<PAGE>
The
Prudential
Series Fund, Inc.
[PICTURE APPEARS HERE]
Semiannual Report to
Contract Owners
Pruco Life's PRUvider/SM/
Pruco Life of New Jersey's PRUvider/SM/
June 30, 1999
[LOGO OF PRUDENTIAL APPEARS HERE]
The Prudential Insurance
Company of America
751 Broad Street
Newark, NJ 07102-3777
Pruco Life Insurance Company
213 Washington Street
Newark, NJ 07102-2992
IFS-19990727-A044796
<PAGE>
The Prudential Series Fund, Inc,
Average Annual Total Return as of June 30, 1999 1
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Six One Three Five Ten Since Inception
Months Year Years Years Years Inception Date
- --------------------------------------------------------------------------------
Balanced Portfolios
Conservative Balanced 4.04% 7.62% 12.24% 12.05% 10.83% 10.78% 5/83
Flexible Managed 6.55 7.19 14.42 14.89 12.56 12.11 5/83
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 6/30/99. Source: Prudential. Six-month returns not
annualized.
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.
PRUvider/SM/ is issued by Pruco Life Insurance Company, and in New York, Pruco
Life Insurance Company of New Jersey, both located at 213 Washington Street,
Newark, NJ 07102, and both subsidiaries of The Prudential Insurance Company of
America, located at 751 Broad Street, Newark, NJ 07102-3777.
PRUvider/SM/ is offered by Pruco Securities Corporation and Prudential
Securities Incorporated, both subsidiaries of Prudential. The principal address
of Pruco Securities is 751 Broad Street, Newark, NJ 07102-3777. Prudential
Securities is located at One Seaport Plaza, New York, NY 10292.
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Table of Contents
Letter to Contract Owners....................................................2
Market Commentary............................................................4
Investment Outlook...........................................................6
The Prudential Series Fund, Inc. Portfolios
Conservative Balanced Portfolio
Flexible Managed Portfolio
Financial Reports
Financial Statements...................................................A1
Schedule of Investments................................................B1
Notes to Financial Statements..........................................C1
Financial Highlights...................................................D1
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Six Months Ended June 30, 1999
To Contract Owners
[PHOTO OF JOHN R. STRANGFELD APPEARS HERE]
John R. Strangfeld
Chairman
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"The winds of change in the equity market and the recent turbulence in
the bond market not only highlight the value of professional portfolio
management, but they illustrate why investors should have a well-diversified
asset allocation strategy."
Dear Contract Owner:
This Semiannual Report presents the investment performance of the two portfolios
of the Prudential Series Fund, Inc., which are available to you in your
PRUvider/SM/ variable life insurance contract.
In the last couple of years, the recurring possibility of a global economic
crisis caused investors to focus on securities they thought to be safe. In the
equity market, they focused on the stocks of a handful of very large companies
that were perceived to be well-buffeted from an economic slowdown. These stocks
became very expensive--out of proportion to their earnings expectations. As a
result, there was a substantial disparity in value between large and small
companies and between growth and value stocks.
Since earlier this year, however, that gap has narrowed significantly amid news
of strong U.S. economic growth and faster-than-expected global stability. While
the long-term prospects of U.S. growth stocks are still very good, many of the
stocks of smaller and economically sensitive companies favored by our value
managers are now posting attractive returns.
In the bond market, U.S. Treasuries and select European government bonds were
the major beneficiaries of the flight to quality that occurred last year. When
this trend reversed itself toward the end of 1998, other sectors of the bond
market rebounded. However, with a strong U.S. economy comes the threat of higher
inflation, which erodes the value of bonds' fixed interest payments. The recent
inflation concerns jolted the bond market toward the end of the reporting period
and helped send long-term interest rates to a 19-month high. Fortunately, the
Federal Reserve appears committed to keeping inflation from threatening the
economy's growth.
How did our Portfolios perform?
The Prudential Series Fund Conservative Balanced and Flexible Managed Portfolios
delivered positive returns for the first half of 1999.
Both Portfolios hold a combination of stocks, bonds, and money market
securities. The Conservative Balanced Portfolio holds more in bonds and money
market securities, which generally makes it less volatile, but may also reduce
returns when stock prices are rising--as was the case in recent months. While it
returned 4.04% during this reporting period, it trailed its benchmark.
The Flexible Managed Portfolio outperformed its benchmark during our reporting
period because of its strong stock returns. Unlike the other Portfolio, the
Flexible Managed Portfolio holds more in stocks, particularly value stocks that
surged in the second quarter of 1999 after being out of favor for a while.
2
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Diversification: Protection against market turbulence
The winds of change in the equity market and the recent turbulence in the bond
market not only highlight the value of professional portfolio management, but
they illustrate why investors should have a well-diversified asset allocation
strategy. It is also a good practice to revisit your strategy regularly and,
when necessary, rebalance your holdings to keep your asset allocation consistent
with your long-term objectives and risk tolerance. As always, remember that past
performance is not indicative of future results.
Your Prudential professional will be happy to help you review and structure a
program to meet your long-term financial needs. All of us at Prudential thank
you for your business and look forward to helping you plan for your future
financial security.
Sincerely,
/s/ John R. Strangfeld
John R. Strangfeld
Chairman,
The Prudential Series Fund, Inc.
July 30, 1999
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Important Note
The rates of return quoted on the following pages reflect the deduction of
investment management fees and investment-related expenses, but not product
charges. They reflect the reinvestment of dividend and capital gains
distributions. They are not an estimate or a guarantee of future performance.
Contract unit values increase or decrease based on the performance of the
portfolio and, when redeemed, may be worth more or less than their original
cost. Changes in contract values depend not only on the investment performance
of the portfolio but also on the insurance and administrative charges,
applicable sales charges, and the mortality and expense risk charge applicable
under the contract. These contract charges effectively reduce the dollar amount
of any net gains and increase the dollar amount of any net losses.
Your Prudential Representative/Pruco Securities Registered Representative can
provide you with actual rates of return for your type of variable life insurance
or annuity contract and show you a personalized illustration of how insurance
charges affect the returns you experience.
3
<PAGE>
Market Commentary
Market Overview
Investors move out into a safer world
It started in the first quarter of the year, but investors were too risk averse
to believe it. By April, however, it could no longer be denied: the world was
becoming a safer place to invest. Japan was showing signs that its economy had
bottomed and was poised to start growing again; Germany was also hinting at
improved economic conditions, and cheaper currencies and lower interest rates
were helping to fuel several emerging market economies.
This encouraging economic news prompted many equity investors to look beyond the
domestic large-capitalization growth stocks that have played such a big part in
driving the market's returns over the past several years. What they found in the
United States was stocks of small-cap companies that were ignored for so long
they had become bargain priced. Investors also found relatively inexpensive
value stocks among the large-cap companies. These stocks included many
cyclicals--stocks that typically do well when the economy thrives. Outside the
United States, investors found stocks in Asia and emerging markets that were
also bargain priced.
Many bond investors responded to a safer global economic environment by pulling
out of U.S. Treasury securities and taking advantage of attractive opportunities
in higher-yielding markets. Treasuries also fell out of favor because investors
expected the Federal Reserve to raise rates in an effort to cool U.S. economic
growth before it led to higher inflation. (Higher inflation erodes the fixed
value of bond interest payments.) The Federal Reserve finally moved on June 30,
when it raised its key short-term interest rate by a quarter of a percentage
point to 5%.
The World
What's causing the global rebound?
Asia--the region that sparked a global financial crisis two years ago--could
actually be credited with helping the world economies get back on course.
Corporate restructuring in many parts of Asia, including Japan and Korea, has
accelerated sharply in the last several months. This has helped companies with
inexpensive valuations greatly improve their prospects for strong earnings
growth. The Asian recovery, in turn, has increased the global demand for
commodities, which has helped the commodity exporters in Russia and Latin
America. The corporate environment in many parts of Europe is also showing signs
of improvement after a disappointing first half of 1999. Company fundamentals
remain strong in Europe, and the weaker euro is helping the export sector.
The views expressed are as of July 30, 1999 and are subject to change based on
market and other conditions.
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How the Markets Compared/1/
[BAR CHART APPEARS HERE]
Return Over Average Return Over
Past 12 Months Past 20 Years (Annualized)
Money Markets 4.8% 6.4%
Bonds 2.7% 9.7%
Foreign Stocks 15.7% 14.5%
U.S. Stocks 22.8% 17.9%
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This chart compares the 12-month return as of 6/30/99 for various categories of
investments with the average annual total return over 20 years for the same
investment. As you can see, stock and bond market returns can vary considerably
from year to year. Unlike stocks, bonds generally offer a fixed rate of return
and principal if held to maturity. An investment's past performance should never
be used to predict future results. There are different risks associated with
each investment sector, which should be carefully considered before investing.
/1/ Source: Lipper, Inc. For purposes of comparison only. U.S. money markets as
measured by Lipper Money Market Average (VA). Bonds as measured by the Lehman
Brothers Gov't. Corp. Index. Foreign stocks as measured by the Morgan Stanley
Capital International World Index. U.S. stocks as measured by the S&P 500
Composite Stock Price Index.
4
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S&P 500 Index--Total Return
by Sector
YTD 1999
--------
Technology 24.8%
Basic Materials 22.2
Energy 19.4
Capital Goods 18.5
Communication Services 17.1
Financials 12.8
Consumer Cyclicals 12.3
Transportation 11.4
Utilities 1.2
Health Care -0.4
Consumer Staples -2.2
S&P 500 Index 12.4
- -----------------------------------------
Source: Standard & Poor's as of 6/30/99. The S&P 500 Composite Stock Price Index
is an unmanaged index of stocks that provide an indication of stock price
movements. Past performance is not indicative of future results. Investors
cannot invest directly in an index.
Stock Market
No longer narrowly focused
When the first half of 1999 drew to a close, it had become obvious that a
broader group of stocks was now benefiting from this accelerated global growth.
The Russell 2000 Index of small-company stocks outperformed the other major
stock indexes. The stock market had placed exceptionally high capitalizations
(the total price of a corporation's outstanding stock) on a few popular
companies.
These "mega-caps" had absorbed a lot of investors' funds, while smaller
companies were much lower priced. So, when investors sold some of their shares
of the mega-caps, enough money was released to have a very large impact on the
prices of small-company stocks. They surged. In many cases, merger and
acquisition activity was a catalyst for a bargain-priced company's gains.
Bond Market
Caught off-guard by strong global economic growth
Treasury prices fell early in the second quarter as investors sold these
government securities to participate in both the wealth of corporate debt
offerings and in the strong stock market. Occasional economic reports that
hinted at inflation also caused temporary "hiccups" in the debt market that
started to become almost routine until mid-May. That's when April's
much-higher-than-expected Consumer Price Index report was released, which was
soon followed by the Federal Reserve's announcement that it was more inclined to
raise interest rates.
These events prompted a major sell-off in the bond market. The yield on the
benchmark 30-year Treasury bond--which moves in the opposite direction of its
price--rose from 5.63% on March 31 to a high of 6.19% on June 24, a level not
seen since November 1997.
As it turned out, this sharp sell-off was unwarranted in light of the fact that
the Federal Reserve increased short-term interest rates by only a quarter of a
percentage point.
In anticipation of an increase in short-term interest rates, investors drove
prices lower in almost all sectors of the U.S. fixed-income market during the
second half of the quarter and spreads (the difference in yield between
corporate bonds and Treasuries) also widened in both the high-grade and
high-yield (junk) bond markets.
Surprisingly, the spread between yields of Treasuries and some better-quality
corporates (A-rated and AA-rated) widened more than the spread between
Treasuries and lower-rated corporates. This is due, in part, to the large supply
of new investment-grade corporate issues, which came to market during this
period.
5
<PAGE>
Investment Outlook
Economic Outlook
Fed to tread slowly
Investors are expected to pay very close attention to world economies during the
second half of the year, and the United States economy will probably be the most
closely scrutinized of all. We expect to see strong U.S. growth coupled with a
moderate increase in inflation.
As we enter the second half of the year, we still think that Y2K preparations
(particularly inventory building), combined with the underlying healthy pace
of growth, will push overall economic readings back up to around the 4% level.
With oil and commodity prices now no longer declining and substantially smaller
declines being registered for other non-oil import prices, the Consumer Price
Index inflation rate should move slightly higher. When Alan Greenspan and the
Federal Reserve meet in August, these trends could prompt them to announce that
they are more inclined to raise interest rates. It usually takes six months for
interest rate moves to be felt in the economy. We think the Federal Reserve will
probably be reluctant to actually raise rates in August, because the move would
be felt early next year when the economy quite possibly may slow down anyway in
response to Y2K factors.
Just what those factors might be remains to be seen. Since Y2K is a unique event
the impact of which cannot be gauged by previous experience, all forecasts are
subject to greater risk than usual over the next three quarters.
Stock Market Outlook
Rally to continue to broaden
As the U.S. economy continues to grow and it becomes more apparent that the
world is a safer place for investing, we expect investors to still be attracted
to U.S. small-company stocks and value stocks, both of which remain relatively
inexpensive compared to large-cap growth stocks.
However, the recent move out of growth stocks and into small-company and value
stocks happened so quickly it will not be surprising if this new trend pauses
from time to time to digest the value gains.
International markets are expected to become more attractive to investors as
well. Since stocks in Europe are not as expensive as those in the S&P 500--
international markets could perform better than the S&P 500 over the next 12
to 18 months. In Japan, corporate restructurings are helping to improve earnings
and should eventually bring about economic growth.
A word of caution, however: Asian and Latin American countries have rebounded so
quickly from such depressed levels that it wouldn't be unusual to see those
markets pause as some investors take their profits.
6
<PAGE>
Safer world helps commodities stage a comeback
With global growth accelerating, the economies of many developing nations
may have the wind at their backs for the first time in a while. This could prove
beneficial to most of the world's commodity producers, since global inventories
of resources such as aluminum and nickel are low and there is little excess
production capacity.
The Asian economic and financial crisis caused large inventory liquidations of
many commodities from Far Eastern consumers. With the world beginning to
recover, not only will demand increase but depleted inventories will have to be
rebuilt.
While prices of commodity company stocks are up significantly in 1999, they have
considerable room to go higher. Long-term supply and demand trends are turning
very positive. Soon the strengths we see in oil will spill over into other
commodity markets.
Bond Market Outlook
Looking for good value
Given expectations for strong U.S. economic growth, we have increased our range
for the yield on the 30-year Treasury bond from 5.25% to 6.25%. In the current
environment, high-yield corporate bonds represent good value.
High expectations for high-yield sector
Because of their low correlation to other financial products, high-yield
corporate bonds (also known as "junk bonds") are an attractive way for suitable
investors to diversify a portfolio. While Treasuries performed poorly during the
first half of the year, high-yield corporates generated a positive return
despite a couple of rough months.
The Federal Reserve's decision to increase short-term rates only slightly and
remove its tightening bias is particularly encouraging to the high-yield sector.
Treasury yields have risen since the beginning of the year; therefore, spreads
(the difference in yield between high-yield bonds and Treasuries) are not as
wide as they were in January. However, they are still wide based on historical
levels.
Default rates, which rose during the first half of the year, shouldn't increase
dramatically from current levels, because economic growth continues to be
strong. Since interest rates are not expected to move significantly between now
and the end of the year, high-yield bonds should earn their coupons and even
realize a little capital appreciation.
7
<PAGE>
Conservative Balanced Portfolio
Performance Summary.
The Prudential Series Fund Conservative Balanced Portfolio returned 4.04% for
the first half of 1999, between the market's 12.4% gain on U.S. stocks and the
2.28% loss on the Lehman Government/Corporate Bond Index. This Portfolio--which
invests in a conservative mix of stocks, bonds, and money market
securities--returned less than the average Balanced (VIP) Portfolio tracked by
Lipper, Inc., because the Portfolio's conservative mandate is consistent with
having a smaller proportion of stocks in the asset allocation. Unfortunately,
bond market participants interpreted signs of a strengthening economy as an
early warning of renewed inflation. These inflationary concerns caused bond
prices to slide.
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Average Annual Returns Through June 30, 1999
Six One Three Five Ten
Months Year Years Years Years
- --------------------------------------------------------------------------------
Conservative Balanced Portfolio/1/ 4.04% 7.62% 12.24% 12.05% 10.83%
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Lipper (VIP) Balanced Avg./2/ 6.12% 10.86% 16.21% 15.63% 11.93%
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S&P 500 Index/3/ 12.38% 22.76% 29.11% 27.86% 18.76%
- --------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index/4/ -2.28% 2.70% 7.19% 7.76% 8.12%
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Conservative Balanced Portfolio inception date:5/13/83.
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$10,000 Invested Over Ten Years
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
- --------------------------------------------------------------------------------
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risk of currency fluctuation and the impact of social, political and
economic change.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses but not product
charges. Source: Prudential. Six-month returns not annualized.
2 The Lipper Variable Insurance Products (VIP) Balanced Average is calculated
by Lipper, Inc., and reflects the investment return of certain portfolios
underlying variable life and annuity products. These returns are net of
investment fees and fund expenses but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the S&P
500 may differ substantially from the securities in the Portfolio.
4 The Lehman Government/Corporate Bond Index is comprised of government and
corporate bonds. The index is an unmanaged index that includes the
reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the index may differ substantially
from the securities in the Portfolio. The Lehman Gov't./Corp. Bond Index is
not the only index that may be used to characterize performance of income
funds, and other indexes may portray different comparative performance.
================================================================================
[GRAPHIC APPEARS HERE]
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Investment Goal
Favorable total return consistent with a more conservatively managed diversified
portfolio.
Types of Investments
Money market instruments, bonds and common stocks of both established and
smaller companies.
Investment Style
The Portfolio management team holds a baseline allocation of 35% stocks, 65%
debt obligations and money market securities.
Performance Review.
Value stocks move ahead.
Solid stock returns led our performance. Approximately 20% of our stocks are
invested using a value style, which returned to favor in the second quarter of
1999. The sharp rise in these stocks helped support the Portfolio's gains for
the half year. The rest of the stock alloca-tion is invested to mirror the
return of the S&P 500 Index. Their gains continued the exceptional performance
of the S&P 500, well above the historical average return. Bonds constituted most
of the Portfolio's investments. As the U.S. economy accelerated, interest rates
rose and prices of existing bonds declined.
Asset allocation had a mixed impact on the Portfolio. We held about 40%
stocks--about 5% more than our norm. On the other hand, we held about one-third
of the assets in intermediate-term bonds instead of money-market instruments.
Although this strategy has historically added value, it hurt performance so far
this year.
<PAGE>
Strategy Session.
Poised to capitalize with value stocks. Approximately 20% of our equities are
managed using a strategy that emphasizes attractively priced stocks. That value
approach worked quite well as investors became more confident about economic
growth and began to search more broadly for inexpensive opportunities. We found
many among companies with market capitalizations (the total price of a company's
outstanding stock) smaller than those on the S&P 500.
A significant proportion of our value portfolio was invested in these small and
mid-sized companies (more than 40% of the portfolio has a market capitalization
below $3 billion, compared with less than 2% of the S&P 500). Most of the value
stock gains were in process-oriented industries including paper, forest
products, and aluminum. Value stocks had a substantial lead over the S&P 500
Index for the half year.
The remaining portion of the portfolio's stock allocation is invested in a
strategy that attempts to mirror the performance of the S&P 500 Index, which
also had an exceptional rise by historical standards. The performance of this
index-based component is less sensitive to changes in investors' style
preference but typically will lag the average equity fund whenever smaller
stocks outperform their larger counterparts.
Good corporate bond buying opportunity anticipated. Our bond holdings had a
focus on corporate bonds, because the additional yield they commanded over
Treasury bonds was attractive. We benefited when that premium shrank and began
to scale back this focus in April. Because many companies are issuing debt now
to avoid the need to come to the market near the year 2000, we expect the supply
of corporate bonds to be high during the summer and early fall, providing a good
buying opportunity.
PORTFOLIO MANAGER
Mark Stumpp
Expensive and rising?
"We believe that, after an unprecedented stretch of rapidly rising stock prices,
the average stock is quite expensive even if earnings should continue to grow at
moderate rates. Nonetheless, we are not inclined to reduce our allocation to
stocks substantially because it already is at quite conservative levels. We also
intend to continue to hold intermediate-term bonds instead of money market
instruments, because we think the long-term prospects for bonds are better than
those for shorter-maturity instruments."
PORTFOLIO MANAGERS
[PHOTO OF MARK STUMPP APPEARS HERE]
Mark Stumpp
[PHOTOS OF WARREN E. SPITZ AND JOHN W. MOSCHBERGER APPEAR HERE]
Warren E. Spitz John W. Moschberger
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Portfolio Composition
(Long-Term)
as of 6/30/99
-------------
Bonds 57.2%
Stocks 42.8%
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Source: Prudential. Holdings are subject to change.
================================================================================
Sector Breakdown - Stock
as of 6/30/99
-------------
Consumer Growth & Staples 22.7%
Technology 18.5%
Financial Services 16.3%
Industrial 16.0%
Consumer Cyclicals 9.9%
Utilities 8.9%
Energy 6.9%
Miscellaneous 0.8%
Sector Breakdown - Bond
as of 6/30/99
-------------
Corporate Bonds 76.2%
U.S. Treasuries 14.0%
Asset-Backed 7.4%
Miscellaneous 2.4%
- -----------------------------------------------------
Source: Prudential. Holdings are subject to change.
<PAGE>
Flexible Managed Portfolio
Performance Summary.
The Prudential Series Fund Flexible Managed Portfolio returned 6.55% for the
first half of 1999, between the market's 12.4% gain on U.S. stocks and the 2.28%
loss on the Lehman Government/Corporate Bond Index. This Portfolio outperformed
the average Flexible (VIP) Portfolio tracked by Lipper, Inc., because of its
strong stock returns.
Approximately one-half of our stocks are managed with a focus on shares trading
at attractive values; these beat the S&P 500 Index due to the strong
second quarter for small and mid-sized companies. The value style benefited when
investors interest moved from expensive investments toward more attractively
priced stocks. Unfortunately, bond market participants interpreted signs of a
strengthening economy as an early warning of renewed inflation. These
inflationary concerns caused bond prices to slide over the half
year.
