.1%
VALUE
COMMON STOCKS -- 92.1% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AUSTRALIA -- 2.6%
Brambles Industries, Ltd. (Diversified
Operations)................................... 615,200 $ 12,204,445
FXF Trust (Media) (a)........................... 224,600 38,045
Publishing and Broadcasting, Ltd. (Media)....... 224,600 1,011,704
Woolworths, Ltd. (Retail)....................... 1,056,356 3,530,548
--------------
16,784,742
--------------
FEDERAL REPUBLIC OF GERMANY -- 4.0%
Linde, AG (Machinery)........................... 12,040 7,350,730
SAP, AG (Computer Services)..................... 39,100 11,881,426
Volkswagen, AG (Autos - Cars & Trucks).......... 11,700 6,583,669
--------------
25,815,825
--------------
FINLAND -- 2.0%
Nokia Corp. (Class "A" Stock)
(Telecommunications).......................... 177,300 12,587,555
--------------
FRANCE -- 5.1%
Carrefour Supermarche, SA (Retail).............. 10,300 5,375,551
France Telecom, SA (Telecommunications) (a)..... 50,000 1,814,178
Legrand, SA (Electrical Equipment).............. 42,500 8,469,625
Total, SA (Class "B" Stock) (Petroleum)......... 69,400 7,555,389
Valeo, SA (Autos - Cars & Trucks)............... 144,685 9,816,408
--------------
33,031,151
--------------
HONG KONG -- 2.0%
Hutchison Whampoa, Ltd. (Diversified
Operations)................................... 1,349,000 8,444,308
New World Development Co., Ltd. (Real Estate
Development).................................. 1,179,000 4,078,110
--------------
12,522,418
--------------
IRELAND -- 2.7%
Bank Of Ireland (Banks and Savings & Loans)..... 1,105,100 17,066,660
--------------
ITALY -- 4.7%
Credito Italiano (Financial Services) (a)....... 3,307,500 10,200,510
Telecom Italia Mobile SpA
(Telecommunications).......................... 4,263,000 19,678,808
--------------
29,879,318
--------------
JAPAN -- 5.2%
Aoyama Trading Co., Ltd. (Retail)............... 214,000 3,823,333
Daibiru Corp. (Real Estate Development)......... 1,070,000 7,835,372
Daito Trust Construction Co. (Construction)..... 541,000 3,306,192
NAMCO, Ltd. (Leisure)........................... 70,500 2,048,806
Nomura Securities Co., Ltd (Financial
Services)..................................... 709,000 9,459,495
Okumura Corp. (Construction).................... 1,275,000 3,030,710
Senshukai Co., Ltd. (Retail).................... 163,000 612,430
Shiseido Co., Ltd. (Cosmetics & Soaps).......... 116,000 1,583,253
Xebio Co., Ltd. (Retail)........................ 146,900 1,171,460
Yamamura Glass Co., Ltd. (Household Products)... 95,000 105,624
--------------
32,976,675
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
NETHERLANDS -- 2.6%
Nutricia Verenigde Bedrijven (Food &
2 Beverages).................................... 200,000 $ 6,067,713
Royal Dutch Petroleum Co. (Oil Services)........ 186,100 10,217,895
SGS-Thomson Microelectronics, N.V.
(Electronics) (a)............................. 5,440 332,180
--------------
16,617,788
--------------
PHILIPPINES -- 1.0%
Philippine Long Distance Telephone,
ADR (Telecommunications)...................... 276,400 6,219,000
--------------
SINGAPORE -- 0.2%
Sembawang Maritime, Ltd. (Trucking/Shipping).... 883,500 1,302,276
--------------
SPAIN -- 3.2%
Banco Central Hispanoamericano, SA (Banks &
Financial Services) (a)....................... 514,212 12,520,792
Telefonica De Espana (Telecommunications)....... 285,300 8,145,293
--------------
20,666,085
--------------
SWEDEN -- 3.9%
Allgon Corp. (Electronics)...................... 48,000 648,381
Hennes & Mauritz, AB (Retail)................... 261,300 11,545,492
Mo Och Domsjo, AB (Series "B" Free) (Forest
Products)..................................... 124,800 3,229,784
Nordbanken Holding, AB (Banks & Financial
Services) (a)................................. 1,697,000 9,619,072
--------------
25,042,729
--------------
SWITZERLAND -- 1.5%
Novartis, AG (Drugs and Medical Supplies)....... 5,900 9,564,295
--------------
UNITED KINGDOM -- 11.9%
Barclays, PLC (Banks and Savings & Loans)....... 353,200 9,455,372
Dixons Group, PLC (Retail)...................... 886,200 8,943,430
Guest Kean & Nettlefolds, PLC (Autos - Cars &
