<PAGE>
The
Prudential
Series Fund, Inc.
[GRAPHIC]
Annual Report to
Contract Owners
Pruco Life's PRUvider(SM)
Pruco Life of New Jersey's PRUvider(SM)
December 31, 1999
IFS-2000-A051731
[LOGO OF PRUDENTIAL INSURANCE COMPANY]
The Prudential Insurance
Company of America
751 Broad Street
Newark, NJ 07102-3777
Pruco Life Insurance Company
213 Washington Street
Newark, NJ 07102-2992
<PAGE>
================================================================================
The Prudential Series Fund, Inc.
Average Annual Total Return as of December 31, 1999(1)
- --------------------------------------------------------------------------------
Six One Three Five Ten Since Inception
Months Year Years Years Years Inception Date
- --------------------------------------------------------------------------------
Balanced Portfolios
Conservative Balanced 2.55% 6.69% 10.59% 12.30% 10.28% 10.60% 5/83
Flexible Managed 1.15 7.78 11.91 14.60 11.77 11.80 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 12/31/99. 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.
================================================================================
Standard & Poor's 500 Composite Stock Price Index (S&P 500) comprises 500 large,
established, publicly traded stocks. Morgan Stanley Capital International Europe
Index comprises approximately 620 European companies. Salomon Brothers Extended
Market Index defines the small capitalization stock universe or remaining 20% of
the available capital of each country and includes the remaining 75% of the BMI
issues. The BMI measures the performance of the entire universe of
institutionally investable securities. Morgan Stanley Capital International
Europe, Australia, Far East Index is a weighted, unmanaged index of performance
that reflects stock price movements in Europe, Australasia, and the Far East.
S&P 500/Barra Value Index contains companies within the S&P 500 with lower
price-to-book ratios. S&P 500/Barra Growth Index contains companies within the
S&P 500 with higher price-to-book ratios. Russell 2000 Value Index measures the
performance of Russell 2000 companies with lower price-to-book ratios. Russell
2000 Growth Index measures the performance of Russell 2000 companies with higher
price-to-book ratios. Morgan Stanley Capital International World Free Index
contains companies in the MSCI World Index that reflect actual buyable
opportunities for the nondomestic investor by taking into account local market
restrictions on share ownership by foreigners. These indexes are calculated in
U.S. dollars, without dividends reinvested. Morgan Stanley Capital International
Japan Index measures the performance of Japan's stock market.
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Letter to Contract Owners ................................................ 3
Commentary and Outlook ................................................... 4-7
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
Report of Independent Accountants ................................... E1
<PAGE>
[BLANK PAGE]
<PAGE>
Letter To Contract Owners
Year Ended December 31, 1999
[PICTURE]
Chairman
John R. Strangfeld
"People differ in their level of comfort when the value of their investments
fluctuates. Moreover, they may prefer less volatility as they approach
retirement. We recommend that you consider your variable contract in the context
of your entire portfolio of investments."
Dear Contract Owner:
This Annual Report reviews the investment strategies and performance of the
portfolios available in your Prudential variable life insurance or variable
annuity contract.
A look back at 1999
Last year, technology growth stocks far outperformed most other investments.
Around the world, the spread of computers, the Internet, and wireless
telecommunications is transforming the way people live. This resulted in
increases in the valuation of many companies in that sector. Emerging market
securities also had particularly strong returns, as the economic recovery of
Asia restored investor confidence in these countries. Meanwhile, most bond
investments did not perform well, nor did small-cap value stocks.
2000: A first glance
The new year began with a wave of profit taking, offset by good news on
inflation, only to be driven lower by renewed concerns about inflation. The
result has been significant daily market moves, both positive and negative.
These daily, monthly, and even yearly developments in the market are important,
and can be very interesting. It's equally important, however, to keep in mind
the fundamentals of investing: asset allocation, diversification, and a
systematic plan to reach long-term goals.
Know your own comfort level
People differ in their level of comfort when the value of their investments
fluctuates. Moreover, they may prefer less volatility as they approach
retirement. We recommend that you consider your variable contract in the context
of your entire portfolio of investments.
Rebalancing your portfolio
After a divergent market such as the past year's, when returns were concentrated
in a narrow group of securities, you may find that the balance among your
holdings has changed. You may have a larger proportion in stocks than you are
comfortable with, or a larger proportion in growth stocks. It may be a good idea
to rebalance your holdings to restore the allocation that you had chosen to meet
your needs.
The value of professional guidance
Your financial professional can help you determine if adjustments should be
made, whether in light of today's dynamic marketplace, or if your needs have
changed. The important point is for you to be comfortable with a plan to help
reach your personal goals, rather than allowing your assets to drift with market
activity.
Sincerely,
/s/ John R. Strangfeld
John R. Strangfeld
Chairman
The Prudential Series Fund, Inc. January 26, 2000
3
<PAGE>
Equity Commentary
December 31, 1999
Global economic recovery and tech take off
- --------------------------------------------------------------------------------
Economies around the world began to recover in 1999 as a global financial crisis
that had roiled financial markets in 1997 and 1998 subsided. A flight of capital
away from emerging market countries had resulted in economic recessions and
weakened currencies in many of these nations. But in 1999 the weaker currencies
helped boost their exports and revive their economies. Because the world economy
was more stable, investors poured money into stocks and bonds of developing
markets and stocks in Latin America, eastern Europe and Asia rose dramatically.
Japanese stocks also rallied as that nation attacked its structural, financial
and business problems.
The pickup in global economic demand boosted commodity prices. The United States
saw strong advances for industrial cyclical stocks such as basic materials and
capital goods. Booming economies, however, often lead to higher interest rates,
so investors were cautious about rising rates throughout the year.
[GRAPH]
Performance of Key Stock Market Indexes
Through December 31, 1999
Six Months 1999
S&P 500 7.7% 21.0%
S&P 500/BARRAValue -1.1% 12.7%
S&P 500/BARRA Growth 15.6% 28.3%
Russell 2000 Value -6.4% -1.5%
Russell 2000 Growth 26.8% 43.1%
MSCI World Index Free* 15.1% 24.8%
MSCI Europe Index* 18.8% 15.9%
MSCI Japan Index* 33.8% 61.5%
*In U.S. currency.
Sources: Morgan Stanley Capital International (MSCI), Standard & Poor's, Frank
Russell Company and Prudential as of December 31, 1999. S&P 500 Composite,
Russell 2000, and Morgan Stanley Capital International indexes are unmanaged
indexes 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. Please refer to inside front cover for benchmark
definitions.
The views expressed are as of January 26, 2000, and are subject to change based
on market and other conditions.
Growth stocks are normally interest rate sensitive, because rising rates reduce
the value of future earnings. In addition, growth companies looking to expand
may borrow from banks or issue bonds. This year, however, a surging tech sector
provided an environment in which companies could raise funds relatively easily
by issuing stock. The tech-heavy Nasdaq Composite closed at a record 4,069--an
86% gain for the year. Small and mid-cap U.S. growth stocks also had strong
performances. The Russell Midcap Growth Index gained 51%; the Russell 2000
Smallcap Growth Index rose 43%.
In contrast, both small-cap value and mid-cap value stocks declined during 1999.
At the beginning of 1999, value stocks were already much cheaper than growth
stocks, and the sharp difference in performance over the course of the year
increased these disparities in relative value.
Geographically broad-based stock gains
- --------------------------------------------------------------------------------
The improved commodities markets and lower production costs due to currency
devaluations made an excellent environment for the stocks of many developing
countries. In Latin America, Mexico benefited from the increased linkage of its
economy to the developed countries to its north; its stocks soared 82% (in U.S.
dollars). Brazil also had a strong year. Both were rebounding from severe
declines in 1998.
Among developed markets, the telecommunications sector saw considerable
jockeying for position, with merger and takeover offers common. Telecom giant
Nokia led the Nordic region to an 88% return. Developed Europe, as a whole,
trailed the global markets but picked up toward the end of the year. The
Japanese stock market rose 62% (in U.S. dollars) in part from the rise of the
yen with respect to the U.S. dollar.
Within the United States, gains were narrow
Increases in prices of U.S. stocks were concentrated. Many technology stocks had
extraordinary returns, whether they were giant companies like Cisco Systems and
Intel or initial public offerings (IPOs) of Internet companies with no earnings.
Although some inexpensive sectors of the U.S. stock market--capital goods, basic
materials, consumer cyclicals and energy--had good returns in 1999, value stocks
overall trailed growth by a very broad margin. In the Russell 3000, which
reflects all market capitalization sectors, growth stocks returned 34% while
value stocks gained 7%.
4
<PAGE>
Equity Outlook 2000
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
How long can it continue?
- --------------------------------------------------------------------------------
The key uncertainty is whether the intense speculation in technology, Internet
and communications stocks that accelerated late in 1999 will continue this year,
or will investors turn to inexpensive industrial cyclical stocks such as capital
goods and basic materials?
Although commodity prices and basic materials shares rose about 15% to 30% in
1999, they started from a very low base and are still relatively cheap.
Commodity inventories are low, so accelerating global economic activity could
push up prices and attract more investors to basic materials stocks. Because
rising commodity prices also typically drive interest rates higher, this could
trigger a market rotation away from the techs to industrials. Many industrial
stocks have become quite inexpensive, while consolidation and restraint in
investing in new capacity have prepared them to leverage the benefits of
improving demand.
We expect continued earnings growth from many technology leaders as Internet use
and wireless telecommunications spread to relatively undeveloped markets.
Business-to-business Internet services are also growing rapidly. Despite the
tremendous average gain of technology stocks in 1999, stock selection was and
will continue to be important: When investors lost confidence in companies'
prospects, the stocks fell, whether it was Amazon.com or a start-up.
U.S. stocks are generally expensive
- --------------------------------------------------------------------------------
Our valuation models suggest the U.S. stock market (as represented by the S&P
500) is 15% to 20% overvalued. Market valuations are at a historic extreme--the
dividend yield on the S&P 500 dropped to 1.16% and the price/earnings ratio
reached 32.0. However, earnings estimates and revisions of estimates are still
positive, which could provide the market with continued momentum.
Investors are paying more attention to earnings and trends than to valuations.
When companies have missed estimates, even by small amounts, their shares have
been punished. A broad decline in profit growth would be a danger signal.
Normally, rising interest rates pose a threat to highly valued growth companies.
In this earnings-focused market, however, it is not clear how investors will
react should both interest rates and earnings continue to rise.
Given the uncertainty, the prudent course is to be exposed to the current trend
and to alternatives--that is, to technology-intensive funds and to funds with a
heavy exposure to commodity cyclicals. Although U.S. stocks are generally
overvalued, there are still companies in many sectors that have good
fundamentals, and whose shares are relatively inexpensive.
Performance of U.S. Market Sectors Through December 31, 1999
[GRAPH]
Six Months 1999
Technology 40.4% 75.1%
Energy -0.3% 19.0%
Capital Goods 8.7% 28.9%
Utilities -9.9% -8.9%
Communication Services 1.7% 19.1%
Basic Materials 3.4% 26.4%
Consumer Cyclicals 8.9% 22.3%
Healthcare -7.9% -8.2%
Consumer Staples -4.2% -6.3%
Financials -7.9% 4.0%
Transportation -18.9% -9.7%
Source: Standard & Poor's as of December 31, 1999. The S&P 500 Index is an
unmanaged index of stocks that provides an indication of stock price movements.
Past performance is not indicative of future results. Investors cannot invest
directly in an index.
5
<PAGE>
Bond Commentary
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
A challenging year for U.S. bonds.
- --------------------------------------------------------------------------------
This year proved to be the worst in the history of the 30-year U.S. Treasury
bond. An investor who purchased this Treasury bond at a 5.10% yield at the
beginning of 1999 lost more than 14% by the end of the year. Many investors sold
Treasuries, believing they no longer needed these conservative securities
because the global financial crisis had begun to fade in the first quarter of
1999. Later in the year, Treasuries sold off amid fear that inflation was
building in the domestic and global economies. Rising inflation hurts bonds by
eroding the value of their fixed interest payments.
Concerns about mounting inflation were well founded. Crude oil prices more than
doubled in 1999, albeit from their lowest level in more than a decade.
Furthermore, the lowest U.S. unemployment rate in 30 years fueled fears of
growing wage pressures. Consumers and businesses spent vigorously, threatening
to boost the prices of goods and services. With the U.S. economy growing
rapidly, the Federal Reserve was bound to increase short-term interest rates to
slow economic growth and prevent spiraling inflation. To compensate for the risk
of rising short-term rates, investors drove prices of Treasuries lower, which
caused their yields to climb. The Treasury market was down 2.56% in 1999, as
measured by the Lehman Brothers U.S. Treasury Index.
The first short-term rate hike occurred in June 1999, when the Fed raised the
federal funds rate (the rate U.S. banks charge each other for overnight loans)
by a quarter of a percentage point to 5.00%. Two more of the same magnitude
followed in August and November 1999, which left the federal funds rate at
5.50%.
In this rising interest-rate environment, other fixed-income markets in the
United States also sold off. Their prices, however, did not decline as much as
the prices of Treasuries, because investors worried less about credit risks in
1999 than during the global financial crisis of 1997 and 1998. As a result,
spreads--or the differences between the yields of other U.S. bond markets and
Treasuries-- generally declined in 1999, albeit with a fair amount of
volatility. Among the U.S. bond market sectors that performed better than
Treasuries in 1999 were investment-grade corporate bonds, federal government
agency securities, high- yield (junk) bonds, asset-backed securities and
mortgage-backed securities.
...but global growth aided emerging market bonds
- --------------------------------------------------------------------------------
Although stronger-than-expected economic growth hurt bond markets in the United
States, emerging market bonds benefited from the resurgence in the global
economy.
They returned 23.07% for the year, beating all other fixed-income markets, as
measured by the Lehman Brothers Emerging Market Index. As Asian and Latin
American economies rebounded in 1999 from the global financial crisis, investors
sought the bonds of nations such as South Korea and Brazil for their higher
yields. Investors felt more confident about owning these riskier debt
securities. Indeed, Moody's Investors Service upgraded the credit ratings of
certain South Korean and Brazilian bonds.
Performance of Fixed-Income Market Indexes Through December 31, 1999
[GRAPH]
Six Months 1999
Global (U.S. Dollar) Index 2.3% -5.2%
U.S. Mortgage-Backed Securities 1.3% 1.9%
Emerging Markets 11.7% 23.1%
U.S. Treasuries -0.1% -2.6%
U.S. Aggregate Index 0.6% -0.8%
U.S. Corp. Invest. Grade 0.3% -2.0%
U.S. Municipals -1.2% -2.1%
U.S. Corporate High Yield 0.2% 2.4%
Source: Lehman Brothers as of December 31, 1999. The Lehman Brothers indexes are
unmanaged indexes of bonds that provide an indication of bond price movements.
Past performance is not indicative of future results. Investors cannot invest
directly in an index.
6
<PAGE>
Bond Outlook 2000
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
U.S bonds still haunted by rate-hike fears
- --------------------------------------------------------------------------------
Uncertainty about whether the Federal Reserve will leave short-term interest
rates unchanged or increase them by a quarter or half percentage point should
heighten volatility in U.S. bond markets early in 2000.
After their most recent meeting in late December 1999, the Fed voted to hold
monetary policy steady. But the central bank issued a statement which warned
that if strong demand for goods and services continues to outstrip the potential
supply, inflation could build in the U.S. economy, despite the growth in
productivity. In other words, the Fed might need to hike short-term rates again
to cool off the economy and keep inflation in check. The U.S. central bank's
next meeting is scheduled for February 2000.
Prudential economists expect U.S. economic growth to slow substantially in the
first half of 2000. But if signs of moderating economic growth do not emerge
quickly enough, the belief that another increase in the federal funds rate is
necessary should prompt investors to push bond yields higher (and their prices
lower) early in the year. We expect the yield on the 30-year U.S. Treasury bond
to climb early in 2000 toward the upper end of our expected trading range, which
is 6.00% to 7.00%. The benchmark yield could then drift lower as it becomes
clear that the U.S. economy is losing steam. Indeed, we expect the 30-year
Treasury bond yield to end the year closer to 6.00%. Despite the uncertainty
facing the bond market early in 2000, we expect returns on U.S. investment-grade
bonds to exceed their rather dismal performance of 1999.
There is also upward pressure on European bond yields, because many economists
expect the European Central Bank (ECB) eventually to increase its 3.00%
refinancing rate (what it charges commercial banks for short-term loans) in the
first half of 2000. European economic growth has accelerated amid growing demand
for European exports, which became very competitive because of the euro's 14%
decline against the U.S. dollar in 1999.
U.S. corporate bonds expected to outperform Treasuries
- --------------------------------------------------------------------------------
We expect both U.S. investment-grade and high-yield (junk) corporate bonds to
continue to perform better than comparable Treasuries, albeit to a lesser extent
than in 1999. We believe many investors will remain comfortable owning the debt
securities of corporations if economic growth in the United States stabilizes at
a 3.5% annualized pace this year, as expected by Prudential economists. Junk
bonds appear to be attractive in light of their higher-than-normal yields. The
average yield of the Lehman Brothers High Yield Index stood at 11.50% at the end
of 1999--its highest level in more than seven years.
Rally in emerging market bonds seen on track
- --------------------------------------------------------------------------------
This growing appetite for higher-yielding assets should also continue to benefit
emerging market bonds. We expect crossover buyers--such as those that normally
purchase investment-grade bonds--to turn to emerging market bonds in Asia, Latin
America and eastern Europe to enhance yields on their portfolios. For example,
such investors might be attracted to Brazilian bonds because of that nation's
improving economic fundamentals, consolidating fiscal reform, increasing levels
of foreign direct investment, and better climate for Brazilian exports created
by the global economic recovery. All things considered, we anticipate further
improvement in emerging market bonds, even though we do not expect them to
replicate the hefty returns of 1999.
7
<PAGE>
Prudential Series Fund
Conservative Balanced Portfolio
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT GOAL
Favorable total return consistent with a more conservatively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 35% stocks and 65%
debt obligations and money market securities.
[GRAPH]
$10,000 Invested Over Ten Years
<TABLE>
<CAPTION>
Conservative Lipper (VIP) Lehman Gov't./
Balanced Portfolio 1 Balanced Funds Avg. 2 Corp. Bond Index 4 S&P 500 Index 3
<S> <C> <C> <C> <C>
89 10,000 10,000 10,000 10,000
10,336 10,209 10,242 10,308
90 10,527 10,134 10,828 9,689
11,386 10,975 11,288 11,068
91 12,535 12,197 12,575 12,635
12,647 12,320 12,888 12,550
92 13,406 13,198 13,528 13,596
14,456 13,983 14,582 14,257
93 15,042 14,678 15,020 14,963
14,691 14,059 14,369 14,457
94 14,896 14,298 14,493 15,160
16,362 16,278 16,203 18,220
95 17,469 17,732 17,282 20,850
18,350 18,525 16,957 22,953
96 19,675 19,933 17,784 25,634
21,208 21,906 18,272 30,914
97 22,322 23,605 19,519 34,183
24,112 25,925 20,333 40,241
98 24,941 27,134 21,368 43,959
25,949 28,972 20,881 49,400
99 26,611 30,228 20,909 53,205
</TABLE>
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 Funds Average is
calculated by Lipper, Inc., and reflects the investment return of certain
portfolios underlying variable life and annuity products. These returns are
net of investment fees and fund expenses, but not product charges.
3 The S&P 500 Composite Stock Price Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange. The S&P 500 is an unmanaged
index that includes the reinvestment of all dividends, but does not reflect
the payment of transaction costs and advisory fees associated with an
investment in the Portfolio. The securities that comprise the S&P 500 may
differ substantially from the securities in the Portfolio.
4 The Lehman Government/Corporate Bond Index is comprised of government and
corporate bonds. The Index is an unmanaged index that includes the
reinvestment of all interest, but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Portfolio. The
securities that comprise the index may differ substantially from the
securities in the Portfolio. The Lehman Gov't./Corp. Bond Index is not the
only index that may be used to characterize performance of income funds, and
other indexes may portray different comparative performance.
Performance Summary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
- --------------------------------------------------------------------------------
Conservative Balanced Portfolio 1 2.55% 6.69% 10.59% 12.30% 10.28%
- --------------------------------------------------------------------------------
Lipper (VIP) Balanced Funds Avg. 2 2.48% 8.58% 14.28% 15.99% 11.65%
- --------------------------------------------------------------------------------
S&P 500 Index 3 7.70% 21.03% 27.56% 28.54% 18.19%
- --------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index 4 0.04% -2.23% 5.58% 7.44% 7.71%
- --------------------------------------------------------------------------------
Conservative Balanced Portfolio inception date: 5/13/83.
The Prudential Series Fund Conservative Balanced Portfolio--which invests in a
conservative mix of bonds, stocks and money market securities--returned 6.69% in
1999, well above the average bond return, because this was a strong year for
stocks and a very poor one for bonds. It trailed the 8.58% return of the Lipper
(VIP) Balanced Fund Average because the Portfolio's conservative mandate
requires a smaller proportion of equities in the asset allocation than the
typical balanced portfolio.
In 1999, stock allocations were kept somewhat above the Portfolio's normal 35%,
adding to the benefit of the strong stock market performance. However, the
portion of our stocks that were actively managed in a value style substantially
trailed the S&P 500, because the index return was boosted by the exceptionally
high returns of technology growth stocks. Moreover, the benefit of the larger
stock allocation was offset by the impact of shifting most of the normal money
market allocation into intermediate bonds. Although the Portfolio's bonds
outperformed their intermediate-bond benchmark, 1999 was a very poor year for
bonds.
Performance Review
- --------------------------------------------------------------------------------
The normal allocation of the Conservative Balanced Portfolio is approximately
equal holdings of stocks, bonds and money market instruments. This balance is
intended to provide better performance than a portfolio consisting only of
bonds, but with less annual volatility. For the past several years, we shifted
most of the money market allocation to intermediate-term bonds to improve the
Portfolio's return. Although that strategy was rewarded in preceding years, 1999
was a particularly poor year for bonds. Our long-term bonds faced only the
second year of negative performance for the bond market (as measured by the
Lehman Brothers U.S. Aggregate Index) since the index began in 1976. The
intermediate-term bonds, though they turned in a positive performance,
contributed less than in previous years.
Another poor year for value stocks. A portion of our stocks is managed with an
active style that has a significant exposure to stocks of mid-sized companies
trading at attractive values. These stocks did not participate in the technology
stock market rally. Consumer cyclical stocks, such as that of housing-related
Owens Corning (insulation and glass), performed poorly. The insurance industry
also had a weak year, which hurt the financial holdings, but brokerages and
integrated financial service companies, such as Lehman Brothers, Morgan Stanley
Dean Witter, and Citigroup, made a substantial contribution to the Portfolio's
return.
8
<PAGE>
Strategy Session
- --------------------------------------------------------------------------------
Active asset allocation. We use a mathematical model to compare the expected
return on the entire stock market (determined primarily by prices and estimated
earnings) to interest rates on bonds. We try to increase the proportion of the
asset class (e.g., stocks or bonds) that offers the best value at any given
time.
Because asset class has a greater impact on returns over the long term than
selection of individual securities, these shifts in allocation may affect
returns significantly. However, such shifts are made less frequently than in the
Flexible Managed Portfolio. The equity allocation is shared between a portion
managed to mirror the behavior of the S&P 500 Index and a part actively managed
in a value style. We continue to invest much of the money market allocation in
intermediate bonds.
Bond strategy: no change. As the global economy speeds up with the recovery of
Asia and the acceleration of Europe, the outlook for corporate profit growth is
good. The higher yields of corporate bonds over government issues make them more
attractive, and we have thus overweighted them.
Value investing. Industrials are our largest focus. Alcoa, the aluminum company,
made a substantial contribution to our return. Demand is high, and Alcoa owns a
large part of the world's supply of alumina, the ore from which aluminum comes.
Paper companies, such as Boise Cascade, Champion International, Mead, and
Georgia Pacific, are benefiting from a slowdown in new capacity.