================================================================================
Average Annual Returns Through June 30, 1999
Six One Three Five Ten
Months Year Years Years Years
- --------------------------------------------------------------------------------
Flexible Managed Portfolio1 6.55% 7.19% 14.42% 14.89% 12.56%
- --------------------------------------------------------------------------------
Lipper (VIP) Flexible Avg.2 5.89% 9.34% 15.70% 15.96% 13.19%
- --------------------------------------------------------------------------------
S&P 500 Index3 12.38% 22.76% 29.11% 27.86% 18.76%
- --------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index4 -2.28% 2.70% 7.19% 7.76% 8.12%
- --------------------------------------------------------------------------------
Flexible Managed Portfolio inception date: 5/13/83.
================================================================================
$10,000 Invested Over Ten Years
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
- --------------------------------------------------------------------------------
The Portfolio may invest in foreign securities. Foreign investments are subject
to the risk of currency fluctuation and the impact of social, political and
economic change.
1 Past performance is not predictive of future performance. Portfolio
performance is net of investment fees and fund expenses but not product
charges. Source: Prudential. Six-month returns not annualized.
2 The Lipper Variable Insurance Products (VIP) Flexible Average is calculated
by Lipper, Inc., and reflects the investment return of certain portfolios
underlying variable life and annuity products. These returns are net of
investment fees and fund expenses but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an
unmanaged index that includes the reinvestment of all dividends but does
not reflect the payment of transaction costs and advisory fees associated
with an investment in the Portfolio. The securities that comprise the S&P
500 may differ substantially from the securities in the Portfolio.
4 The Lehman Government/Corporate Bond Index is comprised of government and
corporate bonds. The index is an unmanaged index that includes the
reinvestment of all interest but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Portfolio. The securities that comprise the index may differ substantially
from the securities in the Portfolio. The Lehman Gov't./Corp. Bond Index is
not the only index that may be used to characterize performance of income
funds, and other indexes may portray different comparative performance.
================================================================================
[GRAPHIC APPEARS HERE]
- --------------------------------------------------------------------------------
Investment Goal
High total return consistent with a more aggressively managed diversified
portfolio.
Types of Investments
Money market instruments, bonds and common stocks of both established and
smaller companies.
Investment Style
The Portfolio management team holds a baseline allocation of 60% stocks and 40%
bonds.
Performance Review.
Value stocks move ahead. Solid stock returns led our performance. Approximately
half of our stocks are invested using a value style, which returned to favor in
the second quarter of 1999. The sharp rise in these stocks helped support the
Portfolio's gains for the half year. The rest of the stock allocation is
invested to mirror the return of the S&P 500 Index. Their 12.4% gain continued
the exceptional performance of S&P 500 stocks, well above the historical average
return.
On the other hand, we held our stock exposure below normal as stock prices rose
through most of the half. Our models suggested that stocks were poorer values
than bonds. We ended the quarter with slightly more than 60% invested in stocks.
We held about one-third of the Portfolio's assets in intermediate-term bonds
instead of money market instruments. Although this strategy has historically
added value, it has hurt performance so far this year.
<PAGE>
Strategy Session.
Poised to capitalize with value stocks. Approximately half of our equities are
managed using a strategy that emphasizes attractively priced stocks. That value
approach worked quite well as investors became more confident about economic
growth and began to search more broadly for inexpensive opportunities. We found
many among companies with market capitalizations (the total price of a company's
outstanding stock) smaller than those on the S&P 500.
A significant proportion of our value portfolio was invested in these small and
mid-sized companies (more than 40% of the portfolio has a market capitalization
below $3 billion, compared with less than 2% of the S&P 500). Most of the value
stock gains were in process-oriented industries including paper, forest products
and aluminum. Value stocks had a substantial lead over the S&P 500 Index for the
half year.
The remaining portion of the portfolio's stock allocation is invested in a
strategy that attempts to mirror the performance of the S&P 500 Index, which
also had an exceptional rise by historical standards. The performance of this
index-based component is less sensitive to changes in investors' style
preference but typically will lag the average equity fund whenever smaller
stocks outperform their larger counterparts.
Good corporate bond buying opportunity anticipated. Our bond holdings had a
focus on corporate bonds, because the additional yield they commanded over
Treasury bonds was attractive. We benefited when that premium shrank and began
to scale back this focus in April. Because many companies are issuing debt now
to avoid the need to come to the market near the year 2000, we expect the supply
of corporate bonds to grow rapidly during the summer and early fall, providing a
good buying opportunity.
PORTFOLIO MANAGER
Mark Stumpp
Expensive and rising?
"We believe that, after an unprecedented stretch of rapidly rising stock prices,
the average stock is quite expensive even if earnings should continue to grow at
moderate rates. Nonetheless, we are not inclined to reduce our allocation to
stocks substantially more because we already are below our norm. We also intend
to continue to hold intermediate-term bonds instead of money market instruments
because we think the long-term prospects for bonds are better than those for
shorter-maturity instruments".
PORTFOLIO MANAGERS
[PHOTO OF MARK STUMPP APPEARS HERE]
Mark Stumpp
[PHOTOS OF WARREN E. SPITZ AND JOHN W. MOSCHBERGER APPEAR HERE]
Warren E. Spitz John W. Moschberger
================================================================================
Portfolio Composition
(Long-Term)
as of 6/30/99
-------------
Stocks 62.4%
Bonds 37.6%
- ---------------------------------------------------
Source: Prudential. Holdings are subject to change.
================================================================================
Sector Breakdown - Stock
as of 6/30/99
-------------
Industrial 22.5%
Consumer Growth & Staples 19.3%
Financial Services 17.4%
Consumer Cyclicals 13.2%
Technology 13.0%
Energy 7.5%
Utilities 6.6%
Miscellaneous 0.5%
Sector Breakdown - Bond
as of 6/30/99
-------------
Corporate Bonds 77.2%
U.S. Treasuries 17.4%
Miscellaneous 4.1%
Asset-Backed 1.1%
U.S. Government Agencies 0.2%
- ---------------------------------------------------
Source: Prudential. Holdings are subject to change.
<PAGE>
[This page intentionally left blank]
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1999
ASSETS
Investments, at value (cost:
$4,767,897,708).......................... $5,114,815,929
Interest and dividends receivable.......... 40,660,377
Receivable for investments sold............ 39,664,609
Receivable for securities lending, net..... 1,156,016
Due from broker -- variation margin........ 1,088,075
Receivable for capital stock sold.......... 7,898
--------------
Total Assets............................. 5,197,392,904
--------------
LIABILITIES
Bank overdraft............................. 45,825
Collateral for securities on loan.......... 500,998,202
Payable for investments purchased.......... 43,839,552
Payable to investment adviser.............. 6,443,716
Payable for capital stock repurchased...... 3,061,124
Securities lending rebate payable.......... 2,359,240
Accrued expenses and other liabilities..... 347,746
--------------
Total Liabilities........................ 557,095,405
--------------
NET ASSETS................................... $4,640,297,499
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,999,597
Paid-in capital, in excess of par........ 4,230,768,766
--------------
4,233,768,363
Undistributed net investment income........ 47,567,932
Accumulated net realized gains on
investments.............................. 12,720,477
Net unrealized appreciation on
investments.............................. 346,240,727
--------------
Net assets, June 30, 1999.................. $4,640,297,499
--------------
--------------
Net asset value and redemption price per
share, 299,959,725 outstanding shares of
common stock (authorized 370,000,000
shares).................................. $ 15.47
--------------
--------------
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1999
INVESTMENT INCOME
Dividends (net of $236,012 foreign
withholding tax)......................... $ 14,402,988
Interest................................... 92,320,057
Income from securities loaned, net......... 1,030,240
---------------
107,753,285
---------------
EXPENSES
Investment advisory fee.................... 12,917,161
Shareholders' reports...................... 267,000
Custodian expense.......................... 119,000
Accounting fees............................ 75,000
Audit fees and expenses.................... 28,000
Legal fees................................. 3,000
Transfer agent's fees and expenses......... 3,500
Directors' fees............................ 1,500
Miscellaneous expenses..................... 16,451
---------------
Total expenses........................... 13,430,612
Less: custodian fee credit................. (64,064)
---------------
Net expenses............................. 13,366,548
---------------
NET INVESTMENT INCOME........................ 94,386,737
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 15,896,485
Futures.................................. 951,307
---------------
16,847,792
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 80,501,883
Futures.................................. (3,157,207)
---------------
77,344,676
---------------
NET GAIN ON INVESTMENTS...................... 94,192,468
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 188,579,205
---------------
---------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED DECEMBER
JUNE 30, 1999 31, 1998
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 94,386,737 $ 200,201,254
Net realized gain on investments....................................................... 16,847,792 263,079,117
Net change in unrealized appreciation on investments................................... 77,344,676 66,472,901
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 188,579,205 529,753,272
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (46,818,805) (201,150,300)
Distributions from net realized capital gains.......................................... (20,089,244) (284,059,981)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (66,908,049) (485,210,281)
------------------ -------------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [2,248,155 and 4,155,780 shares, respectively]...................... 34,303,551 64,306,807
Capital stock issued in reinvestment of dividends and distributions [4,355,993 and
32,017,520 shares, respectively]...................................................... 66,908,049 485,210,281
Capital stock repurchased [(24,748,737) and (34,980,138) shares, respectively]......... (378,545,027) (542,332,348)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL STOCK TRANSACTIONS................... (277,333,427) 7,184,740
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (155,662,271) 51,727,731
NET ASSETS:
Beginning of period.................................................................... 4,795,959,770 4,744,232,039
------------------ -------------------
End of period(a)....................................................................... $ 4,640,297,499 $ 4,795,959,770
------------------ -------------------
------------------ -------------------
(a) Includes undistributed net investment income of:................................... $ 47,567,932 $ --
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
(UNAUDITED)
June 30, 1999
ASSETS
Investments, at value (cost:
$5,375,155,909).......................... $5,814,648,192
Cash....................................... 84,577
Receivable for investments sold............ 42,422,053
Interest and dividends receivable.......... 30,364,381
Due from Broker-Variation Margin........... 3,223,625
Receivable for securities lending, net..... 1,197,085
Receivable for capital stock sold.......... 107,304
--------------
Total Assets............................. 5,892,047,217
--------------
LIABILITIES
Collateral for securities on loan.......... 443,760,222
Payable for investments purchased.......... 50,246,584
Payable to investment advisor.............. 8,123,005
Securities lending rebate payable.......... 2,262,792
Payable for capital stock repurchased...... 1,950,175
Accrued expenses........................... 530,379
--------------
Total Liabilities........................ 506,873,157
--------------
NET ASSETS................................... $5,385,174,060
--------------
--------------
Net assets were comprised of:
Common stock, at $.01 par value.......... $ 3,085,491
Paid-in capital, in excess of par........ 4,802,034,302
--------------
4,805,119,793
Undistributed net investment income........ 83,838,361
Accumulated net realized gain on
investments.............................. 60,414,368
Net unrealized appreciation on
investments.............................. 435,801,538
--------------
Net assets at June 30, 1999................ $5,385,174,060
--------------
--------------
Net asset value and redemption price per
308,549,113 shares outstanding common
stock (authorized 370,000,000 shares).... $ 17.45
--------------
--------------
STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1999
INVESTMENT INCOME
Interest................................... $ 75,435,897
Dividends (net of $495,226 foreign
withholding)............................. 24,361,214
Income from securities loaned, net......... 729,817
---------------
100,526,928
---------------
EXPENSES
Investment advisory fee.................... 16,091,896
Shareholder's reports...................... 299,000
Custodian expense.......................... 144,000
Accounting expense......................... 67,000
Audit expense.............................. 31,000
Transfer agent's fees and expenses......... 3,500
Directors' fees............................ 1,500
Miscellaneous expenses..................... 20,392
---------------
Total expenses........................... 16,658,288
Less: custodian fee credit................. (38,171)
---------------
Net expenses............................... 16,620,117
---------------
NET INVESTMENT INCOME........................ 83,906,811
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on:
Investments.............................. 59,114,365
Futures contracts........................ 18,244,372
---------------
77,358,737
---------------
Net change in unrealized appreciation:
Investments.............................. 172,656,432
Futures contracts........................ 11,431,193
---------------
184,087,625
---------------
NET GAIN ON INVESTMENTS...................... 261,446,362
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 345,353,173
---------------
---------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 83,906,811 $ 177,588,088
Net realized gain on investments....................................................... 77,358,737 513,883,914
Net change in unrealized appreciation on investments................................... 184,087,625 (167,145,159)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 345,353,173 524,326,843
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income................................................... (239,006) (178,186,396)
Distributions from net realized capital gains.......................................... (60,930,102) (552,345,875)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (61,169,108) (730,532,271)
------------------ -------------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [1,827,460 and 4,188,120 shares, respectively]...................... 29,615,192 74,668,669
Capital stock issued in reinvestment of dividends and distributions [3,554,343 and
43,615,212 shares, respectively]...................................................... 62,545,734 730,532,271
Capital stock repurchased [(23,550,870) and (38,796,213) shares, respectively]......... (401,152,319) (679,156,218)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL STOCK TRANSACTIONS........ (308,991,393) 126,044,722
------------------ -------------------
TOTAL DECREASE IN NET ASSETS............................................................. (24,807,328) (80,160,706)
NET ASSETS:
Beginning of period.................................................................... 5,409,981,388 5,490,142,094
------------------ -------------------
End of period (a)...................................................................... $ 5,385,174,060 $ 5,409,981,388
------------------ -------------------
------------------ -------------------
(a) Includes undistributed net investment income of:................................... $ 83,838,361 $ 170,556
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
June 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 92.4% PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS -- 52.9% RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
AEROSPACE -- 0.8%
Lockheed Martin Corp.,
6.85%, 05/15/01............................... A3 $ 1,900 $ 1,919,741
Raytheon Co.,
5.95%, 03/15/01............................... Baa1 34,900 34,784,481
--------------
36,704,222
--------------
AIRLINES -- 2.9%
Continental Airlines, Inc.,
7.461%, 04/01/15.............................. Aa3 11,691 11,848,390
8.00%, 12/15/05............................... Ba2 4,270 4,075,886
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 14,000 16,608,480
10.375%, 02/01/11............................. Ba1 22,905 27,689,396
United Airlines, Inc.,
10.67%, 05/01/04.............................. Baa3 46,865 52,928,862
11.21%, 05/01/14.............................. Baa3 18,433 23,595,346
--------------
136,746,360
--------------
ASSET-BACKED SECURITIES -- 3.9%
California Infrastructure SCE-1, Ser. 1997-1,
6.14%, 03/25/02............................... Aaa 3,356 3,361,061
6.17%, 03/25/03............................... Aaa 6,000 6,011,220
6.28%, 09/25/05............................... Aaa 7,000 6,964,720
Chase Manhattan Credit Master Trust, Ser.
1996-3,
7.04%, 02/15/05............................... Aaa 15,000 15,201,450
Citibank Credit Card Master Trust I, (c)
6.10%, 05/15/08............................... Aaa 56,500 55,319,150
MBNA Master Card Trust, Ser. 1999-B,
5.90%, 08/15/11............................... Aaa 41,400 39,044,193
Peco Energy Transition Trust, Ser. 1999-A,
5.63%, 03/01/05............................... Aaa 28,000 27,445,320
5.80%, 03/01/07............................... Aaa 14,500 13,963,065
Standard Credit Card Master Trust, Ser. 1993-2,
5.95%, 10/07/04............................... Aaa 4,650 4,555,512
Team Fleet Financing Corp., Ser. 1997-1,
7.35%, 05/15/03............................... Aa2 11,000 11,046,406
--------------
182,912,097
--------------
AUTO-CARS & TRUCKS -- 1.7%
Ford Motor Co.,
6.375%, 02/01/29.............................. A1 16,000 13,889,440
Lear Corp.,
7.96%, 05/15/05............................... Ba1 15,000 14,512,500
TRW, Inc.,
6.45%, 06/15/01............................... Baa1 50,300 50,347,156
--------------
78,749,096
--------------
BANKS AND SAVINGS & LOANS -- 3.4%
Bank of Nova Scotia, (Canada),
6.50%, 07/15/07............................... A1 7,200 7,150,500
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
Bayerische Landesbank Girozentrale, (Germany),
(c)
5.875%, 12/01/08.............................. Aaa $ 22,000 $ 20,414,020
Capital One Bank,
6.97%, 02/04/02............................... Baa3 25,000 25,130,750
7.08%, 10/30/01............................... Baa3 19,000 19,167,010
Deutsche Bank,
7.872%, 12/29/49.............................. A1 3,300 3,194,796
HSBC Holding PLC,
7.50%, 07/15/09............................... A2 12,100 12,224,993
Kansallis-Osake-Pankki, (Finland),
8.65%, 01/01/49............................... Baa1 10,000 10,023,000
Key Bank,
5.80%, 04/01/04............................... Aa3 30,000 29,025,600
National Australia Bank, (Australia),
6.40%, 12/10/07............................... A1 14,000 13,912,080
Okobank, (Finland),
6.561%, 09/27/49.............................. A3 6,250 6,231,250
7.325%, 10/29/49.............................. NR 9,000 9,000,000
7.70%, 10/29/49............................... NR 3,500 3,500,000
--------------
158,973,999
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.6%
British Sky Broadcasting, Inc.,
6.875%, 02/23/09.............................. Baa2 17,200 15,691,732
Cable & Wire Communications PLC, (United
Kingdom),
6.75%, 12/01/08............................... Baa1 4,200 4,042,962
CSC Holdings, Inc.,
7.25%, 07/15/08............................... Ba2 7,600 7,240,520
7.875%, 12/15/07.............................. Ba2 6,200 6,154,368
Tele-Communications, Inc.,
6.34%, 02/01/02............................... Ba1 12,000 12,034,680
8.25%, 01/15/03............................... Baa3 2,000 2,118,920
9.25%, 04/15/02............................... Baa3 9,500 10,221,810
9.875%, 06/15/22.............................. Baa3 12,900 16,454,853
--------------
73,959,845
--------------
CHEMICALS -- 0.6%
ICI Wilmington Inc.,
9.50%, 11/15/00............................... Baa1 8,000 8,331,120
Lyondell Chemical Co.,
9.625%, 05/01/07.............................. Ba3 6,200 6,339,500
Rohm & Haas Co.,
6.95%, 07/15/04............................... A3 4,000 3,999,040
6.95%, 07/15/04............................... A3 6,100 6,088,593
7.85%, 07/15/29............................... A3 5,200 5,196,204
--------------
29,954,457
--------------
COMPUTERS -- 0.1%
International Business Machine Corp.,
5.625%, 04/12/04.............................. A1 6,000 5,766,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CONSULTING -- 1.1%
Comdisco, Inc., M.T.N.,
6.00%, 01/30/02............................... Baa1 $ 30,000 $ 29,579,400
6.375%, 11/30/01.............................. Baa1 21,500 21,443,025
--------------
51,022,425
--------------
CONTAINERS -- 0.6%
Owens-Illinois, Inc.,
7.15%, 05/15/05............................... Ba1 26,000 24,995,880
7.50%, 05/15/10............................... Ba1 800 760,904
--------------
25,756,784
--------------
DIVERSIFIED OPERATIONS -- 1.1%
Cox Enterprises, Inc., (c)
6.625%, 06/14/02.............................. Baa1 7,200 7,195,176
Seagram (J.) & Sons,
5.79%, 04/15/01............................... Baa3 22,800 22,505,880
Tyco International Group, SA,
6.125%, 06/15/01.............................. Baa1 17,725 17,631,235
6.875%, 01/15/29.............................. Baa1 3,000 2,758,470
--------------
50,090,761
--------------
DRUGS & MEDICAL SUPPLIES -- 0.4%
Mallinckrodt, Inc.,
6.30%, 03/15/11 (a)........................... Baa2 16,780 16,486,350
--------------
FINANCIAL SERVICES -- 11.4%
Advanta Corp., M.T.N.,
7.50%, 08/28/00............................... Ba2 35,000 34,438,250
Arkwright Corp.,
9.625%, 08/15/26.............................. Baa3 8,000 8,602,000
BCH Financial Services,
5.496%, 04/28/05.............................. A3 10,000 9,982,100
Bear Stearns & Co.,
6.50%, 07/05/00............................... A2 20,000 20,045,000
Capital One Financial Corp.,
7.25%, 05/01/06............................... Ba1 9,300 9,009,375
CIT Group Inc.,
5.80%, 03/26/02............................... Aa3 16,000 15,754,720
CoMed Transitional Funding Trust,
5.44%, 03/25/07............................... Aaa 24,820 23,718,488
Conseco, Inc.,
7.60%, 06/21/01............................... Ba1 7,000 7,019,670
8.70%, 11/15/26............................... Ba2 2,422 2,170,427
8.796%, 04/01/27.............................. Ba2 4,170 3,773,433
Donaldson Lufkin, & Jenrette Inc.,
5.625%, 02/15/16.............................. Baa1 5,480 5,423,392
Dresdner Funding Trust,
8.15%, 06/30/31............................... Aa2 18,200 17,528,784
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa3 9,000 8,953,200
6.95%, 03/01/04............................... Baa2 17,500 17,253,250
7.50%, 06/15/03............................... Baa3 5,000 5,021,500
Finova Capital Corp.,
6.125%, 03/15/04.............................. Baa1 21,000 20,501,250
First Industrial, L.P.,
6.50%, 04/05/11............................... Baa2 9,000 8,826,210
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
FINANCIAL SERVICES (CONT'D.)