Trucks)....................................... 339,840 6,999,582
Hays, PLC (Commercial Services)................. 584,400 7,823,669
Johnson Matthey, PLC (Precious Metals).......... 723,400 6,511,877
Royal & Sun Alliance Insurance Group, PLC
(Insurance)................................... 701,400 7,101,620
Siebe, PLC (Machinery).......................... 482,240 9,518,364
Vodafone Group, PLC (Telecommunications)........ 2,692,600 19,568,417
--------------
75,922,331
--------------
UNITED STATES -- 39.5%
3Com Corp. (Computers) (a)...................... 152,200 5,317,487
Adaptec, Inc. (Computer Services) (a)........... 276,400 10,261,350
Adobe Systems, Inc. (Computer Services)......... 199,500 8,229,375
Baker Hughes, Inc. (Oil & Gas Services)......... 184,300 8,040,087
Circus Circus Enterprises, Inc. (Leisure) (a)... 346,300 7,099,150
Cisco Systems, Inc. (Computers) (a)............. 260,700 14,534,025
Consolidated Stores Corp. (Retail) (a).......... 215,400 9,464,137
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B40
<PAGE>
GLOBAL PORTFOLIO (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
Electronic Arts, Inc. (Computer Services) (a)... 264,000 $ 9,982,500
Intel Corp. (Electronics)....................... 113,600 7,980,400
Mattel, Inc. (Toys)............................. 323,658 12,056,260
Microsoft Corp. (Computer Services) (a)......... 91,200 11,787,600
Mirage Resorts, Inc. (Leisure) (a).............. 342,800 7,798,700
Mobil Corp. (Oil & Gas)......................... 182,700 13,188,656
Oracle Corp. (Computer Services) (a)............ 190,500 4,250,531
PMC-Sierra, Inc. (Electronics) (a).............. 287,500 8,912,500
Proffitt's, Inc. (Retail) (a)................... 170,400 4,845,750
Progressive Corp. (Insurance)................... 49,800 5,969,775
Quorum Health Group, Inc. (Hospitals) (a)....... 228,400 5,966,950
Safeway, Inc. (Retail) (a)...................... 166,600 10,537,450
Tenet Healthcare Corp. (Hospitals/ Hospital
Management) (a)............................... 242,000 8,016,250
Texas Instruments, Inc. (Electronics)........... 248,800 11,196,000
The Limited, Inc. (Retail)...................... 383,200 9,771,600
Tiffany & Co. (Retail).......................... 180,000 6,491,250
Time Warner, Inc. (Media)....................... 195,000 12,090,000
Transocean Offshore, Inc. (Petroleum
Services)..................................... 179,500 8,649,656
U.S.A. Waste Services, Inc. (Environmental
Services) (a)................................. 185,300 7,273,025
Walt Disney Co. (Leisure)....................... 103,900 10,292,594
Wells Fargo & Co. (Banks and Savings & Loans)... 35,700 12,117,919
--------------
252,120,977
--------------
TOTAL COMMON STOCKS
(cost $472,116,637)............................................ 588,119,825
--------------
PREFERRED STOCKS -- 1.0%
FEDERAL REPUBLIC OF GERMANY -- 1.0%
Wella, AG (Cosmetics & Soaps)
(cost $6,328,858)............................. 8,500 6,451,389
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $478,445,495)............................................ 594,571,214
--------------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENT -- 3.7% (000)
-------------
REPURCHASE AGREEMENT
UNITED STATES
Merrill Lynch, Pierce, Fenner & Smith, Inc.,
6.25%, 01/02/98 (cost $23,539,000) (b)........ $ 23,539 23,539,000
--------------
TOTAL INVESTMENTS -- 96.8%
(cost $501,984,495; Note 6).................................... 618,110,214
FORWARD CURRENCY CONTRACTS --
NET AMOUNT RECEIVABLE FROM
COUNTERPARTIES (C) -- 0.1%..................................... 473,292
OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.1%....................
19,817,846
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 638,401,352
--------------
--------------
</TABLE>
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
The following abbreviations are used in portfolio descriptions:
AB Aktiebolag (Swedish Stock Company)
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) Merrill Lynch, Pierce, Fenner & Smith, Inc., repurchase price $23,547,664
due 1/2/98. The value of the collateral was $24,008,143.