Outlook
- --------------------------------------------------------------------------------
[PHOTO]
Portfolio Manager Mark Stumpp
On average, stocks are expensive.
"Our asset allocation technology does not attempt to predict the future, but
rather attempts to react to pricing variations as they occur in the market. At
the beginning of the year 2000, our models suggest that stocks are still
somewhat expensive, because today's higher interest rates reduce the value
implicit in strongly rising earnings. Although we believe our models may
somewhat undervalue the growth stocks that have become a larger share of the
stock market, we think, nonetheless, that the risks associated with stocks at
these prices are greater than the potential rewards. We will wait for either a
break in interest rates or falling stock prices before significantly
overweighting stocks compared with our normal levels."
Portfolio Composition (Long Term)
as of 12/31/99
--------------
Bonds 56.2%
Stocks 42.4%
Money Market 1.4%
Source: Prudential. Holdings subject to change.
Sector Breakdown--Stock
as of 12/31/99
--------------
Technology 25.3%
Consumer Growth & Staples 21.0%
Industrials 14.9%
Financials 14.6%
Consumer Cyclicals 9.4%
Utilities 8.6%
Energy 5.8%
Miscellaneous 0.4%
Sector Breakdown--Bond
as of 12/31/99
--------------
Corporate Bonds 87.6%
U.S. Treasuries 5.1%
Asset-Backed 4.1%
Short-Term/Cash 1.9%
Equity Securities 1.1%
Miscellaneous 0.2%
Source: Prudential. Holdings subject to change.
9
<PAGE>
Prudential Series Fund
Flexible Managed Portfolio
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT GOAL
High total return consistent with a more aggressively managed diversified
portfolio.
TYPES OF INVESTMENTS
Money market instruments, bonds and common stocks of both established and
smaller companies.
INVESTMENT STYLE
The Portfolio management team holds a baseline allocation of 60% stocks and 40%
bonds.
$10,000 Invested Over Ten Years
<TABLE>
<CAPTION>
Flexible Lipper (VIP) Lehman Gov't./
Managed Portfolio 1 Flexible Avg. 2 Corp. Bond Index 4 S&P 500 Index 3
<S> <C> <C> <C> <C>
89 10,000 10,000 10,000 10,000
10,198 10,266 10,242 10,308
90 10,191 10,101 10,828 9,689
11,078 11,230 11,288 11,068
91 12,783 12,734 12,575 12,635
12,507 12,749 12,888 12,550
92 13,756 13,750 13,528 13,596
14,982 14,597 14,582 14,257
93 15,899 15,389 15,020 14,963
15,032 14,771 14,369 14,457
94 15,396 15,138 14,493 15,160
17,268 17,286 16,203 18,220
95 19,111 19,044 17,282 20,850
20,087 20,122 16,957 22,953
96 21,717 21,797 17,784 25,634
23,916 24,141 18,272 30,914
97 25,618 26,141 19,519 34,183
28,073 28,951 20,333 40,241
98 28,240 30,260 21,368 43,959
30,091 32,174 20,881 49,400
99 30,436 34,262 20,909 53,205
</TABLE>
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.
Performance Summary
- --------------------------------------------------------------------------------
Six
Average Annual Returns Months 1-Year 3-Year 5-Year 10-Year
- --------------------------------------------------------------------------------
Flexible Managed Portfolio 1 1.15% 7.78% 11.91% 14.60% 11.77%
- --------------------------------------------------------------------------------
Lipper (VIP) Flexible Avg. 2 5.63% 12.07% 15.17% 17.11% 12.94%
- --------------------------------------------------------------------------------
S&P 500 Index 3 7.70% 21.03% 27.56% 28.54% 18.19%
- --------------------------------------------------------------------------------
Lehman Gov't./Corp. Bond Index 4 0.04% -2.23% 5.58% 7.44% 7.71%
- --------------------------------------------------------------------------------
Flexible Managed Portfolio inception date: 5/13/83.
The Prudential Series Fund Flexible Managed Portfolio--which invests in an
actively managed mix of stocks, bonds and money market securities--had an
overall return of 7.78%. The gain was a result of the strong performance of
stocks in 1999, while the bond market (as measured by the Lehman Brothers U.S.
Aggregate Index) had only the second year of negative performance since the
Index began in 1976. The Portfolio trailed the 12.07% Lipper (VIP) Flexible Fund
Average, primarily because the portion of our stocks that were actively managed
in a value style substantially trailed that of the S&P 500.
In addition, our models indicated that stocks were overvalued for much of the
year, so we were slightly below our 60% norm and did not participate as fully,
as we might have, when markets rose. Although the bond market lost ground
overall in 1999, our bond holdings held up considerably better than their
benchmark.
Performance Review
- --------------------------------------------------------------------------------
A tightly focused market. Our asset pricing model compares the current price of
stocks and bonds, considering earnings, earnings growth, and interest rates. In
1999, stocks looked overvalued, but the threat of rising interest rates and a
strong enthusiasm for technology stocks pulled investors to the stock market
nonetheless. The portion of our portfolio allocated to the broad stock market
performed best. We had significant exposure to stocks throughout the period, but
had slightly underweighted them relative to our normal position. As a result,
the benefit from the rising market was somewhat less than it might have been.
Over the year, rising interest rates pushed down bond prices. Our bond portfolio
had a focus on corporate bonds instead of U.S. Treasuries, and the impact of
falling interest rates was mostly offset by the higher yields on corporates and
by the fact that their prices held up better than those of Treasuries. They
began the year being relatively inexpensive because during the financial crisis
of 1997-98, investors strongly preferred the greater safety of U.S. government
bonds. As the world appeared a safer place, the higher yields on corporates
attracted more investors.
Another poor year for value stocks. Half of our stocks are managed with an
active style that has a significant exposure to stocks of mid-sized companies
trading at attractive values. These stocks did not participate in the technology
stock market rally. Consumer cyclical stocks, such as those of housing-related
Owens Corning (insulation and glass) and Oakwood (manufactured housing),
performed poorly. The insurance industry had a poor year, which hurt the
financial holdings, but brokerages and integrated financial service companies,
such as Lehman Brothers, Morgan Stanley Dean Witter, and Citigroup, made a
substantial contribution to the Portfolio's return.
10
<PAGE>
Strategy Session
- --------------------------------------------------------------------------------
Active asset allocation. We use a mathematical model to compare the expected
return on the entire stock market (determined primarily by prices and estimated
earnings) to interest rates on bonds. We try to increase the proportion of the
asset class (e.g., stocks or bonds) that offers the best value at any time.
Because asset class has a greater impact on returns over the long term than
selection of individual securities, these shifts in allocation may affect
returns significantly. Your equity allocation is shared between a portion
managed to mirror the behavior of the S&P 500 Index and a part actively managed
in a value style.
Value investing. Industrials are our largest focus. Alcoa, the aluminum company,
made a substantial contribution to our return. Demand is high, and Alcoa owns a
large part of the world's supply of alumina, the ore from which aluminum comes.
Paper companies, such as Boise Cascade, Champion International, Mead, and
Georgia Pacific, are benefiting from a slowdown in new capacity.
Bond strategy: no change. As the global economy speeds up with the recovery of
Asia and the acceleration of Europe, the outlook for corporate profit growth is
good. The higher yields of corporate bonds over government issues make them more
attractive, and we have thus overweighted them.
Outlook
- --------------------------------------------------------------------------------
Portfolio Manager Mark Stumpp
[PHOTO]
On average, stocks are expensive.
"Our asset allocation technology does not attempt to predict the future, but
rather attempts to react to pricing variations as they occur in the market. At
the beginning of the year 2000, our models suggest that stocks are still
somewhat expensive, because today's higher interest rates reduce the value
implicit in strongly rising earnings. Although we believe our models may
somewhat undervalue the growth stocks that have become a larger share of the
stock market, we think, nonetheless, that the risks associated with stocks at
these prices are greater than the potential rewards. We will wait for either a
break in interest rates or falling stock prices before significantly
overweighting stocks compared with our normal levels."
Portfolio Composition (Long Term)
as of 12/31/99
--------------
Stocks 57.4%
Bonds 41.8%
Money Market 0.8%
Source: Prudential. Holdings subject to change.
Sector Breakdown--Stock
as of 12/31/99
--------------
Industrials 21.9%
Consumer Growth & Staples 18.6%
Technology 17.9%
Financials 17.0%
Consumer Cyclicals 11.9%
Utilities 6.5%
Energy 5.9%
Miscellaneous 0.3%
Sector Breakdown--Bond
as of 12/31/99
--------------
Corporate Bonds 78.5%
U.S. Treasuries 13.0%
Asset-Backed 5.3%
Short-Term/Cash 1.7%
Equity Securities 1.3%
U.S. Government Agencies 0.2%
Source: Prudential. Holdings subject to change.
11
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<S> <C>
December 31, 1999
ASSETS
Investments, at value
(cost: $4,474,325,684)................... $4,854,781,493
Cash....................................... 1,422,807
Receivable for securities lending,
income................................... 4,689,111
Interest and dividends receivable.......... 42,739,444
Receivable for investments sold............ 166,868
Receivable for capital stock sold.......... 39,860
--------------
Total Assets............................. 4,903,839,583
--------------
LIABILITIES
Collateral for securities on loan.......... 504,046,862
Payable to investment adviser.............. 6,028,201
Securities lending rebate payable.......... 2,965,737
Payable for investments purchased.......... 2,020,467
Payable for capital stock repurchased...... 1,222,854
Accrued expenses........................... 290,137
Due to broker -- variation margin.......... 125,094
--------------
Total Liabilities........................ 516,699,352
--------------
NET ASSETS................................... $4,387,140,231
==============
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,856,249
Paid-in capital, in excess of par........ 4,013,577,042
--------------
4,016,433,291
Undistributed net investment income........ 392,041
Distributions in excess of net realized
gain on investments...................... (9,619,315)
Net unrealized appreciation on
investments.............................. 379,934,214
--------------
Net assets, December 31, 1999.............. $4,387,140,231
==============
Net asset value and redemption price per
share, 285,624,853 outstanding shares of
common stock (authorized 370,000,000
shares).................................. $ 15.36
==============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<S> <C>
Year Ended December 31, 1999
INVESTMENT INCOME
Dividends (net of $286,950 foreign
withholding tax)......................... $ 27,413,849
Interest................................... 181,248,101
Income from securities loaned, net......... 1,820,729
---------------
210,482,679
---------------
EXPENSES
Investment advisory fee.................... 25,195,056
Shareholders' reports...................... 493,000
Accounting fees............................ 260,000
Custodian's fees and expenses.............. 210,000
Audit fee and expenses..................... 45,000
Legal fees and expenses.................... 21,200
Transfer agent's fees and expenses......... 8,000
Directors' fees............................ 4,000
Miscellaneous.............................. 94,076
---------------
Total expenses........................... 26,330,332
Less: custodian fee credit................. (80,190)
---------------
Net expenses............................. 26,250,142
---------------
NET INVESTMENT INCOME........................ 184,232,537
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)ON
INVESTMENTS
Net realized gain (loss) on:
Investments.............................. 938,110
Futures.................................. (493,916)
---------------
444,194
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 114,039,471
Futures.................................. (3,001,308)
---------------
111,038,163
---------------
NET GAIN ON INVESTMENTS...................... 111,482,357
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 295,714,894
===============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998
------------------ -------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 184,232,537 $ 200,201,254
Net realized gain on investments........................ 444,194 263,079,117
Net change in unrealized appreciation on investments.... 111,038,163 66,472,901
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 295,714,894 529,753,272
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................... (183,840,496) (201,150,300)
Distributions from net realized capital gains........... (16,406,123) (284,059,981)
Distributions in excess of net realized capital gains... (9,619,315) --
--------------- ---------------
TOTAL DIVIDENDS AND DISTRIBUTIONS....................... (209,865,934) (485,210,281)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [3,595,334 and 4,155,780 shares,
respectively].......................................... 54,694,876 64,306,807
Capital stock issued in reinvestment of dividends and
distributions [13,845,674 and 32,017,520 shares,
respectively].......................................... 209,865,934 485,210,281
Capital stock repurchased [(49,920,477) and (34,980,138)
shares, respectively].................................. (759,229,309) (542,332,348)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL STOCK TRANSACTIONS............................. (494,668,499) 7,184,740
--------------- ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................... (408,819,539) 51,727,731
NET ASSETS:
Beginning of year....................................... 4,795,959,770 4,744,232,039
--------------- ---------------
End of year (a)......................................... $ 4,387,140,231 $ 4,795,959,770
=============== ===============
(a) Includes undistributed net investment income of..... $ 392,041 $ --
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<S> <C>
December 31, 1999
ASSETS
Investments, at value
(cost: $5,219,625,332)................... $5,631,103,413
Cash....................................... 2,947,562
Interest and dividends receivable.......... 36,766,337
Receivable for securities lending income... 3,251,757
Receivable for investments sold............ 488,542
Receivable for capital stock sold.......... 2,875
--------------
Total Assets............................. 5,674,560,486
--------------
LIABILITIES
Collateral for securities on loan.......... 526,881,461
Payable to investment adviser.............. 7,566,477
Payable for investments purchased.......... 5,161,402
Payable from broker........................ 4,214,978
Securities lending rebate payable.......... 2,877,006
Payable for capital stock repurchased...... 1,500,619
Due from broker -- variation margin........ 598,738
Accrued expenses........................... 495,510
--------------
Total Liabilities........................ 549,296,191
--------------
NET ASSETS................................... $5,125,264,295
==============
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,904,882
Paid-in capital, in excess of par........ 4,494,235,963
--------------
4,497,140,845
Undistributed net investment income........ 168,078,194
Accumulated net realized gain on
investments.............................. 50,083,953
Net unrealized appreciation on
investments.............................. 409,961,303
--------------
Net assets................................. $5,125,264,295
==============
Net asset value and redemption price per
share, 290,488,231 outstanding shares of
common stock (authorized 370,000,000
shares).................................. $ 17.64
==============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<S> <C>
Year Ended December 31, 1999
INVESTMENT INCOME
Dividends (net of $611,104 foreign
withholding tax)......................... $ 43,655,429
Income from securities loaned, net......... 1,727,448
Interest................................... 155,468,167
---------------
200,851,044
---------------
EXPENSES
Investment advisory fee.................... 31,532,667
Shareholders' reports...................... 577,000
Accounting fees............................ 240,000
Custodian's fees and expenses.............. 225,000
Audit fee and expenses..................... 47,000
Legal fees and expenses.................... 22,000
Transfer agent's fees and expenses......... 8,000
Directors' fees............................ 4,000
Miscellaneous.............................. 105,969
---------------
Total expenses........................... 32,761,636
Less: custodian fee credit................. (58,367)
---------------
Net expenses............................. 32,703,269
---------------
NET INVESTMENT INCOME........................ 168,147,775
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on:
Investments.............................. 45,313,528
Futures.................................. 21,714,794
---------------
67,028,322
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 174,886,106
Futures.................................. (16,638,716)
---------------
158,247,390
---------------
NET GAIN ON INVESTMENTS...................... 225,275,712
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 393,423,487
===============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998
------------------ -------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income................................... $ 168,147,775 $ 177,588,088
Net realized gain on investments........................ 67,028,322 513,883,914
Net change in unrealized appreciation on investments.... 158,247,390 (167,145,159)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 393,423,487 524,326,843
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income.................... (240,137) (178,186,396)
Distributions from net realized capital gains........... (60,930,102) (552,345,875)
--------------- ---------------
TOTAL DIVIDENDS AND DISTRIBUTIONS....................... (61,170,239) (730,532,271)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Capital stock sold [3,138,333 and 4,188,120 shares,
respectively].......................................... 53,348,688 74,668,669
Capital stock issued in reinvestment of dividends and
distributions [3,554,343 and 43,615,212 shares,
respectively].......................................... 61,170,239 730,532,271
Capital stock repurchased [(42,922,625) and (38,796,213)
shares, respectively].................................. (731,489,268) (679,156,218)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL STOCK TRANSACTIONS............................. (616,970,341) 126,044,722
--------------- ---------------
TOTAL DECREASE IN NET ASSETS.............................. (284,717,093) (80,160,706)
NET ASSETS:
Beginning of year....................................... 5,409,981,388 5,490,142,094
--------------- ---------------
End of year (a)......................................... $ 5,125,264,295 $ 5,409,981,388
=============== ===============
(a) Includes undistributed net investment income of:.... $ 168,078,194 $ 170,558
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
A2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 91.8%
<S> <C> <C> <C>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS -- 49.3% (UNAUDITED) (000) (000)
------------ --------- --------------
AEROSPACE -- 0.8%
Litton Industries, Inc.,
8.00%, 10/15/09 .............................. Baa2 $ 3,300 $ 3,286,140
Lockheed Martin Corp.,
6.85%, 05/15/01 .............................. A3 1,900 1,886,928
Northrop-Grumman Corp.,
7.875%, 03/01/26 ............................. Baa3 4,500 4,221,360
Raytheon Co.,
5.95%, 03/15/01 .............................. Baa1 26,900 26,462,337
--------------
35,856,765
--------------
AIRLINES -- 3.2%
Continental Airlines, Inc.,
7.461%, 04/01/15 ............................. Aa3 11,641 11,209,589
8.00%, 12/15/05 .............................. Ba2 4,530 4,143,410
Delta Air Lines, Inc.,
7.90%, 12/15/09(b) ........................... Baa3 47,300 46,056,483
8.30%, 12/15/29 .............................. Baa3 4,000 3,849,320
United Airlines, Inc.,
10.67%, 05/01/04 ............................. Baa3 46,865 51,323,267
11.21%, 05/01/14 ............................. Baa3 18,433 22,361,257
--------------
138,943,326
--------------
ASSET-BACKED SECURITIES -- 2.1%
California Infrastructure,
6.14%, 03/25/02 .............................. Aaa 1,091 1,080,166
6.17%, 03/25/03 .............................. Aaa 2,000 1,989,840
6.28%, 09/25/05 .............................. Aaa 7,000 6,861,960
Chase Manhattan Credit Master Trust, Series
1996-3,
7.04%, 02/15/05 .............................. Aaa 15,000 15,032,700
Citibank Credit Card Master Trust, Series
1999-5,
6.10%, 05/15/08 .............................. NR 56,500 53,192,490
Standard Credit Card Master Trust,
5.95%, 10/07/04 .............................. Aaa 4,650 4,482,879
Team Fleet Financing Corp.,
7.35%, 05/15/03 .............................. Aa2 11,000 10,961,500
--------------
93,601,535
--------------
AUTO-CARS & TRUCKS -- 1.5%
Ford Motor Co.,
6.375%, 02/01/29 ............................. A1 16,000 13,432,960
7.45%, 07/16/31(b) ........................... A1 2,900 2,789,916
Lear Corp.,
7.96%, 05/15/05 .............................. Ba1 10,325 10,015,250
8.25%, 02/01/02 .............................. B2 4,710 4,615,800
TRW, Inc.,
6.45%, 06/15/01 .............................. Baa1 35,300 34,880,812
United Rentals, Inc.,
8.80%, 08/15/08 .............................. B1 1,435 1,338,137
--------------
67,072,875
--------------
BANKS AND SAVINGS & LOANS -- 4.0%
Bank of Nova Scotia (Canada),
6.50%, 07/15/07 .............................. A1 7,200 7,083,000
Barclays Bank PLC, (United Kingdom),
7.40%, 12/15/09 .............................. Aa3 2,500 2,456,750
Bayerische Landesbank Girozentrale, (Germany),
5.875%, 12/01/08 ............................. Aaa 7,800 6,994,728
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
BANKS AND SAVINGS & LOANS (CONT'D.)
Capital One Bank,
<S> <C> <C> <C>
6.76%, 07/23/02 .............................. Baa2 $ 2,500 $ 2,441,200
6.97%, 02/04/02 .............................. Baa3 25,000 24,606,000
7.08%, 10/30/01 .............................. Baa3 19,000 18,814,370
Chase Manhattan Corp.,
7.00%, 11/15/09(b) ........................... A1 2,500 2,405,375
Compass Bancshares, Inc.,
8.10%, 08/15/09 .............................. A1 3,900 3,889,470
Dresdner Funding Trust,
8.151%, 06/30/31 ............................. Aa2 18,200 17,351,880
Hypovereinsbank,
8.741%, 06/30/31(b) .......................... Aa3 1,800 1,797,660
Key Bank NA,
5.80%, 04/01/04 .............................. Aa3 30,000 28,401,600
Keycorp Capital, Inc.,
7.75%, 07/15/29(b) ........................... A1 5,050 4,696,500
National Australia Bank,
6.40%, 12/10/07 .............................. A1 14,000 13,953,800
Sanwa Finance Aruba A.E.C.,
8.35%, 07/15/09 .............................. A3 9,600 9,672,960
Sovereign Bancorp,
10.25%, 05/15/04 ............................. Ba3 1,030 1,038,137
10.50%, 11/15/06 ............................. Ba3 1,780 1,815,600
Sovereign Bancorp, Sr. Notes,
6.625%, 03/15/01 ............................. Ba3 4,000 3,870,000
Washington Mutual, Inc.,
8.25%, 10/01/02 .............................. A3 7,800 7,944,066
Washington Mutual, Inc.,
7.50%, 08/15/06 .............................. A3 12,000 11,871,000
--------------
171,104,096
--------------
BUILDING PRODUCTS -- 0.4%
Hanson Overseas B.V.,
7.375%, 01/15/03 ............................. A3 16,751 16,801,085
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.6%
British Sky Broadcasting, Inc.,
6.875%, 02/23/09 ............................. Baa2 12,200 10,717,700
Cable & Wire Communications PLC (United
Kingdom),
6.75%, 12/01/08 .............................. Baa1 4,200 4,133,892
Cox Communications, Inc.,
6.94%, 10/01/01 .............................. Baa2 4,000 3,982,960
7.875%, 08/15/09 ............................. Baa2 5,000 5,068,500
CSC Holdings, Inc.,
7.25%, 07/15/08 .............................. Ba2 7,600 7,166,496
7.875%, 12/15/07 ............................. Ba2 4,240 4,162,323
Rogers Cablesystems Ltd., (Canada)
11.00%, 12/01/15 ............................. B2 4,010 4,541,325
Tele-Communications, Inc.,
6.34%, 02/01/02 .............................. Ba1 4,500 4,456,530
8.25%, 01/15/03 .............................. Baa3 2,000 2,069,580
9.25%, 04/15/02 .............................. Baa3 9,500 9,971,485
9.875%, 06/15/22 ............................. Baa3 12,900 15,743,676
--------------
72,014,467
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B1
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
CHEMICALS -- 0.1%
Lyondell Chemical,
9.625%, 05/01/07 ............................. Ba2 $ 2,745 $ 2,806,762
Monsanto Co.,
6.85%, 12/01/28 .............................. A2 1,500 1,322,355
--------------
4,129,117
--------------
CONSULTING -- 1.1%
Comdisco, Inc.,
6.00%, 01/30/02 .............................. Baa1 30,000 29,046,600
6.375%, 11/30/01 ............................. Baa1 21,500 21,083,545
--------------
50,130,145
--------------
CONTAINERS -- 0.3%
Owens-Illinois, Inc.,
7.15%, 05/15/05 .............................. Ba1 13,000 12,019,670
7.50%, 05/15/10 .............................. Ba1 800 703,376
--------------
12,723,046
--------------
DIVERSIFIED OPERATIONS -- 0.5%
Corning Inc,,
6.85%, 03/01/29 .............................. A3 2,180 1,899,456
Tyco International Group, SA,
6.125%, 06/15/01 ............................. Baa1 17,725 17,425,093
Tyco International Ltd.,
6.875%, 01/15/29(b) .......................... Baa1 2,800 2,379,636
7.00%, 06/15/28(b) ........................... Baa1 1,800 1,557,648
--------------
23,261,833
--------------
DRUGS & MEDICAL SUPPLIES -- 0.4%
Mallinckrodt, Inc.,
6.30%, 03/15/11 .............................. Baa2 16,780 16,402,450
--------------
FINANCIAL SERVICES -- 7.5%
Arkwright Corp.,
9.625%, 08/15/26 ............................. Baa3 8,000 7,838,400
AT&T Capital Corp.,
6.60%, 05/15/05 .............................. A1 9,000 8,655,120
Bch Financial Ser,
5.813%, 04/28/05 ............................. A3 10,000 9,999,000
Bombardier Capital, Inc. M.T.N.,
7.30%, 12/15/02 .............................. A3 10,000 9,960,000
Capital One Financial Corp.,
7.25%, 05/01/06 .............................. Ba1 9,300 8,788,500
CIT Group Inc.,
5.80%, 03/26/02 .............................. Aa3 16,000 15,592,640
CoMed Transitional Funding Trust,
5.44%, 03/25/07 .............................. Aaa 10,000 9,362,500
Enterprise Rent-A-Car USA Finance Co., M.T.N.