FMR Corp.,
7.57%, 06/15/29............................... Aa3 $ 450 $ 448,380
General Motors Acceptance Corp.,
5.95%, 03/14/03............................... A2 47,000 45,895,030
Goldman Sachs Group, L.P.,
5.56%, 01/11/01............................... A1 6,800 6,749,000
7.80%, 07/15/02............................... A1 15,985 16,528,330
Heller Financial, Inc., (c)
6.00%, 03/19/04............................... A3 6,900 6,679,269
International Lease Finance Corp.,
5.90%, 03/12/03............................... A1 37,500 36,639,750
Lehman Brothers Holdings, Inc.,
6.625%, 04/01/04.............................. Baa1 26,890 26,194,625
6.625%, 02/05/06.............................. Baa1 10,645 10,365,037
Marsh & McLennan Cos., Inc., (c)
6.625%, 06/15/04.............................. A2 6,830 6,839,357
MCN Investment Corp.,
6.30%, 04/02/11............................... Baa2 8,250 8,094,075
Morgan Stanley Dean Witter & Co., M.T.N.,
6.09%, 03/09/11............................... A1 59,915 59,677,737
6.875%, 03/01/03.............................. Aa3 3,000 3,040,500
PaineWebber Group, Inc.,
7.015%, 02/10/04.............................. Baa1 6,000 5,966,160
7.625%, 10/15/08.............................. Baa1 5,000 5,057,350
Salomon, Inc., M.T.N.,
6.59%, 02/21/01............................... Baa1 9,750 9,812,498
6.75%, 02/15/03............................... Baa1 5,000 5,021,050
7.25%, 05/01/01............................... Baa1 8,625 8,780,250
Sears Roebuck Acceptance Corp.,
6.38%, 10/07/02............................... A2 30,650 30,484,490
Textron Financial Corp.,
6.05%, 03/16/09............................... Aaa 17,346 17,295,626
--------------
527,589,563
--------------
FOOD & BEVERAGE -- 0.2%
Archer-Daniels Midland Co.,
6.625%, 05/01/29.............................. Aa3 8,100 7,414,659
Coca-Cola Bottling Co.,
6.375%, 05/01/09.............................. Baa2 3,000 2,815,950
--------------
10,230,609
--------------
FOREST PRODUCTS -- 0.4%
Fort James Corp.,
6.234%, 03/15/11.............................. Baa3 17,500 17,341,625
--------------
INDUSTRIAL -- 0.5%
Compania Sud Americana de Vapores, SA, (Chile),
7.375%, 12/08/03.............................. Baa 4,600 4,367,332
Scotia Pacific Co.,
7.71%, 01/20/14............................... Baa2 23,800 17,255,000
--------------
21,622,332
--------------
LEISURE & TOURISM -- 0.6%
Carnival Corp.,
5.65%, 10/15/00............................... A2 5,000 4,968,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
LEISURE & TOURISM (CONT'D.)
ITT Corp.,
6.25%, 11/15/00............................... Baa2 $ 5,253 $ 5,136,541
6.75%, 11/15/03............................... Baa2 21,500 20,164,420
--------------
30,269,661
--------------
MEDIA -- 0.5%
Liberty Media Group,
7.875%, 07/15/09.............................. Baa3 3,200 3,180,928
8.50%, 07/15/29............................... Baa3 3,600 3,590,172
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 6,425 6,565,900
Time Warner, Inc.,
8.11%, 08/15/06............................... Ba1 1,500 1,572,240
United News & Media PLC,
7.25%, 07/01/04............................... Baa2 6,950 6,886,755
--------------
21,795,995
--------------
OIL & GAS -- 0.5%
Atlantic Richfield Co.,
5.55%, 04/15/03............................... A2 11,300 11,055,920
B.J. Services Co.,
7.00%, 02/01/06............................... Ba1 4,000 3,936,080
Conoco Inc.,
5.90%, 04/15/04............................... A3 6,500 6,342,570
--------------
21,334,570
--------------
OIL & GAS SERVICES -- 1.0%
KN Energy Inc.,
6.30%, 03/01/21............................... Baa2 27,550 27,455,228
6.45%, 11/30/01............................... Baa2 11,950 11,969,120
6.45%, 03/01/03............................... Baa2 6,050 5,951,385
--------------
45,375,733
--------------
RAILROADS -- 0.3%
Norfolk Southern Corp.,
6.875%, 05/01/01.............................. Baa1 16,000 16,157,760
--------------
REAL ESTATE INVESTMENT TRUST -- 3.2%
Camden Property Trust,
7.23%, 10/30/00............................... Baa2 22,000 22,024,200
Duke Realty L.P.,
7.30%, 06/30/03............................... Baa2 6,250 6,295,000
EOP Operating, L.P.,
6.375%, 01/15/02.............................. Baa1 7,000 6,910,260
6.50%, 06/15/04............................... Baa1 6,000 5,760,600
6.625%, 02/15/05.............................. Baa 17,938 17,302,636
ERP Operating, L.P.,
6.15%, 09/15/00............................... A3 45,000 44,707,500
6.63%, 04/13/15............................... A3 13,400 12,929,124
7.10%, 06/23/04............................... A3 3,250 3,252,308
Felcor Suite Hotels, Inc.,
7.625%, 10/01/07.............................. Ba1 8,000 7,240,000
Hanson Overseas B.V.,
7.375%, 01/15/03.............................. A3 5,400 5,488,668
Simon Debartolo Group, Inc.,
6.75%, 06/15/05............................... Baa1 17,500 16,804,375
--------------
148,714,671
--------------
RETAIL -- 2.3%
Dayton-Hudson Corp.,
6.40%, 02/15/03............................... A3 8,250 8,211,638
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
RETAIL (CONT'D.)
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Ba1 $ 25,850 $ 27,038,066
8.50%, 06/15/03............................... Ba1 22,400 23,714,656
Kroger Co.,
6.34%, 06/01/01............................... Baa3 13,950 13,832,297
7.25%, 06/01/09............................... Baa3 8,200 8,164,125
7.70%, 06/01/29 (b)........................... Baa3 2,950 2,920,500
Rite Aid Corp.,
6.70%, 12/15/01............................... A3 5,000 4,983,550
Safeway Stores Inc.,
5.75%, 11/15/00............................... Baa2 6,000 5,966,280
6.05%, 11/15/03............................... Baa2 12,000 11,742,600
--------------
106,573,712
--------------
TELECOMMUNICATIONS -- 3.7%
360 Communication Co.,
7.125%, 03/01/03.............................. Ba2 22,550 22,876,750
7.60%, 04/01/09............................... Ba1 7,000 7,267,050
Airtouch Communications, Inc.,
7.00%, 10/01/03............................... Baa2 8,200 8,350,962
Cox Communications, Inc.,
6.94%, 10/01/01............................... Baa2 4,000 4,030,840
Electric Lightwave, Inc.,
6.05%, 05/15/04............................... A2 4,700 4,544,148
Lucent Technologies, Inc.,
6.45%, 03/15/29............................... A2 15,500 14,021,455
MCI Worldcom Inc.,
6.125%, 04/15/12.............................. Baa2 10,800 10,728,288
7.55%, 04/01/04............................... Ba1 9,535 9,868,820
Sprint Capital Corp.,
5.70%, 11/15/03............................... Baa1 11,000 10,542,070
6.125%, 11/15/08.............................. Baa1 25,000 23,072,250
Telecom De Puerto Rico,
6.65%, 05/15/06............................... Baa2 15,000 14,566,050
6.80%, 05/15/09............................... Baa2 12,500 12,007,875
Worldcom Inc.,
6.125%, 08/15/01.............................. Baa2 14,200 14,155,128
6.95%, 08/15/28............................... Baa2 16,000 15,167,200
--------------
171,198,886
--------------
UTILITIES -- 1.0%
CINergy Corp.,
6.125%, 04/15/04.............................. Baa2 10,000 9,673,500
Commonwealth Edison Co.,
7.375%, 01/15/04.............................. Baa3 14,000 14,358,260
Edison Mission Energy,
7.73%, 06/15/09............................... A3 6,900 6,971,484
Niagara Mohawk Power,
7.375%, 08/01/03.............................. Ba2 10,000 10,244,700
Pennsylvania Electric Co.,
5.75%, 04/01/04............................... A2 5,100 4,944,756
--------------
46,192,700
--------------
WASTE MANAGEMENT -- 0.4%
USA Waste Service,
6.125%, 07/15/01.............................. Baa3 18,000 17,892,180
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B3
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 7.4%
United States Treasury Bonds,
5.25%, 11/15/28............................... $ 157,395 $ 139,516,502
8.125%, 05/15/21.............................. 64,400 78,426,964
United States Treasury Notes,
4.75%, 02/15/04............................... 3,600 3,462,732
4.75%, 11/15/08............................... 55,500 50,964,540
5.25%, 05/15/04............................... 2,120 2,083,239
5.50%, 05/15/09............................... 40,320 39,387,398
5.875%, 11/15/05 (b).......................... 1,800 1,800,000
6.50%, 05/15/05............................... 4,700 4,843,914
7.50%, 02/15/05............................... 21,700 23,361,352
--------------
343,846,641
--------------
FOREIGN GOVERNMENT BONDS -- 1.3%
Quebec Province, (Canada),
7.50%, 07/15/23............................... A1 8,700 8,844,942
Republic Of Columbia, (Columbia),
9.75%, 04/23/09............................... Baa3 6,200 5,115,000
Republic of Panama, (Panama),
4.00%, 07/17/14............................... Ba1 12,500 9,390,625
Republic Of Philippines, (Philippines),
8.875%, 04/15/08.............................. Ba1 7,600 7,395,104
Republic of Poland, (Poland),
4.00%, 10/27/24............................... Baa3 8,500 5,482,500
United Mexican States, (Mexico),
10.375%, 02/17/09............................. NR 25,400 25,476,200
--------------
61,704,371
--------------
TOTAL LONG-TERM BONDS
(cost $2,496,469,893).................................................... 2,454,963,405
--------------
COMMON STOCKS -- 38.7% SHARES
-------------
AEROSPACE -- 0.7%
AlliedSignal, Inc............................... 72,300 4,554,900
Boeing Co....................................... 122,100 5,395,294
GenCorp, Inc.................................... 98,400 2,484,600
General Dynamics Corp........................... 17,300 1,185,050
Goodrich (B.F.) Co.............................. 8,300 352,750
Litton Industries, Inc. (b)..................... 77,600 5,567,800
Lockheed Martin Corp............................ 52,700 1,963,075
Northrop Grumman Corp........................... 8,000 530,500
Parker-Hannifin Corp............................ 56,825 2,599,744
Raytheon Co. (Class "B" Stock).................. 42,900 3,019,087
United Technologies Corp........................ 60,200 4,315,587
--------------
31,968,387
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AIRLINES -- 0.4%
AMR Corp. (b)................................... 177,400 $ 12,107,550
Delta Air Lines, Inc............................ 17,500 1,008,437
Southwest Airlines Co........................... 42,700 1,329,037
US Airways Group, Inc. (b)...................... 124,500 5,423,531
--------------
19,868,555
--------------
APPAREL -- 0.1%
Fruit Of The Loom, Inc. (Class "A" Stock) (b)... 84,100 819,975
Nike, Inc. (Class "B" Stock).................... 36,800 2,329,900
Reebok International Ltd........................ 8,800 163,900
--------------
3,313,775
--------------
AUTOS - CARS & TRUCKS -- 0.7%
Cummins Engine Co., Inc......................... 6,000 342,750
Dana Corp....................................... 21,900 1,008,769
Delphi Automotive Systems Corp. (b)............. 132,252 2,454,928
Ford Motor Co................................... 214,500 12,105,844
General Motors Corp............................. 183,500 12,111,000
Genuine Parts Co................................ 23,200 812,000
MascoTech, Inc.................................. 94,400 1,598,900
Midas, Inc...................................... 22,100 627,087
Navistar International Corp. (b)................ 7,200 360,000
PACCAR, Inc..................................... 9,400 501,725
Titan International, Inc........................ 101,250 1,202,344
TRW, Inc........................................ 16,300 894,462
--------------
34,019,809
--------------
BANKS AND SAVINGS & LOANS -- 2.1%
AmSouth Bancorporation.......................... 24,000 556,500
Banc One Corp................................... 153,072 9,117,351
Bank of New York Co., Inc....................... 97,800 3,588,037
BankAmerica Corp................................ 225,261 16,514,447
BankBoston Corp................................. 39,000 1,993,875
BB&T Corp....................................... 40,600 1,489,512
Chase Manhattan Corp............................ 110,100 9,537,412
Comerica, Inc................................... 20,000 1,188,750
First Union Corp................................ 129,000 6,063,000
Firstar Corp.................................... 90,000 2,520,000
Fleet Financial Group, Inc...................... 74,000 3,283,750
Golden West Financial Corp...................... 7,300 715,400
Huntington Bancshares, Inc...................... 28,600 1,001,000
KeyCorp......................................... 59,400 1,908,225
Mellon Bank Corp................................ 66,800 2,429,850
Mercantile Bancorporation, Inc.................. 20,200 1,153,925
Morgan (J.P.) & Co., Inc........................ 22,800 3,203,400
National City Corp.............................. 41,900 2,744,450
Northern Trust Corp............................. 14,300 1,387,100
PNC Bank Corp................................... 39,200 2,258,900
Providian Financial Corp........................ 18,950 1,771,825
Regions Financial Corp.......................... 30,000 1,153,125
Republic New York Corp.......................... 14,000 954,625
SouthTrust Corp................................. 20,000 767,500
Summit Bancorp.................................. 23,800 995,137
Suntrust Banks, Inc............................. 40,900 2,839,994
Synovus Financial Corp.......................... 35,250 700,594
U.S. Bancorp.................................... 94,900 3,226,600
Union Planters Corp............................. 17,000 759,687
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B4
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
Wachovia Corp................................... 25,700 $ 2,198,956
Wells Fargo & Co................................ 214,000 9,148,500
--------------
97,171,427
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc.................................... 19,600 699,475
Omnicom Group, Inc.............................. 21,400 1,712,000
--------------
2,411,475
--------------
CHEMICALS -- 0.8%
Air Products & Chemicals, Inc................... 28,800 1,159,200
Dow Chemical Co................................. 29,300 3,717,437
Du Pont (E.I.) de Nemours & Co.................. 146,500 10,007,781
Eastman Chemical Co............................. 9,300 481,275
Engelhard Corp.................................. 22,600 511,325
Ferro Corp...................................... 134,900 3,709,750
FMC Corp. (b)................................... 4,900 334,731
Grace (W.R.) & Co............................... 11,600 213,150
Great Lakes Chemical Corp....................... 6,400 294,800
Hercules, Inc................................... 15,100 593,619
Lyondell Chemical Co............................ 81,700 1,685,062
Millennium Chemicals, Inc. (b).................. 146,527 3,452,542
Monsanto Co..................................... 80,300 3,166,831
Nalco Chemical Co............................... 10,400 539,500
OM Group, Inc................................... 63,300 2,183,850
Praxair, Inc.................................... 20,700 1,013,006
Raychem Corp.................................... 11,300 418,100
Rohm & Haas Co.................................. 29,511 1,265,286
Sigma-Aldrich Corp.............................. 12,700 437,356
Union Carbide Corp.............................. 16,700 814,125
--------------
35,998,726
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp. (b)............................... 96,500 1,978,250
Deluxe Corp..................................... 8,600 334,862
--------------
2,313,112
--------------
COMPUTER SERVICES -- 3.0%
3Com Corp. (b).................................. 48,500 1,294,344
Adobe Systems, Inc.............................. 7,300 599,741
America Online, Inc. (b)........................ 138,700 15,326,350
Autodesk, Inc................................... 7,300 215,806
Automatic Data Processing, Inc.................. 80,000 3,520,000
BMC Software, Inc. (b).......................... 30,700 1,657,800
Cabletron Systems, Inc. (b)..................... 24,800 322,400
Ceridian Corp. (b).............................. 20,600 673,362
Cisco Systems, Inc. (b)......................... 411,000 26,509,500
Computer Associates International, Inc.......... 70,500 3,877,500
Computer Sciences Corp. (b)..................... 20,000 1,383,750
Compuware Corp. (a)............................. 48,000 1,527,000
Electronic Data Systems Corp.................... 64,900 3,670,906
EMC Corp. (b)................................... 130,600 7,183,000
First Data Corp................................. 56,200 2,750,287
Microsoft Corp. (b)............................. 660,900 59,604,919
Novell, Inc. (b)................................ 41,900 1,110,350
Oracle Corp. (b)................................ 187,400 6,957,225
Parametric Technology Corp. (b)................. 40,200 557,775
Peoplesoft, Inc................................. 30,000 517,500
Silicon Graphics, Inc. (b)...................... 20,600 337,325
Unisys Corp..................................... 34,400 1,339,450
--------------
140,936,290
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
COMPUTERS -- 1.5%
Apple Computer, Inc. (b)........................ 17,800 $ 824,362
Compaq Computer Corp............................ 219,589 5,201,514
Data General Corp. (b).......................... 7,600 110,675
Dell Computer Corp. (b)......................... 331,200 12,254,400
Gateway 2000, Inc. (b).......................... 20,600 1,215,400
Hewlett-Packard Co.............................. 132,100 13,276,050
International Business Machines Corp............ 238,200 30,787,350
Networking Appliance, Inc. (b).................. 2,000 111,750
Seagate Technology, Inc. (b).................... 33,200 850,750
Sun Microsystems, Inc. (b)...................... 100,300 6,908,162
--------------
71,540,413
--------------
CONSTRUCTION -- 0.2%
Centex Corp..................................... 9,300 349,331
Fluor Corp...................................... 9,400 380,700
Foster Wheeler Corp............................. 6,400 90,400
Giant Cement Holdings, Inc. (b)................. 58,100 1,329,037
Oakwood Homes Corp.............................. 139,300 1,828,312
Pulte Corp...................................... 6,600 152,212
Standard Pacific Corp........................... 154,000 1,992,375
Webb (Del E.) Corp.............................. 140,300 3,349,662
--------------
9,472,029
--------------
CONTAINERS -- 0.1%
Ball Corp....................................... 4,700 198,575
Bemis Co., Inc.................................. 8,300 329,925
Crown Cork & Seal Co., Inc...................... 15,100 430,350
Owens-Illinois, Inc. (b)........................ 76,600 2,503,862
Sealed Air Corp................................. 10,100 655,237
--------------
4,117,949
--------------
COSMETICS & SOAPS -- 0.6%
Alberto Culver Co. (Class "B" Stock)............ 5,900 157,087
Avon Products, Inc.............................. 34,700 1,925,850
Colgate-Palmolive Co............................ 38,900 3,841,375
Gillette Co..................................... 144,400 5,920,400
International Flavors & Fragrances, Inc......... 13,600 603,500
Procter & Gamble Co............................. 172,800 15,422,400
--------------
27,870,612
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.5%
Eastman Kodak Co................................ 78,100 5,291,275
Philip Morris Co., Inc.......................... 424,400 17,055,575
--------------
22,346,850
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.2%
Avery Dennison Corp............................. 14,700 887,512
Pitney Bowes, Inc............................... 37,000 2,377,250
Xerox Corp...................................... 85,400 5,043,937
--------------
8,308,699
--------------
DIVERSIFIED OPERATIONS -- 1.1%
ConAgra, Inc.................................... 65,000 1,730,625
Fortune Brands, Inc............................. 22,300 922,662
General Electric Capital Corp................... 425,600 48,092,800
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B5
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
DIVERSIFIED OPERATIONS (CONT'D.)
Kansas City Southern Industries, Inc............ 13,300 $ 848,706
Tomkins PLC, ADR, (United Kingdom).............. 83,300 1,520,225
--------------
53,115,018
--------------
DRUGS AND MEDICAL SUPPLIES -- 3.3%
Abbott Laboratories............................. 197,500 8,986,250
Allergan, Inc................................... 8,500 943,500
ALZA Corp. (b).................................. 11,500 585,062
American Home Products Corp..................... 171,600 9,867,000
Amgen, Inc. (b)................................. 66,300 4,036,012
Bard (C.R.), Inc................................ 5,700 272,531
Bausch & Lomb, Inc.............................. 7,400 566,100
Baxter International, Inc....................... 36,900 2,237,062
Becton, Dickinson & Co.......................... 33,800 1,014,000
Biomet, Inc..................................... 13,700 544,575
Boston Scientific Corp. (b)..................... 51,300 2,253,994
Bristol-Myers Squibb Co......................... 258,700 18,222,181
Cardinal Health, Inc............................ 36,700 2,353,387
Guidant Corp.................................... 39,800 2,047,212
Johnson & Johnson............................... 175,000 17,150,000
Lilly (Eli) & Co................................ 143,100 10,249,537
Mallinckrodt, Inc............................... 11,400 414,675
Medtronic, Inc.................................. 76,000 5,918,500
Merck & Co., Inc................................ 308,600 22,836,400
Pfizer, Inc..................................... 168,900 18,536,775
Pharmacia & Upjohn, Inc......................... 68,000 3,863,250
Schering-Plough Corp............................ 191,300 10,138,900
St. Jude Medical, Inc. (b)...................... 9,400 334,875
Warner-Lambert Co............................... 106,900 7,416,187
Watson Pharmaceuticals, Inc. (b)................ 11,000 385,687
--------------
151,173,652
--------------
ELECTRONICS -- 0.5%
Applied Materials, Inc. (b)..................... 48,000 3,546,000
Belden, Inc..................................... 67,100 1,606,206
EG&G, Inc....................................... 7,100 252,937
Emerson Electric Co............................. 56,300 3,539,862
Grainger (W.W.), Inc............................ 12,300 661,894
Harris Corp..................................... 8,900 348,769
Honeywell, Inc.................................. 15,900 1,842,412
Motorola, Inc................................... 78,100 7,399,975
Rockwell International Corp..................... 25,100 1,524,825
Solectron Corp.................................. 33,600 2,240,700
Tektronix, Inc.................................. 7,900 238,481
Thomas & Betts Corp............................. 8,600 406,350
--------------
23,608,411
--------------
FINANCIAL SERVICES -- 2.4%
American Express Co............................. 58,900 7,664,362
Associates First Capital Corp................... 97,144 4,304,693
Bear Stearns Companies, Inc..................... 13,825 646,319
Block (H.R.), Inc............................... 13,300 665,000
Capital One Financial Corp...................... 25,200 1,403,325
Citigroup, Inc.................................. 516,150 24,517,125
Countrywide Credit Industries, Inc.............. 14,600 624,150
Dun & Bradstreet Corp........................... 22,600 800,887
Federal Home Loan Mortgage Corp................. 88,300 5,121,400
Federal National Mortgage Association........... 135,000 9,230,625
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES (CONT'D.)