(c) Outstanding forward currency contracts at December 31, 1997 were as
follows:
</TABLE>
<TABLE>
<CAPTION>
VALUE AT
FOREIGN CURRENCY SETTLEMENT CURRENT APPRECIATION
CONTRACTS DATE VALUE (DEPRECIATION)
- ---------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Sale:
Hong Kong Dollar,
expiring 04/27/98.... $ 2,122,100 $ 2,202,596 $ (80,496)
Japanese Yen,
expiring 05/21/98.... $ 16,000,000 $ 15,446,212 $ 553,788
</TABLE>
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of December 31, 1997 were as
follows:
<TABLE>
<S> <C>
Commercial Banks 12.6%
Computer Services 11.9%
Retail 11.9%
Telecommunications 10.6%
Oil & Gas Services 7.4%
Electronics 5.9%
Leisure 4.3%
Automobiles 3.7%
Diversified Operations 3.2%
Machinery 2.6%
Hospitals 2.2%
Media 2.1%
Insurance 2.1%
Toys 1.9%
Real Estate Development 1.9%
Drugs & Medical Supplies 1.5%
Cosmetics & Soaps 1.3%
Commercial Services 1.2%
Environmental Services 1.1%
Precious Metals 1.0%
Construction 1.0%
Food & Beverage 1.0%
Forest Products 0.5%
Trucking & Shipping 0.2%
Repurchase Agreement 3.7%
---------
96.8%
---------
Forward currency contracts 0.1%
Other assets in excess of liabilities 3.1%
---------
100.0%
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B41
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
CERTAIN PORTFOLIOS OF
THE PRUDENTIAL SERIES FUND, INC.
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. The information presented in thse
financial statements pertains to only the eleven Portfolios available for
investment by Discovery Select Group Retirement Annuity: Money Market Portfolio,
Diversified Bond Portfolio, Government Income Portfolio, Conservative Balanced
Portfolio, Flexible Managed Portfolio, High Yield Bond Portfolio, Stock Index
Portfolio, Equity Income Portfolio, Equity Portfolio, Prudential Jennison
Portfolio and Global Portfolio. 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. The ability of the issuers of the securities held by the
Money Market Portfolio to meet their obligations may be affected by economic
developments in a specific industry or region.
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.
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.
The High Yield Bond Portfolio may hold up to 15% of its net assets in illiquid
securities, including those which are restricted as to disposition under
securities law ("restricted securities"). Certain issues of restricted
securities held by the High Yield Bond Portfolio at December 31, 1997 include
registration rights, some of which are currently under contract to be
registered. Restricted securities, sometimes referred to as private placements,
are valued pursuant to the valuation procedures noted above.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Series Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction
including accrued interest. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Series Fund may
by delayed or limited. (See Note 5).
C1
<PAGE>
FOREIGN CURRENCY TRANSLATION: The books and records of the Series Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of 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 year, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market prices of securities held at the end of the fiscal year.
Similarly, the Series Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of long-term portfolio securities sold during the fiscal year. Accordingly,
these realized and unrealized foreign currency gains (losses) are included in
the reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at fiscal year 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 buyer. The proceeds of the short sale will be
retained by the broker-dealer through which it made the short sale as collateral
for its obligation to deliver the security upon conclusion of the sale. The
Portfolio may have to pay a fee to borrow the particular security and may be
obligated to remit any interest or dividends received on such borrowed
securities. A gain, limited to the price at which the Portfolio sold the
security short, or a loss, unlimited in magnitude, will be recognized upon the
termination of a short sale if the market price at termination is less than or
greater than, respectively, the proceeds originally received.
OPTIONS: The Series Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value with respect to
securities which the Series Fund currently owns or intends to purchase. The
Series Fund's principal reason for writing options is to realize, through
receipts of premiums, a greater current return than would be realized on the
underlying security alone. When the Series Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Series Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or
paid is an adjustment to the proceeds from the sales or the cost of the purchase
in determining whether the Series Fund has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.
The Series Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series Fund bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
FINANCIAL FUTURES CONTRACTS: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the "initial margin". Subsequent
C2
<PAGE>
payments, known as "variation margin", are made or received by the Series Fund
each day, depending on the daily fluctuations in the value of the underlying
security. Such variation margin is recorded for financial statement purposes on
a daily basis as unrealized gain or loss. When the contract expires or is
closed, the gain or loss is realized and is presented in the statement of
operations as net realized gain (loss) on financial futures contracts.
The Series Fund invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series Fund intends to purchase,
against fluctuations in value. Under a variety of circumstances, the Series Fund
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts and the
underlying assets.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of four elements: stated
coupon, original issue discount, market discount and market premium is recorded
on the accrual basis. Certain portfolios own shares of real estate investment
trusts ("REITs") which report information on the source of their distributions
annually. A portion of distributions received from REITs during the period is
estimated to be a return of capital and is recorded as a reduction of their
costs. During the year ended December 31, 1997, certain Portfolios purchased
securities from and sold securities to other Portfolios of the Series Fund or
other funds or accounts managed by The Prudential or its affiliates in
accordance with the provisions of Rule 17a-7 of the Investment Company Act of
1940. 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 except for expenses
that are charged directly at a Portfolio level.