6.35%, 01/15/01 .............................. Baa3 9,000 8,908,200
6.95%, 03/01/04 .............................. Baa2 17,500 16,990,750
7.50%, 06/15/03 .............................. Baa3 5,000 4,958,000
Finova Capital Corp.,
6.125%, 03/15/04 ............................. Baa1 21,000 19,918,500
Ford Motor Credit Corp.,
7.375%, 10/28/09(b) .......................... A1 3,265 3,232,350
Gatx Capital Corp.,
7.75%, 12/01/06 .............................. Baa2 10,000 9,910,700
General Motors Acceptance Corp.,
5.95%, 03/14/03 .............................. A2 47,000 45,256,300
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
FINANCIAL SERVICES (CONT'D.)
Heller Financial, Inc.,
<S> <C> <C> <C>
6.00%, 03/19/04 .............................. A3 $ 2,500 $ 2,373,825
HVB Funding Trust,
9.00%, 10/22/31 .............................. Aa3 1,200 1,230,600
International Lease Finance Corp.,
5.90%, 03/12/03 .............................. A1 37,500 36,078,750
MBNA Corp.,
5.90%, 08/15/11 .............................. Aaa 41,400 37,528,354
MCN Investment Corp.,
6.30%, 04/02/11 .............................. Baa2 8,250 8,102,325
Osprey Trust,
8.31%, 01/15/03 .............................. Baa3 26,000 25,863,500
Pemex Finance Ltd, (Cayman Islands),
9.14%, 08/15/04 .............................. Baa1 10,000 9,961,000
Sears Roebuck Acceptance Corp.,
6.38%, 10/07/02 .............................. A2 21,000 20,325,270
Textron Financial Corp.,
6.05%, 03/16/09 .............................. Aaa 9,404 9,348,512
--------------
330,183,096
--------------
FOOD & BEVERAGE -- 0.3%
Archer-Daniels Midland Co.,
6.625%, 05/01/29 ............................. Aa3 8,100 6,890,913
Coca-Cola Bottling Co.,
6.375%, 05/01/09 ............................. Baa2 3,000 2,702,400
Coca-Cola Enterprises, Inc.,
7.125%, 09/30/09(b) .......................... A2 2,600 2,550,600
Embotelladora Andina S.A.,
7.875%, 10/01/97 ............................. Baa1 1,250 961,131
--------------
13,105,044
--------------
FOREST PRODUCTS -- 0.7%
Fort James Corp.,
6.234%, 03/15/11 ............................. Baa3 17,500 17,318,700
Georgia-Pacific Corp.,
7.75%, 11/15/29(b) ........................... Baa2 1,015 967,234
Scotia Pacific Co.,
7.71%, 01/20/14 .............................. NR 18,800 14,100,000
--------------
32,385,934
--------------
INDUSTRIAL -- 0.1%
Cendant Corp.,
7.75%, 12/01/03 .............................. Baa1 2,000 1,995,200
Compania Sud Americana de Vapores, S.A.,
(Chile),
7.375%, 12/08/03 ............................. Baa 4,600 4,381,822
--------------
6,377,022
--------------
INSURANCE -- 0.2%
Allstate Corp.,
7.20%, 12/01/09 .............................. A1 1,700 1,652,723
Conseco, Inc.,
8.50%, 10/15/02 .............................. Ba1 4,050 4,101,840
8.796%, 04/01/27 ............................. Ba2 2,170 1,969,687
--------------
7,724,250
--------------
INVESTMENT BANKERS -- 2.5%
Bear Stearns & Co.,
7.625%, 12/07/09 ............................. A2 1,300 1,276,496
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
INVESTMENT BANKERS (CONT'D.)
Donaldson Lufkin, & Jenrette
<S> <C> <C> <C>
Inc.,
5.625%, 02/15/16 ............................. Baa1 $ 5,480 $ 5,359,385
Goldman Sachs Gp,,
6.25%, 02/01/03 .............................. A1 4,000 3,882,760
Goldman Sachs Group, Inc.,
5.56%, 01/11/01 .............................. A1 6,800 6,719,488
7.80%, 07/15/02 .............................. A1 11,985 12,120,550
Lehman Brothers Holdings, Inc.,
6.375%, 03/15/01 ............................. Baa1 4,300 4,263,665
6.625%, 04/01/04 ............................. Baa1 26,890 26,030,596
6.625%, 02/05/06 ............................. Baa1 10,645 10,056,970
Morgan Stanley Dean Witter & Co.,
6.875%, 03/01/03 ............................. Aa3 3,000 2,969,940
7.125%, 01/15/03 ............................. A1 17,080 17,066,507
PaineWebber Group, Inc.,
7.015%, 02/10/04 ............................. Baa1 6,000 5,868,900
7.625%, 10/15/08 ............................. Baa1 5,000 4,904,900
Salomon, Inc.,
7.25%, 05/01/01 .............................. Baa1 2,165 2,171,863
Salomon, Inc.,
6.75%, 02/15/03 .............................. Baa1 5,000 4,936,550
--------------
107,628,570
--------------
LEISURE -- 0.5%
ITT Corp.,
6.75%, 11/15/03 .............................. Baa2 21,500 19,999,945
Marriott International,
7.875%, 09/15/09 ............................. Baa1 250 246,065
--------------
20,246,010
--------------
MEDIA -- 1.1%
Cox Enterprises, Inc.,
6.625%, 06/14/02 ............................. Baa1 7,200 7,095,816
Liberty Media Group,
7.875%, 07/15/09 ............................. Baa3 3,200 3,187,520
8.50%, 07/15/29 .............................. Baa3 3,600 3,726,000
Paramount Communications, Inc.,
7.50%, 01/15/02 .............................. Ba2 6,425 6,438,942
Seagram (J.) & Sons,
5.79%, 04/15/01 .............................. Baa3 22,800 22,302,960
Time Warner, Inc.,
8.11%, 08/15/06 .............................. Ba1 1,500 1,543,755
United News & Media PLC,
7.25%, 07/01/04 .............................. Baa2 4,680 4,494,672
World Color Press, Inc.,
8.375%, 11/15/08 ............................. B1 2,140 2,091,850
--------------
50,881,515
--------------
OIL & GAS -- 0.5%
Amerada Hess Corp.,
7.375%, 10/01/09 ............................. Baa1 500 487,955
7.875%, 10/01/29 ............................. Baa1 2,020 1,970,106
Atlantic Richfield Co.,
5.55%, 04/15/03 .............................. A2 11,300 10,833,084
5.90%, 04/15/09 .............................. A2 5,420 4,918,054
B.J. Services Co.,
7.00%, 02/01/06 .............................. Ba1 4,000 3,785,360
--------------
21,994,559
--------------
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Parker & Parsley Petroleum Co.,
8.875%, 04/15/05 ............................. Ba2 $ 2,340 $ 2,327,809
Union Pacific Resources,
7.95%, 04/15/29(b) ........................... Baa3 3,400 3,300,414
--------------
5,628,223
--------------
OIL & GAS SERVICES -- 1.0%
KN Energy, Inc.,
6.30%, 03/01/21 .............................. Baa2 27,550 27,263,480
6.45%, 11/30/01 .............................. Baa2 11,950 11,740,875
6.45%, 03/01/03 .............................. Baa2 6,050 5,881,024
--------------
44,885,379
--------------
RAILROADS -- 0.2%
Norfolk Southern Corp.,
6.875%, 05/01/01 ............................. Baa1 4,000 3,989,840
6.95%, 05/01/02 .............................. Baa1 1,300 1,294,384
Union Pacific Corp.,
7.375%, 09/15/09 ............................. Baa3 1,400 1,370,054
--------------
6,654,278
--------------
REAL ESTATE INVESTMENT TRUST -- 1.8%
Duke Realty L.P.,
7.30%, 06/30/03 .............................. Baa2 6,250 6,180,625
EOP Operating, L.P.,
6.375%, 01/15/02 ............................. Baa1 7,000 6,843,200
6.50%, 06/15/04 .............................. Baa1 6,000 5,698,200
6.625%, 02/15/05 ............................. Baa 17,938 16,919,122
ERP Operating, L.P.,
6.63%, 04/13/15 .............................. A3 13,400 12,557,676
7.10%, 06/23/04 .............................. A3 3,250 3,175,672
First Industrial, L.P.,
6.50%, 04/05/11 .............................. Baa2 9,000 8,804,340
HRPT Properties Trust,
7.426%, 07/09/07 ............................. Baa2 1,500 1,491,300
Simon Debartolo Group, Inc.,
6.75%, 06/15/05(b) ........................... Baa1 17,500 16,306,500
--------------
77,976,635
--------------
RETAIL -- 2.2%
Dayton-Hudson Corp.,
6.40%, 02/15/03 .............................. A3 8,250 8,072,790
Federated Department Stores, Inc.,
8.125%, 10/15/02 ............................. Ba1 25,850 26,265,151
8.50%, 06/15/03 .............................. Ba1 22,400 23,020,256
Kroger Co., (The),
6.34%, 06/01/01 .............................. Baa3 13,950 13,793,063
7.25%, 06/01/09 .............................. Baa3 8,200 7,872,000
7.70%, 06/01/29 .............................. Baa3 1,300 1,228,500
Safeway Stores Inc.,
6.05%, 11/15/03 .............................. Baa2 12,000 11,436,480
Saks, Inc.,
8.25%, 11/15/08 .............................. Baa3 5,000 4,864,500
--------------
96,552,740
--------------
TELECOMMUNICATIONS -- 3.6%
360 Communication Co.,
7.125%, 03/01/03(b) .......................... Ba2 22,550 22,425,524
7.60%, 04/01/09 .............................. Ba1 7,000 7,003,780
Airtouch Communications, Inc.,
7.00%, 10/01/03 .............................. Baa2 8,200 8,192,210
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B3
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
TELECOMMUNICATIONS (CONT'D.)
AT&T Canada, Inc.,
<S> <C> <C> <C>
(Canada),
7.65%, 09/15/06 .............................. Baa3 $ 3,250 $ 3,233,783
Electric Lightwave, Inc.,
6.05%, 05/15/04 .............................. A2 4,700 4,436,048
Global Crossing Holdings, Ltd.,
9.125%, 11/15/06 ............................. Ba2 3,000 2,966,250
MCI Worldcom Inc.,
6.125%, 04/15/12 ............................. Baa2 10,800 10,624,824
7.55%, 04/01/04(b) ........................... Ba1 9,535 9,646,941
Rogers Cantel Inc.,
9.375%, 06/01/08 ............................. Ba3 1,805 1,877,200
Sprint Capital Corp.,
6.125%, 11/15/08 ............................. Baa1 25,000 22,667,000
Sprint Corp.,
5.70%, 11/15/03 .............................. Baa1 11,000 10,437,350
Telecom De Puerto Rico,
6.65%, 05/15/06 .............................. Baa2 15,000 14,231,850
6.80%, 05/15/09 .............................. Baa2 12,500 11,399,125
US West, Inc.,
6.875%, 08/15/01 ............................. Baa1 19,000 18,920,200
Williams Communications Group, Inc.,
10.875%, 10/01/09 ............................ B2 2,470 2,584,238
Worldcom Inc.,
6.125%, 08/15/01 ............................. Baa2 8,700 8,605,953
--------------
159,252,276
--------------
UTILITIES -- 2.5%
CINergy Corp.,
6.125%, 04/15/04 ............................. Baa2 10,000 9,431,300
Cogentrix Energy, Inc.,
8.75%, 10/15/08 .............................. Ba1 5,000 4,850,000
Commonwealth Edison Co.,
7.375%, 01/15/04 ............................. Baa3 14,000 14,064,540
Edison Mission Energy,
7.73%, 06/15/09 .............................. A3 6,900 6,872,193
El Paso Energy Corp.,
6.625%, 07/15/01 ............................. Baa2 8,200 8,134,974
Hydro-Quebec,
7.50%, 04/01/16 .............................. A2 1,900 1,858,409
Niagara Mohawk Power,
7.375%, 08/01/03 ............................. Ba2 10,000 10,001,000
Peco Energy Transition Trust,
5.63%, 03/01/05 .............................. Aaa 28,000 27,149,360
5.80%, 03/01/07 .............................. Aaa 14,500 13,703,950
PSEG Energy Holdings, Inc.,
10.00%, 10/01/09 ............................. Ba1 3,465 3,421,688
Sonat, Inc.,
7.625%, 07/15/11(b) .......................... Baa1 9,200 9,024,740
--------------
108,512,154
--------------
WASTE MANAGEMENT -- 0.4%
Allied Waste Industries, Inc.,
7.625%, 01/01/06 ............................. Ba2 755 679,500
USA Waste Service,
6.125%, 07/15/01 ............................. Baa3 18,000 17,131,500
--------------
17,811,000
--------------
FOREIGN GOVERNMENT BONDS -- 1.4%
Junta De Andaluci, (Spain),
7.25%, 10/01/29 .............................. Aa3 720 686,304
Province of Saskatchewan, (Canada),
9.125%, 02/15/21 ............................. A2 1,800 2,074,032
Quebec Province, (Canada),
7.50%, 07/15/23 .............................. A1 7,075 6,898,479
7.50%, 09/15/29(b) ........................... A2 3,400 3,344,240
<CAPTION>
LONG-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
BONDS (CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
FOREIGN GOVERNMENT BONDS (CONT'D.)
Republic Of Columbia,
<S> <C> <C> <C>
9.75%, 04/23/09(b) ........................... Baa3 $ 6,200 $ 5,750,500
Republic of Panama,
4.25%, 07/17/14 .............................. Ba1 12,500 9,812,500
Republic Of Philippines,
8.875%, 04/15/08 ............................. Ba1 7,600 7,410,000
Republic of Poland,
4.00%, 10/27/24 .............................. Baa3 8,500 5,610,000
United Mexican States,
10.375%, 02/17/09 ............................ Ba1 18,400 19,504,000
--------------
61,090,055
--------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 6.7%
United States Treasury Bond,
5.25%, 02/15/29(b) ........................... 57,660 47,677,324
6.375%, 08/15/27(b) .......................... 35,800 34,384,826
6.75%, 08/15/26(b) ........................... 31,450 31,597,501
8.125%, 05/15/21(b) .......................... 57,900 66,367,875
8.125%, 08/15/21(b) .......................... 28,800 33,029,856
United States Treasury Notes,
5.875%, 11/15/04(b) .......................... 7,325 7,181,943
6.00%, 08/15/04 .............................. 385 378,982
6.00%, 08/15/09(b) ........................... 55,099 53,377,156
6.50%, 05/15/05(b)(d) ........................ 1,120 1,120,347
6.50%, 10/15/06(b) ........................... 17,170 17,124,328
7.50%, 02/15/05(d) ........................... 185 192,949
--------------
292,433,087
--------------
TOTAL LONG-TERM BONDS
(cost $2,243,049,105).................................................... 2,163,362,567
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
COMMON STOCKS -- 41.6% ------------- --------------
<S> <C> <C>
AEROSPACE -- 0.6%
Boeing Co. ..................................... 122,100 5,074,781
GenCorp, Inc. .................................. 98,400 971,700
General Dynamics Corp. ......................... 21,800 1,149,950
Goodrich (B.F.) Co. ............................ 10,600 291,500
Honeywell International, Inc. .................. 98,912 5,705,986
Litton Industries, Inc.(a) ..................... 77,600 3,870,300
Lockheed Martin Corp. .......................... 50,000 1,093,750
Northrop Grumman Corp. ......................... 8,000 432,500
Parker-Hannifin Corp. .......................... 56,825 2,915,833
Raytheon Co. (Class "B" Stock) ................. 42,900 1,139,531
United Technologies Corp. ...................... 60,200 3,913,000
--------------
26,558,831
--------------
AIRLINES -- 0.4%
AMR Corp. ...................................... 176,000 11,792,000
Delta Air Lines, Inc. .......................... 17,500 871,719
Southwest Airlines Co. ......................... 59,400 961,537
US Airways Group, Inc.(a) ...................... 122,300 3,921,244
--------------
17,546,500
--------------
APPAREL -- 0.0%
Nike, Inc. (Class "B" Stock) ................... 36,800 1,823,900
Reebok International Ltd. ...................... 8,800 72,050
--------------
1,895,950
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B4
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
AUTOS - CARS & TRUCKS -- 0.7%
Cummins Engine Co., Inc. ....................... 4,200 $ 202,912
Dana Corp. ..................................... 19,700 589,769
Delphi Automotive Systems Corp. ................ 132,252 2,082,969
Ford Motor Co. ................................. 196,400 10,495,125
General Motors Corp. ........................... 167,700 12,189,694
Genuine Parts Co.(b) ........................... 20,400 506,175
MascoTech, Inc. ................................ 94,400 1,197,700
Midas, Inc. .................................... 22,100 483,437
Navistar International Corp.(a) ................ 7,200 341,100
PACCAR, Inc. ................................... 9,400 416,537
Titan International, Inc. ...................... 101,250 658,125
TRW, Inc. ...................................... 14,500 753,094
--------------
29,916,637
--------------
BANKS AND SAVINGS & LOANS -- 1.6%
AmSouth Bancorporation ......................... 36,400 702,975
Banc One Corp. ................................. 148,172 4,750,765
Bank of New York Co., Inc. ..................... 92,500 3,700,000
BankAmerica Corp. .............................. 217,061 10,893,749
BB&T Corp. ..................................... 37,800 1,034,775
Chase Manhattan Corp. .......................... 104,800 8,141,650
Comerica, Inc. ................................. 20,000 933,750
First Union Corp. .............................. 118,500 3,888,281
Firstar Corp. .................................. 123,938 2,618,190
Golden West Financial Corp. .................... 21,900 733,650
Hanvit Bank, GDR, (South Korea) ................ 238,200 1,518,525
Huntington Bancshares, Inc. .................... 28,360 677,095
KeyCorp ........................................ 56,300 1,245,637
Mellon Financial Corp. ......................... 64,000 2,180,000
Morgan (J.P.) & Co., Inc. ...................... 22,100 2,798,412
National City Corp. ............................ 80,600 1,909,212
Northern Trust Corp. ........................... 27,200 1,441,600
Old Kent Financial Corp. ....................... 5,000 176,875
PNC Bank Corp. ................................. 37,400 1,664,300
Providian Financial Corp. ...................... 17,950 1,634,572
Regions Financial Corp. ........................ 27,300 685,912
Republic New York Corp. ........................ 12,500 900,000
SouthTrust Corp. ............................... 20,000 756,250
Summit Bancorp(b) .............................. 21,300 652,312
SunTrust Banks, Inc. ........................... 39,400 2,711,212
Synovus Financial Corp. ........................ 35,250 700,594
U.S. Bancorp ................................... 92,000 2,190,750
Union Planters Corp. ........................... 17,000 670,437
Wachovia Corp. ................................. 25,700 1,747,600
Wells Fargo & Co. .............................. 209,400 8,467,612
--------------
72,126,692
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc. .................................. 16,700 393,494
Lexmark International Group, Inc. .............. 12,833 1,161,386
Molex, Inc. .................................... 14,000 793,625
Omnicom Group, Inc.(b) ......................... 21,400 2,140,000
--------------
4,488,505
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
CHEMICALS -- 0.7%
Air Products & Chemicals, Inc. ................. 28,800 $ 966,600
Dow Chemical Co. ............................... 27,600 3,688,050
Du Pont (E.I.) de Nemours & Co. ................ 132,420 8,723,167
Eastman Chemical Co. ........................... 9,300 443,494
Engelhard Corp. ................................ 18,000 339,750
Ferro Corp. .................................... 134,900 2,967,800
FMC Corp.(a) ................................... 3,400 194,862
Grace (W.R.) & Co. ............................. 8,600 119,325
Great Lakes Chemical Corp. ..................... 6,400 244,400
Hercules, Inc. ................................. 12,500 348,437
Lyondell Chemical Co. .......................... 81,700 1,041,675
Millennium Chemicals, Inc. ..................... 146,527 2,893,908
Monsanto Co. ................................... 80,300 2,860,687
OM Group, Inc. ................................. 63,300 2,179,894
Omnova Solutions, Inc. ......................... 98,400 762,600
Praxair, Inc. .................................. 18,700 940,844
Rohm & Haas Co. ................................ 27,311 1,111,216
Sigma-Aldrich Corp. ............................ 12,700 381,794
Union Carbide Corp. ............................ 16,700 1,114,725
--------------
31,323,228
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp.(a) ............................... 96,500 2,563,281
Deluxe Corp. ................................... 8,600 235,962
Quintiles Transnational Corp. .................. 6,000 112,125
--------------
2,911,368
--------------
COMPUTER SERVICES -- 5.0%
3Com Corp.(a) .................................. 44,700 2,100,900
Adaptec, Inc.(a) ............................... 6,000 299,250
Adobe Systems, Inc. ............................ 14,600 981,850
America Online, Inc.(a) ........................ 275,800 20,805,662
Analog Devices, Inc. ........................... 18,000 1,674,000
Autodesk, Inc. ................................. 7,300 246,375
Automatic Data Processing, Inc. ................ 77,700 4,186,087
BMC Software, Inc.(a) .......................... 29,000 2,318,187
Cabletron Systems, Inc.(a) ..................... 20,800 540,800
Ceridian Corp.(a) .............................. 17,300 373,031
Cisco Systems, Inc.(a) ......................... 405,100 43,396,337
Citrix Systems, Inc. ........................... 8,800 1,082,400
Computer Associates International, Inc. ........ 68,700 4,804,706
Computer Sciences Corp.(a) ..................... 20,000 1,892,500
Compuware Corp.(a) ............................. 44,900 1,672,525
Comverse Technology, Inc.(a) ................... 7,300 1,056,675
Electronic Data Systems Corp. .................. 61,400 4,109,962
EMC Corp.(a)(b) ................................ 125,975 13,762,769
First Data Corp. ............................... 54,200 2,672,737
Microsoft Corp.(a) ............................. 635,100 74,147,925
Novell, Inc.(a) ................................ 41,900 1,673,381
Oracle Corp.(a)(b) ............................. 178,900 20,047,981
Parametric Technology Corp.(a) ................. 35,200 952,600
Peoplesoft, Inc. ............................... 30,000 641,250
Silicon Graphics, Inc.(a) ...................... 20,600 202,137
Unisys Corp. ................................... 32,100 1,025,194
Yahoo!, Inc. ................................... 30,600 13,240,237
--------------
219,907,458
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B5
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
COMPUTERS -- 1.9%
Apple Computer, Inc.(a)(b) ..................... 17,800 $ 1,830,062
Compaq Computer Corp. .......................... 215,789 5,839,790
Dell Computer Corp.(a)(b) ...................... 318,500 16,243,500
Gateway, Inc. .................................. 38,400 2,767,200
Hewlett-Packard Co. ............................ 127,500 14,527,031
International Business Machines Corp. .......... 224,800 24,278,400
Networking Appliance, Inc.(a) .................. 14,700 1,221,019
Seagate Technology, Inc.(a) .................... 29,700 1,382,906
Sun Microsystems, Inc.(a) ...................... 192,400 14,898,975
--------------
82,988,883
--------------
CONSTRUCTION -- 0.1%
Centex Corp. ................................... 6,700 165,406
Fluor Corp. .................................... 9,400 431,225
Foster Wheeler Corp. ........................... 6,400 56,800
Pulte Corp. .................................... 6,600 148,500
Standard Pacific Corp. ......................... 154,000 1,694,000
Webb (Del E.) Corp. ............................ 140,300 3,498,731
Vulcan Materials Co. ........................... 9,000 359,438
--------------
6,354,100
--------------
CONTAINERS -- 0.1%
Ball Corp. ..................................... 4,700 185,062
Bemis Co., Inc. ................................ 5,700 198,787
Crown Cork & Seal Co., Inc. .................... 15,100 337,862
Owens-Illinois, Inc.(a) ........................ 76,600 1,919,787
Pactiv Corp.(a) ................................ 22,000 233,750
Sealed Air Corp. ............................... 10,100 523,306
--------------
3,398,554
--------------
COSMETICS & SOAPS -- 0.7%
Alberto Culver Co. (Class "B" Stock) ........... 5,900 152,294
Avon Products, Inc. ............................ 29,600 976,800
Colgate-Palmolive Co. .......................... 74,000 4,810,000
Gillette Co. ................................... 139,700 5,753,894
International Flavors & Fragrances, Inc. ....... 11,400 430,350
Procter & Gamble Co. ........................... 164,900 18,066,856
--------------
30,190,194
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.3%
Eastman Kodak Co. .............................. 76,700 5,081,375
Philip Morris Co., Inc. ........................ 408,700 9,476,731
--------------
14,558,106
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.1%
Avery Dennison Corp. ........................... 14,700 1,071,262
Pitney Bowes, Inc. ............................. 35,600 1,719,925
Xerox Corp. .................................... 83,700 1,898,944
--------------
4,690,131
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
DIVERSIFIED OPERATIONS -- 1.5%
Fortune Brands, Inc. ........................... 22,300 $ 737,294
General Electric Capital Corp. ................. 407,200 63,014,200
Tomkins PLC, ADR ............................... 131,600 1,932,875
--------------
65,684,369
--------------
DRUGS AND MEDICAL SUPPLIES -- 3.0%
Abbott Laboratories ............................ 192,200 6,979,262
Allergan, Inc. ................................. 17,000 845,750
ALZA Corp.(a) .................................. 11,500 398,187
American Home Products Corp. ................... 162,300 6,400,706
Amgen, Inc.(a) ................................. 127,300 7,645,956
Bard (C.R.), Inc. .............................. 5,700 302,100
Bausch & Lomb, Inc. ............................ 6,100 417,469
Baxter International, Inc. ..................... 35,700 2,242,406
Becton, Dickinson & Co. ........................ 30,400 813,200
Biomet, Inc. ................................... 13,700 548,000
Boston Scientific Corp.(a) ..................... 49,100 1,074,062