Fifth Third Bancorp............................. 35,200 $ 2,343,000
Franklin Resource, Inc.......................... 32,900 1,336,562
Goldman Sachs Group, Inc. (b)................... 13,200 953,700
Household International, Inc.................... 61,952 2,934,976
Lehman Brothers Holdings, Inc................... 185,900 11,572,275
MBNA Corp....................................... 105,750 3,238,594
Merrill Lynch & Co., Inc........................ 103,900 8,305,506
Morgan Stanley Dean Witter & Co................. 129,190 13,241,975
PaineWebber Group, Inc.......................... 13,000 607,750
Paychex, Inc.................................... 34,500 1,099,687
Schwab (Charles) Corp. (b)...................... 52,200 5,735,475
SLM Holding Corp................................ 21,400 980,387
State Street Corp............................... 21,400 1,827,025
Transamerica Corp............................... 15,600 1,170,000
Washington Mutual, Inc.......................... 77,178 2,730,172
--------------
113,054,970
--------------
FOOD & BEVERAGES -- 1.4%
Anheuser-Busch Companies, Inc................... 62,200 4,412,312
Archer-Daniels-Midland Co....................... 75,275 1,162,058
Bestfoods....................................... 36,400 1,801,800
Brown-Forman Corp. (Class "B" Stock)............ 8,700 567,131
Campbell Soup Co................................ 57,500 2,666,562
Coca Cola Enterprises, Inc...................... 53,800 1,600,550
Coca-Cola Co.................................... 320,900 20,056,250
Coors (Adolph) Co. (Class "B" Stock)............ 4,800 237,600
General Mills, Inc.............................. 21,100 1,695,912
Heinz (H.J.) & Co............................... 46,500 2,330,812
Hershey Foods Corp.............................. 18,300 1,086,562
Kellogg Co...................................... 52,000 1,716,000
Nabisco Group Holdings Corp..................... 324,400 6,346,075
PepsiCo, Inc.................................... 191,000 7,389,312
Pioneer Hi-Bred International, Inc.............. 32,200 1,253,787
Quaker Oats Co.................................. 17,600 1,168,200
Ralston-Ralston Purina Group.................... 43,400 1,320,987
Sara Lee Corp................................... 118,700 2,693,006
Seagram Co., Ltd................................ 52,800 2,659,800
Sysco Corp...................................... 41,900 1,249,144
Whitman Corp.................................... 132,800 2,390,400
Wrigley (William) Jr. Co........................ 15,000 1,350,000
--------------
67,154,260
--------------
FOREST PRODUCTS -- 0.7%
Boise Cascade Corp.............................. 152,000 6,517,000
Champion International Corp..................... 106,400 5,093,900
Fort James Corp................................. 28,200 1,068,075
Georgia-Pacific Corp............................ 57,400 2,719,325
International Paper Co.......................... 54,121 2,733,110
Louisiana-Pacific Corp.......................... 188,700 4,481,625
Mead Corp....................................... 107,900 4,504,825
Potlatch Corp................................... 4,500 197,719
Temple-Inland, Inc.............................. 6,600 450,450
Westvaco Corp................................... 13,000 377,000
Weyerhaeuser Co................................. 26,500 1,821,875
Willamette Industries, Inc...................... 82,700 3,809,369
--------------
33,774,273
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group........................... 10,300 645,681
Consolidated Natural Gas Co..................... 12,500 759,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B6
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
GAS PIPELINES (CONT'D.)
Peoples Energy Corp............................. 5,500 $ 207,281
Sempra Energy................................... 33,699 762,440
Sonat, Inc...................................... 13,100 433,937
Williams Companies, Inc......................... 54,400 2,315,400
--------------
5,124,114
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.5%
Columbia/HCA Healthcare Corp.................... 284,100 6,481,031
HEALTHSOUTH Corp. (b)........................... 51,600 770,775
Humana, Inc. (b)................................ 197,200 2,551,275
IMS Health, Inc................................. 42,700 1,334,375
LifePoint Hospitals, Inc. (b)................... 10,552 141,792
Manor Care, Inc................................. 13,000 314,437
McKesson HBOC, Inc.............................. 35,530 1,141,401
Service Corp. International..................... 39,400 758,450
Shared Medical Systems Corp..................... 4,100 267,525
Smith (A.O.) Corp............................... 105,450 2,952,600
Tenet Healthcare Corp. (b)...................... 230,200 4,273,088
Triad Hospitals, Inc. (b)....................... 10,552 142,452
Wellpoint Health Networks Inc................... 6,000 509,250
--------------
21,638,451
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.2%
Clorox Co....................................... 14,900 1,591,506
Kimberly-Clark Corp............................. 70,100 3,995,700
Leggett & Platt, Inc............................ 114,700 3,190,094
--------------
8,777,300
--------------
HOUSING RELATED -- 0.6%
Armstrong World Industries, Inc................. 4,100 237,031
Fleetwood Enterprises, Inc...................... 3,400 89,888
Hanson, PLC, ADR, (United Kingdom).............. 309,562 13,736,814
Kaufman & Broad Home Corp....................... 6,100 151,738
Lowe's Companies, Inc........................... 48,200 2,732,338
Masco Corp...................................... 42,900 1,238,738
Maytag Corp..................................... 12,400 864,125
Newell Rubbermaid Inc........................... 36,814 1,711,851
Owens Corning................................... 106,900 3,674,688
Stanley Works................................... 11,000 354,063
Tupperware Corp................................. 9,600 244,800
Whirlpool Corp.................................. 9,500 703,000
--------------
25,739,074
--------------
INSTRUMENTS - CONTROLS
Johnson Controls, Inc........................... 10,900 755,506
PE Corp-PE Biosystems Group..................... 6,100 699,975
--------------
1,455,481
--------------
INSURANCE -- 1.6%
Aetna, Inc...................................... 19,400 1,735,088
AFLAC Inc....................................... 30,000 1,436,250
Allstate Corp................................... 106,300 3,813,513
American General Corp........................... 33,500 2,525,063
American International Group, Inc............... 159,863 18,713,962
Aon Corp........................................ 32,500 1,340,625
Berkley (W.R.) Corp............................. 42,400 1,060,000
Chubb Corp...................................... 76,000 5,282,000
CIGNA Corp...................................... 27,400 2,438,600
Cincinnati Financial Corp....................... 21,800 818,863
Conseco, Inc.................................... 41,821 1,272,927
Financial Security Assurance Holdings Ltd....... 34,000 1,768,000
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
INSURANCE (CONT'D.)
Hartford Financial Services Group, Inc.......... 31,500 $ 1,836,844
Jefferson-Pilot Corp............................ 14,500 959,719
Lincoln National Corp........................... 25,800 1,349,663
Loews Corp...................................... 43,700 3,457,763
Marsh & McLennan Companies, Inc................. 33,100 2,499,050
MBIA, Inc....................................... 13,000 841,750
MGIC Investment Corp............................ 13,900 675,888
Progressive Corp................................ 10,100 1,464,500
Provident Companies, Inc........................ 17,000 680,000
Reinsurance Group of America, Inc............... 173,325 6,109,706
SAFECO Corp..................................... 102,900 4,540,463
St. Paul Companies, Inc......................... 31,900 1,014,819
Torchmark Corp.................................. 118,400 4,040,400
Trenwick Group, Inc............................. 64,850 1,598,958
United Healthcare Corp.......................... 23,700 1,484,213
UNUM Corp....................................... 18,500 1,012,875
--------------
75,771,502
--------------
LEISURE -- 0.3%
Brunswick Corp.................................. 9,000 250,875
Carnival Corp. (Class "A" Stock)................ 82,500 4,001,250
Disney (Walt) Co................................ 267,600 8,245,425
Harrah's Entertainment, Inc. (b)................ 15,800 347,600
Hilton Hotels Corp.............................. 30,300 429,881
King World Productions, Inc..................... 11,500 400,344
Marriott International, Inc. (Class "A"
Stock)........................................ 31,600 1,181,050
Mirage Resorts, Inc. (b)........................ 23,600 395,300
--------------
15,251,725
--------------
MACHINERY -- 0.4%
Briggs & Stratton Corp.......................... 3,900 225,225
Case Corp....................................... 96,800 4,658,500
Caterpillar, Inc................................ 46,000 2,760,000
Commercial Intertech Corp....................... 28,300 451,031
Cooper Industries, Inc.......................... 12,800 665,600
Deere & Co...................................... 30,700 1,216,488
Dover Corp...................................... 27,900 976,500
DT Industries, Inc.............................. 35,800 328,913
Eaton Corp...................................... 9,200 846,400
Flowserve Corp.................................. 39,486 747,766
Global Industrial Technologies, Inc. (b)........ 61,400 740,638
Ingersoll-Rand Co............................... 21,400 1,382,975
Milacron, Inc................................... 6,300 116,550
Paxar Corp...................................... 229,925 2,069,325
Snap-On, Inc.................................... 9,500 343,781
Timken Co....................................... 9,900 193,050
--------------
17,722,742
--------------
MANUFACTURING -- 0.3%
Hussmann International, Inc..................... 66,400 1,099,750
Illinois Tool Works, Inc........................ 32,000 2,624,000
Tyco International Ltd.......................... 106,222 10,064,535
--------------
13,788,285
--------------
MEDIA -- 1.2%
CBS Corp. (b)................................... 156,700 6,806,656
Central Newspapers, Inc. (Class "A" Stock)...... 100,000 3,762,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B7
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MEDIA (CONT'D.)
Clear Channel Communications, Inc. (b).......... 42,300 $ 2,916,056
Comcast Corp. (Special Class "A" Stock)......... 96,300 3,701,531
Donnelley (R.R.) & Sons Co...................... 18,600 689,363
Dow Jones & Co., Inc............................ 12,000 636,750
Gannett Co., Inc................................ 35,800 2,555,225
Houghton Mifflin Co............................. 58,700 2,762,569
Interpublic Group of Companies, Inc............. 17,800 1,541,925
Knight-Ridder, Inc.............................. 67,800 3,724,763
Lee Enterprises, Inc............................ 50,900 1,552,450
McGraw-Hill, Inc................................ 25,600 1,380,800
Mediaone Group, Inc............................. 79,000 5,875,625
Meredith Corp................................... 8,300 287,388
New York Times Co. (Class "A" Stock)............ 25,500 938,719
Time Warner, Inc................................ 156,700 11,517,450
Times Mirror Co. (Class "A" Stock).............. 8,900 527,325
Tribune Co...................................... 15,000 1,306,875
Viacom, Inc. (Class "B" Stock) (b).............. 89,800 3,951,200
--------------
56,435,170
--------------
METALS - FERROUS -- 0.3%
AK Steel Holding Corp........................... 146,900 3,305,250
Allegheny Teledyne, Inc......................... 24,400 552,050
Bethlehem Steel Corp. (b)....................... 241,500 1,856,531
LTV Corp........................................ 204,900 1,370,269
Material Sciences Corp. (b)..................... 96,900 1,453,500
National Steel Corp. (Class "B" Stock) (b)...... 36,000 301,500
Nucor Corp...................................... 10,500 498,094
USX-U.S. Steel Group, Inc....................... 87,600 2,365,200
Worthington Industries, Inc..................... 9,200 151,225
--------------
11,853,619
--------------
METALS - NON FERROUS -- 0.5%
Alcan Aluminum Ltd.............................. 29,500 942,156
Alcoa, Inc...................................... 327,900 20,288,813
Cyprus Amax Minerals Co......................... 14,600 221,738
Inco Ltd........................................ 26,200 471,600
Reynolds Metals Co.............................. 8,200 483,800
--------------
22,408,107
--------------
MINERAL RESOURCES
ASARCO, Inc..................................... 6,300 118,519
Burlington Resources, Inc....................... 23,300 1,007,725
Homestake Mining Co............................. 33,100 271,006
Phelps Dodge Corp............................... 7,000 433,563
--------------
1,830,813
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.4%
AES Corp........................................ 24,000 1,395,000
Coltec Industries, Inc.......................... 43,700 947,744
Crane Co........................................ 10,800 339,525
Danaher Corp.................................... 17,400 1,011,375
Donaldson Co., Inc.............................. 109,200 2,675,400
Ecolab, Inc..................................... 16,700 728,538
IDEX Corp....................................... 60,100 1,975,788
ITT Industries, Inc............................. 10,700 407,938
Laidlaw, Inc.................................... 51,500 379,813
Mark IV Industries, Inc......................... 86,542 1,828,200
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY (CONT'D.)
Millipore Corp.................................. 6,800 $ 275,825
NACCO Industries, Inc. (Class "A" Stock)........ 1,300 95,550
Pall Corp....................................... 18,500 410,469
PPG Industries, Inc............................. 22,800 1,346,625
Textron, Inc.................................... 20,400 1,679,175
Thermo Electron Corp. (b)....................... 20,900 419,306
Trinity Industries, Inc......................... 52,200 1,748,700
Wolverine Tube, Inc. (b)........................ 37,000 929,625
York International Corp......................... 27,000 1,155,938
--------------
19,750,534
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
American Greetings Corp. (Class "A" Stock)...... 11,400 343,425
Black & Decker Corp............................. 12,100 763,813
Corning, Inc.................................... 30,200 2,117,775
Jostens, Inc.................................... 6,100 128,481
Minnesota Mining & Manufacturing Co............. 52,200 4,538,138
Polaroid Corp................................... 7,000 193,375
Unilever N.V., ADR, (United Kingdom)............ 74,418 5,190,645
--------------
13,275,652
--------------
MISCELLANEOUS - INDUSTRIAL
Tenneco, Inc.................................... 22,000 525,250
--------------
OIL & GAS -- 1.9%
Amerada Hess Corp............................... 11,100 660,450
Anadarko Petroleum Corp......................... 15,100 555,869
Ashland, Inc.................................... 11,800 473,475
Atlantic Richfield Co........................... 42,400 3,543,050
Basin Exploration, Inc. (b)..................... 17,400 349,088
Cabot Oil & Gas Corp. (Class "A" Stock)......... 88,600 1,650,175
Chevron Corp.................................... 84,900 8,081,419
Coastal Corp.................................... 28,600 1,144,000
Eastern Enterprises............................. 3,200 127,200
Enron Oil & Gas Co.............................. 48,400 980,100
Exxon Corp...................................... 316,500 24,410,063
Kerr-McGee Corp................................. 10,525 528,223
Mobil Corp...................................... 101,500 10,048,500
Murphy Oil Corp................................. 27,600 1,347,225
NICOR, Inc...................................... 7,600 289,275
Noble Affiliates, Inc........................... 50,900 1,434,744
Ocean Energy Inc................................ 63,700 613,113
Phillips Petroleum Co........................... 34,500 1,735,781
Pioneer Natural Resources Co.................... 334,644 3,681,084
Royal Dutch Petroleum Co........................ 279,100 16,815,775
Sunoco, Inc..................................... 10,100 304,894
Texaco, Inc..................................... 69,500 4,343,750
Union Pacific Resources Group, Inc.............. 29,700 484,481
Unocal Corp..................................... 33,300 1,319,513
USX-Marathon Group.............................. 39,900 1,299,244
Western Gas Resources, Inc...................... 103,000 1,648,000
--------------
87,868,491
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.2%
Elf Aquitaine SA, ADR, (France)................. 124,800 9,180,600
Occidental Petroleum Corp....................... 46,000 971,750
--------------
10,152,350
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B8
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS SERVICES -- 0.5%
Apache Corp..................................... 15,000 $ 585,000
Baker Hughes, Inc............................... 43,050 1,442,175
Enron Corp...................................... 45,700 3,735,975
Halliburton Co.................................. 55,500 2,511,375
Helmerich & Payne, Inc.......................... 7,900 188,119
McDermott International, Inc.................... 403,600 11,401,700
ONEOK, Inc...................................... 4,900 155,575
Rowan Companies, Inc. (b)....................... 13,600 250,750
Schlumberger Ltd................................ 70,800 4,509,075
--------------
24,779,744
--------------
PRECIOUS METALS -- 0.1%
Apex Silver Mines Ltd........................... 82,200 1,017,225
Barrick Gold Corp............................... 50,600 980,375
Battle Mountain Gold Co......................... 36,000 87,750
Freeport-McMoRan Copper & Gold, Inc. (Class "B"
Stock)........................................ 21,300 382,069
Newmont Mining Corp............................. 24,500 486,938
Placer Dome, Inc................................ 32,700 386,269
Stillwater Mining Co. (b)....................... 75,000 2,451,563
--------------
5,792,189
--------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe Corp............... 60,700 1,881,700
CSX Corp........................................ 27,600 1,250,625
Norfolk Southern Corp........................... 50,200 1,512,275
Union Pacific Corp.............................. 32,500 1,895,156
--------------
6,539,756
--------------
REAL ESTATE INVESTMENT TRUST -- 0.3%
Crescent Real Estate Equities Co................ 336,700 7,996,625
Equity Residential Properties Trust............. 37,700 1,698,856
Vornado Realty Trust (b)........................ 185,200 6,539,875
--------------
16,235,356
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc......................... 18,200 396,988
McDonald's Corp................................. 176,100 7,275,131
Tricon Global Restaurants, Inc. (b)............. 19,000 1,028,375
Wendy's International, Inc...................... 15,500 438,844
--------------
9,139,338
--------------
RETAIL -- 2.6%
Albertson's, Inc................................ 56,466 2,911,528
AutoZone, Inc. (b).............................. 19,800 596,475
Best Buy Co., Inc. (b).......................... 10,000 675,000
Charming Shoppes, Inc. (b)...................... 811,300 4,943,859
Circuit City Stores, Inc........................ 12,900 1,199,700
Consolidated Stores Corp........................ 12,400 334,800
Costco Companies, Inc. (b)...................... 29,400 2,353,838
CVS Corp........................................ 50,400 2,557,800
Dayton-Hudson Corp.............................. 56,600 3,679,000
Dillard's, Inc.................................. 43,700 1,534,963
Dollar General Corporation...................... 28,125 815,625
Federated Department Stores, Inc. (b)........... 26,400 1,397,550
Great Atlantic & Pacific Tea Co., Inc........... 6,000 202,875
Harcourt General, Inc........................... 8,000 412,500
Home Depot, Inc................................. 191,900 12,365,556
IKON Office Solutions, Inc...................... 21,100 316,500
J.C. Penney Co., Inc............................ 35,300 1,714,256
Kmart Corp. (b)................................. 644,400 10,592,325
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
RETAIL (CONT'D.)