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 fiscal year ended
December 31, 1997, the application of this statement increased (decreased) net
unrealized appreciation on investments ("APP"), paid-in capital in excess of par
C3
<PAGE>
("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>
Conservative Balanced Portfolio........ -- $ 33,509 $ 48,752 $ (82,261)
Flexible Managed Portfolio............. -- -- 625,749 (625,749)
High Yield Bond Portfolio.............. $ (227,243) -- 337,328 (110,085)
Equity Income Portfolio................ -- (387,527) (2,921) 390,448
Equity Portfolio....................... -- -- 247,917 (247,917)
Global Portfolio....................... -- (903,000) 6,950,576 (6,047,576)
</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 Associates LLC ("Jennison"), under which Jennison
furnishes investment advisory services in connection with the management of the
Prudential Jennison Portfolio. The Prudential compensates Jennison 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 Porfolio.................. 0.40%
Diversified Bond Portfolio............. 0.40
Government Income Portfolio............ 0.40
Conservative Balanced Portfolio........ 0.55
Flexible Managed Portfolio............. 0.60
High Yield Bond Portfolio.............. 0.55
Stock Index Portfolio.................. 0.35
Equity Income Portfolio................ 0.40
Equity Portfolio....................... 0.45
Prudential Jennison Portfolio.......... 0.60
Global Portfolio....................... 0.75
</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 fiscal year ended
December 31, 1997.
PIC and Jennison are indirect, wholly-owned subsidiaries of The Prudential.
The Series Fund entered into a credit agreement (the "Agreement") on October 28,
1997 with an unaffiliated lender. The maximum commitment under the Agreement is
$250,000,000. The Agreement expires on December 18, 1998. Interest on any such
borrowings outstanding will be at market rates. The purpose of the Agreement is
to serve as an alternative source of funding for capital share redemptions. The
Series Fund has not borrowed any amounts pursuant to the Agreement as of
December 31, 1997. The Series Fund pays a commitment fee at an annual rate of
.055 of 1% on the unused portion of the credit facility. The commitment fee is
accrued and paid quarterly by the Series Fund.
C4
<PAGE>
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES
For the fiscal year ended December 31, 1997, Prudential Securities Incorporated,
an indirect, wholly-owned subsidiary of The Prudential, earned $1,080,605 in
brokerage commissions from transactions executed on behalf of the following
Portfolios:
<TABLE>
<CAPTION>
Fund Commission
- --------------------------------------- -----------
<S> <C>
Conservative Balanced Portfolio........ $ 256,752
Flexible Managed Portfolio............. 428,008
Equity Income Portfolio................ 198,726
Equity Portfolio....................... 189,498
Global Portfolio....................... 7,621
-----------
$1,080,605
</TABLE>
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 in the joint repurchase agreement account represented
$1,038,519,000 as of December 31, 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............. $ 45,329,000 4.37%
Government Income Portfolio............ 13,337,000 1.28
Conservative Balanced Portfolio........ 81,783,000 7.88
Flexible Managed Portfolio............. 137,860,000 13.28
High Yield Bond Portfolio.............. 15,691,000 1.51
Stock Index Portfolio.................. 98,176,000 9.45
Equity Income Portfolio................ 98,435,000 9.48
Equity Portfolio....................... 490,528,000 47.23
Prudential Jennison Portfolio.......... 27,931,000 2.69
All other portfolios (currently not
available to Group Discovery
Select).............................. 29,449,000 2.83
--------------- ----------
$ 1,038,519,000 100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
CIBC Oppenheimer, 6.10%, in the principal amount of $138,519,000, repurchase
price $138,566,045, due 1/2/98. The value of the collateral including accrued
interest was $141,862,492.
Salomon Smith Barney Inc., 6.75%, in the principal amount of $300,000,000,
repurchase price $300,112,500, due 1/2/98. The value of the collateral including
accrued interest was $306,560,575.
SBC Warburg Dillon Read Inc., 6.50%, in the principal amount of $300,000,000,
repurchase price $300,108,333, due 1/2/98. The value of the collateral including
accrued interest was $306,557,797.
UBS Securities Corp., 6.55%, in the principal amount of $300,000,000, repurchase
price $300,109,167, due 1/2/98. The value of the collateral including accrued
interest was $306,001,638.