Bristol-Myers Squibb Co. ....................... 247,900 15,912,081
Cardinal Health, Inc.(b) ....................... 35,200 1,685,200
Guidant Corp. .................................. 37,900 1,781,300
Johnson & Johnson .............................. 167,800 15,626,375
Lilly (Eli) & Co. .............................. 136,700 9,090,550
Mallinckrodt, Inc. ............................. 8,600 273,587
Medtronic, Inc. ................................ 146,600 5,341,737
Merck & Co., Inc. .............................. 291,500 19,548,719
Pfizer, Inc. ................................... 484,600 15,719,212
Pharmacia & Upjohn, Inc. ....................... 64,200 2,889,000
Schering-Plough Corp.(b) ....................... 182,600 7,703,437
St. Jude Medical, Inc.(a) ...................... 9,400 288,462
Warner-Lambert Co. ............................. 106,900 8,759,119
Watson Pharmaceuticals, Inc.(a) ................ 11,000 393,937
--------------
132,679,814
--------------
ELECTRONICS -- 1.5%
Advanced Micro Devices, Inc.(a) ................ 16,400 474,575
Applied Materials, Inc.(a) ..................... 46,600 5,903,637
Belden, Inc. ................................... 67,100 1,409,100
Emerson Electric Co. ........................... 54,700 3,138,412
Grainger (W.W.), Inc. .......................... 12,300 588,094
Intel Corp.(b) ................................. 411,100 33,838,669
KLA-Tencor Corp.(a) ............................ 10,300 1,147,162
LSI Logic Corp.(a) ............................. 17,000 1,147,500
Micron Technology, Inc. ........................ 31,100 2,418,025
National Semiconductor Corp.(a) ................ 19,100 817,719
Rockwell International Corp. ................... 23,500 1,125,062
Solectron Corp. ................................ 33,200 3,158,150
Tektronix, Inc. ................................ 5,900 229,362
Teradyne, Inc. ................................. 16,000 1,056,000
Texas Instruments, Inc. ........................ 99,600 9,648,750
Thomas & Betts Corp. ........................... 6,500 207,187
Xilinx Inc.(a) ................................. 34,000 1,545,937
--------------
67,853,341
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B6
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 2.8%
American Express Co. ........................... 56,000 $ 9,310,000
Associates First Capital Corp. ................. 91,444 2,508,995
Bear Stearns Companies, Inc. ................... 14,516 620,559
Block (H.R.), Inc. ............................. 11,400 498,750
Capital One Financial Corp. .................... 25,200 1,214,325
Citigroup, Inc. ................................ 495,750 27,545,109
Countrywide Credit Industries, Inc. ............ 14,600 368,650
Dun & Bradstreet Corp. ......................... 19,800 584,100
Federal Home Loan Mortgage Corp. ............... 86,500 4,070,906
Federal National Mortgage Assoc. ............... 127,100 7,935,806
Fifth Third Bancorp ............................ 33,700 2,472,738
Fleet Boston Financial Corp. ................... 115,522 4,021,610
Franklin Resource, Inc. ........................ 32,900 1,054,856
Goldman Sachs Group, Inc.(a) ................... 13,200 1,243,275
Household International, Inc. .................. 59,852 2,229,487
Lehman Brothers Holdings, Inc. ................. 185,900 15,743,406
MBNA Corp. ..................................... 98,450 2,682,763
Merrill Lynch & Co., Inc. ...................... 103,900 8,675,650
Morgan Stanley Dean Witter & Co. ............... 124,590 17,785,223
PaineWebber Group, Inc. ........................ 15,300 593,831
Paychex, Inc. .................................. 31,300 1,252,000
Price (T. Rowe) Associates, Inc. ............... 8,000 295,500
Schwab (Charles) Corp.(a) ...................... 102,500 3,933,438
SLM Holding Corp. .............................. 21,400 904,150
State Street Corp. ............................. 20,200 1,475,863
Washington Mutual, Inc. ........................ 74,278 1,931,228
--------------
120,952,218
--------------
FOOD & BEVERAGE -- 1.4%
Anheuser-Busch Companies, Inc.(b) .............. 59,500 4,217,063
Archer-Daniels-Midland Co. ..................... 79,038 963,276
Bestfoods ...................................... 34,300 1,802,894
Brown-Forman Corp. (Class "B" Stock) ........... 8,700 498,075
Campbell Soup Co. .............................. 52,700 2,038,831
Coca Cola Enterprises, Inc.(b) ................. 53,800 1,082,725
Coca-Cola Co. .................................. 308,200 17,952,650
ConAgra, Inc. .................................. 61,300 1,383,081
Coors (Adolph) Co. (Class "B" Stock)............ 4,000 210,000
General Mills, Inc. ............................ 36,900 1,319,175
Heinz (H.J.) & Co. ............................. 44,400 1,767,675
Hershey Foods Corp. ............................ 16,600 788,500
Kellogg Co. .................................... 48,900 1,506,731
Nabisco Group Holdings Corp. ................... 319,400 3,393,625
PepsiCo, Inc. .................................. 185,500 6,538,875
Quaker Oats Co. ................................ 16,100 1,056,563
Ralston-Ralston Purina Group(b) ................ 40,000 1,115,000
Sara Lee Corp. ................................. 114,400 2,523,950
Seagram Co., Ltd. .............................. 52,800 2,372,700
Sysco Corp. .................................... 41,900 1,657,669
Unilever NV .................................... 71,018 3,866,035
Whitman Corp. .................................. 132,800 1,784,500
Wrigley (William) Jr. Co. ...................... 15,000 1,244,063
--------------
61,083,656
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 0.8%
Boise Cascade Corp. ............................ 149,900 $ 6,070,950
Champion International Corp. ................... 106,400 6,590,150
Fort James Corp. ............................... 28,200 771,975
Georgia-Pacific Corp. .......................... 97,800 4,963,350
International Paper Co. ........................ 52,221 2,947,223
Louisiana-Pacific Corp. ........................ 184,400 2,627,700
Mead Corp. ..................................... 107,900 4,686,906
Potlatch Corp. ................................. 3,500 156,187
Temple-Inland, Inc. ............................ 6,600 435,187
Westvaco Corp. ................................. 13,000 424,125
Weyerhaeuser Co. ............................... 24,900 1,788,131
Willamette Industries, Inc. .................... 82,700 3,840,381
--------------
35,302,265
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group .......................... 10,300 651,475
Consolidated Natural Gas Co. ................... 12,500 811,719
El Paso Energy Corp. ........................... 19,100 741,319
Peoples Energy Corp. ........................... 5,500 184,250
Sempra Energy .................................. 29,299 509,070
Williams Companies, Inc. ....................... 54,400 1,662,600
--------------
4,560,433
--------------
HOSPITALS/ HOSPITAL MANAGEMENT -- 0.5%
Columbia/HCA Healthcare Corp. .................. 283,900 8,321,819
Healthsouth Corp.(a) ........................... 51,600 277,350
Humana, Inc.(a) ................................ 266,200 2,179,512
IMS Health, Inc. ............................... 39,400 1,071,187
LifePoint Hospitals, Inc.(a) ................... 10,552 124,645
Manor Care, Inc. ............................... 13,000 208,000
McKesson HBOC Inc. ............................. 32,430 731,702
Service Corp. International .................... 33,800 234,487
Shared Medical Systems Corp. ................... 2,300 117,156
Smith (A.O.) Corp. ............................. 105,450 2,306,719
Tenet Healthcare Corp.(a) ...................... 279,700 6,572,950
Triad Hospitals, Inc.(a) ....................... 10,552 159,599
Wellpoint Health Networks Inc. ................. 6,000 395,625
--------------
22,700,751
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.2%
Clorox Co.(b) .................................. 27,800 1,400,425
Kimberly-Clark Corp. ........................... 68,200 4,450,050
Leggett & Platt, Inc. .......................... 125,700 2,694,694
--------------
8,545,169
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc. ............... 4,100 136,838
Fleetwood Enterprises, Inc. .................... 3,400 70,125
Hanson, PLC, ADR, (United Kingdom) ............. 309,562 12,517,913
Kaufman & Broad Home Corp. ..................... 6,100 147,544
Lowe's Companies, Inc. ......................... 46,500 2,778,375
Masco Corp. .................................... 46,900 1,190,088
Maytag Corp. ................................... 11,000 528,000
Newell Rubbermaid Inc.(b) ...................... 36,814 1,067,606
Owens Corning(b) ............................... 106,900 2,064,506
Stanley Works .................................. 11,000 331,375
Tupperware Corp. ............................... 9,600 162,600
Whirlpool Corp. ................................ 9,500 618,094
--------------
21,613,064
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B7
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
INSTRUMENT-CONTROLS -- 0.1%
Johnson Controls, Inc. ......................... 10,900 $ 619,937
PerkinElmer, Inc. .............................. 7,100 295,981
PE Corp-PE Biosystems Group. ................... 12,200 1,467,812
--------------
2,383,730
--------------
INSURANCE -- 1.5%
Aetna, Inc. .................................... 18,200 1,015,787
Allstate Corp. ................................. 99,700 2,392,800
American General Corp. ......................... 30,700 2,329,362
American International Group, Inc. ............. 193,553 20,927,918
Aon Corp.(b) ................................... 32,500 1,300,000
Berkley (W.R.) Corp. ........................... 42,400 885,100
Chubb Corp. .................................... 74,500 4,195,281
CIGNA Corp. .................................... 25,000 2,014,062
Cincinnati Financial Corp. ..................... 19,100 595,681
Conseco, Inc. .................................. 38,621 690,350
Financial Security Assurance Holdings Ltd. ..... 34,000 1,772,250
Hartford Financial Services Group, Inc. ........ 27,500 1,302,812
Jefferson-Pilot Corp. .......................... 13,100 894,075
Lincoln National Corp. ......................... 25,800 1,032,000
Loews Corp. .................................... 42,400 2,573,150
Marsh & McLennan Companies, Inc. ............... 33,100 3,167,256
MBIA, Inc. ..................................... 13,000 686,563
MGIC Investment Corp.(b) ....................... 13,900 836,606
Progressive Corp. .............................. 9,400 687,375
Reinsurance Group of America, Inc. ............. 173,325 4,809,769
SAFECO Corp. ................................... 100,600 2,502,425
St. Paul Companies, Inc. ....................... 28,600 963,463
Torchmark Corp. ................................ 118,400 3,441,000
Trenwick Group, Inc. ........................... 64,850 1,098,397
United Healthcare Corp. ........................ 22,000 1,168,750
UnumProvident Corp.(b) ......................... 29,110 933,339
--------------
64,215,571
--------------
LEISURE -- 0.3%
Brunswick Corp. ................................ 9,000 200,250
Carnival Corp. (Class "A" Stock) ............... 80,500 3,848,906
Disney (Walt) Co. .............................. 260,300 7,613,775
Harrah's Entertainment, Inc.(a) ................ 15,800 417,713
Hilton Hotels Corp. ............................ 30,300 291,638
Marriott International, Inc. (Class "A"
Stock) ....................................... 28,900 912,156
Mirage Resorts, Inc.(a) ........................ 23,600 361,375
--------------
13,645,813
--------------
MACHINERY -- 0.3%
Briggs & Stratton Corp. ........................ 2,200 117,975
Caterpillar, Inc. .............................. 44,300 2,084,869
Commercial Intertech Corp. ..................... 28,300 360,825
Cooper Industries, Inc. ........................ 12,800 517,600
Deere & Co. .................................... 28,000 1,214,500
Dover Corp. .................................... 25,700 1,166,138
Eaton Corp. .................................... 8,200 595,525
Flowserve Corp. ................................ 39,486 671,262
Ingersoll-Rand Co. ............................. 21,400 1,178,338
Milacron, Inc. ................................. 6,300 96,863
Paxar Corp. .................................... 229,925 1,939,992
Snap-On, Inc. .................................. 9,500 252,344
Timken Co. ..................................... 9,900 202,331
--------------
10,398,562
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
MANUFACTURING -- 0.3%
Hussmann International, Inc. ................... 122,100 $ 1,839,131
Illinois Tool Works, Inc.(b) ................... 32,000 2,162,000
Tyco International Ltd. ........................ 210,022 8,164,605
--------------
12,165,736
--------------
MEDIA -- 1.5%
CBS Corp.(a) ................................... 161,547 10,328,911
Central Newspapers, Inc.(Class "A" Stock) ...... 100,000 3,937,500
Clear Channel Communications, Inc.(a)(b) ....... 40,900 3,650,325
Comcast Corp. (Special Class "A" Stock)(b) ..... 93,800 4,713,450
Donnelley (R.R.) & Sons Co. .................... 15,700 389,556
Dow Jones & Co., Inc. .......................... 10,600 720,800
Gannett Co., Inc. .............................. 34,400 2,805,750
Houghton Mifflin Co. ........................... 58,700 2,476,406
Interpublic Group of Companies, Inc. ........... 35,600 2,053,675
Knight-Ridder, Inc.(b) ......................... 67,800 4,034,100
Lee Enterprises, Inc. .......................... 50,900 1,625,619
McGraw-Hill, Inc. .............................. 23,700 1,460,513
Mediaone Group, Inc.(b) ........................ 77,700 5,968,331
Meredith Corp. ................................. 5,500 229,281
New York Times Co. (Class "A" Stock)(b) ........ 22,900 1,124,963
Time Warner, Inc. .............................. 157,800 11,430,638
Times Mirror Co. (Class "A" Stock) ............. 8,900 596,300
Tribune Co. .................................... 30,000 1,651,875
Viacom, Inc. (Class "B" Stock)(a) .............. 87,600 5,294,325
--------------
64,492,318
--------------
METALS-FERROUS -- 0.2%
AK Steel Holding Corp. ......................... 146,900 2,772,738
Allegheny Technologies, Inc. ................... 12,200 273,738
Bethlehem Steel Corp.(a) ....................... 241,500 2,022,563
Material Sciences Corp.(a) ..................... 96,900 987,169
National Steel Corp. (Class "B" Stock)(a) ...... 36,000 267,750
Nucor Corp. .................................... 10,500 575,531
USX-U.S. Steel Group, Inc. ..................... 94,100 3,105,300
Worthington Industries, Inc. ................... 9,200 152,375
--------------
10,157,164
--------------
METALS-NON FERROUS -- 0.7%
Alcan Aluminum Ltd.(b) ......................... 26,700 1,099,706
Alcoa, Inc. .................................... 326,300 27,082,900
Inco Ltd. ...................................... 26,200 615,700
Reynolds Metals Co. ............................ 8,200 628,325
--------------
29,426,631
--------------
MINERAL RESOURCES -- 0.0%
Burlington Resources, Inc.(b) .................. 23,300 770,356
Homestake Mining Co. ........................... 33,100 258,594
Phelps Dodge Corp. ............................. 8,393 563,380
--------------
1,592,330
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B8
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 0.4%
AES Corp. ...................................... 24,000 $ 1,794,000
Crane Co. ...................................... 10,800 214,650
Danaher Corp. .................................. 17,400 839,550
Donaldson Co., Inc. ............................ 109,200 2,627,625
Ecolab, Inc. ................................... 16,700 653,388
IDEX Corp.(b) .................................. 60,100 1,825,538
ITT Industries, Inc. ........................... 10,700 357,781
Mark IV Industries, Inc. ....................... 86,542 1,530,712
Millipore Corp. ................................ 6,800 262,650
NACCO Industries, Inc. (Class "A" Stock) ....... 1,300 72,231
Pall Corp. ..................................... 13,800 297,563
PPG Industries, Inc. ........................... 21,100 1,320,069
Textron, Inc. .................................. 19,300 1,480,069
Thermo Electron Corp.(a) ....................... 20,900 313,500
Trinity Industries, Inc. ....................... 52,200 1,484,438
Wolverine Tube, Inc.(a) ........................ 37,000 522,625
York International Corp. ....................... 59,100 1,621,556
--------------
17,217,945
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.2%
American Greetings Corp. (Class "A" Stock) ..... 8,200 193,725
Black & Decker Corp. ........................... 10,400 543,400
Corning, Inc. .................................. 30,200 3,893,913
Jostens, Inc. .................................. 6,100 148,306
Minnesota Mining & Manufacturing Co. ........... 50,000 4,893,750
Polaroid Corp. ................................. 7,000 131,688
--------------
9,804,782
--------------
OIL & GAS -- 1.9%
Amerada Hess Corp. ............................. 11,100 629,925
Anadarko Petroleum Corp. ....................... 15,100 515,288
Ashland, Inc. .................................. 9,400 309,613
Atlantic Richfield Co. ......................... 41,300 3,572,450
Basin Exploration, Inc.(a) ..................... 17,400 306,675
Cabot Oil & Gas Corp. (Class "A" Stock) ........ 88,600 1,423,138
Chevron Corp. .................................. 82,800 7,172,550
Coastal Corp. .................................. 26,100 924,919
Eastern Enterprises ............................ 3,200 183,800
Exxon Mobil Corp. .............................. 430,270 34,663,627
Kerr-McGee Corp. ............................... 10,525 652,550
Murphy Oil Corp. ............................... 27,600 1,583,550
NICOR, Inc. .................................... 4,900 159,250
Noble Affiliates, Inc. ......................... 50,900 1,091,169
Ocean Energy Inc ............................... 63,700 493,675
Phillips Petroleum Co. ......................... 32,600 1,532,200
Pioneer Natural Resources Co. .................. 435,944 3,896,250
Royal Dutch Petroleum Co. ...................... 267,500 16,167,031
Sunoco, Inc. ................................... 10,100 237,350
Texaco, Inc. ................................... 68,000 3,693,250
Unocal Corp. ................................... 30,900 1,037,081
USX-Marathon Group ............................. 36,900 910,969
Western Gas Resources, Inc. .................... 103,000 1,358,313
--------------
82,514,623
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Baker Hughes, Inc. ............................. 40,150 $ 845,659
Conoco, Inc (Class "B") ........................ 68,394 1,701,301
EOG Resources, Inc. ............................ 48,400 850,025
Occidental Petroleum Corp. ..................... 41,300 893,113
Transocean Sedco Forex, Inc. ................... 13,397 451,315
Union Pacific Resources Group, Inc. ............ 29,700 378,675
--------------
5,120,088
--------------
OIL & GAS SERVICES -- 0.5%
Apache Corp. ................................... 15,000 554,063
Enron Corp. .................................... 89,000 3,949,375
Halliburton Co. ................................ 55,500 2,233,875
Helmerich & Payne, Inc. ........................ 7,900 172,319
McDermott International, Inc. .................. 401,600 3,639,500
ONEOK, Inc. .................................... 4,900 123,113
Rowan Companies, Inc.(a) ....................... 9,600 208,200
Schlumberger Ltd.(b) ........................... 69,200 3,892,500
Tosco Corp. .................................... 9,000 244,688
Total SA (Class "B" Stock), (France) ........... 79,933 5,535,360
--------------
20,552,993
--------------
PRECIOUS METALS -- 0.1%
Apex Silver Mines Ltd. ......................... 82,200 981,263
Barrick Gold Corp. ............................. 50,600 894,988
Freeport-McMoRan Copper & Gold, Inc. (Class "B"
Stock) ....................................... 21,300 449,963
Newmont Mining Corp. ........................... 24,500 600,250
Placer Dome, Inc. .............................. 32,700 351,525
Stillwater Mining Co.(a) ....................... 75,000 2,390,625
--------------
5,668,614
--------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe Corp. ............. 60,700 1,471,975
CSX Corp. ...................................... 27,600 865,950
Kansas City Southern Industries, Inc. .......... 13,300 992,513
Norfolk Southern Corp. ......................... 46,800 959,400
Union Pacific Corp. ............................ 30,800 1,343,650
--------------
5,633,488
--------------
REAL ESTATE INVESTMENT TRUST -- 0.3%
Crescent Real Estate Equities Co. .............. 336,700 6,186,863
Equity Residential Properties Trust ............ 37,700 1,609,319
Vornado Realty Trust ........................... 185,200 6,019,000
--------------
13,815,182
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc. ....................... 18,200 329,875
McDonald's Corp. ............................... 171,500 6,913,594
Tricon Global Restaurants, Inc.(a) ............. 19,000 733,875
Wendy's International, Inc. .................... 15,500 319,688
--------------
8,297,032
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B9
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
RETAIL -- 2.8%
Albertson's, Inc. .............................. 54,566 $ 1,759,754
AutoZone, Inc.(a) .............................. 19,800 639,788
Bed Bath & Beyond, Inc. ........................ 8,000 278,000
Best Buy Co., Inc.(a) .......................... 22,000 1,104,125
Charming Shoppes, Inc.(a) ...................... 811,300 5,374,863
Circuit City Stores, Inc. ...................... 25,800 1,162,613
Consolidated Stores Corp. ...................... 12,400 201,500
Costco Wholesale Corp.(b) ...................... 28,200 2,573,250
CVS Corp. ...................................... 48,400 1,932,975
Dayton-Hudson Corp. ............................ 55,200 4,053,750
Dillard's, Inc. ................................ 43,700 882,194
Dollar General Corporation ..................... 28,125 639,844
Federated Department Stores, Inc.(a) ........... 26,400 1,334,850
Great Atlantic & Pacific Tea Co., Inc. ......... 6,000 167,250
Harcourt General, Inc. ......................... 8,000 322,000
Home Depot, Inc. ............................... 280,350 19,221,497
Huttig Building Products, Inc. ................. 2,400 11,849
IKON Office Solutions, Inc. .................... 17,100 116,494
J.C. Penney Co., Inc. .......................... 33,100 659,931
Kmart Corp.(a) ................................. 638,100 6,420,881
Kohl's Corp.(a) ................................ 20,300 1,465,406
Kroger Co.(a) .................................. 107,946 2,037,481
Liz Claiborne, Inc. ............................ 10,500 395,063
Longs Drug Stores, Inc. ........................ 6,100 157,456
May Department Stores Co. ...................... 41,900 1,351,275
Nordstrom, Inc. ................................ 17,500 458,281
Office Depot, Inc. ............................. 34,500 377,344
Pep Boys - Manny, Moe & Jack ................... 6,927 63,209
Rite Aid Corp. ................................. 31,400 351,288
Safeway, Inc.(a) ............................... 62,900 2,236,881
Sears, Roebuck & Co. ........................... 48,900 1,488,394
Sherwin-Williams Co. ........................... 21,800 457,800
Staples, Inc.(a) ............................... 59,500 1,234,625
Supervalu, Inc. ................................ 13,000 260,000
Tandy Corp. .................................... 25,400 1,249,363
The Gap, Inc. .................................. 109,300 5,027,800
The Limited, Inc. .............................. 198,053 8,578,171
TJX Companies, Inc. ............................ 40,600 829,763
Toys 'R' Us, Inc.(a) ........................... 146,500 2,096,781
Wal-Mart Stores, Inc.(b) ....................... 553,100 38,233,038
Walgreen Co. ................................... 124,200 3,632,850
Winn-Dixie Stores, Inc. ........................ 17,500 418,906
--------------
121,258,583
--------------
RUBBER -- 0.0%
Cooper Tire & Rubber Co. ....................... 9,300 144,731
Goodyear Tire & Rubber Co. ..................... 59,400 1,674,338
--------------
1,819,069
--------------
<CAPTION>
COMMON
VALUE
SHARES (NOTE 2)
STOCKS (CONTINUED) ------------- --------------
<S> <C> <C>
TELECOMMUNICATIONS -- 4.7%
ADC Telecommunications, Inc.(a) ................ 14,000 $ 1,015,875
AFLAC Inc. ..................................... 30,000 1,415,625
Alcatel Alsthom, ADR, (France)(b) .............. 124,900 5,620,500
Alltel Corp. ................................... 35,800 2,960,213
Andrew Corp.(a) ................................ 9,900 187,481
AT&T Corp.(b) .................................. 397,748 20,185,711
Bell Atlantic Corp. ............................ 194,900 11,998,531