Kohl's Corp. (b)................................ 20,300 $ 1,566,906
Kroger Co. (b).................................. 111,246 3,107,935
Liz Claiborne, Inc.............................. 10,500 383,250
Longs Drug Stores, Inc.......................... 6,100 210,831
May Department Stores Co........................ 44,300 1,810,763
Nordstrom, Inc.................................. 20,300 680,050
Office Depot, Inc............................... 22,500 496,406
Pep Boys - Manny, Moe & Jack.................... 8,927 193,046
Rite Aid Corp................................... 31,400 773,225
Safeway, Inc. (b)............................... 62,900 3,113,550
Sears, Roebuck & Co............................. 51,000 2,272,688
Sherwin-Williams Co............................. 21,800 604,950
Staples, Inc. (b)............................... 59,500 1,840,781
Supervalu, Inc.................................. 13,000 333,938
Tandy Corp...................................... 27,200 1,329,400
The Gap, Inc.................................... 111,300 5,606,738
The Limited, Inc................................ 222,253 10,084,730
TJX Companies, Inc.............................. 40,600 1,352,488
Toys 'R' Us, Inc. (b)........................... 121,600 2,515,600
Wal-Mart Stores, Inc............................ 578,800 27,927,100
Walgreen Co..................................... 127,700 3,751,188
Winn-Dixie Stores, Inc.......................... 20,100 742,444
--------------
119,302,157
--------------
RUBBER -- 0.1%
Cooper Tire & Rubber Co......................... 12,300 290,588
Goodyear Tire & Rubber Co....................... 59,400 3,493,463
--------------
3,784,051
--------------
SEMICONDUCTORS -- 0.8%
Advanced Micro Devices, Inc. (b)................ 22,200 400,987
Intel Corp...................................... 434,000 25,823,000
KLA-Tencor Corp. (b)............................ 10,300 668,212
LSI Logic Corp. (b)............................. 17,000 784,125
Micron Technology, Inc.......................... 33,100 1,334,344
National Semiconductor Corp. (b)................ 19,100 483,469
Texas Instruments, Inc.......................... 50,500 7,322,500
--------------
36,816,637
--------------
TELECOMMUNICATIONS -- 3.6%
Alcatel Alsthom, ADR, (France).................. 124,900 3,544,038
Alltel Corp..................................... 35,800 2,559,700
Ameritech Corp.................................. 143,100 10,517,850
Andrew Corp. (b)................................ 13,900 263,231
AT&T Corp....................................... 409,648 22,863,479
Bell Atlantic Corp.............................. 202,100 13,212,288
BellSouth Corp.................................. 250,800 11,756,250
CenturyTel, Inc................................. 18,000 715,500
Frontier Corp................................... 23,500 1,386,500
General Instrument Corp......................... 23,200 986,000
GTE Corp........................................ 125,600 9,514,200
Lucent Technologies, Inc........................ 391,455 26,398,747
MCI WorldCom, Inc............................... 239,614 20,666,708
Nextel Communications, Inc. (Class "A" Stock)
(b)........................................... 37,300 1,871,994
Nortel Networks Corp............................ 86,340 7,495,391
SBC Communications, Inc......................... 254,600 14,766,800
Scientific-Atlanta, Inc......................... 8,400 302,400
Sprint Corp..................................... 115,200 6,084,000
Sprint Corp. (PCS Group)........................ 57,250 3,270,406
Telecomunicacoes Brasileiras SA, ADR,
(Brazil)...................................... 55,900 3,494
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B9
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
Tellabs, Inc. (b)............................... 50,600 $ 3,418,663
US West, Inc.................................... 66,960 3,933,900
Vodafone Group, PLC, ADR, (United Kingdom)...... 9,750 1,920,750
--------------
167,452,289
--------------
TEXTILES
National Service Industries, Inc................ 6,700 241,200
Pillowtex Corp. (b)............................. 18,530 302,271
Russell Corp.................................... 5,700 111,150
Springs Industries, Inc......................... 3,200 139,600
VF Corp......................................... 15,600 666,900
--------------
1,461,121
--------------
TOBACCO -- 0.1%
RJR Nabisco Holdings, Inc....................... 94,067 2,963,121
UST, Inc........................................ 22,700 663,975
--------------
3,627,096
--------------
TOYS
Hasbro, Inc..................................... 25,500 712,406
Mattel, Inc..................................... 47,151 1,246,555
--------------
1,958,961
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp. (b)....................... 38,500 2,088,625
Ryder System, Inc............................... 9,000 234,000
Yellow Corp. (b)................................ 43,600 773,900
--------------
3,096,525
--------------
UTILITIES - ELECTRICAL & GAS -- 0.6%
Ameren Corp..................................... 17,700 679,238
American Electric Power Co., Inc................ 26,200 984,138
Carolina Power & Light Co....................... 20,000 856,250
Central & South West Corp....................... 27,600 645,150
CINergy Corp.................................... 19,600 627,200
CMS Energy Corp................................. 13,000 544,375
Consolidated Edison, Inc........................ 30,400 1,375,600
Constellation Energy Group...................... 18,400 545,100
Dominion Resources, Inc......................... 26,600 1,152,113
DTE Energy Co................................... 19,200 768,000
Duke Energy Corp................................ 46,200 2,512,125
Edison International............................ 45,700 1,222,475
Entergy Corp.................................... 33,100 1,034,375
FirstEnergy Corp. (b)........................... 31,300 970,300
Florida Progress Corp........................... 7,000 289,188
FPL Group, Inc.................................. 23,200 1,267,300
GPU, Inc........................................ 16,400 691,875
New Century Energies, Inc....................... 15,000 582,188
Niagara Mohawk Holdings Inc. (b)................ 22,600 363,013
Northern States Power Co........................ 17,700 428,119
Pacific Gas & Electric Co....................... 50,300 1,634,750
PacifiCorp...................................... 38,600 709,275
PECO Energy Co.................................. 25,600 1,072,000
PP&L Resources, Inc............................. 20,200 621,150
Public Service Enterprise Group, Inc............ 28,800 1,177,200
Reliant Energy, Inc............................. 39,100 1,080,138
Southern Co..................................... 89,400 2,369,100
Texas Utilities Co.............................. 38,300 1,579,875
Unicom Corp..................................... 29,800 1,149,163
--------------
28,930,773
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
WASTE MANAGEMENT -- 0.2%
Browning-Ferris Industries, Inc................. 20,300 $ 872,900
Waste Management, Inc........................... 118,902 6,390,983
--------------
7,263,883
--------------
TOTAL COMMON STOCKS
(cost $1,397,682,780).......................................... 1,799,087,228
--------------
PREFERRED STOCKS -- 0.8%
FINANCIAL SERVICES -- 0.7%
Central Hispano Capital Corp.,.................. 1,225,900 31,264,588
--------------
TELECOMMUNICATIONS -- 0.1%
Telecomunicacoes Brasileiras SA, ADR,
(Brazil)...................................... 55,900 5,041,481
--------------
TOTAL PREFERRED STOCKS
(cost $36,871,416)............................................. 36,306,069
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $3,931,024,089).......................................... 4,290,356,702
--------------
PRINCIPAL
MOODY'S AMOUNT
SHORT-TERM INVESTMENTS -- 17.8% RATING (000)
------------ ---------
COMMERCIAL PAPER -- 8.3%
Abbey National Treasury Services, PLC,
5.85%, 07/01/99............................... NR $ 2,400 2,400,000
BBL North America, Inc.
5.83%, 07/11/99 (e)........................... P1 45,000 45,000,000
Bishop's Gate Residential
5.80%, 07/11/99 (e)........................... P1 33,300 33,300,000
Caterpillar Financial Services,
5.30%, 07/09/99............................... P1 2,442 2,439,124
Conoco, Inc.
5.22%, 07/14/99 (e)........................... P1 44,000 43,917,060
CXC, Inc.
5.15%, 08/20/99 (e)........................... P1 15,000 14,892,708
Eastman Kodak Co.,
5.06%, 07/08/99............................... P1 2,800 2,797,245
Edison Asset Securitization LLC
4.92%, 07/14/99 (e)........................... P1 56,572 56,471,490
Enterprise Funding Corp.
5.18%, 08/13/99 (e)........................... P1 25,000 24,845,319
5.35%, 07/14/99............................... NR 2,300 2,295,557
Federated Department Stores, Inc.
5.05%, 07/12/99 (e)........................... P1 10,000 9,984,569
Ford Motor Credit Co.
5.02%, 08/20/99 (e)........................... P1 3,676 3,650,370
Fortune Brands Inc.,
5.80%, 07/01/99............................... NR 950 950,000
Gateway Fuel Co.,
5.80%, 07/01/99............................... P1 2,400 2,400,000
General Electric Capital Corp.,
5.06%, 07/22/99............................... NR 1,200 1,196,458
General Mills Corp,
5.12%, 07/12/99............................... P3 1,975 1,971,910
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B10
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
General Motors Acceptance Corp.
5.04%, 08/23/99 (e)........................... P1 $ 40,000 $ 39,703,200
Heller Financial Inc.
5.35%, 07/08/99 (e)........................... P1 12,500 12,486,997
ING American Insurance Holdings, Inc.,
5.80%, 07/01/99............................... NR 2,400 2,400,000
International Lease Finance,
5.25%, 07/14/99............................... A1 1,500 1,497,156
Merrill Lynch & Co. Inc,
5.27%, 07/12/99............................... P1 1,349 1,346,828
Morgan (J.P.) & Co., Inc.,
5.25%, 07/13/99............................... P3 1,400 1,397,550
Old Line Funding Corp.,
5.12%, 07/01/99............................... NR 2,500 2,500,000
Potomac Electrical Power Co.,
5.30%, 07/07/99............................... NR 2,600 2,597,704
Raytheon Co.
5.25%, 07/23/99 (e)........................... P1 38,000 37,878,083
Rohm & Haas Co.
6.30%, 07/01/99 (e)........................... P1 21,000 21,000,000
Ryder System, Inc.
5.08%, 07/02/99 (e)........................... P1 4,500 4,499,365
Sonoco Products,
5.80%, 07/01/99............................... P1 1,100 1,100,000
Southern California Edison Co.,
5.25%, 07/12/99............................... P3 2,600 2,595,829
Triple-A One Plus Funding Corp.,
5.36%, 07/13/99............................... NR 2,500 2,495,533
Wells Fargo & Company,
6.00%, 07/01/99............................... P3 1,829 1,829,000
--------------
383,839,055
--------------
OTHER CORPORATE OBLIGATIONS -- 5.5%
Advanta Corp., M.T.N.,
6.99%, 10/18/99............................... Ba3 15,000 14,913,300
7.25%, 08/16/99............................... Ba2 3,000 3,000,924
Capital One Bank,
7.35%, 06/20/00............................... Baa3 8,100 8,172,900
Comdisco, Inc.,
5.94%, 04/13/00............................... Baa1 12,500 12,539,000
Deutsche Bank AG
5.125%, 07/01/99 (e).......................... NR 47,485 47,485,000
Enterprise Rent-A-Car USA Finance Co.,
8.75%, 12/15/99............................... Baa3 5,000 5,055,000
General Electric Capital International Funding
5.07%, 08/09/99 (e)........................... NR 42,000 41,769,315
MCI WorldCom Inc.
5.05%, 07/07/99 (e)........................... NR 10,632 10,623,051
5.05%, 07/09/99 (e)........................... NR 22,000 21,975,311
Salomon Smith Barney Holdings, Inc.
5.05%, 08/04/99............................... NR 33,100 32,942,131
SunAmerica, Inc.,
6.20%, 10/31/99............................... Baa1 9,000 9,015,210
Tele-Communications, Inc.,
6.375%, 09/15/99.............................. Ba1 8,000 8,017,200
7.375%, 02/15/00.............................. Ba1 40,700 41,102,930
--------------
256,611,272
--------------
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 3.9%
Joint Repurchase Agreement Account,
4.775%, 07/01/99 (Note 5)..................... $ 171,632 $ 171,632,000
Merrill Lynch Triparty Repurchase Agreement,
5.10%, 07/02/99 (cost $10,000,000) (d)........ P3 10,000 10,000,000
--------------
181,632,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Bill,
4.545%, 09/16/99 (a).......................... 2,400 2,376,900
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $836,873,619)...................................................... 824,459,227
--------------
TOTAL INVESTMENTS -- 110.2%
(cost $4,767,897,708; Note 6)............................................ 5,114,815,929
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (F).............................
1,088,075
LIABILITIES IN EXCESS OF OTHER ASSETS -- 10.2%.............................
(475,606,505)
--------------
TOTAL NET ASSETS -- 100.0%................................................. $4,640,297,499
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
NR Not Rated by Moody's or Standard & Poor's
N.V. Naamloze Vennootsohap (Dutch Corporation)
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) Portion of securities on loan with an aggregate market value of
$495,243,585, cash collateral of $500,998,202 was received with which the
portfolio purchased securities.
(d) Merrill Lynch Triparty Repurchase Agreement, repurchase price $10,002,833,
due 7/2/99. The value of the collateral including accrued interest was
$10,201,949.
(e) Represents securities purchased with cash collateral received for
securities on loan.
(f) Open futures contracts as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 1999 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
26 S&P 500 Index Sep 99 $ 8,737,450 $ 8,981,050 $ 243,600
1,179 U.S. Treasury 5 yr Sep 99 $ 129,432,094 $ 128,511,000 $ (921,094)
-------------
$ (677,494)
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B11
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 87.2%
VALUE
COMMON STOCKS -- 53.6% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.2%
AlliedSignal, Inc............................... 76,900 $ 4,844,700
Boeing Co....................................... 131,100 5,792,981
GenCorp, Inc.................................... 403,900 10,198,475
General Dynamics Corp........................... 16,200 1,109,700
Goodrich (B.F.) Co.............................. 8,200 348,500
Litton Industries, Inc. (a)..................... 306,000 21,955,500
Lockheed Martin Corp............................ 51,600 1,922,100
Northrop Grumman Corp........................... 8,500 563,656
Parker-Hannifin Corp............................ 191,600 8,765,700
Raytheon Co. (Class "B" Stock).................. 45,500 3,202,062
United Technologies Corp........................ 61,600 4,415,950
--------------
63,119,324
--------------
AIRLINES -- 1.2%
AMR Corp. (a)................................... 640,900 43,741,425
Delta Air Lines, Inc............................ 18,800 1,083,350
Southwest Airlines Co........................... 44,400 1,381,950
US Airways Group, Inc. (a)...................... 476,100 20,740,107
--------------
66,946,832
--------------
APPAREL -- 0.2%
Fruit Of The Loom, Inc. (Class "A" Stock) (a)... 310,300 3,025,425
Nike, Inc. (Class "B" Stock).................... 39,800 2,519,837
Reebok International Ltd........................ 9,100 169,487
Titan International, Inc........................ 415,700 4,936,437
--------------
10,651,186
--------------
AUTOS - CARS & TRUCKS -- 1.3%
Cummins Engine Co., Inc......................... 4,800 274,200
Dana Corp....................................... 23,650 1,089,378
Ford Motor Co................................... 377,300 21,293,869
General Motors Corp............................. 491,400 32,432,400
Genuine Parts Co. (b)........................... 24,400 854,000
Johnson Controls, Inc........................... 11,600 804,025
MascoTech, Inc.................................. 388,000 6,571,750
Midas, Inc...................................... 90,866 2,578,323
Navistar International Corp. (a)................ 6,100 305,000
PACCAR, Inc. (b)................................ 10,000 533,750
TRW, Inc........................................ 12,800 702,400
--------------
67,439,095
--------------
BANKS AND SAVINGS & LOANS -- 1.9%
AmSouth Bancorporation.......................... 16,500 382,594
Banc One Corp................................... 159,764 9,515,943
Bank of New York Co., Inc. (b).................. 105,500 3,870,531
BankAmerica Corp................................ 231,241 16,952,856
BankBoston Corp................................. 37,700 1,927,412
BB&T Corp....................................... 42,400 1,555,550
Chase Manhattan Corp............................ 114,900 9,953,212
Comerica, Inc................................... 20,700 1,230,356
First Union Corp. (b)........................... 132,000 6,204,000
Firstar Corp.................................... 91,900 2,573,200
Fleet Financial Group, Inc...................... 75,300 3,341,437
Golden West Financial Corp...................... 7,500 735,000
Huntington Bancshares, Inc...................... 29,520 1,033,200
KeyCorp......................................... 61,200 1,966,050
Mellon Bank Corp................................ 69,800 2,538,975
Mercantile Bancorporation, Inc.................. 21,300 1,216,762
Morgan (J.P.) & Co., Inc........................ 24,300 3,414,150
National City Corp.............................. 44,500 2,914,750
Northern Trust Corp............................. 14,600 1,416,200
PNC Bank Corp. (b).............................. 38,600 2,224,325
Providian Financial Corp........................ 17,900 1,673,650
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
Regions Financial Corp.......................... 28,100 $ 1,080,094
Republic New York Corp.......................... 15,000 1,022,812
SouthTrust Corp................................. 19,000 729,125
Summit Bancorp (b).............................. 21,100 882,244
Suntrust Banks, Inc............................. 41,900 2,909,431
Synovus Financial Corp.......................... 35,100 697,612
U.S. Bancorp.................................... 97,600 3,318,400
Union Planters Corp............................. 18,000 804,375
Wachovia Corp................................... 26,500 2,267,406
Wells Fargo & Co................................ 223,400 9,550,350
--------------
99,902,002
--------------
BUSINESS SERVICES
Equifax, Inc.................................... 20,000 713,750
Omnicom Group, Inc.............................. 22,700 1,816,000
--------------
2,529,750
--------------
CHEMICALS -- 1.3%
Air Products & Chemicals, Inc................... 31,400 1,263,850
Dow Chemical Co................................. 30,400 3,857,000
Du Pont (E.I.) de Nemours & Co.................. 153,200 10,465,475
Eastman Chemical Co............................. 9,800 507,150
Engelhard Corp.................................. 15,600 352,950
Ferro Corp...................................... 553,650 15,225,375
FMC Corp. (a)................................... 3,500 239,094
Grace (W.R.) & Co............................... 8,000 147,000
Great Lakes Chemical Corp....................... 7,700 354,681
Hercules, Inc................................... 11,900 467,819
Lyondell Chemical Co............................ 329,000 6,785,625
Millennium Chemicals, Inc. (a).................. 601,600 14,175,200
Monsanto Co..................................... 86,700 3,419,231
Nalco Chemical Co............................... 6,600 342,375
OM Group, Inc................................... 260,300 8,980,350
Praxair, Inc.................................... 19,800 968,962
Raychem Corp.................................... 7,900 292,300
Rohm & Haas Co.................................. 27,158 1,164,399
Sigma-Aldrich Corp.............................. 11,600 399,475
Union Carbide Corp.............................. 17,700 862,875
--------------
70,271,186
--------------
COMMERCIAL SERVICES
Cendant Corp. (a)............................... 109,600 2,246,800
Deluxe Corp..................................... 9,000 350,437
--------------
2,597,237
--------------
COMPUTER SERVICES -- 2.7%
3Com Corp. (a).................................. 45,500 1,214,281
Adobe Systems, Inc.............................. 6,600 542,231
America Online, Inc. (a)........................ 142,300 15,724,150
Autodesk, Inc................................... 7,600 224,675
Automatic Data Processing, Inc.................. 83,000 3,652,000
BMC Software, Inc. (a).......................... 29,200 1,576,800
Cabletron Systems, Inc. (a)..................... 25,600 332,800
Ceridian Corp. (a).............................. 18,600 607,987
Cisco Systems, Inc. (a)......................... 422,000 27,219,000
Computer Associates International, Inc.......... 73,000 4,015,000
Computer Sciences Corp. (a)..................... 20,000 1,383,750
Compuware Corp. (a)............................. 48,000 1,527,000
Electronic Data Systems Corp.................... 66,300 3,750,094
EMC Corp. (a)(b)................................ 135,600 7,458,000
First Data Corp................................. 58,800 2,877,525
Microsoft Corp. (a)............................. 678,400 61,183,200
Novell, Inc. (a)................................ 43,500 1,152,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B12
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
COMPUTER SERVICES (CONT'D.)
Oracle Corp. (a)................................ 196,950 $ 7,311,769
Parametric Technology Corp. (a)................. 31,500 437,062
Peoplesoft, Inc. (b)............................ 30,000 517,500
Silicon Graphics, Inc. (a)...................... 23,400 383,175
Unisys Corp..................................... 31,400 1,222,637
--------------
144,313,386
--------------
COMPUTERS -- 1.4%
Apple Computer, Inc. (a)(b)..................... 21,300 986,456
Compaq Computer Corp............................ 225,461 5,340,607
Data General Corp. (a).......................... 7,900 115,044
Dell Computer Corp. (a)......................... 340,000 12,580,000
Gateway 2000, Inc. (a).......................... 20,200 1,191,800
Hewlett-Packard Co.............................. 138,300 13,899,150
International Business Machines Corp............ 242,600 31,356,050
Networking Appliance, Inc. (a).................. 2,000 111,750
Seagate Technology, Inc. (a).................... 28,900 740,562
Sun Microsystems, Inc. (a)...................... 104,000 7,163,000
--------------
73,484,419
--------------
CONSTRUCTION -- 0.6%
Centex Corp..................................... 9,600 360,600
Fluor Corp...................................... 9,800 396,900
Foster Wheeler Corp............................. 6,600 93,225
Oakwook Homes Corp.............................. 572,000 7,507,500
Pulte Corp...................................... 6,900 159,131
Standard Pacific Corp........................... 632,400 8,181,675
Webb (Del E.) Corp.............................. 576,500 13,763,937
--------------
30,462,968
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 4,900 207,025
Bemis Co., Inc.................................. 6,600 262,350
Crown Cork & Seal Co., Inc...................... 15,600 444,600
Owens-Illinois, Inc. (a)........................ 255,700 8,358,194
Sealed Air Corp................................. 10,900 707,137
--------------
9,979,306
--------------
COSMETICS & SOAPS -- 0.5%
Alberto Culver Co. (Class 'B' Stock)............ 6,200 165,075
Avon Products, Inc.............................. 33,300 1,848,150
Colgate-Palmolive Co............................ 39,700 3,920,375
Gillette Co..................................... 150,100 6,154,100
International Flavors & Fragrances, Inc......... 14,100 625,687
Procter & Gamble Co............................. 177,400 15,832,950
--------------
28,546,337
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.8%
Eastman Kodak Co................................ 187,300 12,689,575
Philip Morris Co., Inc.......................... 774,200 31,113,163
--------------
43,802,738
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.2%
Avery Dennison Corp............................. 15,000 905,625
Pitney Bowes, Inc............................... 35,100 2,255,175
Xerox Corp...................................... 92,500 5,463,281
--------------
8,624,081
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
DIVERSIFIED OPERATIONS -- 1.1%
Fortune Brands, Inc............................. 24,200 $ 1,001,275
General Electric Co............................. 437,900 49,482,700
Tomkins PLC, ADR (b)............................ 391,400 7,143,050
--------------
57,627,025
--------------
DRUGS AND MEDICAL SUPPLIES -- 2.9%
Abbott Laboratories............................. 206,300 9,386,650
Allergan, Inc................................... 8,800 976,800
ALZA Corp. (a).................................. 9,900 503,662
American Home Products Corp..................... 179,400 10,315,500
Amgen, Inc. (a)................................. 70,500 4,291,687
Bard (C.R.), Inc................................ 5,900 282,094
Bausch & Lomb, Inc.............................. 7,100 543,150
Baxter International, Inc....................... 38,400 2,328,000
Becton, Dickinson & Co.......................... 31,500 945,000
Biomet, Inc..................................... 14,500 576,375
Boston Scientific Corp. (a)..................... 51,800 2,275,962
Bristol-Myers Squibb Co......................... 265,500 18,701,156
Cardinal Health, Inc. (b)....................... 34,450 2,209,106
Guidant Corp.................................... 37,700 1,939,194
Johnson & Johnson............................... 179,700 17,610,600
Lilly (Eli) & Co................................ 149,800 10,729,425
Mallinckrodt, Inc............................... 7,500 272,812
Medtronic, Inc.................................. 79,200 6,167,700
Merck & Co., Inc................................ 318,300 23,554,200
Pfizer, Inc..................................... 173,400 19,030,650
Pharmacia & Upjohn, Inc......................... 67,800 3,851,887
Schering-Plough Corp............................ 199,700 10,584,100
St. Jude Medical, Inc. (a)...................... 8,900 317,062
Warner-Lambert Co............................... 111,100 7,707,562
Watson Pharmaceuticals, Inc. (a)................ 9,000 315,562
--------------
155,415,896
--------------
ELECTRONICS -- 1.2%
Advanced Micro Devices, Inc. (a)................ 17,000 307,062
Applied Materials, Inc. (a)..................... 50,700 3,745,462
Belden, Inc..................................... 275,600 6,597,175
EG&G, Inc....................................... 7,300 260,062
Emerson Electric Co............................. 60,200 3,785,075
Grainger (W.W.), Inc............................ 13,000 699,562
Harris Corp..................................... 9,000 352,687
Honeywell, Inc.................................. 15,900 1,842,412
Intel Corp...................................... 445,500 26,507,250
KLA-Tencor Corp. (a)............................ 10,900 707,137
LSI Logic Corp. (a)............................. 18,600 857,925
Micron Technology, Inc.......................... 34,300 1,382,719
Motorola, Inc................................... 80,200 7,598,950
National Semiconductor Corp. (a)................ 19,000 480,937
Rockwell International Corp..................... 24,300 1,476,225
Solectron Corp.................................. 32,900 2,194,019
Tektronix, Inc.................................. 8,200 247,537
Texas Instruments, Inc.......................... 52,500 7,612,500
Thomas & Betts Corp............................. 9,000 425,250
--------------
67,079,946
--------------
ENGINEERING & CONSTRUCTION -- 0.1%
Giant Cement Holdings, Inc. (a)................. 244,900 5,602,087
--------------
ENVIRONMENTAL SERVICES
Browning-Ferris Industries, Inc................. 21,800 937,400
--------------
EXPLORATION & PRODUCTION -- 0.1%
Apex Silver Mines Ltd........................... 340,400 4,212,450
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B13
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 3.6%
American Express Co............................. 61,200 $ 7,963,650
Associates First Capital Corp................... 100,990 4,475,119
Bear Stearns Companies, Inc..................... 14,675 686,056
Block (H.R.), Inc............................... 13,400 670,000
Capital One Financial Corp...................... 24,900 1,386,619
Citigroup, Inc.................................. 775,876 36,854,110
Countrywide Credit Industries, Inc.............. 14,000 598,500
Dun & Bradstreet Corp........................... 23,000 815,062
Federal Home Loan Mortgage Corp................. 91,300 5,295,400
Federal National Mortgage Association........... 140,900 9,634,037
Fifth Third Bancorp............................. 34,800 2,316,375
Franklin Resource, Inc. (b)..................... 33,000 1,340,625
Goldman Sachs Group, Inc. (a)................... 53,100 3,836,475
Household International, Inc.................... 64,592 3,060,046
Lehman Brothers Holdings, Inc................... 719,100 44,763,975
MBNA Corp....................................... 104,600 3,203,375
Merrill Lynch & Co., Inc........................ 286,300 22,886,106
Morgan Stanley Dean Witter & Co................. 299,995 30,749,488
PaineWebber Group, Inc.......................... 14,000 654,500
Paychex, Inc.................................... 29,850 951,469
Schwab (Charles) Corp. (a)...................... 53,600 5,889,300
SLM Holding Corp................................ 19,000 870,437
State Street Corp............................... 20,600 1,758,725
Transamerica Corp............................... 16,000 1,200,000
Washington Mutual, Inc.......................... 80,836 2,859,573
--------------
194,719,022
--------------
FOOD & BEVERAGES -- 1.9%
Anheuser-Busch Companies, Inc................... 65,000 4,610,936
Archer-Daniels-Midland Co....................... 77,915 1,202,813
Bestfoods....................................... 37,800 1,871,100
Brown-Forman Corp. (Class "B" Stock)............ 6,700 436,756
Campbell Soup Co................................ 59,600 2,763,950
Coca-Cola Co. (b)............................... 329,400 20,587,500
Coca-Cola Enterprises, Inc...................... 54,500 1,621,375
ConAgra, Inc.................................... 64,600 1,719,975
Coors (Adolph) Co. (Class "B" Stock)............ 2,900 143,550
General Mills, Inc.............................. 21,400 1,720,025
Heinz (H.J.) & Co............................... 47,400 2,375,925
Hershey Foods Corp.............................. 20,300 1,205,312
Kellogg Co...................................... 54,000 1,782,000
Nabisco Group Holdings Corp..................... 1,226,900 24,001,231
PepsiCo, Inc.................................... 198,400 7,675,600
Pioneer Hi-Bred International, Inc.............. 31,100 1,210,956
Quaker Oats Co.................................. 17,600 1,168,200
Ralston-Ralston Purina Group.................... 42,200 1,284,462
Sara Lee Corp................................... 123,800 2,808,712
Seagram Co., Ltd................................ 52,600 2,649,725
Sysco Corp...................................... 44,200 1,317,712
Unilever NV..................................... 75,842 5,289,979
Whitman Corp.................................... 545,200 9,813,600
Wrigley (William) Jr. Co........................ 15,200 1,368,000
--------------
100,629,394
--------------
FOREST PRODUCTS -- 2.0%
Boise Cascade Corp.............................. 665,800 28,546,175
Champion International Corp..................... 401,600 19,226,600
Fort James Corp................................. 27,100 1,026,412
Georgia-Pacific Corp............................ 157,800 7,475,775
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FOREST PRODUCTS (CONT'D.)