C5
<PAGE>
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchases and the proceeds from the sales of securities
(excluding short-term issues) for the fiscal year ended December 31, 1997 were
as follows:
Cost of Purchases:
<TABLE>
<CAPTION>
High
Government Conservative Flexible Yield
Diversified Bond Income Balanced Managed Bond
---------------- --------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Non-Government......................... $ 945,035,546 $ 32,595,904 $ 7,826,155,071 $ 8,194,217,051 $ 621,811,073
Government............................. $ 698,725,477 $ 339,764,606 $ 5,017,442,019 $ 3,054,412,991 0
</TABLE>
<TABLE>
<CAPTION>
Stock Equity Prudential
Index Income Equity Jennison Global
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Non-Government......................... $ 403,642,905 $ 740,428,728 $ 867,315,279 $ 372,363,033 $ 444,118,554
Government............................. 0 $ 30,617,187 0 0 0
</TABLE>
Proceeds from Sales:
<TABLE>
<CAPTION>
High
Government Conservative Flexible Yield
Diversified Bond Income Balanced Managed Bond
---------------- --------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Non-Government......................... $ 874,682,352 $ 45,532,205 $ 7,823,232,061 $ 8,576,103,609 $ 493,219,610
Government............................. $ 748,008,571 $ 378,144,111 $ 5,106,797,609 $ 3,018,431,969 0
</TABLE>
<TABLE>
<CAPTION>
Stock Equity Prudential
Index Income Equity Jennison Global
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Non-Government......................... $ 93,393,476 $ 578,561,955 $ 566,041,815 $ 200,408,743 $ 430,051,852
Government............................. 0 $ 31,762,500 0 0 0
</TABLE>
The federal income tax basis and unrealized appreciation (depreciation) of the
Fund's investments as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
High
Government Conservative Flexible Yield
Diversified Bond Income Balanced Managed Bond
---------------- --------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation.......... $ 30,167,647 $ 13,268,358 $ 311,261,405 $ 565,581,079 $ 21,326,564
Gross Unrealized Depreciation.......... 17,570,453 -- 111,299,483 149,894,627 10,398,413
Total Net Unrealized................... 12,597,194 13,268,358 199,961,922 415,686,452 10,928,151
Tax Basis.............................. 790,688,975 411,381,627 4,496,062,195 5,055,701,095 551,773,633
</TABLE>
<TABLE>
<CAPTION>
Stock Equity Prudential
Index Income Equity Jennison Global
--------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation.......... $ 1,004,558,128 $ 531,904,089 $ 1,911,479,018 $ 91,141,747 $ 144,895,851
Gross Unrealized Depreciation.......... 20,055,024 32,407,877 84,670,946 11,774,207 28,770,132
Total Net Unrealized................... 984,503,104 499,496,212 1,826,808,072 79,367,540 116,125,719
Tax Basis.............................. 1,468,430,760 1,533,057,472 4,198,636,403 427,492,211 501,984,495
</TABLE>
For federal income tax purposes, the following Portfolios had capital loss
carryforwards as of December 31, 1997. 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 Capital Losses
Carryforwards Carryforwards
Utilized in 1997 Available Expiration Year
----------------- -------------- ----------------
<S> <C> <C> <C>
Government Income Portfolio............ $ 649,746 $ 7,267,545 2003
High Yield Bond Portfolio.............. 12,940,997 6,390,479 2003
Prudential Jennison Portfolio.......... 2,160,575 --
</TABLE>
C6
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET
------------------------------------------------
Year ended
December 31,
------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income and realized and
unrealized gains..................... 0.54 0.51 0.56 0.40 0.29
Dividends and distributions............ (0.54) (0.51) (0.56) (0.40) (0.29)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 5.41% 5.22% 5.80% 4.05% 2.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $657.5 $668.8 $613.3 $583.3 $474.7
Ratios to average net assets:
Expenses............................. 0.43% 0.44% 0.44% 0.47% 0.45%
Net investment income................ 5.28% 5.10% 5.64% 4.02% 2.90%
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED BOND
------------------------------------------------
Year ended
December 31,
------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 11.07 $ 11.31 $ 10.04 $ 11.10 $ 10.83
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.80 0.76 0.76 0.68 0.68
Net realized and unrealized gains
(losses) on investments.............. 0.11 (0.27) 1.29 (1.04) 0.40
-------- -------- -------- -------- --------
Total from investment operations... 0.91 0.49 2.05 (0.36) 1.08
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.83) (0.73) (0.75) (0.68) (0.66)
Distributions from net realized
gains................................ (0.13) -- (0.03) (0.02) (0.15)
-------- -------- -------- -------- --------
Total distributions................ (0.96) (0.73) (0.78) (0.70) (0.81)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 11.02 $ 11.07 $ 11.31 $ 10.04 $ 11.10
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 8.57% 4.40% 20.73% (3.23)% 10.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $816.7 $720.2 $655.8 $541.6 $576.2
Ratios to average net assets:
Expenses............................. 0.43% 0.45% 0.44% 0.45% 0.46%
Net investment income................ 7.18% 6.89% 7.00% 6.41% 6.05%
Portfolio turnover rate................ 224% 210% 199% 32% 41%
</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 year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D1
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GOVERNMENT INCOME
------------------------------------------------