BellSouth Corp. ................................ 235,600 11,029,025
CenturyTel, Inc. ............................... 15,400 729,575
General Instrument Corp. ....................... 21,000 1,785,000
Global Crossing Ltd.(a) ........................ 88,690 4,434,500
GTE Corp. ...................................... 122,800 8,665,075
Lucent Technologies, Inc. ...................... 383,755 28,709,671
MCI Worldcom, Inc. ............................. 350,421 18,594,214
Motorola, Inc. ................................. 77,100 11,352,975
Nextel Communications, Inc. (Class "A"
Stock)(a)(b) ................................. 42,300 4,362,188
Nortel Networks Corp.(b) ....................... 164,980 16,662,980
QUALCOMM, Inc.(b) .............................. 79,600 14,029,500
SBC Communications, Inc. ....................... 426,308 20,782,515
Scientific-Atlanta, Inc. ....................... 8,400 467,250
Sprint Corp.(b) ................................ 108,600 7,310,138
Sprint Corp. (PCS Group) ....................... 55,450 5,683,625
Tellabs, Inc.(a) ............................... 49,100 3,151,606
US West, Inc. .................................. 63,660 4,583,520
--------------
205,717,293
--------------
TEXTILES -- 0.0%
National Service Industries, Inc. .............. 4,000 118,000
Russell Corp. .................................. 5,700 95,475
Springs Industries, Inc. ....................... 3,200 127,800
VF Corp. ....................................... 15,600 468,000
--------------
809,275
--------------
TOBACCO -- 0.1%
R.J. Reynolds Tobacco Holdings, Inc. ........... 94,066 1,657,913
UST, Inc. ...................................... 22,700 571,756
--------------
2,229,669
--------------
TOYS -- 0.0%
Hasbro, Inc. ................................... 25,500 486,094
Mattel, Inc. ................................... 47,151 618,857
--------------
1,104,951
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp.(a) ....................... 36,400 1,490,125
Ryder System, Inc. ............................. 9,000 219,938
Yellow Corp.(a) ................................ 43,600 733,025
--------------
2,443,088
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B10
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (NOTE 2)
(CONTINUED) ------------- --------------
UTILITIES - ELECTRICAL & GAS -- 0.5%
<S> <C> <C>
Ameren Corp.(b) ................................ 17,700 $ 579,675
American Electric Power Co., Inc.(b) ........... 23,500 754,938
Carolina Power & Light Co. ..................... 20,000 608,750
Central & South West Corp.(b) .................. 27,600 552,000
CINergy Corp. .................................. 19,600 472,850
CMS Energy Corp. ............................... 13,000 405,438
Consolidated Edison, Inc.(b) ................... 28,100 969,450
Constellation Energy Group ..................... 18,400 533,600
Dominion Resources, Inc.(b) .................... 24,300 953,775
DTE Energy Co. ................................. 19,200 602,400
Duke Energy Corp. .............................. 46,200 2,315,775
Edison International ........................... 45,700 1,196,769
Entergy Corp. .................................. 29,800 767,350
FirstEnergy Corp.(a) ........................... 31,300 710,119
Florida Progress Corp. ......................... 7,000 296,188
FPL Group, Inc. ................................ 23,200 993,250
GPU, Inc. ...................................... 16,400 490,975
New Century Energies, Inc. ..................... 15,000 455,625
Niagara Mohawk Holdings Inc.(a) ................ 22,600 314,988
Northern States Power Co. ...................... 17,700 345,150
Pacific Gas & Electric, Co. .................... 47,200 967,600
PECO Energy Co. ................................ 23,200 806,200
Pinnacle West Capital Corp. .................... 3,000 91,688
PP&L Resources, Inc. ........................... 20,200 462,075
Public Service Enterprise Group, Inc............ 28,800 1,002,600
Reliant Energy, Inc. ........................... 39,100 894,413
Southern Co.(b) ................................ 89,400 2,100,900
Texas Utilities Co. ............................ 35,800 1,273,138
Unicom Corp. ................................... 27,400 917,900
--------------
22,835,579
--------------
WASTE MANAGEMENT -- 0.0%
Allied Waste Industries, Inc. .................. 10,000 88,125
Waste Management, Inc. ......................... 77,142 1,325,878
--------------
1,414,003
--------------
TOTAL COMMON STOCKS
(cost $1,366,247,177).......................................... 1,826,564,329
--------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS -- 0.9%
COMMON STOCKS (NOTE 2)
(CONTINUED) ------------- --------------
UTILITIES - ELECTRICAL & GAS -- 0.5%
<S> <C> <C>
FINANCIAL SERVICES -- 0.7%
Central Hispano Capital Corp., ................. 1,225,900 30,798,669
--------------
TELECOMMUNICATIONS -- 0.2%
Telecomunicacoes Brasileiras S.A., ADR(b) ...... 50,200 6,450,700
--------------
TOTAL PREFERRED STOCKS
(cost $36,227,123)............................................. 37,249,369
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $3,645,523,405).......................................... 4,027,176,265
--------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
INVESTMENTS -- 18.9% ------------ --------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 11.5%
Baker Hughes, Inc.,
4.75%, 01/03/00 .............................. P1 $ 1,000 999,736
Barton Capital Corp,
5.94%, 01/21/00(c) ........................... P1 20,000 19,940,600
6.20%, 01/20/00 .............................. P1 10,000 9,967,278
6.29%, 01/10/00 .............................. P1 500 499,214
6.00%, 01/14/00(c) ........................... P1 5,430 5,420,045
<CAPTION>
SHORT-TERM
INVESTMENTS MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
(CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
<S> <C> <C> <C>
<CAPTION>
COMMERCIAL PAPER (CONT'D.)
Bayerische Landesbank,
<S> <C> <C> <C>
5.98%, 02/23/00 .............................. P1 $ 570 $ 564,982
Bell Atlantic Corp.,
5.20%, 01/07/00 .............................. P1 1,016 1,015,120
BMW U.S. Capital,
5.00%, 01/04/00 .............................. P1 1,000 999,583
Central & SouthWest Corp.,
7.20%, 01/21/00(c) ........................... P2 25,000 24,910,000
Clipper Receivables Corp.,
6.12%, 01/24/00 .............................. P1 12,554 12,504,914
Coca Cola Enterprises,
5.25%, 01/03/00 .............................. NR 1,000 999,708
Comdisco, Inc.,
6.45%, 01/28/00(c) ........................... P2 10,000 9,955,208
6.55%, 01/28/00(c) ........................... P2 15,000 14,931,771
Cox Enterprises, Inc.,
6.85%, 01/21/00(c) ........................... P2 26,000 25,910,950
Duke Energy Corp,
5.00%, 01/03/00 .............................. P1 1,000 999,722
Falcon Asset Securitization Corp.,
6.00%, 01/11/00(c) ........................... P1 40,000 39,946,667
Ford Motor Credit Corp,
5.40%, 01/04/00 .............................. P1 1,000 999,550
GTE Funding, Inc.,
6.03%, 01/10/00(c) ........................... P1 25,000 24,970,688
Heller Financial, Inc.,
6.00%, 01/13/00(c) ........................... P2 12,500 12,479,167
6.05%, 01/14/00(c) ........................... P2 10,000 9,981,514
Kerr McGee Credit LLC,
6.45%, 01/14/00(c) ........................... P2 10,000 9,980,292
6.50%, 01/13/00(c) ........................... P2 33,000 32,940,417
Keyspan Corp.,
6.50%, 01/12/00(c) ........................... P2 43,000 42,930,125
Merrill Lynch & Co. Inc,
6.12%, 01/18/00 .............................. P1 1,000 997,110
Morgan (J.P.) & Co., Inc.,
5.96%, 03/13/00 .............................. P1 1,005 993,020
National Australia Fund,
5.00%, 01/04/00 .............................. P1 1,000 999,583
Novartis Financial Corp.,
5.50%, 01/05/00 .............................. P1 1,000 999,389
Old Line Funding Corp,
6.01%, 01/12/00(c) ........................... P1 22,990 22,955,458
6.33%, 01/12/00 .............................. P1 8,500 8,483,560
Svenska Handelsbank, Inc.,
6.07%, 01/14/00(c) ........................... P1 50,000 50,000,000
Thunder Bay Funding,
6.27%, 01/13/00 .............................. P1 1,100 1,097,701
Triple-A One Funding, Inc.,
6.01%, 01/12/00(c) ........................... NR 21,051 21,019,371
6.27%, 01/14/00 .............................. NR 33,373 33,297,438
6.34%, 01/19/00 .............................. NR 442 440,599
UBS Finance (Delaware),
4.50%, 01/04/00 .............................. NR 1,000 999,625
Windmill Funding Corp.,
6.38%, 01/07/00(c) ........................... NR 58,000 57,958,884
--------------
504,088,989
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B11
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) (000)
(CONTINUED) ------------ --------- --------------
<S> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS -- 3.6%
Advanta Corp.,
7.50%, 08/28/00 .............................. Ba2 $ 35,000 $ 34,638,100
Bear Stearns & Co.,
6.50%, 07/05/00 .............................. A2 20,000 19,976,000
Camden Property Trust,
7.23%, 10/30/00 .............................. Baa2 22,000 21,918,600
Carnival Corp.,
5.65%, 10/15/00 .............................. A2 5,000 4,953,450
Comdisco, Inc.,
5.94%, 04/13/00 .............................. Baa1 12,500 12,461,250
Equity Residential Properties Trust,
6.15%, 09/15/00 .............................. A3 45,000 44,631,000
ICI Wilmington Inc.,
9.50%, 11/15/00 .............................. Baa1 8,000 8,154,640
ITT Corp.,
6.25%, 11/15/00 .............................. Baa2 5,253 5,150,724
Safeway Stores Inc.,
5.75%, 11/15/00 .............................. Baa2 6,000 5,946,960
--------------
157,830,724
--------------
</TABLE>
<TABLE>
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.0%
Joint Repurchase Agreement Account,
2.875%, 01/03/00 (Note 5) .................... 87,560 87,560,000
--------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TIME DEPOSITS -- 1.7%
Abbey National Treasury Services,
9.50%, 01/04/00(c) ........................... P1 50,000 50,000,000
Banque Nationale de Paris,
2.00%, 01/03/00(c) ........................... P1 3,345 3,345,000
Chase Manhattan Corp.,
5.50%, 01/03/00(c) ........................... P1 10,000 10,000,000
Deutsche Bank,
5.00%, 01/03/00(c) ........................... P1 13,000 13,000,000
--------------
76,345,000
--------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS PRINCIPAL
AMOUNT VALUE
(000) (000)
(CONTINUED) --------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
United States Treasury Bill,
5.196%, 03/16/00(d) .......................... $ 1,800 $ 1,780,515
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $828,802,279)........................................ 827,605,228
--------------
TOTAL INVESTMENTS -- 110.7%
(cost $4,474,325,684: Note 6).............................. 4,854,781,493
VARIATION MARGIN ON OPEN FUTURES CONTRACTS(E)................
(125,094)
LIABILITIES IN EXCESS OF OTHER ASSETS -- 10.7%............... (467,516,168)
--------------
TOTAL NET ASSETS -- 100%..................................... $4,387,140,231
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (German Stock Company)
ADR American Depository Receipt
GDR Global Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
SA Sociedad Aronime (Spanish Corporation) or Societe Aronyme (French
Corporation)
(a) Non-income producing security.
(b) Portion of securities on loan with an aggregate market value of
$481,860,900, cash collateral of $504,046,862 was received with which the
portfolio purchased securities.
(c) Represents securities purchased with cash collateral received for
securities on loan.
(d) Security segregated as collateral for futures contracts.
(e) Open futures contracts as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31, APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE 1999 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
88 U.S. T-Bond Mar 00 $ 8,310,500 $ 8,002,500 $(308,000)
93 U.S. Treasury 10yr Mar 00 9,129,680 8,914,922 (214,758)
20 S&P 500 Index Mar 00 7,175,150 7,421,000 245,850
193 U.S. Treasury 5yr Mar 00 19,161,703 18,917,016 (244,687)
---------
$(521,595)
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B12
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
DECEMBER 31, 1999
<TABLE>
LONG-TERM INVESTMENTS -- 89.3%
VALUE
COMMON STOCKS -- 54.2% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 0.9%
Boeing Co. ..................................... 123,500 $ 5,132,969
GenCorp, Inc. .................................. 403,900 3,988,512
General Dynamics Corp. ......................... 22,200 1,171,050
Goodrich (B.F.) Co. ............................ 10,600 291,500
Honeywell International, Inc. .................. 99,912 5,763,673
Litton Industries, Inc. (a)..................... 306,000 15,261,750
Lockheed Martin Corp. .......................... 48,900 1,069,687
Northrop Grumman Corp. ......................... 8,500 459,531
Parker-Hannifin Corp. .......................... 189,500 9,723,719
Raytheon Co. (Class "B" Stock) ................. 44,100 1,171,406
United Technologies Corp. ...................... 61,600 4,004,000
--------------
48,037,797
--------------
AIRLINES -- 1.2%
AMR Corp. ...................................... 638,000 42,746,000
Delta Air Lines, Inc. .......................... 17,800 886,662
Southwest Airlines Co. ......................... 61,800 1,000,387
US Airways Group, Inc. (a)...................... 472,500 15,149,531
--------------
59,782,580
--------------
APPAREL -- 0.1%
Nike, Inc. (Class "B" Stock) ................... 37,900 1,878,419
Reebok International Ltd. ...................... 9,100 74,506
Titan International, Inc. ...................... 415,700 2,702,050
--------------
4,654,975
--------------
AUTOS - CARS & TRUCKS -- 1.1%
Cummins Engine Co., Inc. ....................... 4,800 231,900
Dana Corp. ..................................... 21,350 639,166
Ford Motor Co. ................................. 314,400 16,800,750
General Motors Corp. ........................... 425,700 30,943,069
Genuine Parts Co. (b)........................... 21,500 533,469
Johnson Controls, Inc. ......................... 11,600 659,750
MascoTech, Inc. ................................ 388,000 4,922,750
Midas, Inc. .................................... 90,866 1,987,694
Navistar International Corp. (a)................ 6,100 288,987
PACCAR, Inc. ................................... 10,000 443,125
TRW, Inc. ...................................... 12,800 664,800
--------------
58,115,460
--------------
BANKS AND SAVINGS & LOANS -- 1.6%
AmSouth Bancorporation ......................... 34,500 666,281
Banc One Corp. ................................. 149,764 4,801,808
Bank of New York Co., Inc. ..................... 97,400 3,896,000
BankAmerica Corp. .............................. 219,241 11,003,158
BB&T Corp. ..................................... 39,500 1,081,312
Chase Manhattan Corp. .......................... 104,400 8,110,575
Comerica, Inc. ................................. 19,000 887,062
First Union Corp. .............................. 122,700 4,026,094
Firstar Corp. .................................. 127,247 2,688,093
Fleet Boston Financial Corp. ................... 117,551 4,092,244
Golden West Financial Corp. .................... 19,200 643,200
Hanvit Bank-GDR ................................ 976,500 6,225,187
Huntington Bancshares, Inc. .................... 29,392 701,734
KeyCorp. ....................................... 54,900 1,214,662
Mellon Financial Corp. ......................... 64,200 2,186,812
Morgan (J.P.) & Co., Inc. ...................... 22,900 2,899,712
National City Corp. ............................ 78,200 1,852,362
Northern Trust Corp. ........................... 27,000 1,431,000
PNC Bank Corp. ................................. 38,600 1,717,700
Providian Financial Corp. ...................... 17,900 1,630,019
Regions Financial Corp. ........................ 28,100 706,012
Republic New York Corp. ........................ 13,500 972,000
SouthTrust Corp. ............................... 19,000 718,437
Summit Bancorp (b).............................. 21,100 646,187
Suntrust Banks, Inc. ........................... 40,400 2,780,025
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Synovus Financial Corp. ........................ 35,100 $ 697,612
U.S. Bancorp. .................................. 91,500 2,178,844
Union Planters Corp. ........................... 18,000 709,875
Wachovia Corp. ................................. 25,200 1,713,600
Wells Fargo & Co. .............................. 207,300 8,382,694
--------------
81,260,301
--------------
BUSINESS SERVICES
Equifax, Inc. .................................. 17,100 402,919
Omnicom Group, Inc. (b)......................... 22,700 2,270,000
--------------
2,672,919
--------------
CHEMICALS -- 1.2%
Air Products & Chemicals, Inc. ................. 28,900 969,956
Dow Chemical Co. ............................... 27,900 3,728,137
Du Pont (E.I.) de Nemours & Co. ................ 134,149 8,837,065
Eastman Chemical Co. ........................... 9,800 467,337
Engelhard Corp. ................................ 15,600 294,450
Ferro Corp. .................................... 553,650 12,180,300
FMC Corp. (a)................................... 3,500 200,594
Grace (W.R.) & Co .............................. 8,000 111,000
Great Lakes Chemical Corp. ..................... 6,500 248,219
Hercules, Inc. ................................. 11,900 331,712
Lyondell Chemical Co. .......................... 329,000 4,194,750
Millennium Chemicals, Inc. ..................... 601,600 11,881,600
Monsanto Co. ................................... 79,300 2,825,062
OM Group, Inc. ................................. 260,300 8,964,081
Omnova Solutions, Inc. ......................... 403,900 3,130,225
Praxair, Inc. .................................. 19,800 996,187
Rohm & Haas Co. ................................ 27,158 1,104,991
Sigma-Aldrich Corp. ............................ 11,600 348,725
Union Carbide Corp. ............................ 15,600 1,041,300
--------------
61,855,691
--------------
CIRCUITS
Analog Devices, Inc. ........................... 19,000 1,767,000
--------------
COMMERCIAL SERVICES
Cendant Corp. (a)............................... 94,000 2,496,875
Deluxe Corp. ................................... 9,000 246,937
Quintiles Transnational Corp. .................. 6,000 112,125
--------------
2,855,937
--------------
COMPUTER SERVICES -- 4.3%
3Com Corp. (a).................................. 45,500 2,138,500
Adaptec, Inc. (a)............................... 7,000 349,125
Adobe Systems, Inc. ............................ 13,200 887,700
America Online, Inc. (a)(b)..................... 275,600 20,790,575
Autodesk, Inc. ................................. 7,600 256,500
Automatic Data Processing, Inc. ................ 80,600 4,342,325
BMC Software, Inc. (a).......................... 29,200 2,334,175
Cabletron Systems, Inc. (a)..................... 25,600 665,600
Ceridian Corp. (a).............................. 18,600 401,062
Cisco Systems, Inc. (a)......................... 409,100 43,824,837
Citrix Systems, Inc. ........................... 9,000 1,107,000
Computer Associates International, Inc. ........ 69,400 4,853,662
Computer Sciences Corp. (a)..................... 20,000 1,892,500
Compuware Corp. (a)............................. 48,000 1,788,000
Comverse Technology, Inc. (a)................... 7,300 1,056,675
Electronic Data Systems Corp. .................. 62,600 4,190,287
EMC Corp. (a)(b)................................ 127,168 13,893,104
First Data Corp. ............................... 54,600 2,692,462
Lexmark International Group, Inc. .............. 12,884 1,166,002
Microsoft Corp. (a)............................. 642,300 74,988,525
Novell, Inc. (a)................................ 43,500 1,737,281
Oracle Corp. (a)(b)............................. 180,550 20,232,884
Parametric Technology Corp. (a)................. 31,500 $ 852,469
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B13
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Peoplesoft, Inc. ............................... 30,000 641,250
Silicon Graphics, Inc. (a)...................... 23,400 229,612
Unisys Corp. ................................... 31,400 1,002,837
Yahoo!, Inc. (a)................................ 31,000 13,413,312
--------------
221,728,261
--------------
COMPUTERS -- 1.6%
Apple Computer, Inc. (a)(b)..................... 19,400 1,994,562
Compaq Computer Corp. .......................... 217,461 5,885,038
Dell Computer Corp. (a)......................... 321,600 16,401,600
Gateway, Inc. .................................. 40,400 2,911,325
Hewlett-Packard Co. ............................ 127,800 14,561,212
International Business Machines Corp. .......... 227,000 24,516,000
Networking Appliance, Inc. (a).................. 14,700 1,221,019
Seagate Technology, Inc. (a).................... 28,900 1,345,656
Sun Microsystems, Inc. (a)...................... 194,900 15,092,569
--------------
83,928,981
--------------
CONSTRUCTION -- 0.4%
Centex Corp. ................................... 7,000 172,812
Fluor Corp. .................................... 9,800 449,575
Foster Wheeler Corp. ........................... 6,600 58,575
Pulte Corp. .................................... 6,900 155,250
Standard Pacific Corp. ......................... 632,400 6,956,400
Vulcan Materials Co. ........................... 9,000 359,437
Webb (Del E.) Corp. ............................ 576,500 14,376,469
--------------
22,528,518
--------------
CONTAINERS -- 0.2%
Ball Corp. ..................................... 2,700 106,312
Bemis Co., Inc. ................................ 6,600 230,175
Crown Cork & Seal Co., Inc. .................... 15,600 349,050
Owens-Illinois, Inc. (a)........................ 255,700 6,408,481
Pactiv Corp. ................................... 21,500 228,437
Sealed Air Corp. ............................... 10,900 564,756
--------------
7,887,211
--------------
COSMETICS & SOAPS -- 0.6%
Alberto Culver Co. (Class "B" Stock) ........... 6,200 160,037
Avon Products, Inc. ............................ 31,400 1,036,200
Colgate-Palmolive Co. .......................... 75,100 4,881,500
Gillette Co. ................................... 136,100 5,605,619
International Flavors & Fragrances, Inc. ....... 13,100 494,525
Procter & Gamble Co. (b)........................ 166,600 18,253,112
--------------
30,430,993
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.6%
Eastman Kodak Co. .............................. 184,400 12,216,500
Philip Morris Co., Inc. ........................ 750,800 17,409,175
--------------
29,625,675
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.1%
Avery Dennison Corp. ........................... 15,000 1,093,125
Pitney Bowes, Inc. ............................. 33,600 1,623,300
Xerox Corp. .................................... 84,900 1,926,169
--------------
4,642,594
--------------
DIVERSIFIED OPERATIONS -- 1.4%
Fortune Brands, Inc. ........................... 21,700 717,456
General Electric Capital Corp. ................. 410,900 63,586,775
Tomkins PLC, ADR (b)............................ 617,300 9,066,594
--------------
73,370,825
--------------
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
DRUGS & MEDICAL SUPPLIES -- 2.7%
Abbott Laboratories ............................ 192,800 $ 7,001,050
Allergan, Inc. ................................. 17,600 875,600
ALZA Corp. (a).................................. 9,900 342,787
American Home Products Corp. ................... 163,900 6,463,806
Amgen, Inc. (a)................................. 127,400 7,651,962
Bard (C.R.), Inc. .............................. 5,900 312,700
Bausch & Lomb, Inc. ............................ 7,100 485,906
Baxter International, Inc. ..................... 36,700 2,305,219
Becton, Dickinson & Co. ........................ 31,500 842,625
Biomet, Inc. ................................... 14,500 580,000
Boston Scientific Corp. (a)..................... 51,800 1,133,125
Bristol-Myers Squibb Co. ....................... 250,200 16,059,712
Cardinal Health, Inc. (b)....................... 34,450 1,649,294
Guidant Corp. .................................. 37,700 1,771,900
Johnson & Johnson .............................. 170,500 15,877,812
Lilly (Eli) & Co. .............................. 138,100 9,183,650
Mallinckrodt, Inc. ............................. 7,500 238,594
Medtronic, Inc. ................................ 148,200 5,400,037
Merck & Co., Inc. .............................. 294,300 19,736,494
Pfizer, Inc. ................................... 489,200 15,868,425
Pharmacia & Upjohn, Inc. ....................... 65,800 2,961,000
Schering-Plough Corp. .......................... 184,400 7,779,375
St. Jude Medical, Inc. (a)...................... 8,900 273,119
Warner-Lambert Co. ............................. 108,300 8,873,831