International Paper Co.......................... 54,582 $ 2,756,391
Louisiana-Pacific Corp.......................... 699,700 16,617,875
Mead Corp....................................... 403,000 16,825,250
Potlatch Corp................................... 4,700 206,506
Temple-Inland, Inc.............................. 7,100 484,575
Westvaco Corp................................... 11,900 345,100
Weyerhaeuser Co................................. 27,000 1,856,250
Willamette Industries, Inc...................... 299,200 13,781,900
--------------
109,148,809
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group........................... 10,500 658,219
Consolidated Natural Gas Co..................... 12,900 783,675
Peoples Energy Corp............................. 5,700 214,819
Sempra Energy................................... 30,253 684,474
Sonat, Inc...................................... 13,500 447,187
Williams Companies, Inc......................... 57,200 2,434,575
--------------
5,222,949
--------------
HOSPITALS/HOSPITAL MANAGEMENT -- 1.2%
Columbia/HCA Healthcare Corp.................... 892,800 20,367,000
Healthsouth Corp. (a)........................... 55,000 821,562
Humana, Inc. (a)................................ 735,100 9,510,375
IMS Health, Inc................................. 40,900 1,278,125
LifePoint Hospitals, Inc. (a)................... 42,447 570,382
Manor Care, Inc................................. 13,300 321,694
McKesson HBOC Inc............................... 34,381 1,104,490
Service Corp. International..................... 40,800 785,400
Shared Medical Systems Corp..................... 4,200 274,050
Smith (A.O.) Corp............................... 433,350 12,133,800
Tenet Healthcare Corp. (a)...................... 799,600 14,842,575
Triad Hospitals, Inc. (a)....................... 42,447 573,034
Wellpoint Health Networks Inc................... 6,000 509,250
--------------
63,091,737
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.4%
Clorox Co....................................... 15,200 1,623,550
Kimberly-Clark Corp............................. 73,000 4,161,000
Leggett & Platt, Inc............................ 470,800 13,094,125
--------------
18,878,675
--------------
HOUSING RELATED -- 1.4%
Armstrong World Industries, Inc................. 6,500 375,781
Fleetwood Enterprises, Inc...................... 6,100 161,269
Hanson, PLC, ADR, (United Kingdom).............. 1,221,100 54,186,312
Kaufman & Broad Home Corp....................... 6,400 159,200
Lowe's Companies, Inc........................... 48,600 2,755,012
Masco Corp...................................... 44,000 1,270,500
Maytag Corp..................................... 10,700 745,656
Newell Rubbermaid Inc........................... 38,355 1,783,507
Owens Corning................................... 413,400 14,210,626
Stanley Works................................... 9,900 318,656
Tupperware Corp................................. 9,900 252,450
Whirlpool Corp.................................. 9,900 732,600
--------------
76,951,569
--------------
INSTRUMENT - CONTROLS
PE Corp-PE Biosystems Group..................... 6,500 745,875
--------------
INSURANCE -- 2.8%
Aetna, Inc...................................... 18,900 1,690,368
Aflac Inc....................................... 31,000 1,484,125
Allstate Corp................................... 115,100 4,129,212
American General Corp........................... 32,400 2,442,150
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B14
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
INSURANCE (CONT'D.)
American International Group, Inc............... 164,103 $ 19,210,306
Aon Corp........................................ 33,450 1,379,812
Berkley (W.R.) Corp............................. 175,850 4,396,250
Chubb Corp...................................... 237,900 16,534,050
CIGNA Corp...................................... 27,100 2,411,900
Cincinnati Financial Corp....................... 22,900 860,180
Conseco, Inc.................................... 41,587 1,265,804
Financial Security Assurance Holdings Ltd....... 140,100 7,285,200
Hartford Financial Services Group, Inc.......... 30,600 1,784,362
Jefferson-Pilot Corp............................ 14,900 986,194
Lincoln National Corp........................... 26,800 1,401,975
Loews Corp...................................... 178,300 14,107,988
Marsh & McLennan Companies, Inc................. 34,900 2,634,950
MBIA, Inc....................................... 13,700 887,075
MGIC Investment Corp............................ 15,100 734,237
Progressive Corp................................ 9,400 1,363,000
Provident Companies, Inc........................ 19,000 760,000
Reinsurance Group of America, Inc............... 711,900 25,094,475
SAFECO Corp..................................... 358,700 15,827,637
St. Paul Companies, Inc......................... 32,500 1,033,906
Torchmark Corp.................................. 425,000 14,503,125
Trenwick Group, Inc............................. 273,300 6,738,553
United Healthcare Corp.......................... 24,400 1,528,050
UNUM Corp....................................... 17,100 936,225
--------------
153,411,109
--------------
LEISURE -- 0.3%
Brunswick Corp.................................. 11,200 312,200
Carnival Corp. (Class "A" Stock)................ 81,700 3,962,450
Disney (Walt) Co................................ 278,500 8,581,281
Harrah's Entertainment, Inc. (a)................ 16,400 360,800
Hilton Hotels Corp.............................. 30,800 436,974
King World Productions, Inc..................... 8,900 309,831
Marriott International, Inc. (Class "A"
Stock)........................................ 33,700 1,259,538
Mirage Resorts, Inc. (a)........................ 22,500 376,875
--------------
15,599,949
--------------
MACHINERY -- 1.0%
Briggs & Stratton Corp.......................... 4,000 231,000
Case Corp....................................... 365,300 17,580,063
Caterpillar, Inc................................ 46,800 2,808,000
Commercial Intertech Corp....................... 115,300 1,837,594
Cooper Industries, Inc.......................... 12,900 670,800
Deere & Co...................................... 32,200 1,275,925
Delphi Automotive Systems Corp.................. 347,454 6,449,615
Dover Corp...................................... 28,000 980,000
DT Industries, Inc.............................. 146,800 1,348,725
Eaton Corp...................................... 9,800 901,600
Flowserve Corp.................................. 161,991 3,067,705
Global Industrial Technologies, Inc. (a)........ 258,100 3,113,331
Ingersoll-Rand Co............................... 22,300 1,441,138
Milacron, Inc................................... 6,400 118,400
Paxar Corp...................................... 954,575 8,591,175
Snap-On, Inc.................................... 9,900 358,256
Timken Co....................................... 10,200 198,900
--------------
50,972,227
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MANUFACTURING -- 0.3%
Hussmann International, Inc..................... 272,600 $ 4,514,938
Illinois Tool Works, Inc........................ 34,400 2,820,800
Tyco International Ltd.......................... 110,956 10,513,081
--------------
17,848,819
--------------
MEDIA -- 1.9%
CBS Corp. (a)................................... 359,800 15,628,813
Central Newspapers, Inc.(Class "A" Stock)....... 410,600 15,448,824
Clear Channel Communications, Inc. (a)(b)....... 42,200 2,909,163
Comcast Corp. (Special Class "A" Stock)......... 99,300 3,816,844
Donnelley (R.R.) & Sons Co...................... 15,000 555,938
Dow Jones & Co., Inc............................ 12,600 668,588
Gannett Co., Inc................................ 36,900 2,633,738
Houghton Mifflin Co............................. 240,700 11,327,944
Interpublic Group of Companies, Inc............. 17,300 1,498,612
Knight-Ridder, Inc. (b)......................... 248,600 13,657,462
Lee Enterprises, Inc............................ 208,900 6,371,450
McGraw-Hill, Inc................................ 26,600 1,434,738
Mediaone Group, Inc. (b)........................ 81,800 6,083,875
Meredith Corp................................... 4,600 159,275
New York Times Co. (Class "A" Stock)............ 22,200 817,238
Time Warner, Inc................................ 163,300 12,002,550
Times Mirror Co. (Class "A" Stock) (b).......... 8,600 509,550
Tribune Co...................................... 16,000 1,394,000
Viacom, Inc. (Class "B" Stock) (a).............. 95,200 4,188,800
--------------
101,107,402
--------------
METALS-FERROUS -- 0.8%
AK Steel Holding Corp........................... 606,100 13,637,250
Allegheny Teledyne, Inc......................... 25,300 572,413
Bethlehem Steel Corp. (a)....................... 924,400 7,106,325
LTV Corp........................................ 841,400 5,626,863
Material Sciences Corp. (a)..................... 397,900 5,968,500
National Steel Corp. (Class "B" Stock) (a)...... 147,300 1,233,637
Nucor Corp...................................... 11,500 545,531
USX-U.S. Steel Group, Inc....................... 318,800 8,607,600
Worthington Industries, Inc..................... 9,700 159,444
--------------
43,457,563
--------------
METALS-NON FERROUS -- 1.4%
Alcan Aluminum Ltd.............................. 32,000 1,022,000
Alcoa, Inc...................................... 1,203,500 74,466,563
Cyprus Amax Minerals Co......................... 15,100 229,331
Inco Ltd........................................ 27,000 486,000
Reynolds Metals Co.............................. 8,900 525,100
--------------
76,728,994
--------------
MINERAL RESOURCES
ASARCO, Inc..................................... 6,500 122,281
Burlington Resources, Inc....................... 21,800 942,850
Homestake Mining Co............................. 34,300 280,831
Phelps Dodge Corp............................... 7,200 445,950
--------------
1,791,912
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.0%
AES Corp........................................ 25,000 1,453,125
Coltec Industries, Inc.......................... 179,200 3,886,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B15
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY (CONT'D.)
Crane Co........................................ 11,100 $ 348,956
Danaher Corp. (b)............................... 16,000 930,000
Donaldson Co., Inc.............................. 448,600 10,990,700
Ecolab, Inc..................................... 17,300 754,713
IDEX Corp. (b).................................. 246,700 8,110,263
ITT Industries, Inc............................. 11,100 423,188
Laidlaw, Inc.................................... 41,300 304,588
Mark IV Industries, Inc......................... 355,500 7,509,938
Millipore Corp.................................. 7,000 283,938
NACCO Industries, Inc. (Class "A" Stock)........ 1,300 95,550
Pall Corp....................................... 20,200 448,188
PPG Industries, Inc............................. 22,200 1,311,188
Textron, Inc.................................... 21,300 1,753,256
Thermo Electron Corp. (a)....................... 17,500 351,093
Trinity Industries, Inc......................... 214,100 7,172,350
Wolverine Tube, Inc. (a)........................ 155,300 3,901,913
York International Corp......................... 110,600 4,735,063
--------------
54,764,410
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.2%
American Greetings Corp. (Class "A" Stock)...... 11,800 355,475
Black & Decker Corp............................. 12,500 789,063
Corning, Inc.................................... 31,900 2,236,988
Jostens, Inc.................................... 6,300 132,693
Minnesota Mining & Manufacturing Co............. 53,900 4,685,931
Polaroid Corp................................... 7,300 201,663
--------------
8,401,813
--------------
MISCELLANEOUS - INDUSTRIAL
Tenneco, Inc.................................... 21,500 513,313
--------------
OIL & GAS -- 2.4%
Amerada Hess Corp............................... 12,100 719,950
Anadarko Petroleum Corp......................... 15,300 563,231
Ashland, Inc.................................... 8,700 349,087
Atlantic Richfield Co........................... 44,500 3,718,531
Basin Exploration, Inc. (a)..................... 71,400 1,432,463
Cabot Oil & Gas Corp. (Class "A" Stock)......... 363,800 6,775,775
Chevron Corp.................................... 86,800 8,262,275
Coastal Corp.................................... 30,500 1,220,000
Eastern Enterprises............................. 3,300 131,175
Enron Oil & Gas Co.............................. 198,700 4,023,675
Exxon Corp...................................... 324,900 25,057,913
Kerr-McGee Corp................................. 10,609 532,439
Mobil Corp...................................... 104,700 10,365,300
Murphy Oil Corp................................. 114,000 5,564,625
NICOR, Inc...................................... 7,800 296,888
Noble Affiliates, Inc........................... 208,900 5,888,369
Ocean Energy, Inc............................... 245,500 2,362,938
Phillips Petroleum Co........................... 35,600 1,791,124
Pioneer Natural Resources Co.................... 1,488,431 16,372,744
Royal Dutch Petroleum Co........................ 286,500 17,261,625
Sunoco, Inc..................................... 10,800 326,025
Texaco, Inc..................................... 72,100 4,506,250
Union Pacific Resources Group, Inc.............. 32,200 525,263
Unocal Corp..................................... 30,800 1,220,450
USX-Marathon Group.............................. 41,800 1,361,113
Western Gas Resources, Inc...................... 423,100 6,769,600
--------------
127,398,828
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS EXPLORATION/PRODUCTION -- 0.7%
Elf Aquitaine SA, ADR, (France)................. 513,400 $ 37,766,988
Occidental Petroleum Corp....................... 49,100 1,037,238
--------------
38,804,226
--------------
OIL & GAS SERVICES -- 1.1%
Apache Corp..................................... 10,900 425,100
Baker Hughes, Inc............................... 41,740 1,398,290
Enron Corp...................................... 46,800 3,825,900
Halliburton Co.................................. 59,900 2,710,475
Helmerich & Payne, Inc.......................... 8,200 195,263
McDermott International, Inc.................... 1,629,400 46,030,550
ONEOK, Inc...................................... 5,000 158,750
Rowan Companies, Inc. (a)....................... 14,100 259,969
Schlumberger Ltd................................ 75,800 4,827,513
--------------
59,831,810
--------------
PRECIOUS METALS -- 0.2%
Barrick Gold Corp............................... 52,400 1,015,250
Battle Mountain Gold Co......................... 37,200 90,674
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 22,100 396,419
Newmont Mining Corp............................. 25,400 504,825
Placer Dome, Inc................................ 28,000 330,750
Stillwater Mining Co. (a)....................... 301,800 9,865,088
--------------
12,203,006
--------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe Corp............... 67,000 2,077,000
CSX Corp........................................ 29,300 1,327,656
Kansas City Southern Industries, Inc............ 11,000 701,937
Norfolk Southern Corp........................... 52,400 1,578,550
Union Pacific Corp.............................. 35,300 2,058,431
--------------
7,743,574
--------------
REAL ESTATE DEVELOPMENT -- 1.2%
Crescent Real Estate Equities Co................ 1,377,600 32,718,000
Equity Residential Properties Trust............. 150,900 6,799,931
Vornado Realty Trust (a)........................ 745,100 26,311,344
--------------
65,829,275
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc......................... 19,000 414,438
McDonald's Corp................................. 184,700 7,630,419
Tricon Global Restaurants, Inc. (a)............. 22,000 1,190,750
Wendy's International, Inc...................... 15,700 444,506
--------------
9,680,113
--------------
RETAIL -- 3.7%
Albertson's, Inc. (b)........................... 55,761 2,875,177
AutoZone, Inc. (a).............................. 19,700 593,463
Best Buy Co., Inc. (a).......................... 10,000 675,000
Charming Shoppes, Inc. (a)...................... 3,332,400 20,306,812
Circuit City Stores, Inc........................ 13,600 1,264,800
Consolidated Stores Corp........................ 13,100 353,700
Costco Companies, Inc. (a)...................... 28,900 2,313,806
CVS Corp........................................ 51,900 2,633,925
Dayton-Hudson Corp.............................. 61,100 3,971,500
Dillard's, Inc.................................. 143,100 5,026,388
Dollar General Corporation...................... 29,000 841,000
Federated Department Stores, Inc. (a)(b)........ 27,500 1,455,781
Great Atlantic & Pacific Tea Co., Inc........... 6,200 209,638
Harcourt General, Inc........................... 8,100 417,656
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
RETAIL (CONT'D.)
Home Depot, Inc................................. 200,900 $ 12,945,494
IKON Office Solutions, Inc...................... 21,800 327,000
J.C. Penney Co., Inc............................ 33,800 1,641,413
Kmart Corp. (a)(b).............................. 2,422,300 39,816,557
Kohl's Corp. (a)................................ 20,800 1,605,500
Kroger Co. (a).................................. 110,400 3,084,300
Liz Claiborne, Inc.............................. 10,900 397,850
Longs Drug Stores, Inc.......................... 6,300 217,744
May Department Stores Co........................ 45,750 1,870,031
Nordstrom, Inc. (b)............................. 20,200 676,700
Office Depot, Inc............................... 22,500 496,406
Pep Boys - Manny, Moe & Jack.................... 9,327 201,696
Rite Aid Corp................................... 36,000 886,500
Safeway, Inc. (a)............................... 66,000 3,267,000
Sears, Roebuck & Co............................. 50,500 2,250,406
Sherwin-Williams Co............................. 22,500 624,375
Staples, Inc. (a)............................... 59,200 1,831,500
Supervalu, Inc.................................. 15,300 393,019
Tandy Corp...................................... 25,600 1,251,200
The Gap, Inc.................................... 114,300 5,757,863
The Limited, Inc................................ 753,340 34,182,803
TJX Companies, Inc.............................. 42,000 1,399,125
Toys 'R' Us, Inc. (a)........................... 387,800 8,022,613
Wal-Mart Stores, Inc............................ 594,200 28,670,150
Walgreen Co..................................... 136,600 4,012,625
Winn-Dixie Stores, Inc.......................... 19,500 720,281
--------------
199,488,797
--------------
RUBBER -- 0.2%
Cooper Tire & Rubber Co......................... 12,800 302,400
Goodyear Tire & Rubber Co....................... 181,800 10,692,113
--------------
10,994,513
--------------
TELECOMMUNICATIONS -- 3.4%
Alcatel Alsthom, ADR, (France).................. 513,000 14,556,374
Alltel Corp..................................... 38,300 2,738,450
Ameritech Corp.................................. 147,100 10,811,850
Andrew Corp. (a)................................ 14,300 270,806
AT&T Corp. (b).................................. 420,572 23,473,175
Bell Atlantic Corp.............................. 208,900 13,656,838
BellSouth Corp.................................. 258,700 12,126,563
CenturyTel, Inc................................. 11,700 465,075
Frontier Corp................................... 21,200 1,250,800
General Instrument Corp......................... 24,000 1,020,000
GTE Corp........................................ 128,600 9,741,450
Lucent Technologies, Inc........................ 402,730 27,159,104
MCI Worldcom, Inc............................... 245,970 21,214,913
Nextel Communications, Inc. (Class "A" Stock)
(a)........................................... 38,400 1,927,200
Nortel Networks Corp............................ 88,700 7,700,269
SBC Communications, Inc......................... 264,100 15,317,800
Scientific-Atlanta, Inc......................... 8,200 295,200
Sprint Corp..................................... 120,400 6,358,625
Sprint Corp. (PCS Group)........................ 54,350 3,104,744
Tellabs, Inc. (a)............................... 53,000 3,580,813
US West, Inc.................................... 67,241 3,950,409
Vodafone Group, ADR, PLC (United Kingdom)....... 10,200 2,009,400
--------------
182,729,858
--------------
TEXTILES
National Service Industries, Inc................ 4,900 176,400
Pillowtex Corp. (a)............................. 73,932 1,206,016
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
TEXTILES (CONT'D.)