Year ended
December 31,
------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 11.22 $ 11.72 $ 10.46 $ 11.78 $ 11.09
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.75 0.75 0.74 0.70 0.70
Net realized and unrealized gains
(losses) on investments.............. 0.30 (0.51) 1.28 (1.31) 0.68
-------- -------- -------- -------- --------
Total from investment operations... 1.05 0.24 2.02 (0.61) 1.38
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.75) (0.74) (0.76) (0.71) (0.64)
Dividends in excess of net investment
income............................... -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions................ (0.75) (0.74) (0.76) (0.71) (0.69)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 11.52 $ 11.22 $ 11.72 $ 10.46 $ 11.78
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 9.67% 2.22% 19.48% (5.16)% 12.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $429.6 $482.0 $501.8 $487.6 $540.1
Ratios to average net assets:
Expenses............................. 0.44% 0.46% 0.45% 0.45% 0.46%
Net investment income................ 6.40% 6.38% 6.55% 6.30% 5.91%
Portfolio turnover rate................ 88% 95% 195% 34% 19%
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 15.52 $ 15.31 $ 14.10 $ 14.91 $ 14.24
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.76 0.66 0.63 0.53 0.49
Net realized and unrealized gains
(losses) on investments.............. 1.26 1.24 1.78 (0.68) 1.23
--------- --------- --------- --------- ---------
Total from investment operations... 2.02 1.90 2.41 (0.15) 1.72
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.76) (0.66) (0.64) (0.51) (0.47)
Dividends in excess of net investment
income............................... -- (1.03) (0.56) (0.15) (0.58)
Distributions from net realized
gains................................ (1.81) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions................ (2.57) (1.69) (1.20) (0.66) (1.05)
--------- --------- --------- --------- ---------
Net Asset Value, end of year........... $ 14.97 $ 15.52 $ 15.31 $ 14.10 $ 14.91
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:(b)............ 13.45% 12.63% 17.27% (0.97)% 12.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $4,744.2 $4,478.8 $3,940.8 $3,501.1 $3,103.2
Ratios to average net assets:
Expenses............................. 0.56% 0.59% 0.58% 0.61% 0.60%
Net investment income................ 4.48% 4.13% 4.19% 3.61% 3.22%
Portfolio turnover rate................ 295% 295% 201% 125% 79%
Average commission rate paid per
share................................ $0.0563 $0.0554 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 year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D2
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 17.79 $ 17.86 $ 15.50 $ 16.96 $ 16.01
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.59 0.57 0.56 0.47 0.57
Net realized and unrealized gains
(losses) on investments.............. 2.52 1.79 3.15 (1.02) 1.88
--------- --------- --------- --------- ---------
Total from investment operations... 3.11 2.36 3.71 (0.55) 2.45
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.58) (0.58) (0.56) (0.45) (0.57)
Dividends in excess of net investment
income............................... -- (1.85) (0.79) (0.46) (0.93)
Distributions from net realized
gains................................ (3.04) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions................ (3.62) (2.43) (1.35) (0.91) (1.50)
--------- --------- --------- --------- ---------
Net Asset Value, end of year........... $ 17.28 $ 17.79 $ 17.86 $ 15.50 $ 16.96
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:(b)............ 17.96% 13.64% 24.13% (3.16)% 15.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $5,490.1 $4,896.9 $4,261.2 $3,481.5 $3,292.2
Ratios to average net assets:
Expenses............................. 0.62% 0.64% 0.63% 0.66% 0.66%
Net investment income................ 3.02% 3.07% 3.30% 2.90% 3.30%
Portfolio turnover rate................ 227% 233% 173% 124% 63%
Average commission rate paid per
share................................ $0.0569 $0.0563 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD BOND
------------------------------------------------
Year Ended
December 31,
------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 7.87 $ 7.80 $ 7.37 $ 8.41 $ 7.72
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.78 0.80 0.81 0.87 0.82
Net realized and unrealized gains
(losses) on investments.............. 0.26 0.06 0.46 (1.10) 0.63
-------- -------- -------- -------- --------
Total from investment operations... 1.04 0.86 1.27 (0.23) 1.45
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.77) (0.78) (0.84) (0.81) (0.76)
Dividends in excess of net investment
income............................... -- (0.01) -- -- --
-------- -------- -------- -------- --------
Total distributions................ (0.77) (0.79) (0.84) (0.81) (0.76)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 8.14 $ 7.87 $ 7.80 $ 7.37 $ 8.41
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 13.78% 11.39% 17.56% (2.72)% 19.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $568.7 $432.9 $367.9 $306.2 $282.9
Ratios to average net assets:
Expenses............................. 0.57% 0.63% 0.61% 0.65% 0.65%
Net investment income................ 9.78% 9.89% 10.34% 9.88% 9.91%
Portfolio turnover rate................ 106% 88% 139% 69% 96%
</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 year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D3
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
STOCK INDEX
---------------------------------------------------
Year Ended
December 31,