Watson Pharmaceuticals, Inc. (a)................ 9,000 322,312
--------------
133,990,335
--------------
ELECTRONICS -- 1.7%
Advanced Micro Devices, Inc. (a)................ 17,000 491,937
Applied Materials, Inc. (a)..................... 47,800 6,055,662
Belden, Inc. ................................... 275,600 5,787,600
Emerson Electric Co. ........................... 55,000 3,155,625
Grainger (W.W.), Inc. .......................... 11,200 535,500
Intel Corp. (b)................................. 415,000 34,159,687
KLA-Tencor Corp. (a)............................ 10,900 1,213,987
LSI Logic Corp. (a)............................. 18,600 1,255,500
Micron Technology, Inc. ........................ 31,900 2,480,225
Molex, Inc. .................................... 14,000 793,625
Motorola, Inc. ................................. 78,100 11,500,225
National Semiconductor Corp. (a)................ 19,000 813,437
Rockwell International Corp. ................... 24,300 1,163,362
Solectron Corp. ................................ 33,500 3,186,687
Tektronix, Inc. ................................ 6,200 241,025
Teradyne, Inc., ................................ 16,000 1,056,000
Texas Instruments, Inc. ........................ 98,600 9,551,875
Thomas & Betts Corp. ........................... 5,800 184,875
Xilinx Inc. (a)................................. 34,000 1,545,937
--------------
85,172,771
--------------
EXPLORATION & PRODUCTION
Apex Silver Mines Ltd. ......................... 340,400 4,063,525
--------------
FINANCIAL SERVICES -- 4.4%
American Express Co. ........................... 56,500 9,393,125
Associates First Capital Corp. ................. 92,290 2,532,207
Bear Stearns Companies, Inc. ................... 14,358 613,804
Block (H.R.), Inc. ............................. 11,400 498,750
Capital One Financial Corp. .................... 24,900 1,199,869
Citigroup, Inc. ................................ 747,876 41,553,860
Countrywide Credit Industries, Inc. ............ 14,000 353,500
Dun & Bradstreet Corp. ......................... 20,100 592,950
Federal Home Loan Mortgage Corp. ............... 87,400 4,113,262
Federal National Mortgage Association .......... 131,300 8,198,044
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B14
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Fifth Third Bancorp ............................ 34,300 $ 2,516,762
Franklin Resource, Inc. ........................ 30,600 981,112
Goldman Sachs Group, Inc. ...................... 53,100 5,001,356
Household International, Inc. .................. 62,492 2,327,827
Lehman Brothers Holdings, Inc. ................. 719,100 60,898,781
MBNA Corp. ..................................... 101,300 2,760,425
Merrill Lynch & Co., Inc. ...................... 285,000 23,797,500
Morgan Stanley Dean Witter & Co. ............... 293,695 41,924,961
Old Kent Financial Corp. ....................... 7,000 247,625
PaineWebber Group, Inc. ........................ 14,000 543,375
Paychex, Inc. .................................. 29,850 1,194,000
Schwab (Charles) Corp. (a)...................... 102,700 3,941,112
SLM Holding Corp. .............................. 19,000 802,750
State Street Corp. ............................. 20,600 1,505,087
T. Rowe Price & Associates ..................... 8,000 295,500
Washington Mutual, Inc. ........................ 74,136 1,927,536
--------------
219,715,080
--------------
FOOD & BEVERAGES -- 1.4%
Anheuser-Busch Companies, Inc. (b).............. 60,300 4,273,762
Archer-Daniels-Midland Co. ..................... 76,560 933,075
Bestfoods ...................................... 35,700 1,876,481
Brown-Forman Corp. (Class "B" Stock) ........... 6,700 383,575
Campbell Soup Co. .............................. 54,800 2,120,075
Coca Cola Enterprises, Inc. (b)................. 54,500 1,096,812
Coca-Cola Co. .................................. 311,200 18,127,400
ConAgra, Inc. .................................. 60,900 1,374,056
Coors (Adolph) Co. (Class "B" Stock) ........... 2,900 152,250
General Mills, Inc. ............................ 37,800 1,351,350
Heinz (H.J.) & Co. ............................. 45,200 1,799,525
Hershey Foods Corp. ............................ 16,500 783,750
Kellogg Co. .................................... 50,900 1,568,356
Nabisco Group Holdings Corp. ................... 1,226,900 13,035,812
PepsiCo, Inc. .................................. 184,400 6,500,100
Quaker Oats Co. ................................ 16,000 1,050,000
Ralston-Ralston Purina Group (b)................ 42,200 1,176,325
Sara Lee Corp. ................................. 115,000 2,537,187
Seagram Co., Ltd. .............................. 52,600 2,363,712
Sysco Corp. .................................... 40,900 1,618,106
Whitman Corp. .................................. 545,200 7,326,125
Wrigley (William) Jr. Co. ...................... 15,200 1,260,650
--------------
72,708,484
--------------
FOREST PRODUCTS -- 2.3%
Boise Cascade Corp. ............................ 665,800 26,964,900
Champion International Corp. ................... 401,600 24,874,100
Fort James Corp. ............................... 27,100 741,862
Georgia-Pacific Corp. .......................... 327,000 16,595,250
International Paper Co. ........................ 52,682 2,973,240
Louisiana-Pacific Corp. ........................ 699,700 9,970,725
Mead Corp. ..................................... 403,000 17,505,312
Potlatch Corp. ................................. 3,700 165,112
Temple-Inland, Inc. ............................ 7,100 468,156
Westvaco Corp. ................................. 11,900 388,237
Weyerhaeuser Co. ............................... 25,400 1,824,037
Willamette Industries, Inc. .................... 299,200 13,894,100
--------------
116,365,031
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group .......................... 10,500 664,125
Consolidated Natural Gas Co. ................... 12,900 837,694
El Paso Energy Co .............................. 19,500 756,844
Peoples Energy Corp. ........................... 5,700 190,950
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Sempra Energy .................................. 30,253 $ 525,646
Williams Companies, Inc. ....................... 54,800 1,674,825
--------------
4,650,084
--------------
HOSPITALS/HOSPITAL MANAGEMENT -- 1.4%
Columbia/HCA Healthcare Corp. .................. 909,600 26,662,650
Healthsouth Corp. (a)........................... 55,000 295,625
Humana, Inc. (a)................................ 1,011,100 8,278,381
IMS Health, Inc. ............................... 40,900 1,111,969
LifePoint Hospitals, Inc. (a)................... 42,447 501,405
Manor Care, Inc. ............................... 13,300 212,800
McKesson HBOC, Inc. ............................ 34,381 775,721
Service Corp. International .................... 35,100 243,506
Shared Medical Systems Corp. ................... 3,200 163,000
Smith (A.O.) Corp. ............................. 433,350 9,479,531
Tenet Healthcare Corp. (a)...................... 1,015,800 23,871,300
Triad Hospitals, Inc. (a)....................... 42,447 642,011
Wellpoint Health Networks, Inc. ................ 6,000 395,625
--------------
72,633,524
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.3%
Clorox Co. ..................................... 28,400 1,430,650
Kimberly-Clark Corp. ........................... 71,100 4,639,275
Leggett & Platt, Inc. .......................... 481,800 10,328,587
--------------
16,398,512
--------------
HOUSING RELATED -- 1.3%
Armstrong World Industries, Inc. ............... 5,800 193,575
Fleetwood Enterprises, Inc. .................... 4,100 84,563
Hanson, PLC, ADR, (United Kingdom) ............. 1,221,100 49,378,231
Kaufman & Broad Home Corp. ..................... 6,400 154,800
Lowe's Companies, Inc. ......................... 46,900 2,802,275
Masco Corp. .................................... 48,000 1,218,000
Maytag Corp. ................................... 10,700 513,600
Newell Rubbermaid, Inc. (b)..................... 36,155 1,048,495
Owens Corning .................................. 410,500 7,927,781
Stanley Works .................................. 9,900 298,238
Tupperware Corp. ............................... 9,900 167,681
Whirlpool Corp. ................................ 9,900 644,119
--------------
64,431,358
--------------
INSTRUMENT-CONTROLS
PE Corp-PE Biosystems Group. ................... 13,000 1,564,063
Perkin Elmer, Inc. ............................. 4,300 179,256
--------------
1,743,319
--------------
INSURANCE -- 2.4%
Aetna, Inc. .................................... 18,900 1,054,856
Allstate Corp. ................................. 99,100 2,378,400
American General Corp. ......................... 30,900 2,344,538
American International Group, Inc. ............. 195,478 21,136,059
Aon Corp. (b)................................... 33,450 1,338,000
Berkley (W.R.) Corp. ........................... 175,850 3,670,869
Chubb Corp. .................................... 237,900 13,396,744
CIGNA Corp. .................................... 24,700 1,989,894
Cincinnati Financial Corp. ..................... 20,200 629,988
Conseco, Inc. .................................. 41,587 743,368
Financial Security Assurance Holdings Ltd. ..... 140,100 7,302,713
Hartford Financial Services Group, Inc. ........ 28,900 1,369,138
Jefferson-Pilot Corp. .......................... 13,400 914,550
Lincoln National Corp. ......................... 25,000 1,000,000
Loews Corp. .................................... 178,300 10,820,581
Marsh & McLennan Companies, Inc. ............... 33,600 $ 3,215,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B15
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
MBIA, Inc. ..................................... 12,100 639,031
MGIC Investment Corp. (b)....................... 13,300 800,494
Progressive Corp. .............................. 9,400 687,375
Reinsurance Group of America, Inc. ............. 711,900 19,755,225
SAFECO Corp. ................................... 356,300 8,862,963
St. Paul Companies, Inc. ....................... 29,100 980,306
Torchmark Corp. ................................ 421,600 12,252,750
Trenwick Group, Inc. ........................... 273,300 4,629,019
United Healthcare Corp. ........................ 22,400 1,190,000
UnumProvident Corp. (b)......................... 30,970 992,976
--------------
124,094,937
--------------
LEISURE -- 0.3%
Brunswick Corp. ................................ 11,200 249,200
Carnival Corp. (Class "A" Stock) ............... 79,600 3,805,875
Disney (Walt) Co. .............................. 261,100 7,637,175
Harrah's Entertainment, Inc. (a)................ 16,400 433,575
Hilton Hotels Corp. ............................ 30,800 296,450
Marriott International, Inc. (Class "A"
Stock) ....................................... 31,000 978,438
Mirage Resorts, Inc. (a)........................ 22,500 344,531
--------------
13,745,244
--------------
MACHINERY -- 0.5%
Briggs & Stratton Corp. ........................ 3,300 176,963
Caterpillar, Inc. .............................. 45,100 2,122,519
Commercial Intertech Corp. ..................... 115,300 1,470,075
Cooper Industries, Inc. ........................ 12,900 521,644
Deere & Co. .................................... 29,500 1,279,563
Delphi Automotive Systems Corp. ................ 347,454 5,472,401
Dover Corp. .................................... 25,800 1,170,675
Eaton Corp. .................................... 9,200 668,150
Flowserve Corp. ................................ 161,991 2,753,847
Ingersoll-Rand Co. ............................. 20,600 1,134,288
Milacron, Inc. ................................. 6,400 98,400
Paxar Corp. .................................... 954,575 8,054,227
Snap-On, Inc. .................................. 7,100 188,594
Timken Co. ..................................... 10,200 208,463
--------------
25,319,809
--------------
MANUFACTURING -- 0.4%
Hussmann International, Inc. ................... 491,500 7,403,219
Illinois Tool Works, Inc. (b)................... 31,800 2,148,488
Tyco International Ltd. ........................ 211,766 8,232,403
--------------
17,784,110
--------------
MEDIA -- 2.2%
CBS Corp. (a)................................... 359,799 23,004,649
Central Newspapers, Inc. (Class "A" Stock) ..... 410,600 16,167,375
Clear Channel Communications, Inc. (a)(b)....... 41,200 3,677,100
Comcast Corp. (Special Class "A" Stock) (b)..... 96,800 4,864,200
Donnelley (R.R.) & Sons Co. .................... 15,000 372,188
Dow Jones & Co., Inc. .......................... 10,700 727,600
Gannett Co., Inc. .............................. 35,500 2,895,469
Houghton Mifflin Co. ........................... 240,700 10,154,531
Interpublic Group of Companies, Inc. ........... 34,600 1,995,988
Knight-Ridder, Inc. (b)......................... 248,600 14,791,700
Lee Enterprises, Inc. .......................... 208,900 6,671,744
McGraw-Hill, Inc. .............................. 24,700 1,522,138
Mediaone Group, Inc. (b)........................ 77,900 $ 5,983,694
Meredith Corp. ................................. 4,600 191,763
New York Times Co. (Class "A" Stock) (b)........ 22,200 1,090,575
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Time Warner, Inc. .............................. 159,300 11,539,294
Times Mirror Co. (Class "A" Stock) ............. 8,600 576,200
Tribune Co. .................................... 29,600 1,629,850
Viacom, Inc. (Class "B" Stock) (a).............. 88,700 5,360,806
--------------
113,216,864
--------------
METALS-FERROUS -- 0.7%
AK Steel Holding Corp. ......................... 606,100 11,440,138
Allegheny Technologies, Inc. ................... 12,650 283,834
Bethlehem Steel Corp. (a)....................... 924,400 7,741,850
Material Sciences Corp. (a)..................... 397,900 4,053,606
National Steel Corp. (Class "B" Stock) (a)...... 147,300 1,095,544
Nucor Corp. .................................... 11,500 630,344
USX-U.S. Steel Group, Inc. ..................... 348,500 11,500,500
Worthington Industries, Inc. ................... 9,700 160,656
--------------
36,906,472
--------------
METALS-NON FERROUS -- 2.0%
Alcan Aluminum Ltd. (b)......................... 28,800 1,186,200
Alcoa, Inc. .................................... 1,200,500 99,641,500
Inco Ltd. ...................................... 27,000 634,500
Reynolds Metals Co. ............................ 8,900 681,963
--------------
102,144,163
--------------
MINERAL RESOURCES
Burlington Resources, Inc. (b).................. 21,800 720,763
Homestake Mining Co. ........................... 34,300 267,969
Phelps Dodge Corp. ............................. 8,653 580,833
--------------
1,569,565
--------------
MISCELLANEOUS-BASIC INDUSTRY -- 0.9%
AES Corp. ...................................... 25,000 1,868,750
Crane Co. ...................................... 7,300 145,088
Danaher Corp. .................................. 16,000 772,000
Donaldson Co., Inc. ............................ 448,600 10,794,438
Ecolab, Inc. ................................... 17,300 676,863
IDEX Corp. (b).................................. 246,700 7,493,513
ITT Industries, Inc. ........................... 11,100 371,156
Mark IV Industries, Inc. ....................... 355,500 6,287,906
Millipore Corp. ................................ 7,000 270,375
NACCO Industries, Inc. (Class "A" Stock) ....... 1,300 72,231
Pall Corp. ..................................... 17,200 370,875
PPG Industries, Inc. ........................... 20,400 1,276,275
Textron, Inc. .................................. 20,200 1,549,088
Thermo Electron Corp. (a)....................... 17,500 262,500
Trinity Industries, Inc. ....................... 214,100 6,088,469
Wolverine Tube, Inc. (a)........................ 155,300 2,193,613
York International Corp. ....................... 238,800 6,552,075
--------------
47,045,215
--------------
MISCELLANEOUS-CONSUMER GROWTH/STABLE -- 0.3%
American Greetings Corp.
(Class "A" Stock) ............................ 11,800 278,775
Black & Decker Corp. ........................... 10,800 564,300
Corning, Inc. .................................. 30,500 3,932,594
Jostens, Inc. .................................. 6,300 153,169
Minnesota Mining & Manufacturing Co. ........... 51,600 5,050,350
MISCELLANEOUS-CONSUMER GROWTH/STABLE (CONT'D.)
Polaroid Corp. ................................. 5,700 $ 107,231
Unilever NV .................................... 70,942 3,861,905
--------------
13,948,324
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
OIL & GAS -- 2.7%
Amerada Hess Corp. ............................. 10,500 595,875
Anadarko Petroleum Corp. ....................... 15,300 522,113
Ashland, Inc. .................................. 8,700 286,556
Atlantic Richfield Co. ......................... 42,200 3,650,300
Basin Exploration, Inc. (a)..................... 71,400 1,258,425
Cabot Oil & Gas Corp. (Class "A" Stock) ........ 363,800 5,843,538
Chevron Corp. .................................. 83,600 7,241,850
Coastal Corp. .................................. 27,900 988,706
Eastern Enterprises ............................ 3,300 189,544
Exxon Mobil Corp. .............................. 434,258 34,984,910
Kerr-McGee Corp. ............................... 10,609 657,758
Murphy Oil Corp. ............................... 114,000 6,540,750
NICOR, Inc. .................................... 5,000 162,500
Noble Affiliates, Inc. ......................... 208,900 4,478,294
Ocean Energy, Inc. ............................. 245,500 1,902,625
Phillips Petroleum Co. ......................... 31,600 1,485,200
Pioneer Natural Resources Co. .................. 1,755,631 15,690,952
Royal Dutch Petroleum Co. ...................... 270,100 16,324,169
Sunoco, Inc. ................................... 10,800 253,800
Texaco, Inc. ................................... 67,200 3,649,800
Total SA (Class "B" Stock), (France)............ 327,959 22,711,161
Transocean Sedco ............................... 14,036 472,838
Union Pacific Resources Group, Inc. ............ 32,200 410,550
Unocal Corp. ................................... 30,800 1,033,725
USX-Marathon Group ............................. 38,700 955,406
Western Gas Resources, Inc. .................... 423,100 5,579,631
--------------
137,870,976
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Conoco, Inc (Class "B") ........................ 69,624 1,731,897
Eog Resources, Inc. ............................ 198,700 3,489,669
Occidental Petroleum Corp. ..................... 44,400 960,150
--------------
6,181,716
--------------
OIL & GAS SERVICES -- 0.5%
Apache Corp. ................................... 10,900 402,619
Baker Hughes, Inc. ............................. 41,740 879,149
Enron Corp. .................................... 91,200 4,047,000
Halliburton Co. ................................ 55,300 2,225,825
Helmerich & Payne, Inc. ........................ 8,200 178,863
McDermott International, Inc. .................. 1,629,400 14,766,438
ONEOK, Inc. .................................... 5,000 125,625
Rowan Companies, Inc. (a)....................... 10,100 219,044
Schlumberger Ltd. (b)........................... 72,500 4,078,125
Tosco Corp ..................................... 9,000 244,688
--------------
27,167,376
--------------
PRECIOUS METALS -- 0.2%
Barrick Gold Corp. ............................. 52,400 926,825
Freeport-McMoRan Copper & Gold, Inc. (Class "B"
Stock) ....................................... 22,100 466,863
Newmont Mining Corp. ........................... 25,400 622,300
Placer Dome, Inc. .............................. 28,000 301,000
Stillwater Mining Co. (a)....................... 301,800 9,619,875
--------------
11,936,863
--------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe Corp. ............. 60,500 1,467,125
CSX Corp. ...................................... 29,300 919,288
RAILROADS (CONT'D.)
Kansas City Southern Industries, Inc............ 11,000 $ 820,875
Norfolk Southern Corp. ......................... 48,900 1,002,450
Union Pacific Corp. ............................ 31,800 1,387,275
--------------
5,597,013
--------------
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
REAL ESTATE DEVELOPMENT -- 1.1%
Crescent Real Estate Equities Co. .............. 1,377,600 25,313,400
Equity Residential Properties Trust ............ 150,900 6,441,544
Vornado Realty Trust ........................... 745,100 24,215,750
--------------
55,970,694
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc. ....................... 19,000 344,375
McDonald's Corp. ............................... 169,900 6,849,094
Tricon Global Restaurants, Inc. (a)............. 20,100 776,363
Wendy's International, Inc. .................... 15,700 323,813
--------------
8,293,645
--------------
RETAIL -- 3.6%
Albertson's, Inc. .............................. 53,861 1,737,017
AutoZone, Inc. (a).............................. 19,700 636,556
Bed Bath & Beyond, Inc. ........................ 8,000 278,000
Best Buy Co., Inc. (a).......................... 22,000 1,104,125
Charming Shoppes, Inc. (a)...................... 3,332,400 22,077,150
Circuit City Stores, Inc. ...................... 25,200 1,135,575
Consolidated Stores Corp. ...................... 13,100 212,875
Costco Wholesale Corp. (b)...................... 27,700 2,527,625
CVS Corp. ...................................... 49,900 1,992,881
Dayton-Hudson Corp. ............................ 56,600 4,156,563
Dillard's, Inc. ................................ 143,100 2,888,831
Dollar General Corporation ..................... 29,000 659,750
Federated Department Stores, Inc. (a)........... 25,700 1,299,456
Great Atlantic & Pacific Tea Co., Inc. ......... 5,200 144,950
Harcourt General, Inc. ......................... 8,100 326,025
Home Depot, Inc. ............................... 283,350 19,427,184
Huttig Building Products, Inc. ................. 1,622 8,009
IKON Office Solutions, Inc. .................... 21,800 148,513
J.C. Penney Co., Inc. .......................... 33,800 673,888
Kmart Corp. (a)................................. 2,422,300 24,374,394
Kohl's Corp. (a)................................ 20,800 1,501,500
Kroger Co. (a).................................. 103,500 1,953,563
Liz Claiborne, Inc. ............................ 10,900 410,113
Longs Drug Stores, Inc. ........................ 4,300 110,994
May Department Stores Co. ...................... 43,350 1,398,038
Nordstrom, Inc. ................................ 17,400 455,663
Office Depot, Inc. ............................. 36,500 399,219
Pep Boys - Manny, Moe & Jack ................... 6,327 57,734
Rite Aid Corp. ................................. 31,600 353,525
Safeway, Inc. (a)............................... 64,100 2,279,556
Sears, Roebuck & Co. ........................... 48,300 1,470,131
Sherwin-Williams Co. ........................... 22,500 472,500
Staples, Inc. (a)............................... 59,200 1,228,400
Supervalu, Inc. ................................ 15,300 306,000
Tandy Corp. .................................... 23,800 1,170,663
The Gap, Inc. .................................. 110,100 5,064,600
The Limited, Inc. .............................. 720,240 31,195,395
TJX Companies, Inc. ............................ 42,000 858,375
Toys "R" Us, Inc. (a)........................... 508,100 7,272,181
Wal-Mart Stores, Inc. (b)....................... 558,300 38,592,488
Walgreen Co. ................................... 129,400 3,784,950
Winn-Dixie Stores, Inc. ........................ 19,500 466,781
--------------
186,611,736
--------------
RUBBER -- 0.1%
Cooper Tire & Rubber Co. ....................... 8,600 $ 133,838
Goodyear Tire & Rubber Co. ..................... 181,800 5,124,488
--------------
5,258,326
--------------
TELECOMMUNICATIONS -- 4.2%
ADC Telecommunications, Inc. (a)................ 15,000 1,088,438
AFLAC Inc. ..................................... 31,000 1,462,813
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
Alcatel Alsthom, ADR, (France) (b).............. 513,000 23,085,000
Alltel Corp. ................................... 37,200 3,075,975
Andrew Corp. (a)................................ 11,600 219,675
AT&T Corp. ..................................... 401,672 20,384,854
Bell Atlantic Corp. ............................ 195,200 12,017,000
BellSouth Corp. ................................ 238,000 11,141,375
CenturyTel, Inc. ............................... 11,700 554,288
General Instrument Corp. ....................... 21,800 1,853,000
Global Crossing Ltd. ........................... 89,460 4,473,000
GTE Corp. ...................................... 121,800 8,594,513
Lucent Technologies, Inc. ...................... 387,430 28,984,607
MCI WorldCom, Inc. ............................. 351,855 18,670,306
Nextel Communications, Inc.