Russell Corp.................................... 5,900 $ 115,050
Springs Industries, Inc......................... 3,300 143,963
VF Corp......................................... 16,700 713,925
--------------
2,355,354
--------------
TOBACCO -- 0.2%
RJR Nabisco Holdings, Inc....................... 395,333 12,453,011
UST, Inc........................................ 24,100 704,925
--------------
13,157,936
--------------
TOYS
Hasbro, Inc..................................... 27,500 768,281
Mattel, Inc. (b)................................ 44,300 1,171,181
--------------
1,939,462
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp. (a)(b).................... 38,200 2,072,350
Ryder System, Inc............................... 9,400 244,400
Yellow Corp. (a)................................ 178,700 3,171,925
--------------
5,488,675
--------------
UTILITY - ELECTRIC -- 0.6%
Ameren Corp..................................... 18,400 706,100
American Electric Power Co., Inc. (b)........... 26,800 1,006,675
Carolina Power & Light Co....................... 20,800 890,500
Central & South West Corp....................... 28,300 661,512
CINergy Corp.................................... 20,700 662,400
CMS Energy Corp................................. 11,000 460,625
Consolidated Edison, Inc. (b)................... 31,200 1,411,800
Constellation Energy Group...................... 18,800 556,950
Dominion Resources, Inc......................... 27,400 1,186,763
DTE Energy Co................................... 19,900 796,000
Duke Energy Corp................................ 49,700 2,702,437
Edison International............................ 46,700 1,249,225
Entergy Corp. (b)............................... 34,400 1,075,000
FirstEnergy Corp. (a)........................... 32,300 1,001,300
Florida Progress Corp........................... 7,000 289,187
FPL Group, Inc.................................. 24,000 1,311,000
GPU, Inc........................................ 16,900 712,969
New Century Energies, Inc....................... 15,000 582,187
Niagara Mohawk Holdings Inc. (a)................ 24,300 390,319
Northern States Power Co........................ 24,200 585,338
Pacific Gas & Electric Co....................... 51,700 1,680,250
PacifiCorp...................................... 39,300 722,137
PECO Energy Co.................................. 29,600 1,239,500
PP&L Resources, Inc............................. 20,900 642,675
Public Service Enterprise Group, Inc............ 29,600 1,209,900
Reliant Energy, Inc............................. 37,400 1,033,175
Southern Co..................................... 94,800 2,512,200
Texas Utilities Co.............................. 37,100 1,530,375
Unicom Corp..................................... 31,000 1,195,437
--------------
30,003,936
--------------
WASTE MANAGEMENT -- 0.3%
Waste Management, Inc........................... 251,062 13,494,582
--------------
TOTAL COMMON STOCKS
(cost $2,401,007,961).......................................... 2,888,674,137
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS -- 32.7% RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CORPORATE BONDS -- 25.6%
AEROSPACE
Lockheed Martin Corp.,
6.85%, 05/15/01............................... A3 $ 400 $ 404,156
--------------
AIRLINES -- 1.9%
Continental Airlines, Inc.,
8.00%, 12/15/05............................... Ba2 12,820 12,237,203
7.461%, 04/01/15.............................. Aa3 8,459 8,573,225
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 14,335 17,005,897
10.375%, 02/01/11............................. Ba1 16,250 19,644,300
United Airlines, Inc.,
10.67%, 05/01/04.............................. Baa3 19,500 22,023,105
11.21%, 05/01/14.............................. Baa3 17,500 22,401,050
--------------
101,884,780
--------------
ASSET-BACKED SECURITIES -- 0.4%
California Infrastructure,
6.17%, 03/25/03............................... Aaa 4,000 4,007,480
Chase Manhattan Credit Master Trust, Series
1996-3,
7.04%, 02/15/05............................... Aaa 11,000 11,147,730
Standard Credit Card Master Trust,
5.95%, 10/07/04............................... Aaa 4,500 4,408,560
--------------
19,563,770
--------------
AUTO-CARS & TRUCKS -- 1.4%
Ford Motor Co.,
6.375%, 02/01/29 (b).......................... A1 17,500 15,191,575
Lear Corp.,
7.96%, 05/15/05............................... Ba1 15,500 14,996,250
Navistar International Corp.,
7.00%, 02/01/03............................... Ba1 11,500 11,212,500
TRW, Inc.,
6.45%, 06/15/01............................... Baa1 32,800 32,830,750
--------------
74,231,075
--------------
BANKS AND SAVINGS & LOANS -- 1.7%
Bank of Nova Scotia (Canada),
6.50%, 07/15/07............................... A1 5,400 5,362,875
Bayerische Landesbank Girozentrale, (Germany),
5.875%, 12/01/08.............................. Aaa 12,500 11,598,875
Central Hispano Leasing
5.496%, 04/28/05.............................. A3 5,000 4,991,050
Deutsche Bank,
7.872%, 12/29/49.............................. A1 3,700 3,582,044
HSBC Holding PLC,
7.50%, 07/15/09............................... A2 8,900 8,991,937
Kansallis-Osake-Pankki, (Finland),
8.65%, 01/01/49............................... Baa1 9,000 9,020,700
Key Bank NA,
5.80%, 04/01/04 (b)........................... Aa3 20,000 19,350,400
National Australia Bank, (Australia),
6.40%, 12/10/07 (b)........................... A1 8,700 8,645,364
6.60%, 12/10/07 (b)........................... A1 5,000 4,825,550
Okobank, (Finland),
6.561%, 09/27/49.............................. A3 16,250 16,201,250
--------------
92,570,045
--------------
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
CABLE & PAY TELEVISION SYSTEMS -- 0.9%
British Sky Broadcasting, Inc.,
6.875%, 02/23/09.............................. Baa2 $ 12,500 $ 11,403,875
Cable & Wire Communications PLC (United
Kingdom),
6.75%, 12/01/08............................... Baa1 3,050 2,935,961
CSC Holdings, Inc.,
7.875%, 12/15/07.............................. Ba2 4,400 4,367,616
7.25%, 07/15/08............................... Ba2 5,500 5,239,850
Rogers Cablesystems, Inc., Sr. Sec'd Notes
(Canada), (Canada),
10.00%, 03/15/05.............................. Ba3 2,000 2,140,000
Tele-Communications, Inc.,
6.34%, 02/01/02............................... Ba1 8,500 8,524,565
9.875%, 06/15/22.............................. Baa3 12,878 16,426,790
--------------
51,038,657
--------------
CHEMICALS -- 0.5%
ICI Wilmington Inc.,
9.50%, 11/15/00............................... Baa1 6,500 6,769,035
Lyondell Chemical Co.,
9.625%, 05/01/07.............................. Ba3 4,500 4,601,250
Rohm & Haas Co.,
6.95%, 07/15/04............................... A3 7,400 7,391,052
7.85%, 07/15/29............................... A3 6,100 6,095,547
--------------
24,856,884
--------------
COMPUTERS -- 0.1%
International Business Machine Corp.,
5.625%, 04/12/04.............................. A1 3,500 3,363,500
--------------
CONSULTING
Comdisco, Inc.
6.375%, 11/30/01.............................. Baa1 2,700 2,692,845
--------------
CONTAINERS -- 0.6%
Owens-Illinois, Inc.,
7.15%, 05/15/05............................... Ba1 34,000 32,686,920
--------------
DIVERSIFIED OPERATIONS -- 0.6%
Cox Enterprises, Inc.,
6.625%, 06/14/02.............................. Baa1 5,200 5,196,516
Seagram (J.) & Sons,
5.79%, 04/15/01............................... Baa3 20,000 19,742,000
Tyco International Group, SA,
6.125%, 06/15/01.............................. Baa1 5,000 4,973,550
6.895%, 1/15/29............................... Baa1 3,500 3,218,223
--------------
33,130,289
--------------
DRUGS & MEDICAL SUPPLIES -- 0.1%
Mallinckrodt, Inc.,
6.30%, 03/15/11............................... Baa2 8,000 7,860,000
--------------
FINANCIAL SERVICES -- 6.3%
Calair Capital Corp.,
8.125%, 04/01/08.............................. Ba2 6,000 5,587,500
Capital One Financial Corp.,
7.25%, 05/01/06............................... Ba1 6,800 6,587,500
Chrysler Financial Corp.,
5.25%, 10/22/01............................... A1 7,050 6,891,798
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
FINANCIAL SERVICES (CONT'D.)
Citibank Credit Card Master Trust,
6.10%, 05/15/08............................... NR $ 44,000 $ 43,080,400
Comdisco Inc.,
6.32%, 11/27/00............................... Baa1 19,000 19,017,670
Conseco, Inc.,
7.60%, 06/21/01............................... Ba1 2,500 2,507,025
8.70%, 11/15/26............................... Ba2 2,408 2,157,881
8.70%, 04/01/27............................... Ba2 5,700 5,157,930
Donaldson Lufkin & Jenrette,
5.74%, 05/01/01............................... A3 10,000 9,881,500
Dresdner Funding Trust,
8.15%, 06/30/31............................... Aa2 20,800 20,032,896
Enterprise Rent-A-Car USA Finance Co.,
6.35%, 01/15/01............................... Baa3 21,000 20,890,800
6.95%, 03/01/04............................... Baa2 7,500 7,394,250
FMR Corp.,
7.57%, 06/15/29............................... Aa3 525 523,110
General Motors Acceptance Corp.,
5.95%, 03/14/03............................... A2 21,500 20,994,535
Heller Financial, Inc.,
6.00%, 03/19/04............................... A3 4,900 4,743,249
International Lease Finance Corp.,
6.00%, 05/15/02............................... A1 43,100 42,644,433
Marsh & Mclennan Cos., Inc.,
6.625%, 06/15/04.............................. A2 5,370 5,377,357
MBNA Corp.,
5.90%, 08/15/11............................... Aaa 29,800 28,104,274
MCN Investment Corp.,
6.30%, 04/02/11............................... Baa2 8,250 8,094,075
Morgan Stanley, Dean Witter Discover & Co.,
M.T.N.,
6.09%, 03/09/11............................... A1 15,000 14,940,600
Salomon, Inc., M.T.N.,
6.59%, 02/21/01............................... Baa1 8,250 8,302,883
7.25%, 05/01/01............................... Baa1 8,625 8,780,250
Textron Financial Corp.,
6.05%, 03/16/09............................... Aaa 11,625 11,591,396
Goldman Sachs Group, Inc.,
5.56%, 01/11/01............................... A1 4,200 4,168,500
Lehman Brothers Holdings, Inc.,
6.625%, 04/01/04 (b).......................... Baa1 21,910 21,343,407
6.625%, 02/05/06 (b).......................... Baa1 7,710 7,507,227
Salomon, Inc.,
6.75%, 08/15/03............................... Baa1 5,000 5,022,250
--------------
341,324,696
--------------
FOOD & BEVERAGE -- 0.2%
Archer-Daniels Midland Co.,
6.625%, 05/01/29.............................. Aa3 8,900 8,146,971
Coca-Cola Bottling Co.,
6.375%, 05/01/09.............................. Baa2 3,500 3,285,275
--------------
11,432,246
--------------
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
FOREST PRODUCTS -- 0.6%
Fort James Corp.,
6.234%, 03/15/11.............................. Baa3 $ 11,000 $ 10,900,450
Scotia Pacific Co.,
7.71%, 01/20/14............................... NR 29,500 21,387,500
--------------
32,287,950
--------------
INDUSTRIAL -- 0.1%
Compania Sud Americana de Vapores, S.A.,
(Chile),
7.375%, 12/08/03.............................. Baa 3,650 3,465,383
--------------
LEISURE & TOURISM -- 0.4%
Carnival Corp.,
5.65%, 10/15/00............................... A2 5,000 4,968,700
ITT Corp.,
6.25%, 11/15/00............................... Baa2 5,183 5,068,093
6.75%, 11/15/03............................... Baa2 14,000 13,130,320
--------------
23,167,113
--------------
MEDIA -- 0.4%
Liberty Media Group,
7.875%, 07/15/09.............................. Baa3 2,400 2,385,696
8.50%, 07/15/29............................... Baa3 4,200 4,188,534
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 9,100 9,299,563
United News & Media PLC,
7.25%, 07/01/04 (b)........................... Baa2 4,780 4,736,502
--------------
20,610,295
--------------
OIL & GAS -- 0.5%
Atlantic Richfield Co.,
5.55%, 04/15/03............................... A2 22,500 22,014,000
B.J. Services Co.,
7.00%, 02/01/06............................... Ba1 4,000 3,936,080
--------------
25,950,080
--------------
OIL & GAS SERVICES -- 0.4%
KN Energy, Inc.,
6.30%, 03/01/21............................... Baa2 20,000 19,931,200
--------------
RAILROADS -- 0.2%
Norfolk Southern Corp.,
6.875%, 05/01/01.............................. Baa1 11,000 11,108,460
--------------
REAL ESTATE INVESTMENT TRUST -- 2.1%
Duke Realty L.P.,
7.30%, 06/30/03............................... Baa2 4,350 4,381,320
EOP Operating, L.P.,
6.375%, 01/15/02.............................. Baa1 5,000 4,935,900
6.50%, 06/15/04............................... Baa1 6,000 5,760,600
6.625%, 02/15/05.............................. Baa 18,187 17,542,816
Equity Residential Properties Trust,
6.15%, 09/15/00............................... A3 25,000 24,837,500
ERP Operating, L.P.,
7.10%, 06/23/04............................... A3 2,375 2,376,686
6.63%, 04/13/15............................... A3 9,200 8,876,712
Felcor Suites, L.P.,
7.375%, 10/01/04.............................. Ba1 25,000 23,125,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
REAL ESTATE INVESTMENT TRUST (CONT'D.)
Hanson Overseas B.V.,
7.375%, 01/15/03.............................. A3 $ 4,000 $ 4,065,680
Simon Debartolo Group, Inc.,
6.75%, 06/15/05............................... Baa1 17,500 16,804,375
--------------
112,706,589
--------------
RETAIL -- 1.1%
Federated Department Stores, Inc.,
8.50%, 06/15/03............................... Ba1 34,890 36,937,694
Kroger Co.,
6.34%, 06/01/01 (b)........................... Baa3 10,450 10,361,828
7.25%, 06/01/09 (b)........................... Baa3 6,000 5,973,750
7.70%, 06/01/29 (b)........................... Baa3 3,450 3,415,500
--------------
56,688,772
--------------
TELECOMMUNICATIONS -- 3.6%
360 Communication Co.,
7.125%, 03/01/03.............................. Ba2 23,776 24,120,514
7.60%, 04/01/09............................... Ba1 12,885 13,376,563
Airtouch Communications, Inc.,
7.00%, 10/01/03............................... Baa2 16,800 17,109,288
Cox Communications, Inc.,
6.94%, 10/01/01 (b)........................... Baa2 4,000 4,030,840
Electric Lightwave, Inc.,
6.05%, 05/15/04............................... A2 5,300 5,124,252
GTE Corp.,
9.375%, 12/01/00.............................. Baa1 11,000 11,496,760
Lucent Technologies, Inc.,
6.45%, 03/15/29 (b)........................... A2 17,500 15,830,675
Qwest Communications International Inc.,
7.50%, 11/01/08............................... Ba1 31,200 30,264,000
Sprint Corp.,
6.875%, 11/15/28.............................. Baa1 13,000 11,786,060
Telecom De Peurto Rico,
6.15%, 05/15/02............................... Baa2 10,500 10,385,865
6.65%, 05/15/06............................... Baa2 10,700 10,390,449
6.80%, 05/15/09............................... Baa2 9,000 8,645,670
Worldcom Inc.,
6.125%, 08/15/01.............................. Baa2 15,600 15,550,704
6.95%, 08/15/28............................... Baa2 17,700 16,778,715
--------------
194,890,355
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.1%
Ryder Systems, Inc.,
7.51%, 03/24/00............................... Baa1 3,000 3,031,080
--------------
UTILITIES -- 1.1%
AES Corp., Sr. Notes,
9.50%, 06/01/09 (b)........................... Ba1 4,500 4,623,750
Calenergy Co., Inc.,
6.96%, 09/15/03 (b)........................... Ba1 15,000 14,869,500
CMS Energy Corp.,
8.00%, 07/01/01 (b)........................... Ba3 7,200 7,182,000
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
LONG-TERM BONDS (CONTINUED) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
UTILITIES (CONT'D.)
Edison Mission Energy,
7.73%, 06/15/09............................... A3 $ 5,000 $ 5,051,800
Niagara Mohawk Power,
7.00%, 10/01/00............................... Ba3 25,000 25,088,000
Pennsylvania Electric Co.,
5.75%, 04/01/04............................... A2 3,600 3,490,416
--------------
60,305,466
--------------
WASTE MANAGEMENT -- 0.3%
USA Waste Service,
6.125%, 07/15/01.............................. Baa3 15,695 15,600,987
--------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 5.8%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... 11,800 3,141,750
United States Treasury Bonds,
7.50%, 11/15/24............................... 38,800 45,105,000
5.25%, 11/15/28............................... 221,355 196,211,286
United States Treasury Notes,
5.75%, 11/15/00 (b)........................... 11,700 11,749,374
5.25%, 05/15/04 (b)........................... 13,255 13,025,158
7.50%, 02/15/05 (b)........................... 18,450 19,862,532
6.50%, 05/15/05 (b)........................... 7,760 7,997,611
4.75%, 11/15/08 (b)........................... 15,000 13,774,200
--------------
310,866,911
--------------
FOREIGN GOVERNMENT BONDS -- 1.3%
Quebec Province, (Canada),
7.50%, 07/15/23 (b)........................... A1 9,300 9,454,938
Republic of Columbia, (Columbia),
9.75%, 04/23/09 (b)........................... Baa3 4,500 3,712,500
Republic of Mexico, (Mexico),
5.874%, 12/31/19.............................. Ba2 9,750 8,214,375
5.875%, 12/31/19.............................. Ba2 10,450 8,804,125
Republic of Panama, (Panama),
4.00%, 07/17/14............................... Ba1 10,600 7,963,250
Republic of Philippines, (Philippines),
8.875%, 04/15/08.............................. Ba1 5,400 5,254,416
Republic of Poland, (Poland),
4.00%, 10/27/24............................... Baa3 11,300 7,288,500
United Mexican States, (Mexico),
10.375%, 02/17/09............................. NR 21,500 21,564,500
--------------
72,256,604
--------------
TOTAL LONG-TERM BONDS
(cost $1,814,851,285).................................................... 1,759,907,108
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B20
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED VALUE
STOCKS -- 0.9% SHARES (NOTE 2)
------------- --------------
<S> <C> <C> <C>
FINANCIAL SERVICES -- 0.5%
Central Hispano Capital Corp.,.................. 1,000,000 $ 25,250,000
--------------
TELECOMMUNICATIONS -- 0.4%
Telecomunicacoes Brasileiras S.A., ADR.......... 223,400 20,147,888
--------------
TOTAL PREFERRED STOCKS
(cost $47,967,832)............................................. 45,397,888
--------------
WARRANTS UNITS
-------------
Telebras-Spons ADR (b).......................... 223,400 13,963
--------------
(cost $20,797)
TOTAL LONG-TERM INVESTMENTS
(cost $4,263,847,875).......................................... 4,699,055,146
--------------
PRINCIPAL
MOODY'S AMOUNT
SHORT-TERM INVESTMENTS -- 20.8% RATING (000)
------------ ---------
COMMERCIAL PAPER -- 5.6%
Abbey National Treasury,
5.85%, 07/01/99............................... P1 $ 1,700 1,700,000
Advanta Corp., M.T.N.,
6.99%, 10/18/99............................... P1 10,000 9,942,200
BellSouth Telecommunications,
5.18%, 07/14/99............................... P1 600 598,879
Caterpillar Financial,
5.30%, 07/09/99............................... P1 1,721 1,718,973
CXC, Inc.,
5.15%, 08/20/99 (c)........................... P1 44,678 44,678,125
Dayton Hudson Corp.,
5.18%, 07/12/99 (c)........................... P1 14,976 14,976,258
Eastman Kodak Co.,
5.40%, 07/08/99............................... P1 600 599,370
Enterprise Funding Corp.,
5.35%, 07/14/99............................... P1 1,700 1,696,716
Federated Department Stores,
5.05%, 07/12/99 (c)........................... P1 9,985 9,984,569
Fortune Brands,
5.80%, 07/01/99............................... P1 1,700 1,700,000
Gateway Fuel,
5.80%, 07/01/99............................... P1 1,700 1,700,000
General Motors Acceptance Corp.,
5.04%, 08/23/99 (c)........................... P1 15,435 15,434,619
Halliburton Co.,
5.40%, 07/13/99............................... P1 537 536,033
Heinz Co.,
5.35%, 07/07/99............................... P1 1,500 1,498,662
Heller Financial, Inc.,
5.35%, 07/08/99 (c)........................... P1 12,487 12,486,997
Ing American Insurance Holdings,
5.80%, 07/01/99............................... P1 1,700 1,700,000
Merrill Lynch & Co. Inc,
5.27%, 07/12/99............................... P1 1,701 1,698,263
Monte Rosa Capital Corp.,
4.92%, 07/15/99 (c)........................... P1 55,083 55,083,405
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONT'D.)