---------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 23.74 $ 19.96 $ 14.96 $ 15.20 $ 14.22
--------- --------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.43 0.40 0.40 0.38 0.36
Net realized and unrealized gains
(losses) on investments.............. 7.34 4.06 5.13 (0.23) 1.00
--------- --------- --------- -------- --------
Total from investment operations... 7.77 4.46 5.53 0.15 1.36
--------- --------- --------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.42) (0.40) (0.38) (0.37) (0.35)
Distributions from net realized
gains................................ (0.87) (0.28) (0.15) (0.02) (0.03)
--------- --------- --------- -------- --------
Total distributions................ (1.29) (0.68) (0.53) (0.39) (0.38)
--------- --------- --------- -------- --------
Net Asset Value, end of year........... $ 30.22 $ 23.74 $ 19.96 $ 14.96 $ 15.20
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 32.83% 22.57% 37.06% 1.01% 9.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $2,448.2 $1,581.4 $1,031.3 $664.5 $615.1
Ratios to average net assets:
Expenses............................. 0.37% 0.40% 0.38% 0.42% 0.42%
Net investment income................ 1.55% 1.95% 2.27% 2.50% 2.43%
Portfolio turnover rate................ 5% 1% 1% 2% 1%
Average commission rate paid per
share................................ $0.0235 $0.0250 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME
---------------------------------------------------
Year Ended
December 31,
---------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 18.51 $ 16.27 $ 14.48 $ 15.66 $ 13.67
--------- --------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.61 0.58 0.64 0.67 0.55
Net realized and unrealized gains
(losses) on investments.............. 6.06 2.88 2.50 (0.45) 2.46
--------- --------- --------- -------- --------
Total from investment operations... 6.67 3.46 3.14 0.22 3.01
--------- --------- --------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.57) (0.71) (0.62) (0.56) (0.50)
Distributions from net realized
gains................................ (2.22) (0.51) (0.73) (0.82) (0.52)
--------- --------- --------- -------- --------
Total distributions................ (2.79) (1.22) (1.35) (1.38) (1.02)
--------- --------- --------- -------- --------
Net Asset Value, end of year........... $ 22.39 $ 18.51 $ 16.27 $ 14.50 $ 15.66
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 36.61% 21.74% 21.70% 1.44% 22.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $2,029.8 $1,363.5 $1,110.0 $859.7 $602.8
Ratios to average net assets:
Expenses............................. 0.41% 0.45% 0.43% 0.52% 0.54%
Net investment income................ 2.90% 3.36% 4.00% 3.92% 3.56%
Portfolio turnover rate................ 38% 21% 64% 63% 41%
Average commission rate paid per
share................................ $0.0566 $0.0553 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 year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D4
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EQUITY
-----------------------------------------------------
Year ended
December 31,
-----------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 26.96 $ 25.64 $ 20.66 $ 21.49 $ 18.90
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.69 0.71 0.55 0.51 0.42
Net realized and unrealized gains on
investments.......................... 5.88 3.88 5.89 0.05 3.67
--------- --------- --------- --------- ---------
Total from investment operations... 6.57 4.59 6.44 0.56 4.09
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.70) (0.67) (0.52) (0.49) (0.40)
Distribution from net realized gains... (1.76) (2.60) (0.94) (0.90) (1.10)
--------- --------- --------- --------- ---------
Total distributions................ (2.46) (3.27) (1.46) (1.39) (1.50)
--------- --------- --------- --------- ---------
Net Asset Value, end of year........... $ 31.07 $ 26.96 $ 25.64 $ 20.66 $ 21.49
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:(b)............ 24.66% 18.52% 31.29% 2.78% 21.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $6,024.0 $4,814.0 $3,813.8 $2,617.8 $2,186.5
Ratios to average net assets:
Expenses............................. 0.46% 0.50% 0.48% 0.55% 0.53%
Net investment income................ 2.27% 2.54% 2.28% 2.39% 1.99%
Portfolio turnover rate................ 13% 20% 18% 7% 13%
Average commission rate paid per
share................................ $0.0336 $0.0524 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
PRUDENTIAL JENNISON
-----------------------------------------
Year Ended
December 31, APRIL 25, 1995(d)
------------------ to
1997 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.................. 0.04 0.02 0.02
Net realized and unrealized gains on
investments.......................... 4.48 1.78 2.54
-------- -------- --------
Total from investment operations... 4.52 1.80 2.56
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.04) (0.03) (0.01)
Distributions from net realized
gains................................ (1.07) -- --
-------- -------- --------
Total distributions................ (1.11) (0.03) (0.01)
-------- -------- --------
Net Asset Value, end of period......... $ 17.73 $ 14.32 $ 12.55
-------- -------- --------
-------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 31.71% 14.41% 24.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $495.9 $226.5 $63.1
Ratios to average net assets:
Expenses............................. 0.64% 0.66% 0.79%(c)
Net investment income................ 0.25% 0.20% 0.15%(c)
Portfolio turnover rate................ 60% 46% 37%
Average commission rate paid per
share................................ $0.0590 $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.