(Class "A" Stock) (a)(b)...................... 42,400 4,372,500
Nortel Networks Corp. (b)....................... 168,200 16,988,200
Qualcomm, Inc. (b).............................. 79,600 14,029,500
SBC Communications, Inc. ....................... 430,550 20,989,313
Scientific-Atlanta, Inc. ....................... 8,200 456,125
Sprint Corp. ................................... 111,900 7,532,269
Sprint Corp. (PCS Group) (b).................... 54,350 5,570,875
Tellabs, Inc. (a)............................... 50,000 3,209,375
US West, Inc. .................................. 65,641 4,726,152
--------------
213,479,153
--------------
TEXTILES
National Service Industries, Inc. .............. 4,900 144,550
Russell Corp. .................................. 5,900 98,825
Springs Industries, Inc. ....................... 3,300 131,794
VF Corp. ....................................... 16,700 501,000
--------------
876,169
--------------
TOBACCO -- 0.2%
R.J. Reynolds Tobacco Holdings, Inc. ........... 395,333 6,967,744
UST, Inc. ...................................... 24,100 607,019
--------------
7,574,763
--------------
TOYS
Hasbro, Inc. ................................... 27,500 524,219
Mattel, Inc. ................................... 44,300 581,438
--------------
1,105,657
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp. (a)(b).................... 36,100 1,477,844
Ryder System, Inc. ............................. 9,400 229,713
Yellow Corp. (a)................................ 178,700 3,004,394
--------------
4,711,951
--------------
UTILITY-ELECTRIC -- 0.5%
Ameren Corp. (b)................................ 18,400 602,600
American Electric Power Co., Inc. (b)........... 24,000 771,000
Carolina Power & Light Co. ..................... 18,400 560,050
Central & South West Corp. (b).................. 28,300 566,000
Cinergy Corp. .................................. 20,700 499,388
CMS Energy Corp. ............................... 11,000 343,063
Consolidated Edison, Inc. ...................... 28,900 997,050
Constellation Energy Group ..................... 18,800 545,200
Dominion Resources, Inc. (b).................... 25,000 981,250
DTE Energy Co. ................................. 19,900 624,363
UTILITY-ELECTRIC (CONT'D.)
Duke Energy Corp. .............................. 46,000 $ 2,305,750
Edison International ........................... 42,800 1,120,825
Entergy Corp. .................................. 31,100 800,825
FirstEnergy Corp. (a)........................... 29,000 657,938
Florida Progress Corp. ......................... 7,000 296,188
FPL Group, Inc. ................................ 22,100 946,156
GPU, Inc. ...................................... 16,900 505,944
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
<S> <C> <C>
------------- --------------
New Century Energies, Inc. ..................... 15,000 455,625
Niagara Mohawk Holdings Inc. (a)................ 24,300 338,681
Northern States Power Co. ...................... 19,900 388,050
Pacific Gas & Electric, Co. .................... 48,600 996,300
PECO Energy Co. ................................ 24,700 858,325
Pinnacle West Capital Corp. .................... 3,000 91,688
PP&L Resources, Inc. ........................... 20,900 478,088
Public Service Enterprise Group, Inc. .......... 27,100 943,419
Reliant Energy, Inc. ........................... 37,400 855,525
Southern Co. (b)................................ 87,000 2,044,500
Texas Utilities Co. ............................ 37,100 1,319,369
Unicom Corp. ................................... 28,500 954,750
--------------
22,847,910
--------------
WASTE MANAGEMENT
Allied Waste Industries, Inc. .................. 10,000 88,125
Waste Management, Inc. ......................... 77,635 1,334,352
--------------
1,422,477
--------------
TOTAL COMMON STOCKS
(cost $2,303,776,139).......................................... 2,779,698,869
--------------
PREFERRED STOCKS -- 1.0%
<S> <C> <C>
FINANCIAL SERVICES -- 0.5%
BCH Eurocapital Limited ........................ 1,000,000 25,250,000
--------------
TELECOMMUNICATIONS -- 0.5%
Telecomunicacoes Brasileiras S.A., ADR (b)...... 201,800 25,931,300
--------------
TOTAL PREFERRED STOCKS
(cost $45,526,299)............................................. 51,181,300
--------------
WARRANTS UNITS
<S> <C> <C>
-------------
Mexico Debenture
(cost $0) .................................... 31,074 3
--------------
</TABLE>
<TABLE>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT
BONDS -- 34.1% (UNAUDITED) (000)
------------ ---------
<S> <C> <C> <C>
AEROSPACE
Lockheed Martin Corp.,
6.85%, 05/15/01 .............................. A3 $ 400 397,248
Rockwell International Corp.,
5.20%, 01/15/98 .............................. A1 2,000 1,277,240
--------------
1,674,488
--------------
AIRLINES -- 2.0%
Continental Airlines, Inc.,
8.00%, 12/15/05 .............................. Ba2 9,970 9,119,160
7.461%, 04/01/15 ............................. Aa3 8,423 8,111,002
Delta Airlines, Inc.,
7.90%, 12/15/09 .............................. Baa3 38,800 37,779,948
8.30%, 12/15/29 .............................. Baa3 4,000 3,849,320
AIRLINES (CONT'D.)
United Airlines, Inc.,
10.67%, 05/01/04 ............................. Baa3 $ 19,500 $ 21,355,035
11.21%, 05/01/14 ............................. Baa3 17,500 21,229,425
--------------
101,443,890
--------------
ASSET-BACKED SECURITIES -- 0.4%
California Infrastructure,
6.17%, 03/25/03 .............................. Aaa 4,000 3,979,680
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Chase Manhattan Credit Master Trust, Series
1996-3,
7.04%, 02/15/05 .............................. Aaa 11,000 11,023,980
Standard Credit Card Master Trust, 5.95%,
10/07/04 ..................................... Aaa 4,500 4,338,270
--------------
19,341,930
--------------
AUTOMOTIVE PARTS
United Rentals, Inc.
8.80%, 08/15/08 .............................. B1 1,785 1,664,513
--------------
AUTO - CARS & TRUCKS -- 1.4%
Ford Motor Co.,
6.38%, 02/01/29 (b)........................... A1 17,500 14,692,300
7.45%, 07/16/31 (b)........................... A1 3,500 3,367,140
Lear Corp.,
7.96%, 05/15/05 .............................. Ba1 11,740 11,387,800
Navistar International Corp.,
7.00%, 02/01/03 .............................. Ba1 11,500 11,011,250
TRW, Inc.,
6.45%, 06/15/01 .............................. Baa1 32,800 32,410,500
--------------
72,868,990
--------------
BANKS & SAVINGS LOANS -- 1.3%
Bank of Nova Scotia, (Canada),
6.50%, 07/15/07 .............................. A1 5,400 5,312,250
Bayerische Landesbank Girozentrale, (Germany),
5.88%, 12/01/08 .............................. Aaa 9,700 8,698,572
Central Hispano Leasing,
6.71%, 04/28/05 .............................. A3 5,000 4,999,500
Hypovereinsbank
8.74%, 06/30/31 (b)........................... Aa3 2,100 2,097,270
Key Bank NA,
5.80%, 04/01/04 .............................. Aa3 20,000 18,934,400
Keycorp Capital, Inc.,
7.75%, 07/15/29 (b)........................... A1 4,400 4,092,000
National Australia Bank,
6.40%, 12/10/07 .............................. A1 8,700 8,671,290
6.60%, 12/10/07 .............................. A1 5,000 4,688,150
Sanwa Finance Aruba
8.35%, 07/15/09 .............................. A3 7,120 7,174,112
Sovereign Bancorp,
10.50%, 11/15/06 ............................. Ba3 4,675 4,768,500
10.25%, 05/15/04 ............................. Ba3 2,670 2,691,093
--------------
72,127,137
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.1%
British Sky Broadcasting, Inc., 6.88%,
02/23/09 ..................................... Baa2 12,500 10,981,250
Cable & Wire Communications PLC (United
Kingdom),
6.75%, 12/01/08 .............................. Baa1 3,050 3,001,993
Cox Communications, Inc.
6.94%, 10/01/01 .............................. Baa2 4,000 3,982,960
7.88%, 08/15/09 (b)........................... Baa2 3,700 3,750,690
CABLE & PAY TELEVISION SYSTEMS (CONT'D.)
CSC Holdings, Inc.,
7.25%, 07/15/08 .............................. Ba2 $ 5,500 $ 5,186,280
7.88%, 12/15/07 .............................. Ba2 3,025 2,969,582
Rogers Cablesystems, Inc., (Canada),
10.00%, 03/15/05 ............................. Ba3 2,000 2,140,000
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Tele-Communications, Inc.,
6.34%, 02/01/02 .............................. Ba1 8,500 8,417,890
9.88%, 06/15/22 .............................. Baa3 12,878 15,716,826
--------------
56,147,471
--------------
CHEMICALS -- 0.2%
Lyondell Chemical,
9.63%, 05/01/07 .............................. Ba3 3,625 3,706,563
Monsanto Corp.
6.85%, 12/01/28 .............................. A2 500 440,785
Rohm & Haas Co,
6.95%, 07/15/04 .............................. A3 4,400 4,343,988
--------------
8,491,336
--------------
COMPUTERS -- 0.2%
International Business Machine Corp.,
5.63%, 04/12/04 .............................. A1 3,500 3,306,730
Unisys Corp.,
12.00%, 04/15/03 ............................. Ba1 6,615 7,044,975
--------------
10,351,705
--------------
CONSULTING
Comdisco, Inc.,
6.375%, 11/30/01 ............................. Baa1 2,700 2,647,701
--------------
CONTAINERS -- 0.5%
Owens-Illinois, Inc.,
7.15%, 05/15/05 .............................. Ba1 26,250 24,270,488
--------------
DIVERSIFIED OPERATIONS -- 0.8%
Corning, Inc.,
6.85%, 03/01/29 .............................. A3 5,000 4,356,550
Cox Enterprises, Inc.,
6.625%, 06/14/02 ............................. Baa1 5,200 5,124,756
Seagram (J.) & Sons,
5.79%, 04/15/01 .............................. Baa3 20,000 19,564,000
Tyco International Group, Ltd.,
6.125%, 06/15/01 ............................. Baa1 5,000 4,915,400
6.875%, 01/15/29 ............................. Baa1 3,400 2,889,558
7.00%, 06/15/28 .............................. Baa1 2,100 1,817,256
--------------
38,667,520
--------------
DRUGS & MEDICAL SUPPLIES -- 0.2%
Mallinckrodt, Inc.,
6.30%, 03/15/11 .............................. Baa2 8,000 7,820,000
Tenet Healthcare Corp.,
7.875%, 01/15/03 ............................. BA1 3,805 3,690,850
--------------
11,510,850
--------------
FINANCIAL SERVICES -- 6.9%
AT&T Cap Corp.,
6.60%, 05/15/05 .............................. A1 16,000 15,386,880
Barclays Bank PLC, (United Kingdom)
7.40%, 12/15/09 .............................. Aa3 600 589,620
Bear Stearns & Co.,
7.625%, 12/07/09 ............................. A2 1,035 1,016,287
Calair Capital Corp.,
8.125%, 04/01/08 ............................. Ba2 6,000 5,280,000
FINANCIAL SERVICES (CONT'D.)
Capital One Bank,
6.76%, 07/23/02 .............................. Baa2 $ 7,500 $ 7,323,600
Capital One Financial Corp.,
7.25%, 05/01/06 .............................. Ba1 6,800 6,426,000
Citibank Credit Card Master Trust, 6.10%,
05/15/08 ..................................... Ba2 44,000 41,424,240
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Conseco, Inc.,
8.70%, 11/15/26 .............................. Ba2 7,000 6,248,060
8.796%, 04/01/27 ............................. Ba2 3,000 2,723,070
Donaldson Lufkin & Jenrette,
5.74%, 05/01/01 .............................. A3 10,000 9,871,600
Dresdner Funding Trust,
8.151%, 06/30/31 ............................. Aa2 20,800 19,830,720
Enterprise Rent-A-Car USA Finance Co.,
6.35%, 01/15/01 .............................. Baa3 21,000 20,785,800
6.95%, 03/01/04 .............................. Baa2 7,500 7,281,750
Ford Motor Credit Corp.
6.70%, 07/16/04 (b)........................... A1 10,000 9,787,500
7.375%, 10/28/09 ............................. A1 2,500 2,475,000
General Motors Acceptance Corp., 5.95%,
03/14/03 ..................................... A2 21,500 20,702,350
Goldman Sachs Group, Inc.,
5.56%, 01/11/01 .............................. A1 4,200 4,150,272
Heller Financial, Inc.,
6.00%, 03/19/04 .............................. A3 4,900 4,652,697
HVB Funding Trust,
9.00%, 10/22/31 .............................. 00 1,400 1,435,700
International Lease Finance Corp., 6.00%,
05/15/02 ..................................... A1 43,100 42,121,630
Lehman Brothers Holdings, Inc.,
6.625%, 04/01/04 ............................. Baa1 21,910 21,209,756
6.625%, 02/05/06 ............................. Baa1 7,710 7,284,100
6.375%, 03/15/01 ............................. Baa1 4,300 4,263,665
MBNA Corp.,
5.90%, 08/15/11 .............................. Aaa 29,800 27,013,163
MCN Investment Corp.,
6.30%, 04/02/11 .............................. Baa2 8,250 8,102,325
Morgan Stanley Dean Witter & Co., 7.125%,
01/15/03 (b).................................. A1 14,540 14,528,513
Osprey Trust,
8.31%, 01/15/03 .............................. Baa3 20,000 19,895,000
RBF Finance Co.,
11.375%, 03/15/09 ............................ Ba3 2,365 2,542,375
Salomon Smith Barney, Inc.,
7.25%, 05/01/01 .............................. Baa1 2,160 2,166,847
6.75%, 08/15/03 .............................. Baa1 5,000 4,918,350
Textron Financial Corp.,
6.05%, 03/16/09 .............................. Aaa 6,302 6,265,300
Washington Mutual, Inc.
7.50%, 08/15/06 .............................. A3 7,000 6,924,750
--------------
354,626,920
--------------
FOOD & BEVERAGE -- 0.3%
Archer-Daniels Midland Co.,
6.625%, 05/01/29 ............................. Aa3 8,900 7,571,497
Coca-Cola Bottling Co.,
6.375%, 05/01/09 ............................. Baa2 3,500 3,152,800
Coca-Cola Enterprises, Inc.,
7.125%, 09/30/09 (b).......................... A2 1,650 1,618,650
--------------
12,342,947
--------------
FOREST PRODUCTS -- 0.7%
Fort James Corp.,
6.234%, 03/15/11 ............................. Baa3 11,000 10,886,040
FOREST PRODUCTS (CONT'D.)
Georgia-Pacific Corp.,
7.75%, 11/15/29 (b)........................... Baa2 $ 1,200 $ 1,143,528
Scotia Pacific Co.,
7.71%, 01/20/14 .............................. Baa2 29,500 22,125,000
--------------
34,154,568
--------------
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
HOSPITAL MANAGEMENT -- 0.1%
Columbia/HCA Healthcare Corp., 6.91%,
06/15/05 ..................................... Baa2 4,990 4,565,850
--------------
INDUSTRIAL -- 0.2%
Allied Waste Industries, Inc.,
7.625%, 01/01/06 ............................. Ba2 4,700 4,230,000
Cendant Corp.,
7.75%, 12/01/03 .............................. Baa1 2,000 1,995,200
Compania Sud Americana de Vapores, S.A.,
(Chile),
7.375%, 12/08/03 ............................. Baa 3,650 3,476,880
--------------
9,702,080
--------------
INSURANCE -- 0.1%
Conseco, Inc.,
8.50%, 10/15/02 .............................. Ba1 1,500 1,519,200
Royal & Sun Alliance Insurance Group PLC,
8.95%, 10/15/29 .............................. A1 3,500 3,575,600
--------------
5,094,800
--------------
LEISURE & TOURISM -- 0.3%
Harrahs Operating Co., Inc.
7.875%, 12/15/05 ............................. Ba2 600 585,000
ITT Corp.,
6.75%, 11/15/03 .............................. Baa2 14,000 13,023,220
Marriott International,
7.875%, 09/15/09 ............................. Baa1 475 467,524
Park Place Entertainment,
7.875%, 12/15/05 ............................. Ba2 5,030 4,803,650
--------------
18,879,394
--------------
MEDIA -- 0.5%
Liberty Media Group,
7.875%, 07/15/09 ............................. Baa3 2,400 2,390,640
8.50%, 07/15/29 .............................. Baa3 4,200 4,347,000
Paramount Communications, Inc., 7.50%,
01/15/02 ..................................... Ba2 9,100 9,119,747
United News & Media PLC,
7.25%, 07/01/04 .............................. Baa2 3,180 3,054,072
World Color Press, Inc.
7.75%, 02/15/09 .............................. B1 4,960 4,736,800
8.375%, 11/15/08 ............................. B1 1,500 1,466,250
--------------
25,114,509
--------------
OIL & GAS -- 0.6%
Atlantic Richfield Co.,
5.55%, 04/15/03 .............................. A2 22,500 21,570,300
Amerada Hess Corp,
7.375%, 10/01/09 ............................. Baa1 900 878,319
7.875%, 10/01/29 ............................. Baa1 2,500 2,438,250
B.J. Services Co.,
7.00%, 02/01/06 .............................. Ba1 4,000 3,785,360
Eott Energy Partnership
11.00%, 10/01/09 ............................. Ba2 3,935 4,092,400
--------------
32,764,629
--------------
OIL & GAS SERVICES -- 0.5%
KN Energy, Inc.,
6.30%, 03/01/21 .............................. Baa2 20,000 19,792,000
OIL & GAS SERVICES (CONT'D.)
Northrop-Grumman Corp.,
7.875%, 03/01/26 ............................. Ba1 $ 5,300 $ 4,971,824
Seagull Energy Co.,
7.875%, 08/01/03 ............................. Ba1 3,750 3,665,625
--------------
28,429,449
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B20
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
OIL & GAS EXPLORATION/PRODUCTION -- 0.1%
Parker & Parsley, Petroleum Co., 8.875%,
04/15/05 ..................................... Ba2 3,100 3,083,849
Union Pacific Resources,
7.95%, 04/15/29 (b)........................... Baa3 3,700 3,591,627
--------------
6,675,476
--------------
RAILROADS -- 0.2%
Norfolk Southern Corp.,
6.875%, 05/01/01 ............................. Baa1 7,200 7,181,712
6.95%, 05/01/02 .............................. Baa1 2,500 2,489,200
Union Pacific Corp.,
7.375%, 09/15/09 ............................. Baa3 550 538,236
--------------
10,209,148
--------------
REAL ESTATE INVESTMENT TRUST -- 2.2%
Duke Realty L.P.,
7.30%, 06/30/03 .............................. Baa2 4,350 4,301,715
EOP Operating, L.P.,
6.375%, 01/15/02 ............................. Baa1 5,000 4,888,000
6.50%, 06/15/04 .............................. Baa1 6,000 5,698,200
6.625%, 02/15/05 ............................. Baa 18,187 17,153,978
6.63%, 04/13/15 .............................. A3 9,200 8,621,688
7.10%, 06/23/04 .............................. A3 2,375 2,320,684
Felcor Suites, L.P.,
7.375%, 10/01/04 ............................. Ba1 25,000 23,000,000
Hanson Overseas B.V.,
7.375%, 01/15/03 ............................. A3 17,400 17,452,026
HMH Properties, Inc.
7.875%, 08/01/05 ............................. Ba2 6,560 6,051,600
HRPT Properties Trust
7.426%, 07/09/07 ............................. Baa2 2,000 1,988,400
Simon Debartolo Group, Inc.,
6.75%, 06/15/05 .............................. Baa1 17,500 16,306,500
--------------
107,782,791
--------------
RETAIL -- 1.2%
Federated Department Stores, Inc., 8.50%,
06/15/03 ..................................... Ba1 34,890 35,856,104
Kroger Co.
6.34%, 06/01/01 .............................. Baa3 10,450 10,332,438
7.70%, 06/01/29 .............................. Baa3 1,500 1,417,500
7.25%, 06/01/09 .............................. Baa3 6,000 5,760,000
Saks Inc.,
8.25%, 11/15/08 .............................. Baa3 3,000 2,918,700
--------------
56,284,742
--------------
TELECOMMUNICATIONS -- 3.7%
360 Communication Co.,
7.125%, 03/01/03 ............................. Ba2 23,776 23,644,756
7.60%, 04/01/09 .............................. Ba1 12,885 12,891,958
Airtouch Communications, Inc., 7.00%,
10/01/03 ..................................... Baa2 16,800 16,784,040
AT&T Canada, Inc., (Canada),
7.65%, 09/15/06 .............................. Baa3 2,400 2,388,024
Electric Lightwave, Inc.,
6.05%, 05/15/04 .............................. A2 5,300 5,002,352
Global Crossing Holdings, Ltd., 9.125%,
11/15/06 ..................................... Ba2 9,035 8,933,356
TELECOMMUNICATIONS (CONT'D.)
Lucent Technologies, Inc.,
6.45%, 03/15/29 .............................. A2 $ 17,500 $ 15,233,575
Qwest Communications International Inc.,
7.50%, 11/01/08 .............................. Ba1 31,200 30,498,000
Rogers Cantel, Inc.,
9.375%, 06/01/08 ............................. Ba3 4,830 5,023,200
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Sprint Corp.,
6.875%, 11/15/28 (b).......................... Baa1 13,000 11,553,230
Telecom De Puerto Rico,
6.15%, 05/15/02 .............................. Baa2 10,500 10,181,325
6.65%, 05/15/06 .............................. Baa2 10,700 10,152,053
6.80%, 05/15/09 .............................. Baa2 9,000 8,207,370
US West, Inc.,
6.875%, 08/15/01 ............................. Baa1 10,000 9,958,000
Williams Communications Group, Inc.