Proctor & Gamble,
5.20%, 07/13/99............................... P1 $ 400 $ 399,305
Public Services Company of Colorado
5.20%, 07/02/99 (c)........................... P1 17,248 17,247,508
Raytheon Co.
5.25%, 07/23/99 (c)........................... P1 49,840 49,839,583
Rohm & Haas Co.
5.75%, 07/06/99 (c)........................... P1 35,971 35,971,250
Ryder Systems, Inc.
5.08%, 07/02/99 (c)........................... P1 3,500 3,499,506
Sonoco Products,
5.80%, 07/01/99............................... P1 1,700 1,700,000
Southern California Edison,
5.25%, 07/12/99............................... P3 600 599,038
Tele-Communications, Inc.,
6.375%, 09/15/99.............................. P1 6,400 6,413,760
7.375%, 02/15/00.............................. P1 6,000 6,059,400
Triple-A ONE Plus,
5.35%, 07/06/99............................... P1 1,700 1,698,737
Wells Fargo & Company,
6.00%, 07/01/99............................... P3 1,700 1,700,000
Windmill Funding Corp.,
5.40%, 07/13/99............................... P1 600 598,920
--------------
303,460,076
--------------
OTHER CORPORATE OBLIGATIONS -- 4.5%
Banco de Commercio Exterior de Colombia, SA,
M.T.N., (Colombia),
8.625%, 06/02/00.............................. NR 5,500 5,438,125
Banco Ganadero, SA, M.T.N., (Colombia),
9.75%, 08/26/99............................... NR 9,600 9,595,839
Capital One Bank,
6.844%, 06/13/00.............................. Baa3 23,900 24,042,205
Comdisco, Inc.,
5.94%, 04/13/00............................... Baa1 12,500 12,539,000
Dayton Hudson Corp.,
5.95%, 06/15/00............................... A3 9,000 9,012,510
General Electric Capital International Funding,
5.07%, 08/09/99 (c)........................... NR 9,945 9,945,075
Conoco, Inc.,
5.20%, 07/06/99 (c)........................... Baa1 19,986 19,985,556
5.22%, 07/13/99 (c)........................... NR 24,957 24,956,500
5.22%, 07/14/99 (c)........................... NR 5,989 5,988,690
MCI Worldcom Inc.,
5.05%, 07/09/99 (c)........................... Baa2 9,989 9,988,778
5.20%, 07/09/99 (c)........................... Baa3 25,977 25,977,467
Okobank Sub NT,
7.225% 10/29/49 (d)........................... NR 9,000 9,000,000
7.900% 10/29/49 (d)........................... NR 3,500 3,500,000
Rider Systems, Inc.,
8.34%, 01/26/00............................... Baa1 5,000 5,062,050
Xerox Capital Corp.,
5.80%, 07/11/99 (c)........................... Baa1 67,300 67,300,000
--------------
240,033,460
--------------
TIME DEPOSIT -- 0.4%
Deutsche Bank AG,
5.125%, 07/11/99 (c).......................... NR 21,696 21,696,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B21
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
MOODY'S AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) RATING (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 10.1%
Joint Repurchase Agreement Account,
4.775%, 07/01/99 (Note 5)..................... $ 536,057 $ 536,057,000
--------------
Merrill Lynch Triparty Repurchase Agreement
Account,
5.10%, 07/02/99 (e)........................... 10,000 10,000,000
--------------
U.S. GOVERNMENT OBLIGATIONS -- 0.2%
United States Treasury Bill,
4.545%, 9/16/99............................... 9,500 9,408,563
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,111,308,034).................................................... 1,120,655,099
--------------
TOTAL INVESTMENTS -- 108.0%
(cost $5,375,155,909; Note 6)............................................ 5,814,648,192
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS (F).............................
3,223,625
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.0)%............................
(432,697,757)
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,385,174,060
--------------
--------------
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
(a) Non-income producing security.
(b) Portion of securities on loan with an aggregate market value of
$438,010,615; cash collateral of $443,760,219 was received with which the
portfolio purchased securities.
(c) Represents security purchased with cash collateral received for securities
on loan.
(d) Indicates a variable rate security. The maturity date presented for this
instrument is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at June 30, 1999.
(e) Merrill Lynch Triparty Repurchase Agreement, repurchase price $10,002,833,
due 7/2/99. The value of the collateral including accrued interest was
$10,202,408.
(f) Open Future Contracts as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE JUNE 30, 1999 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Positions:
24 S&P 500 Index Sep 99 $ 8,071,125 $ 8,290,200 $ 219,075
588 U.S. Treasury Bond Sep 99 $ 359,300,165 $ 354,789,032 $ (4,511,133)
527 U.S. Treasury Note Sep 99 $ 56,841,687 $ 57,443,000 $ 601,313
--------------
$ (3,690,745)
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B22
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
CONSERVATIVE BALANCED PORTFOLIO AND FLEXIBLE MANAGED PORTFOLIO OF
THE PRUDENTIAL SERIES FUND, INC.
(UNAUDITED)
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of seventeen Portfolios ("Portfolio" or "Portfolios"),
each with a separate series of capital stock. The information presented in these
financial statements pertains to only two Portfolios: Conservative Balanced
Portfolio and Flexible Managed Portfolio.
NOTE 2: ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Series Fund and the Portfolios in preparation of its financial
statements.
SECURITIES VALUATION: Equity securities traded on an exchange or NASDAQ
(whether domestic or foreign) are valued at the last reported sales price on the
primary exchange on which they are traded, or if there is not a sale, at the
mean of the last reported bid and asked prices or at the bid price on such day
in the absence of an asked price. Equity securities that are not sold on an
exchange or NASDAQ are valued by an independent pricing agent or a principal
market maker. Debt securities, in general, are valued using an independent
pricing service. Options on stock or stock indices are valued at the average of
the last reported bid and asked prices on the exchange on which they are traded.
Futures contracts and options on futures contracts are valued at the last
reported sale price, or if there is not a sale, at the mean between the last
reported bid and asked prices on the commodity exchange or the board of trade on
which they are traded. Any security for which a reliable market quotation is
unavailable is valued at fair value by The Prudential Insurance Company of
America ("The Prudential") under the direction of the Series Fund's Board of
Directors. Short-term securities are valued at amortized cost.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Series Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction
including accrued interest. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Series Fund may
by delayed or limited.
FOREIGN CURRENCY TRANSLATION: The books and records of the Series Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investments securities, other assets and liabilities - at
the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses - at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market prices of securities held at the end of the fiscal period.
Similarly, the Series Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of long-term portfolio securities sold during the fiscal period. Accordingly,
these realized and unrealized foreign currency gains (losses) are included in
the reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at fiscal period end exchange rates are reflected as a component of
net unrealized appreciation (depreciation) on investments and foreign
currencies.
C1
<PAGE>
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: Conservative Balanced Portfolio and Flexible Managed Portfolio may
sell a security it does not own in anticipation of a decline in the market value
of that security (short sale). When a Portfolio makes a short sale, it must
borrow the security sold short and deliver it to the buyer. The proceeds of the
short sale will be retained by the broker-dealer through which it made the short
sale as collateral for its obligation to deliver the security upon conclusion of
the sale. The Portfolio may have to pay a fee to borrow the particular security
and may be obligated to remit any interest or dividends received on such
borrowed securities. A gain, limited to the price at which the Portfolio sold
the security short, or a loss, unlimited in magnitude, will be recognized upon
the termination of a short sale if the market price at termination is less than
or greater than, respectively, the proceeds originally received.
OPTIONS: The Series Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value with respect to
securities which the Series Fund currently owns or intends to purchase. The
Series Fund's principal reason for writing options is to realize, through
receipts of premiums, a greater current return than would be realized on the
underlying security alone. When the Series Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Series Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or
paid is an adjustment to the proceeds from the sales or the cost of the purchase
in determining whether the Series Fund has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.
The Series Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series Fund bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
FINANCIAL FUTURES CONTRACTS: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the "initial margin". Subsequent payments, known as "variation
margin", are made or received by the Series Fund each day, depending on the
daily fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.
The Series Fund invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series Fund intends to purchase,
against fluctuations in value. Under a variety of circumstances, the Series Fund
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts and the
underlying assets.
SECURITIES LENDING: The Series Fund may lend its portfolio securities to
broker-dealers, qualified banks and certain institutional investors. The loans
are secured by collateral in an amount equal to at least the market value at all
times of the loaned securities plus any accrued interest and dividends. During
the time the securities are on loan, the Series Fund will continue to receive
the interest and dividends or amounts equivalent thereto, on the loaned
securities while receiving a fee from the borrower or earning interest on the
investment of the cash collateral. Loans are subject to termination at the
option of the borrower or the Series Fund. Upon termination of the loan, the
borrower will return to the lender securities identical to the loaned
securities. The Series Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan of its securities and may share the
interest earned on the collateral with the borrower. The Series Fund bears the
risk of delay in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. Prudential Securities
Incorporated ("PSI") is the securities lending agent for the
C2
<PAGE>
Series Fund. PSI is an indirect, wholly owned subsidiary of The Prudential. For
the six months ended June 30, 1999, PSI has been compensated approximately
$543,000.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of four elements: stated
coupon, original issue discount, market discount and market premium is recorded
on the accrual basis. Certain portfolios own shares of real estate investment
trusts ("REITs") which report information on the source of their distributions
annually. A portion of distributions received from REITs during the year is
estimated to be a return of capital and is recorded as a reduction of their
costs. 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.
Net investment income, other than administration and distribution fees, and
unrealized and realized gains or losses are allocated daily to each class of
shares based upon the relative proportion of net assets of each class at the
beginning of the day.
CUSTODY FEE CREDITS: The Series Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian. Such custody fee credits are presented as a reduction of gross
expenses in the accompanying 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 each Portfolio of
the Series Fund to continue to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
net income to shareholders. Therefore, no federal income tax provision is
required.
Withholding taxes on foreign dividends, interest and capital gains have been
provided for in accordance with the Series Fund's understanding of the
applicable country's tax rules and regulations.
DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions of each Portfolio are
declared in cash and automatically reinvested in additional shares of the
Portfolio. The Conservative Balanced Portfolio will declare and distribute
dividends from net investment income, if any, quarterly and distributions from
net capital gains, if any, at least annually. The Flexible Managed Portfolio
will declare and distribute dividends from net investment income and
distributions from net capital gains, if any, at least annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
NOTE 3: AGREEMENTS
The Series Fund has an investment advisory agreement with The Prudential.
Pursuant to this agreement The Prudential has responsibility for all investment
advisory services and supervises the subadvisers' performance of such services.
The Prudential has entered into a service agreement with The Prudential
Investment Corporation ("PIC"), which provides that PIC will furnish to The
Prudential such services as The Prudential may require in connection with the
performance of its obligations under the investment advisory agreement with the
Series Fund. The Prudential pays for the 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>
Conservative Balanced Portfolio........ 0.55%
Flexible Managed Portfolio............. 0.60
</TABLE>
The Series Fund has a distribution agreement with Prudential Investment
Management Services LLC ("PIMS") which acts as the distributor of the Class I
and Class II shares of the Series Fund. The Series Fund compensates PIMS for
distributing and servicing the Series Fund's Class II shares pursuant to a plan
of distribution (the "Class II Plan"), regardless of expenses actually incurred
by PIMS. The distribution fees are
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<PAGE>
accrued daily and payable quarterly. No distribution or service fees are paid to
PIMS as distributor for Class I shares of the Series Fund. Pursuant to the Class
II Plan, the Series Fund compensates PIMS for distribution-related activities at
an annual rate of .25% of the average daily net assets of the Class II shares.
The Series Fund has an administration agreement with Prudential Investments Fund
Management LLC ("PIFM") which acts as the administrator of the Class II shares
of the Series Fund. The administration fee paid to PIFM is accrued daily and
payable quarterly, at the annual rate of .15% of the average daily net assets of
the Class II shares.
The Prudential has agreed to refund to a Portfolio, the portion of the
investment advisory fee for that Portfolio equal to the amount that the
aggregate annual ordinary operating expenses (excluding interest, taxes and
brokerage commissions) exceeds 0.75% of the Portfolio's average daily net
assets. No refund was required for the six months ended June 30, 1999.
PIC, PIMS and PIFM are indirect, wholly-owned subsidiaries of The Prudential.
As of March 11, 1999, the Series Fund, along with other affiliated registered
investment companies (the "Funds"), has a syndicated credit agreement ("SCA")
with an unaffiliated lender. The maximum commitment under the SCA is $1 billion.
The Funds pays a commitment fee at an annual rate of .065 of 1% on the unused
portion of the credit facility, which is accrued and paid on a pro rata basis by
the Funds. Interest on any such borrowings outstanding will be at market rates.
The SCA expires on March 9, 2000. Prior to March 11, 1999, the Series Fund had a
credit agreement with a maximum commitment of $250,000,000. The commitment fee
was .055 of 1% on the unused portion of the facility. The Series Fund did not
borrow any amounts pursuant to either agreement during the six months ended June
30, 1999. The purpose of the agreements is to serve as an alternative source of
funding for capital share redemptions.
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ("PMFS"), a wholly owned subsidiary of PIFM,
began serving as the Series Fund's transfer agent on March 14, 1999. Transfer
agent fees and expenses in the statements of operations include certain
out-of-pocket expense paid to nonaffiliates. During the period March 14, 1999
through June 30, 1999, the Series Fund incurred fees for the services of PMFS
and as of June 30, 1999 fees were due to PMFS as follows:
<TABLE>
<CAPTION>
Transfer Agent's Transfer Agent
Fees Fees Payable
---------------- --------------
<S> <C> <C>
Conservative Balanced Portfolio........ $ 3,100 $ 800
Flexible Managed Portfolio............. 3,200 800
------- -------
$ 6,300 $ 1,600
</TABLE>
For the six months ended June 30, 1999, PSI earned $8,807 in brokerage
commissions from transactions executed on behalf of the Conservative Balanced
Portfolio and the Flexible Managed Portfolio as follows:
<TABLE>
<CAPTION>
Fund Commission
- --------------------------------------- ----------
<S> <C>
Conservative Balanced Portfolio........ $ 1,742
Flexible Managed Portfolio............. 7,065
----------
$ 8,807
</TABLE>
NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT
The Series Fund may transfer uninvested cash balances into a single joint
repurchase agreement account, the daily aggregate balance of which is invested
in one or more repurchase agreements collateralized by U.S. Government
obligations. The Series Fund's undivided interest in the joint repurchase
agreement account
C4
<PAGE>
represented $1,150,168,000 as of June 30, 1999. 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>
Conservative Balanced Portfolio........ $ 171,632,000 14.92%
Flexible Managed Portfolio............. 536,057,000 46.61
All other portfolios (currently not
available to PRUvider)............... 442,479,000 38.47
--------------- ----------
$ 1,150,168,000 100.00%
</TABLE>
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
Bear, Stearns & Co., Inc., 4.80%, in the principal amount of $150,000,000,
repurchase price $150,020,000, due 7/1/99. The value of the collateral including
accrued interest was $153,554,030.
Goldman, Sachs & Co., 4.82%, in the principal amount of $310,000,000, repurchase
price $310,041,505, due 7/1/99. The value of the collateral including accrued
interest was $317,349,453.
Morgan (J.P.) Securities, Inc., 4.65%, in the principal amount of $70,168,000,
repurchase price $70,177,063, due 7/1/99. The value of the collateral including
accrued interest was $71,625,963.
Morgan Stanley Dean Witter, 4.72%, in the principal amount of $310,000,000,
repurchase price $310,040,644, due 7/1/99. The value of the collateral including
accrued interest was $316,244,264.
Warburg Dillon Reed LLC, 4.80%, in the principal amount of $310,000,000,
repurchase price $310,041,333, due 7/1/99. The value of the collateral including
accrued interest was $316,876,844.
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchases and the proceeds from the sales of securities
(excluding short-term issues) for the six months ended June 30, 1999 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
Conservative Flexible
Balanced Managed
--------------- ---------------
<S> <C> <C>
Government Securities.................. $ 1,648,483,500 $ 1,198,041,677
Non-Government Securities.............. $ 1,981,320,228 $ 1,355,784,779
</TABLE>
Proceeds from Sales:
<TABLE>
<CAPTION>
Conservative Flexible
Balanced Managed
--------------- ---------------
<S> <C> <C>
Government Securities.................. $ 1,532,452,466 $ 1,034,349,485
Non-Government Securities.............. $ 2,402,210,961 $ 1,785,115,056
</TABLE>
The federal income tax basis and unrealized appreciation (depreciation) of the
Series Fund's investments as of June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Conservative Flexible
Balanced Managed
--------------- ---------------
<S> <C> <C>
Gross Unrealized Appreciation.......... $ 480,008,589 $ 678,008,589
Gross Unrealized Depreciation.......... 145,565,684 240,666,406
Total Net Unrealized................... 334,442,905 437,342,183
Tax Basis.............................. 4,276,071,049 5,377,306,009
</TABLE>
NOTE 7: CAPITAL
The Series Fund offers Class I and Class II shares. Both Class I and Class II
shares of a Portfolio are not subject to any sales charge or redemption charge
and are sold at the net asset value of the Portfolio. Class I shares are sold
only to certain separate accounts of The Prudential to fund benefits under
certain variable life insurance
C5
<PAGE>
and variable annuity contracts ("contracts"). Class II shares are sold only to
separate accounts of non-Prudential insurance companies as investment options
under certain contracts. The accounts invest in shares of the Series Fund
through subaccounts that correspond to the portfolios. The accounts will redeem
shares of the Series Fund to the extent necessary to provide benefits under the
contracts or for such other purposes as may be consistent with the contracts.
Currently there are only Class I shares outstanding in the Conservative Balanced
and Flexible Managed Portfolios.
C6
<PAGE>
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
-----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------
1999 1998 1997 1996 1995(a) 1994(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10 $ 14.91
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.31 0.66 0.76 0.66 0.63 0.53
Net realized and unrealized gains
(losses) on investments.............. 0.30 1.05 1.26 1.24 1.78 (0.68)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 0.61 1.71 2.02 1.90 2.41 (0.15)
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.15) (0.66) (0.76) (0.66) (0.64) (0.51)
Distributions from net realized
gains................................ (0.07) (0.94) (1.81) (1.03) (0.56) (0.15)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (0.22) (1.60) (2.57) (1.69) (1.20) (0.66)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 15.47 $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN:(b)............ 4.04% 11.47% 13.45% 12.63% 17.27% (0.97)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $4,640.3 $4,796.0 $4,744.2 $4,478.8 $3,940.8 $3,501.1
Ratios to average net assets:
Expenses............................. 0.57%(c) 0.57%(c) 0.56% 0.59% 0.58% 0.61%
Net investment income................ 4.02%(c) 4.19%(c) 4.48% 4.13% 4.19% 3.61%
Portfolio turnover rate................ 82% 167% 295% 295% 201% 125%
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------
1999 1998 1997 1996 1995(a) 1994(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of period... $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50 $ 16.96
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.27 0.58 0.59 0.57 0.56 0.47
Net realized and unrealized gains
(losses) on investments.............. 0.81 1.14 2.52 1.79 3.15 (1.02)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations... 1.08 1.72 3.11 2.36 3.71 (0.55)
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income... -- (0.59) (0.58) (0.58) (0.56) (0.45)
Distributions from net realized
gains................................ (.19) (1.85) (3.04) (1.85) (0.79) (0.46)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................ (.19) (2.44) (3.62) (2.43) (1.35) (0.91)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, end of period......... $ 17.45 $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN:(b)............ 6.55% 10.24% 17.96% 13.64% 24.13% (3.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................ $5,385.2 $5,410.0 $5,490.1 $4,896.9 $4,261.2 $3,481.5
Ratios to average net assets:
Expenses............................. 0.62%(c) 0.61% 0.62% 0.64% 0.63% 0.66%
Net investment income................ 3.13%(c) 3.21% 3.02% 3.07% 3.30% 2.90%
Portfolio turnover rate................ 53% 138% 227% 233% 173% 124%
</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
the reinvestment of dividends and distributions. Total investment returns
for less than a full year are not annualized.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
D1
<PAGE>
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<PAGE>
================================================================================
The toll-free number shown below can be used to make transfers and
reallocations, review how your premiums are being allocated and receive current
investment option values in your contract. Unit values for each investment
option are available to all Contract Owners from the toll-free number. The phone
lines are open each business day during the hours shown. Please be sure to have
your contract number available when you call.
[LOGO APPEARS HERE]
1-800-778-2255
8 a.m. - Midnight Eastern Time
================================================================================
In the past, Contract Owners who held several variable contracts at the same
address received multiple copies of Annual Reports and Semiannual Reports. In an
effort to lessen waste and reduce your fund's expenses of postage and printing,
we will attempt to mail only one copy of this report, based on our current
records for Contract Owners with the same last name and same address. No action
on your part is necessary. Upon request, we will furnish you with additional
reports. The above toll-free number should be used to request any additional
copies of the Pruco Life's PRUviderSM Semiannual Report. Proxy material and tax
information will continue to be sent to each account of record.
================================================================================
The Prudential Series Fund, Inc.
Board of Directors
JOHN R. STRANGFELD
Chairman,
The Prudential Series Fund, Inc.
W. SCOTT McDONALD, JR., Ph.D.
Vice President,
Kaludis Consulting Group
E. MICHAEL CAULFIELD
Executive Vice President,
Prudential Financial Management
The Prudential Insurance
Company of America
SAUL K. FENSTER, Ph.D.
President,
New Jersey Institute of Technology
JOSEPH WEBER, Ph.D.
Vice President,
Interclass (international corporate learning)
<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.
------------
Bulk Rate
U.S. Postage
P.O. Box 7478 PAID
Philadelphia, PA 19101-7478 Prudential
------------
Address Service Requested
[LOGO APPEARS HERE]
PRUvider SAR 6/99 Printed in the U.S.A. VAL-DR-105
on recycled paper.