D5
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
------------------------------------------------
Year Ended
December 31,
------------------------------------------------
1997 1996 1995(a) 1994(a) 1993(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 17.85 $ 15.53 $ 13.88 $ 14.64 $ 10.37
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.09 0.11 0.06 0.02 0.02
Net realized and unrealized gains
(losses) on investments.............. 1.11 2.94 2.14 (0.74) 4.44
-------- -------- -------- -------- --------
Total from investment operations... 1.20 3.05 2.20 (0.72) 4.46
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.13) (0.11) (0.24) (0.02) (0.08)
Dividends in excess of net investment
income............................... (0.10) -- -- -- --
Distributions from net realized
gains................................ (0.90) (0.62) (0.31) (0.02) (0.11)
-------- -------- -------- -------- --------
Total distributions................ (1.13) (0.73) (0.55) (0.04) (0.19)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 17.92 $ 17.85 $ 15.53 $ 13.88 $ 14.64
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN:(b)............ 6.98% 19.97% 15.88% (4.89)% 43.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $638.4 $580.6 $400.1 $345.7 $129.1
Ratios to average net assets:
Expenses............................. 0.85% 0.92% 1.06% 1.23% 1.44%
Net investment income................ 0.47% 0.64% 0.44% 0.20% 0.18%
Portfolio turnover rate................ 70% 41% 59% 37% 55%
Average commission rate paid per
share................................ $0.0247 $0.0358 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 year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE PRUDENTIAL SERIES FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Money Market, Diversified Bond,
Government Income, Conservative Balanced, Flexible Managed, High Yield Bond,
Stock Index, Equity Income, Equity, Prudential Jennison and Global Portfolios
(eleven of the fifteen portfolios that constitute The Prudential Series Fund,
Inc.; the "Portfolios") at December 31, 1997, the results of each of their
operations for the year then ended, and the changes in each of their net assets
and financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
The financial highlights of the Prudential Jennison Portfolio for the period
April 25, 1995 through December 31, 1995 and the financial highlights for each
of the three years in the period ended December 31, 1995 for each of the other
ten portfolios were audited by other independent accountants whose report
thereon dated February 15, 1996 expressed an unqualified opinion on those
financial highlights.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
February 13, 1998
E1
<PAGE>
TAX INFORMATION
Although we understand that the vast majority, if not all, of the
shareholders/contract holders of the Series Fund currently maintain a tax
deferred status, we are nevertheless required by the Internal Revenue Code to
advise you within 60 days of the Series Fund's fiscal year end (December 31,
1997) as to the federal tax status of dividends paid by the Fund during such
fiscal year. Accordingly, we are advising you that in 1997, the Fund paid
dividends as follows:
<TABLE>
<CAPTION>
ORDINARY DIVIDENDS
- ----------------------------------------------------------------------------------------------------
LONG-TERM CAPITAL GAINS
-------------------------------- TOTAL
INCOME TAXED @ 28% TAXED @ 20% DIVIDENDS
----------- --------------- --------------- -----------
SHORT-TERM
CAPITAL GAINS
---------------
<S> <C> <C> <C> <C> <C>
Money Market Portfolio.............. $ 0.540 -- -- -- $ 0.540
Diversified Bond Portfolio.......... 0.827 $ 0.079 $ 0.053 -- 0.959
Government Income Portfolio......... 0.750 -- -- -- 0.750
Conservative Balanced Portfolio..... 0.759 0.585 0.356 0.874 2.574
Flexible Managed Portfolio.......... 0.585 0.856 1.016 1.168 3.625
High Yield Bond Portfolio........... 0.773 -- -- -- 0.773
Stock Index Portfolio............... 0.422 0.068 0.024 0.771 1.285
Equity Income Portfolio............. 0.565 0.016 0.508 1.699 2.788
Equity Portfolio.................... 0.704 0.150 0.682 0.930 2.466
Prudential Jennison Portfolio....... 0.041 0.069 0.488 0.509 1.107
Global Portfolio.................... 0.230 -- 0.301 0.595 1.126
</TABLE>
E2
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.
MENDEL A. MELZER, CFA W. SCOTT McDONALD, JR., E. MICHAEL CAULFIELD
CHAIRMAN, Ph.D. CEO,
THE PRUDENTIAL SERIES PRINCIPAL, PRUDENTIAL INVESTMENTS,
FUND, INC. KALUDIS CONSULTING PRESIDENT, THE
GROUP PRUDENTIAL SERIES FUND,
INC.
SAUL K. FENSTER, Ph.D. JOSEPH WEBER, Ph.D.
PRESIDENT, NEW JERSEY VICE PRESIDENT,
INSTITUTE OF TECHNOLOGY INTERCLASS
(INTERNATIONAL
CORPORATE LEARNING)