10.70%, 10/01/07 ............................. B2 4,100 4,305,000
10.875%, 10/01/09 ............................ B2 1,400 1,464,750
Worldcom, Inc.,
6.95%, 08/15/28 (b)........................... Baa2 17,700 16,070,892
--------------
192,291,881
--------------
UTILITIES -- 1.5%
AES Corp.
9.50%, 06/01/09 .............................. Ba1 10,000 10,200,000
Calenergy Co. Inc.,
6.96%, 09/15/03 .............................. Ba1 15,000 14,661,000
Calpine Corp.,
10.50%, 05/15/06 ............................. Ba1 8,330 8,746,500
CMS Energy Corp.,
8.00%, 07/01/11 .............................. Ba3 7,200 7,132,320
Cogentrix Energy, Inc.,
8.10%, 03/15/04 .............................. Ba1 5,775 5,542,499
Edison Mission Energy,
7.73%, 06/15/09 .............................. A3 5,000 4,979,850
El Paso Energy,
6.625%, 07/15/01 ............................. Baa2 6,000 5,952,420
Hydro-Quebec,
7.50%, 04/01/16 .............................. A2 2,075 2,029,578
PSEG Energy Holdings, Inc.,
10.00%, 10/01/09 ............................. Ba1 4,590 4,532,625
Sonat, Inc.
7.625%, 07/15/11 ............................. Baa1 7,800 7,651,410
Utilicorp United, Inc.,
7.00%, 07/15/04 .............................. Baa3 5,000 4,828,700
--------------
76,256,902
--------------
WASTE MANAGEMENT -- 0.3%
USA Waste Service,
6.125%, 07/15/01 ............................. Baa3 15,695 14,937,716
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 5.0%
Federal National Mortgage Association, Zero
Coupon,
10/09/19(b)................................... 11,800 2,907,638
United States Treasury Note,
5.875%, 11/15/04(b)........................... 4,980 4,882,741
6.00%, 08/15/09(b)............................ 2,555 2,475,156
6.75%, 08/15/26(b)............................ 70,200 70,529,238
6.375%, 08/15/27(b)........................... 61,400 58,972,858
United States Treasury Bond,
7.50%, 11/15/24(b)............................ 38,800 42,358,736
8.125%, 08/15/21(b)........................... 45,000 51,609,150
5.25%, 02/15/29(b)............................ 18,320 15,148,258
6.125%, 08/15/29(b)........................... 5,000 4,766,400
--------------
253,650,175
--------------
FOREIGN GOVERNMENT BONDS -- 1.6%
Junta De Andaluci, (Spain),
7.25%, 10/01/29 .............................. Aa3 $ 840 $ 800,688
Province of Saskatchewan, (Canada),
9.125%, 02/15/21 ............................. A2 2,300 2,650,152
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B21
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Quebec Province, (Canada),
7.50%, 09/15/29 (b)........................... A2 3,700 3,639,320
7.50%, 07/15/23 (b)........................... A1 7,500 7,312,875
Republic of Argentina
Zero Coupon, 10/15/01 ........................ BBB 7,625 6,385,938
Republic of Columbia,
9.75%, 04/23/09 (b)........................... Baa3 4,500 4,173,750
Republic of Mexico,
6.836%, 12/31/19 ............................. Ba2 9,750 9,152,810
6.932%, 12/31/19 ............................. Ba2 3,550 3,332,563
6.942%, 12/31/19 ............................. Ba2 6,900 6,477,375
Republic of Panama,
4.25%, 07/17/14 .............................. Ba1 10,600 8,321,000
Republic of Philippines,
8.875%, 04/15/08 ............................. Ba1 5,400 5,265,000
Republic of Poland,
4.00%, 10/27/24 .............................. Baa3 11,300 7,458,000
United Mexican States,
10.375%, 02/17/09 ............................ Ba1 15,500 16,430,000
--------------
81,399,471
--------------
TOTAL LONG-TERM BONDS
(cost $1,820,813,183).................................................... 1,746,371,467
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,170,115,621).................................................... 4,577,251,639
--------------
SHORT-TERM INVESTMENTS -- 20.6%
<S> <C> <C> <C>
CERTIFICATE OF DEPOSIT -- 1.0%
Bank of Montreal
5.96%, 1/14/00 (c)(d)......................... P1 50,000 50,000,000
--------------
CERTIFICATE OF DEPOSIT-YANKEE -- 1.0%
Svenska Handels Bank
6.07%, 1/14/00 (c)(d)......................... P1 50,000 50,000,000
--------------
COMMERCIAL PAPER -- 11.2%
Baker Hughes,
4.75%, 01/03/00 .............................. P1 1,000 999,736
Barton Capital Corp,
6.00%, 01/11/00 (c)(d)........................ P1 12,391 12,374,479
6.06%, 02/02/00 .............................. P1 7,138 7,099,550
6.10%, 02/03/00 .............................. P1 3,700 3,679,311
6.20%, 01/20/00 .............................. P1 30,000 29,901,833
6.56%, 02/11/00 (c)(d)........................ P1 4,000 3,971,573
6.75%, 02/01/00 (c)(d)........................ P1 6,275 6,240,880
Baus Funding LLC,
6.20%, 01/25/00 .............................. P1 10,000 9,958,668
6.20%, 01/31/00 .............................. P1 15,000 14,922,500
Bayerische Landesbank,
5.98%, 02/23/00 .............................. P3 1,000 991,196
BCI Funding Corp,
6.33%, 01/11/00 .............................. P1 1,500 1,497,363
Bell Atlantic Financial Services,
5.20%, 01/07/00 .............................. P3 1,012 1,011,123
COMMERCIAL PAPER (CONT'D.)
Central & Southwest Corp.,
7.20%, 01/21/00 (c)(d)........................ P1 $ 25,000 $ 24,910,000
Clipper Receivables Corp.,
6.12%, 01/24/00 .............................. P1 37,446 37,299,586
Coastal Corp.,
6.50%, 01/14/00 (c)(d)........................ P1 35,000 34,930,485
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D.) (UNAUDITED) (000) (NOTE 2)
<S> <C> <C> <C>
------------ --------- --------------
Coca Cola Enterprises,
5.25%, 01/03/00 .............................. P1 1,000 999,709
Comdisco, Inc.,
6.45%, 01/31/00 (c)(d)........................ P1 25,000 24,874,580
Cox Enterprises, Inc.,
6.57%, 01/19/00 (c)(d)........................ P1 10,495 10,464,355
6.85%, 01/21/00 (c)(d)........................ P1 26,000 25,910,950
Cregem North America,
5.97%, 03/01/00 .............................. P1 949 939,557
CXC, Inc.,
6.00%, 01/21/00 .............................. P1 1,700 1,694,333
Deutche Bank Financial, Inc.,
6.10%, 02/02/00 .............................. P1 800 795,662
Duke Energy Corp.,
5.00%, 01/03/00 .............................. P1 950 949,736
Enterprise Funding Corp.,
6.38%, 01/14/00 .............................. P1 2,032 2,027,318
Falcon Asset Securitization,
6.24%, 01/21/00 .............................. P1 6,850 6,826,253
Ford Motor Credit Co.,
6.00%, 01/21/00 .............................. P1 1,153 1,149,157
General Electric Capital Corp.,
6.33%, 01/26/00 .............................. P1 650 647,143
General Motors Acceptance Corp.,
5.99%, 02/17/00 .............................. P1 1,000 992,180
Heller Financial, Inc.,
6.00%, 01/13/00 (c)(d)........................ P1 12,500 12,479,167
6.05%, 01/14/00 (c)(d)........................ P1 40,000 39,926,056
Kerr Mcgee Credit,
6.50%, 01/13/00 (c)(d)........................ P1 40,000 39,927,778
6.45%, 01/14/00 (c)(d)........................ P1 9,300 9,281,671
Keyspan Corp.,
6.50%, 01/12/00 (c)(d)........................ P1 49,000 48,920,375
Merrill Lynch & Co. Inc.,
6.12%, 01/18/00 .............................. P1 1,388 1,383,989
Novartis Finance Corp.,
5.50%, 01/05/00 .............................. P1 1,000 999,389
Old Line Funding Corp.,
6.30%, 01/19/00 .............................. P1 2,269 2,261,853
6.33%, 01/12/00 .............................. P1 8,500 8,483,560
PHH Corp.,
6.95%, 01/27/00 (c)(d)........................ P1 25,000 24,884,167
Sonoco Products,
6.05%, 02/03/00 .............................. P1 700 696,118
Thunder Bay Funding, Inc.,
6.06%, 02/04/00 .............................. P1 13,680 13,601,705
6.20%, 01/19/00 .............................. P1 14,827 14,781,036
Triple-A One Plus Funding,
6.20%, 01/20/00 .............................. P1 6,019 5,999,304
6.27%, 01/14/00 .............................. P1 46,000 45,895,849
COMMERCIAL PAPER (CONT'D.)
Variable Funding Corp.,
6.25%, 01/20/00 (c)(d)........................ P1 $ 20,000 $ 19,940,972
Windmill Funding Corp.,
6.38%, 01/07/00 (c)(d)........................ P1 17,000 16,987,949
--------------
574,510,154
--------------
EURO-TIME DEPOSIT -- 0.2%
Chase Manhattan Bank
5.50%, 01/03/00 (c)(d)........................ P1 10,000 10,000,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B22
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1999
<TABLE>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D.) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS -- 2.4%
Banco de Commercio Exterior de Columbia, SA,
M.T.N., (Colombia),
8.625%, 06/02/00 ............................. P1 5,500 5,445,000
Carnival Corp.,
5.65%, 10/15/00 .............................. A2 5,000 4,953,450
Comdisco, Inc.,
5.94%, 04/13/00 .............................. Baa1 12,500 12,461,250
6.32%, 11/27/00 .............................. Baa1 19,000 18,870,800
Dayton Hudson Corp.,
5.95%, 06/15/00 .............................. A3 9,000 8,987,310
Equity Residential Properties Trust,
6.15%, 09/15/00 .............................. A3 25,000 24,795,000
GTE Corp.,
9.375%, 12/01/00 ............................. Baa1 11,000 11,264,770
ICI Wilmington, Inc.,
9.50%, 11/15/00 .............................. Baa1 6,500 6,625,646
ITT Corp.,
6.25%, 11/15/00 .............................. Baa2 5,183 5,082,088
Niagara Mohawk Power,
7.00%, 10/01/00 .............................. Ba3 18,902 18,892,994
Ryder System, Inc.,
7.51%, 03/24/00 .............................. Baa1 3,000 3,006,510
8.34%, 01/26/00 .............................. Baa1 5,000 5,006,846
--------------
125,391,664
--------------
TIME DEPOSIT -- 1.3%
Abbey National Treasury
9.50%, 01/04/00 (c)(d)........................ NR 50,000 50,000,000
Banque National
2.00%, 01/03/00 (c)(d)........................ NR 2,071 2,071,000
Deutche Bank
5.00%, 01/03/00 (c)(d)........................ NR 13,000 13,000,000
--------------
65,071,000
--------------
PRINCIPAL
SHORT-TERM AMOUNT VALUE
INVESTMENTS (CONT'D.) (000) (NOTE 2)
--------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 3.2%
Joint Repurchase Agreement Account,
2.875%, 01/03/00 (Note 5) .................... $ 164,437 $ 164,437,000
--------------
U.S. GOVERNMENT OBLIGATIONS -- 0.3%
United States Treasury Bill
5.19%, 03/16/00 .............................. 600 593,506
5.196%, 03/16/00 ............................. 14,000 13,848,450
--------------
14,441,956
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,049,509,711).................................................... 1,053,851,774
--------------
TOTAL INVESTMENTS -- 109.9%
(cost $5,219,625,332; Note 6)............................................ 5,631,103,413
--------------
VARIATION MARGIN ON OPEN FUTURES CONTRACTS(E)..............................
(598,738)
--------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (9.9%)............................
(505,240,380)
--------------
TOTAL NET ASSETS -- 100%................................................... $5,125,264,295
==============
</TABLE>
The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
GDR Global Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)
(a) Non-Income producing security.
(b) Portion of securities on loan with an aggregate market value of
$503,764,431; cash collateral of $526,881,461 was received with which the
portfolio purchased securities.
(c) Represents security purchased with cash collateral received for securities
on loan.
(d) Security segregated as collateral for future contracts.
(e) Open Future Contracts as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31, APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE 1999 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
U.S. 5 yr Treasury
763 Note Mar 00 $1,812,125 $ 844,781 $ (967,344)
1,115 U.S. Treasury Bond Mar 00 6,695,155 3,073,281 (3,621,874)
232 S&P 500 Index Mar 00 1,437,163 4,509,603 3,072,440
-----------
$(1,516,778)
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
B23
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
CONSERVATIVE BALANCED PORTFOLIO AND FLEXIBLE MANAGED PORTFOLIO OF
THE PRUDENTIAL SERIES FUND, INC.
NOTE 1: GENERAL
The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of 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 or a principal market maker. Options on stock or stock indices
are valued at the average of the last reported bid and asked prices on the
exchange on which they are traded. Futures contracts and options on futures
contracts are valued at the last reported sale price, or if there is not a sale,
at the mean between the last reported bid and asked prices on the commodity
exchange or the board of trade on which they are traded. Any security for which
a reliable market quotation is unavailable is valued at fair value by The
Prudential Insurance Company of America ("The Prudential") under the direction
of the Series Fund's Board of Directors.
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 investment securities, other assets and liabilities - at the
current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses - at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal year, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market prices of securities held at the end of the fiscal year.
Similarly, the Series Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of long-term portfolio securities sold during the fiscal year. Accordingly,
these realized and unrealized foreign currency gains (losses) are included in
the reported net realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at fiscal year end exchange rates are reflected as a component of
net unrealized appreciation (depreciation) on investments and foreign
currencies.
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 Series Fund. PSI is
an indirect, wholly owned subsidiary of The Prudential. For the year ended
December 31,
C2
<PAGE>
1999, PSI has been compensated approximately $485,400 and $468,000 for the
Conservative Balanced Portfolio and the Flexible Managed Protfolio,
respectively.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of four elements: stated
coupon, original issue discount, market discount and market premium is recorded
on the accrual basis. Certain portfolios own shares of real estate investment
trusts ("REITs") which report information on the source of their distributions
annually. A portion of distributions received from REITs during the year is
estimated to be a return of capital and is recorded as a reduction of their
costs. These estimates are adjusted when the actual amounts are known. 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 Portfolio specific
expenses which are attributable directly at a Portfolio or Class level.
For Portfolios with multiple classes and shares, net investment income, other
than administration and distribution fees, and unrealized and realized gains or
losses are allocated daily to each class of shares based upon the relative
proportion of net assets of each class at the beginning of the day.
CUSTODY FEE CREDITS: The Series Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian. Such custody fee credits are presented as a reduction of gross
expenses in the accompanying 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>
Portfolio 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 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 Class II shares of each
Portfolio compensates
C3
<PAGE>
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 reimburse each Portfolio, the portion of the
investment advisory fee for that Portfolio equal to the amount that the
aggregate annual ordinary operating expenses (excluding interest, taxes and
brokerage commissions) exceeds 0.75% of the Portfolio's average daily net
assets. No reimbursement was required for the year ended December 31, 1999.
PIC, PIMS and PIFM are 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 year ended December
31, 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 December 31, 1999, the Series Fund incurred fees for the services of
PMFS and as of December 31, 1999 fees were due to PMFS as follows:
<TABLE>
<CAPTION>
Transfer Agent's Transfer Agent
Fees Fees Payable
---------------- --------------
<S> <C> <C>
Conservative Balanced Portfolio........ $ 7,700 $ 700
Flexible Managed Portfolio............. 8,000 800
------- ------
$15,700 $1,500
</TABLE>
For the year ended December 31, 1999, PSI earned $12,857 in brokerage
commissions from transactions executed on behalf of the Conservative Balanced
Portfolio and the Flexible Managed Portfolio as follows:
<TABLE>
<CAPTION>
Commission
----------
<S> <C>
Conservative Balanced Portfolio........ $ 2,600
Flexible Managed Portfolio............. 10,257
-------
$12,857
</TABLE>
NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT
The Series Fund may transfer uninvested cash balances into a single joint
repurchase agreement account, the daily aggregate balance of which is invested
in one or more repurchase agreements collateralized by U.S. Government
obligations. The Series Fund's undivided interest in the joint repurchase
agreement account represented $744,612,000 as of December 31, 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........ $ 87,560,000 11.76%
Flexible Managed Portfolio............. 164,437,000 22.08
All other portfolios (currently not
available to PRUvider)............... 492,615,000 66.16
------------ ------
$744,612,000 100.00%
</TABLE>
C4
<PAGE>
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
ABN AMRO Incorporated, 2.75%, in the principal amount of $210,000,000,
repurchase price $210,048,125, due 1/3/00. The value of the collateral including
accrued interest was $214,200,332.
Bear, Stearns & Co., Inc., 2.75%, in the principal amount of $210,000,000,
repurchase price $210,048,125, due 1/3/00. The value of the collateral including
accrued interest was $214,345,594.
Lehman Brothers, Inc., 2.50%, in the principal amount of $100,000,000,
repurchase price $100,020,833, due 1/3/00. The value of the collateral including
accrued interest was $101,984,334.
Morgan (J.P.) Securities, Inc., 4.50%, in the principal amount of $114,612,000,
repurchase price $114,654,980, due 1/3/00. The value of the collateral including
accrued interest was $117,037,615.
Salomon Smith Barney Inc., 2.00%, in the principal amount of $110,000,000,
repurchase price $110,018,333, due 1/3/00. The value of the collateral including
accrued interest was $112,554,452.
NOTE 6: PORTFOLIO SECURITIES
The aggregate cost of purchases and the proceeds from the sales of securities
(excluding short-term issues) for the year ended December 31, 1999 were as
follows:
Cost of Purchases:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
------------ ----------
<S> <C> <C>
Government Securities.................. 2$,149,354,256 $1,633,799,829
Non-Government Securities.............. 2$,569,102,770 $1,933,267,104
</TABLE>
Proceeds from Sales:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
------------ ----------
<S> <C> <C>
Government Securities.................. 2$,058,784,264 $1,439,490,453
Non-Government Securities.............. 3$,179,565,912 $2,423,290,053
</TABLE>
The federal income tax basis and unrealized appreciation (depreciation) of the
Series Fund's investments as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
------------ ----------
<S> <C> <C>
Gross Unrealized Appreciation.......... 6$18,254,006 $830,907,342
Gross Unrealized Depreciation.......... 240,643,859 422,071,306
Total Net Unrealized................... 377,610,147 408,836,036
Tax Basis.............................. 4,477,171,346 5,222,267,377
</TABLE>
The Conservative Balanced Portfolio and the Flexible Managed Portfolio have
elected to treat $8,302,364 and $16,235,978, respectively, of net currency
losses incurred in the two month period ended December 31, 1999 as having been
incurred in the following fiscal year.
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 Prudential to fund benefits under certain
variable life insurance and variable annuity contracts ("contracts"). Class II
shares are sold only to separate accounts of non-Prudential insurance companies
as investment options under certain contracts. The accounts invest in shares of
the Series Fund through subaccounts that correspond to the portfolios. The
accounts will redeem shares of the Series Fund to the extent necessary to
provide benefits under the contracts or for such other purposes as may be
consistent with the contracts. Currently there are only Class I shares
outstanding in the Conservative Balanced and Flexible Managed Portfolios.
C5
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
CONSERVATIVE BALANCED
-----------------------------------------------------
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.62 0.66 0.76 0.66 0.63
Net realized and unrealized gains on
investments.......................... 0.37 1.05 1.26 1.24 1.78
-------- -------- -------- -------- --------
Total from investment operations... 0.99 1.71 2.02 1.90 2.41
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.62) (0.66) (0.76) (0.66) (0.64)
Distributions from net realized
gains................................ (0.06) (0.94) (1.81) (1.03) (0.56)
Distributions in excess of net realized
gains................................ (0.03) -- -- -- --
-------- -------- -------- -------- --------
Total distributions................ (0.71) (1.60) (2.57) (1.69) (1.20)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 15.36 $ 15.08 $ 14.97 $ 15.52 $ 15.31
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:(B)............ 6.69% 11.74% 13.45% 12.63% 17.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $4,387.1 $4,796.0 $4,744.2 $4,478.8 $3,940.8
Ratios to average net assets:
Expenses............................. 0.57% 0.57% 0.56% 0.59% 0.58%
Net investment income................ 4.02% 4.19% 4.48% 4.13% 4.19%
Portfolio turnover rate................ 109% 167% 295% 295% 201%
</TABLE>
<TABLE>
FLEXIBLE MANAGED PORTFOLIO
-----------------------------------------------------
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.58 0.58 0.59 0.57 0.56
Net realized and unrealized gains on
investments.......................... 0.69 1.14 2.52 1.79 3.15
-------- -------- -------- -------- --------
Total from investment operations... 1.27 1.72 3.11 2.36 3.17
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income... -- (0.59) (0.58) (0.58) (0.56)
Distributions from net realized
gains................................ (0.19) (1.85) (3.04) (1.85) (0.79)
-------- -------- -------- -------- --------
Total distributions................ (0.19) (2.44) (3.62) (2.43) (1.35)
-------- -------- -------- -------- --------
Net Asset Value, end of year........... $ 17.64 $ 16.56 $ 17.28 $ 17.79 $ 17.86
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:(b)............ 7.78% 10.24% 17.96% 13.64% 24.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $5,125.3 $5,410.0 $5,490.1 $4,896.9 $4,261.2
Ratios to average net assets:
Expenses............................. 0.62 0.61% 0.62% 0.64% 0.63%
Net investment income................ 3.20 3.21% 3.02% 3.07% 3.30%
Portfolio turnover rate................ 76% 138% 227% 233% 173%
</TABLE>
(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
SEE NOTES TO FINANCIAL STATEMENTS.
D1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE PRUDENTIAL SERIES FUND, INC.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Conservative Balanced Portfolio and
Flexible Managed Portfolio (two of the seventeen portfolios that constitute The
Prudential Series Fund, Inc.: the "Portfolios") at December 31, 1999, the
results of each of their operations for the year then ended, the changes in each
of their net assets for each of the two years in the period then ended and each
of their financial highlights for the each of the four years in the period then
ended, in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Portfolios'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights of each Portfolio for the
period ended December 31, 1995 were audited by other independent accountants
whose opinion dated February 15, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 23, 2000
TAX INFORMATION (UNAUDITED)
Although we understand that the vast majority, if not all, of the
shareholders/contract holders of the Series Fund currently maintain a tax
deferred status, we are nevertheless required by the Internal Revenue Code to
advise you within 60 days of the Series Fund's fiscal year end (December 31,
1999 as to the federal tax status of dividends paid by the Series Fund during
such fiscal year. Accordingly, we are advising you that in 1999, the Series Fund
paid dividends as follows:
<TABLE>
<CAPTION>
ORDINARY DIVIDENDS
------------------
SHORT-TERM LONG-TERM TOTAL
INCOME CAPITAL GAINS CAPITAL GAINS DIVIDENDS
-------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Conservative Balanced Portfolio $0.623 $0.043 $0.043 $0.709
Flexible Managed Portfolio 0.001 0.100 0.093 0.194
</TABLE>
E1
<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.
[GRAPHIC]
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. To request additional copies you may contact the reallocation area at
the toll-free number above. 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 W. SCOTT McDONALD, JR., Ph.D.
Chairman, Vice President,
The Prudential Series Fund, Inc. Kaludis Consulting Group
SAUL K. FENSTER, Ph.D. JOSEPH WEBER, Ph.D.
President, Vice President,
New Jersey Institute of Technology Interclass (international corporate
learning)
<PAGE>
================================================================================
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.
-------------
P.O. Box 7478 Bulk Rate
Philadelphia, PA 19101-7478 U.S. Postage
PAID
Address Service Requested Prudential
-------------
[RECYCLING LOGO]
PRUvider AR 12/31/1999 Printed in the U.S.A. VAL-DR-105
on recycled paper using soybean ink.
